ECON1131 Midterm: Erbil_MicroExam2_StudyGuide.docx

what is a key factor that determines a firm's profitability?

A differentiation of a firm's product from other products

B factors affecting a firm's entire market

C a firm's average cost of production relative to that of competing firms

D chance events

E all of the above

economic theory suggests countries benefit from international trade by producing more of those good and services for which they have a comparative advantage (and less of that for which a country does not have a comparative advantage). However, countries rarely specialize completely, why?

even with international trade, countries rarely specialize completely because

A, all goods and services can be traded internationally

B, some countries would lose as a result of free trade

C, consumers in different countries have homogeneous tastes

D, some countries do not have an absolute advantege producing anything

E, production of most goods involves increasing opportunity costs.

31. A country's tax system influences the attractiveness of investing in that country and affects the relative level of profitability for an MNC.

a. True

b. False

32. Points inside a production possibilities frontier represent

a. unattainable production combinations

b. efficiency

c. situations where supply exceeds demand

d. unemployment of resources

33. Firms in a high-wage nation like the U.S. can compete effectively with imports from low-wage nations if

a. the U.S. reduces tariffs on imports

b. low-wage nations impose tariffs on U.S. made goods

c. labor productivity is higher in the low-wage nation

d. labor productivity is higher in the U.S.

34. Assume that production in the United States is valued at $100,000. National income is therefore $100,000. Of their income, workers save $2000, pay $6,000 in taxes, spend $89,000 on consumer goods, and spend $2000 on imports. Businesses spend $5,000 in new investment spending. And, foreigners spend $1000 on exports. To avoid any problems of inflation or unemployment, the government should have a budget deficit or surplus of:

a. $2,000 surplus

b. $1,000 deficit

c. $2,000 deficit

d. $1000 surplus

e. $0 deficit

35. Autarky means-----------------------------------------------------------------

a. the absence of government

b. lack of agriculture

c. self-sufficient, in the absence of international trade

d. short of exchange rates

36. The more people there are----------------------, the less the public as a whole will spend on goods and services.

a. unemployed

b. underemployed

c. employed

d. as discouraged workers

37, Which of the following theories holds that countries will produce and export products that use large amounts of production factors that they have in abundance?

a. Mercantilism

b. The theory of absolute advantage

c. The factor endowment theory

d. None of the above.

38. Suppose that a consumer has a marginal propensity to consume of 0.79. If this consumer earns an extra $1220, her saving would be expected to increase by-----------------------------

39. Many countries in Asia, Africa, and South America-----------------------

a. Are developing countries

b. Are industrialized nations

c. Have a high demand for nonessential products

d. Do not trade

40. Which two of the following are regarded as the main aims of the World Trade Organization (WTO)?

a) To eliminate discrimination in world trade

b) To provide financial assistance to countries with debt

c) To reduce tariff barriers

d) To make infant industry protection illegal

e) To help give preferences to smaller economies

b) and e) a) and c) a) and d) c) and e) b) and d)

41. Last year Sophia's nominal income increased by 12% while the price level rose by 5.5%. Consequently, Sophia's real income:

a. rose by approximately 7%

b. fell by approximately 1%

c. rose by approximately 2%

d. ------------------------------------

42. Consumer surplus

a. is always positive.

b. for a particular unit of consumption is computed by taking the difference between quantity demand and quantity supplied.

c. for all units consumed is the area below demand and below market price over all the units consumed.

d. added to producer surplus provides a measure of the net gain to society from the production and consumption of the good.

43. A decline in Real GDP for six or more consecutive months is called-------------------------------

a. A trough

b. A recession

c. An expansion

d. A recovery

44. What do we call the situation where capital grows faster than the labor force?

a. economic growth

b. technological change

c. productivity growth

d. capital deepening

45. The terms of trade are-------------------------------------------

a. the cost of transportation between countries

b. the ratio of wages in two countries

c. the terms which are used in the trade negotiations

d. the rate at which two products can be exchanged

A bowed out PPF reflects which of the following ideas?

i.increasing opportunity cost

ii. resources are not equally productive in all activities

iii. prices of goods increase over time

1 point

QUESTION 2

With no international trade, a country ________ consume at a point outside of its PPF; with international trade, a country ________ consume at a point outside of its PPF.

1 point

QUESTION 3

If the production possibilities frontier between two goods is a straight line, then the

1 point

QUESTION 4

As an economy produces more of one of the goods on a bowed out production possibilities frontier, what happens to the opportunity cost of producing the good?

1 point

QUESTION 5

"Comparative advantage" is defined as a situation in which one person can produce

1 point

QUESTION 6

When a production possibilities frontier is bowed outward, as more of one good is produced, its opportunity cost

1 point

QUESTION 7

A bowed out production possibility frontier shows that the

1 point

QUESTION 8

Which of the following statements is correct?

1 point

QUESTION 9

A major earthquake occurs in the central part of the United States. What impact would this have on the nation's production possibilities frontier and why?

1 point

QUESTION 10

When a nation is producing on its production possibilities frontier, if more resources are used to produce one good, then the production of other goods

1 point

QUESTION 11

Moving along a country's PPF, a reasonable opportunity costs increase is that

1 point

QUESTION 12

A reason the production possibilities frontier exists is

1 point

QUESTION 13

Moving from one point to another on a production possibilities frontier implies

1 point

QUESTION 14

Specialization and trade make a country better off because with trade the country can consume at a point

1 point

QUESTION 15

The production possibilities frontier is the

1 point

QUESTION 16

The opportunity cost of economic growth is ________ and the benefit of economic growth is ________.

1 point

QUESTION 17

In terms of a nation's production possibilities frontier, what impact does international trade have?

1 point

QUESTION 18

The production possibilities frontier illustrates the

1 point

QUESTION 19

As we move along the production possibilities frontier,

1 point

QUESTION 20

What is the opportunity cost of economic growth?

1 point

QUESTION 21

Which of the following statements is correct?

i.As the economy grows, the opportunity costs of economic growth decrease.

ii. Economic growth has no opportunity cost.

iii. The opportunity cost of economic growth is current consumption forgone.

1 point

QUESTION 22

Does economic growth depend upon which of the following?

i. Increasing the quantity of labor.

ii. Lowering the prices of goods and services.

iii. Advancing technology.

1 point

QUESTION 23

When drawing a production possibilities frontier, which of the following is held constant?

1 point

QUESTION 24

To increase its economic growth, a nation should

1 point

QUESTION 25

The opportunity cost of one more slice of pizza in terms of sodas is the