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Final Exam Practice 2.docx
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Final_Exam_Practice_2.docx-Final Exam Practice 2 Multiple Choice
Final Exam Practice 2.docx-Final Ex...
Final_Exam_Practice_2.docx-Final Exam Practice 2 Multiple Choice
Page 1
Final Exam Practice 2
Multiple Choice
Identify the choice that best completes the statement or answers the question.
1. Senator Noitall says that in order to help poor countries develop, the United States should: 1. Prevent U.S.
corporations from investing in poor countries because they take profits that the poor countries should have;
2. Not import goods from poor countries that use child labor; 3. Work to promote political stability in poor
countries; and 4. Reduce poor countries’ reliance on market forces in their economies. How many of these
ideas are likely to help poor countries grow?
a.
1
b.
2
c.
3
d.
4
2. Country A and country B are the same except country A currently has a lower level of capital. Assuming
diminishing returns, if both countries increase their capital by 100 units and other factors that determine
output are unchanged, then
a.
output
in country
A
increases by
more
than
in
country
B.
b.
output in country A increases by the same amount as in country B.
c.
output in country A increases by less than in country B.
d.
None of the above is necessarily correct.
3. Which of the following could be a consequence of a depreciation of the U.S. real exchange rate?
a.
John, a French citizen, decides that Iowa pork has become too expensive and cancels
his order.
b.
Nick, a U.S. citizen, decides that the trip to Nepal he’s been thinking about is now
made affordable by the depreciation.
c.
Roberta,
a
U.S.
citizen,
decides
to
import fewer
windshield
wipers
for
her
auto
parts
company.
d.
All of the above are correct.
4. The theory of purchasing-power parity primarily explains
a.
why trade deficits tend to move to zero over time.
b.
how foreign prices affect domestic prices.
c.
the
determination
of
the
real
exchange
rate.
d.
why a change in the real exchange rate changes a country’s net exports.
5. An externality
a.
results
in
an
equilibrium
that
does
not
maximize
the
total
benefits
to
society.
b.
causes demand to exceed supply.
c.
strengthens the role of the “invisible hand” in the marketplace.
d.
affects buyers but not sellers.
Figure 10-2.
The graph depicts the market for plastic.
Page 2
8.5
8
7.5
7
6.5
6
5.5
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
200
500
65
0
Quantity
6.
Refer to Figure 10-2.
Suppose that the production of plastic creates a social cost which is depicted in the
graph above. Without any government regulation, what price will the firm charge per unit of plastic?
a.
$3
b.
$3.50
c.
$5
d.
$8
Table 10-1
The following table shows the private value, private cost, and external cost for various quantities of output in
a market.
Quantity
Private Value
Private Cost
External Cost
1
$14
$10
$2
2
13
11
2
3
12
12
2
4
11
13
2
5
10
14
2
6
9
15
2
7
8
16
2
7.
Refer to Table 10-1.
What is the equilibrium quantity of output in the market?
a.
2 units
b.
3
units
c.
4 units
d.
5 units
8. Negative externalities occur when one person's actions
a.
cause another person to lose money in a stock market transaction.
b.
cause his or her employer to lose business.
Price
Social
Cost
Private
Cost
Deman
d
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