1-Economic growth is illustrated by A) An outward shift of the economy's production possibilities curve. B) The movement tol a point outside of the production possibilities curve. C) A movement onto the economy's production possibilities curve. D) A movement along the economy's production possibilities curve. E) A reduction in the unemployment of resources 2-Economists use the term "marginal utility" to describe the A) Total satisfaction received from consumption of a good. B) Change in total satisfaction caused by consumption of an additional unit of a good. C) Price paid for every unit consumed. D) Inverse of the measure of total utility. E) Average utility of each unit of a good consumed 3The idea that the utility a consumer derives from successive units of a good diminishes as total consumption of the good increases is known as A) Utility maximization. B) The utility theory of demand. C Diminishin mar inal utili . D) The paradox of value. E) Diminishing total utility 4-A good with a horizontal demand curve has a demand: A) for which there are no substitute. B) with a price elasticity of demand of D. C with a rice. elasticit of demand of inni . D) with an income elasticity of demand of 5 The economic system that answers the What, How and For Whom questions by central authority is a: A) Market economy. B) Command economy C) Traditional economy. D) None of the above. 6- If used cell phones are inferior goods and new cell phones are normal goods, then an increase in consumer incomes will result in a(n) in demand for A) Increase; used cell phones B) Decrease; used cell phones C) Decrease; new cell phones. D) Decrease; both new cell phones and used cell phones E) Increase; both new cell phones and used cell phones 7 Which of the following is a macroeconomic topic? A) Why plumbers earn more than janitors B) The reasons for the rise in average prices C) Whether the army should buy more tanks or more rockets D) The reasons for a rise in the price of orange juice 8- Persistent negative current account balances will lead to . A) c and d B) d and e C) Budciet deficits D) Appreciation of foreign currency E) Depreciation of domestic currencv 9 Assume the market for smartphones is in equilibrium. Now suppose the price of flash memory chips, an input used in manufacturing smartphones, increases. Based on the model of supply and demand, how will the equilibrium price and equilibrium quantity of smartphones change? A) The equilibrium price and quantity will both increase. B) The equilibrium price and quantity will both decrease. C) The equilibrium price will increase, but the equilibrium quantity will decrease. D) The equilibrium price will decrease, but the equilibrium quantity will increase. 10- Which of the following is NOT an example of an opportunity cost? A) Because David used all of his vacation time to paint his house, he was unable to visit the Caribbean last year. B) By choosing to attend college, Jean was not able to continue working as an electrician; as a result, she gave up more than $85,000 in earnings while she was in college. C) Because Mary is now being paid a higher wage, she can afford to buy a new car even though she is moving into a bigger apartment. D) By spending Thursday night studying for an economics exam, a student was unable to complete a homework assignment for calculus class. 11- An industry has been dumping its toxic waste free of charge into a river. A government action to ensure a more efcient use of resources would have which of the following effects on the industry's output and product price? Output Price A) Decrease Decrease B) Decrease Increase C) Increase Decrease D) Increase Increase E) Increase No change 12For many goods, the price elasticity of demand increases over time after a price hike because: A) The ability to find good substitutes for the product whose price rose increases over time. B) Inflation causes all prices and incomes to increase over time. C) Consumer incomes tend to increase over time. D) ALL of the above answers are correct. 13-Which of the following would cause the U.S. dollar to depreciate against the Japanese yen? A) Greater popularity of U.S. exports in Japan. B) A higher price level in Japan. C) Higher real interest rates in the United States. D) Higher incomes in the United States. 14- If the short-run average variable costs of production for a firm are rising, then this indicates that: A) Average total costs are at a maximum. B) Average fixed costs are constant. C) Marginal costs are above average variable costs. D) Average variable cost are below average xed costs. 15-During the last decade, the price of shoes rose substantially yet people bought more pairs of new shoes each year. This experience suggests that A) the demand curve for shoes shifted leftward. B) the supply curve of shoes shifted rightward. C) the supply curve of shoes shifted leftward. D) the demand curve for shoes shifted rightward Exhibit 1 1.00 D. 30 Prlu (pounds 0. 60 per dollar) 1140' 0. 20 l} 100 QED-400500 anamny of dollars (millions per day) .16-Above Exhibit 1 shows a situation in which: A) Both the dollar and the pound have depreciated. B) Both the dollar and the pound have appreciated. C) The dollar has depreciated and the pound has appreciated. | D) The dollar has appreciated and the pound has depreciated. El 17-Which of the following could cause the dollar-pound exchange rates to change as shown in above Exhibit 1? A) American goods become more popular in Great Britain. B) British incomes rise, while U.S. incomes remain unchanged. C) The U.S. price level rises, while the British price level remains unchanged. D) The U.S. real interest rate rises, while the British real interest rate remains unchanged. 