1.Imagine Firm A has an absolute advantage in cereal production over Firm B. If both firms are producing 10 boxes of cereal an hour, what is true about the marginal cost of the 11th box of cereal?
The marginal cost is lower for Firm A than Firm B
2. Fill in the blank. The gains from trade enables _______________ the production possibility frontier.
Consumption outside
3. Which of the following statements best describes the implications of comparative advantage?
Import goods if the opportunity cost of importing is lower than the cost of producing them locally
4. Country A has a comparative advantage over Country B in the production of corn if ____________.
the opportunity cost of producing corn is lowest in Country A
5. Complete the sentence with the most suitable pairs of words: (1) is the only sustainable way to consume outside the PPF curve and (2) allows us to shift the PPF curve outward in the long run.
Trade (1); technology (2)
6. Which of these determines the location of the production possibilities frontier?
All of these answers
7. Imagine Russia exports lumber to Norway. Which of the following describes the price that Norway pays for this lumber?
It is above Russia’s and below Norway’s opportunity cost of producing lumber
8. There are two goods (bread and shirts) and two factors of production (labor and capital). Bread is capital-intensive, while shirts are labor-intensive. Country A is abundant in labor; Country B is abundant in capital. Under free trade, which is true?
Country A will export shirts, while country B will export bread.
9. Which of the following is an example of an automatic fiscal policy stabilizer?
Decrease in tax revenues as real GDP decreases
10. What describes a cyclically balanced budget?
Runs a surplus in boom years and a deficit in lean years, and balanced over the economic cycle
11. According to economic theory, wages are correlated with _____________.
the marginal revenue product of labor
12. Which of these is true about the backward-bending supply curve of labor theory?
At low wage levels the substitution effect dominates the income effect
13. A competitive employer will hire additional labor as long as:
MRPL exceeds the wage rate
14. Imagine that a newspaper that employs five journalists is able to publish 50 articles a week. It then hires a sixth journalist and its production increases to 54 articles per week. What is the marginal product of labor?
4 articles
15. A worker takes a position in a dangerous area and receives hazard pay. This is an example of which of the following wage differentials?
Compensating differential
16. Which of the following could shift a firm’s labor demand curve?
All of these answers
17. What is the future value of $105 invested for one year at 7%?
$112
18. If a sum of money is invested for one year at 9% interest, it’s value will be $120. What is the present value of this investment?
$110
19. Which of the following is equivalent to the marginal revenue product of labor?
The marginal product of labor multiplied by the price of output
20. At equilibrium, an additional unit of capital increases output by 30 and is associated with additional $300 in labor cost. If the wage rate is $20/hour, what is the marginal product of labor?
2 units of output
21. Which of the following does NOT describe a difference between discretionary policy and automatic stabilizers?
One focuses on minimizing fluctuations in real GDP, the other does not.
22. If the interest rate is 5% and a firm issues a five year bond for $1,000, approximately how much will the firm repay at the end of the five years?
$1,282
23. Economic efficiency occurs when all trading partners _____________.
specialize in the area(s) where they have a comparative advantage
24. Which of the following could shift a firm’s labor demand curve?
All of these answers
25. A firm sells boxes of cereal for $5 each. With 20 workers the firm produces 80 boxes an hour, and with 21 workers it produces 82 boxes an hour. If the firm has 21 workers at the competitive equilibrium, what is the MRPL and what is the wage rate?
$10; $10
26. If the demand for labor increases and the supply of labor remains unchanged, what will happen to the wage rate?
Wages will increase
27. A factory is an example of which type of factor of production?
Capital
28. How do automatic stabilizers dampen economic fluctuations?
Stabilizers increase demand during recessions and decrease demand during booms
29. Which of the following is a way government can “crowd-out” private investment?
All of these answers.
30. Which of the following is a possible contributor to racial wage differentials?
All of these answers
31. Which of the following is NOT a benefit from international trade?
Increased comparative advantage
32. What is the major function of financial intermediaries?
All of these answers
33. Which of these statements best establishes the relationship between risk and return on investment?
The higher the risk, the higher the expected return
34. Which of the following is a financial intermediary?
All of these
35. How will an increase in wages impact the supply of labor, ceteris paribus?
The quantity supplied will increase, as depicted as a movement along the supply of labor curve.
36.During recessions, government spending automatically ___________ and government revenue automatically _________.
increases; decreases
37. What is the primary activity of unions?
Negotiating
38. Which of the following is a possible contributor to racial wage differentials?
All of these answers
39. Which of these may be a topic of collective bargaining between a union and an employer?
All of these answers
Other Links:
See other websites for quiz:
Check on QUIZLET