18-Which of the following best describes total xed cost? A) The change in total cost when one additional unit of output is produced. B) Total cost divided by the quantity of output produced. C) Total variable cost divided by the quantity of output produced. D) Total xed cost divided by the quantity of output produced. 19-Which of the following CORRECTLY describes how price adjustments eliminate a shortage? A) As the price rises, the quantity demanded decreases while the quantity supplied increases. B) As the price rises, the quantity demanded increases while the quantity supplied decreases. C) As the price falls, the quantity demanded decreases while the quantity supplied increases. D) As the price falls, the quantity demanded increases while the quantity supplied decreases 20- Which of the following would be classified as a short run decision? A) A firm's decision to decrease the amount of electricity used in day to day operations by encouraging employees to adopt conservation strategies, e.g., shut off lights when leaving a room. B) A restaurant's decision to increase the number of customers it can accommodate by adding on a new dining room. C) A trucking firm's decision to move to a smaller facility. D) A university's decision to add a new residence hall. 21- Imposing a restrictive quota on imported plasma TVs will: A) Increase the price of the plasma TVs and decrease the quantity consumed. B) Increase both the price of the plasma TVs and the quantity consumed. C) Leave the price of the plasma TVs unchanged but decrease the quantity consumed. D) Leave the price and the quantity consumed of plasma TVs unchanged, because domestic producers will expand production to make up for the reduction in imports. 22-In Europe during the 14th century, the Black Plague killed 24 million people or close to 37 percent of the population. How would this affect the production possibilities curves for the countries of Europe at that time? A) The production possibilities curves for these countries would have shifted outward. B) The production possibilities curves for these countries would have shifted inward. C) The production possibilities curves for these countries would have been unaffected. D) This would have been illustrated by a movement along the production possibilities curves for these countries. but it would not have shifted them. 23- Which of the following is not a characteristic of a perfectly competitive market? A) There is a large number of small firms. B) Firms sell a homogeneous product. C) Firms can easily enter or exit the market. D) Firms are price makers, not price takers. 24-The balance of payments on current account does not include the following items A) Merchandise exports B) Invisible trade items (services) C) Current transfer items D) Foreign stocks and bonds E) Merchandise import 25-Factors that cause demand and supply schedules for foreign exchange to shift do not include: A) Relative inflation rates B) Relative interest rates C) Different welfare systems D) Relative income levels E) Government intervention 26-. The theory of comparative advantage suggests that nations should produce a good if they: A) Have the lowest opportunity cost. B) Have the lowest wages. C) Have the most resources. D) Can produce more of the good than any other nation. 27- Identify whether each of the following items creates a surplus item or a decit item in the current account of the U.S. balance of payments. - A Central European company sells products to a U.S. hobby-store chain. - Japanese residents pay a U.S. travel company to arrange hotel stays, ground transportation, and tours of various U.S. cities, including New York, Chicago, and Orlando. A Mexican company pays a U.S. accounting rm to audit its income statements. A U.S. microprocessor manufacturer purchases raw materials from a Canadian firm. 28-The I'income effect" in the market for aspirin means that: A) Aspirin are generally taken by people with higher than average incomes. B) A decrease in the price of a substitute good like acetaminophen will make aspirin takers feel a little poorer than they were before. C) An increase in the price of aspirin will reduce the total purchasing power of aspirin takers, making them able to afford fewer aspirin. D) an increase in the price of aspirin will cause headache sufferers to look for a lower priced remedy. 29-Cupcakes and granola bars are substitutes in consumption. The price of a granola bar increases so the demand for: A) Granola bars will increase, that is, the demand curve will shift rightward. B) Cupcakes will increase, that is, the demand curve will shi rightward. C) Granola bars will decrease, that is, the demand curve will shi leftward. D) Cupcakes will decrease, that is, the demand curve will shift leftward. 30-1f real interest rates in the United States are higher than those of our trading partners, what will tend to happen to the foreign exchange value of the dollar and the U.S. current account deficit or surplus? A) The dollar will depreciate; the current account will move toward a deficit. B) The dollar will depreciate; the current account will move toward a surplus. C) The dollar will appreciate; the current account will move toward a deficit. D) The dollar will appreciate; the current account will move toward a surplus. 31- Alcoa had a monopoly in the US. aluminum market from the late nineteenth century until the end of World War 11. Which barrier to entry was the source of Alcoa's monopoly power? A) Ownership of a vital resource. B) Government franchises and licenses. C) Patents and copyrights. D) Economies of scale