I. True or False1. Profit equals marginal revenue minus marginal cost. F2. Accountants often ignore implicit costs. T3. The increase of price makes the demand increase. F4. Diminishing marginal productivity implies decreasing total product F5. A monopolist maximizes profit by producing an output level where marginal cost equals price. F6. If the nominal interest rate is 8% and the inflation is 3.5%. The real interest rate is 4.5% T7. Buying stocks, bonds and the other financial assets is investment T8. The rate of change in the GDP deflator measures the change in prices of fixed basket of goods. F9. The CPI contains the price of imported goods while the GDP deflator only contains prices of domestic goods. T10. A rise in the price of imports will not be reflected in the GDP deflator. T11. A mother who has left work to bring up a child or someone entering higher education would not be classed as unemployed as they are not actively seeking employment. T12. In order to increase the money supply, FED will sell government bond. T13. In long-run, Aggregate Supply Curve slopes upward. T14. A profit- maximizing firm in a competitive market will increase production when average revenue exceeds marginal cost. F15. In competitive markets, firms that raise their prices are typically rewarded with larger profits. F16. A popular resort restaurant will maximize profits if it chooses to stay open during the less-crowed "off season" when its total revenue exceed its variable costs. F17. Because there are many buyers and sellers in a perfectly competitive market, no one seller can influence the market price. T18. "The more taxes imposed, the less people use cigarette" is a positive statement. T19. The marginal cost curve of firms in competitive market is the supply curve of them. T20. The monopolists have no supply curve. TII. Multiple choices1. A country country's trade balance A. must be zeroB. must be greater than zeroC.is greater than zero only if exports are greater than importsD. is greater than zero only if imports are greater than exports.2. Which of following both raise net exports?A. Exports rise, imports riseB. Exports rise, imports fallC. Imports rise, exports riseD. Imports rise, exports fall3. For a firm in a perfectly competitive market, the price of the good is alwaysA. Equal to marginal revenueB. Equal to total revenueC. Greater than average revenueD. Equal to the firm's efficient scale of output4. Which of the following would be considered a topic of study in microeconomics?A. The effect of changes in saving rates on GDPB. The impact of minimum-wage laws on employment in the fast-food industryC. The impact of monetary policy on the rate of inflationD. The effect of tax policy on the rate of economic growth5. An industry is a natural monopoly wheni. The government assists the firm in maintaining the monopolyii. A single firm owns key resourceiii. a single firm can supply a good or service to an entire market at a smaller cost than could 2 or more filmsA.ii onlyB. iii onlyC. i and ii onlyD. ii and iii only6. A demand curve is theA. curve that relates income with quantity demanded.B. upward-sloping line relating price with quantity supplied.C. downward-sloping line relating the price of the good with the quantity demanded.D. none of the above answers is correct.7. If a good is normal, then an increase in income will result inA. a lower market priceB. a decrease in the demand for the goodC. an increase in the demand for the goodD. no change in the demand for the good

8. According to the graph, at the equilibrium price,A. 20 units would be supplied and demanded.B. 40 units would be supplied and demanded.C. 60 units would be supplied and demanded.D. 60 units would be supplied, but only 20 would be demanded.9. According to the graph, at a price of $7,A. a surplus would exist and the price would tend to rise.B. a surplus would exist and the price would tend to fall.C. the market would be in equilibrium.D. a shortage would exist and the price would tend to fall10. The price of mocha latte at Starbucks increases from 3$ to 5$ per cup. The quantity sold falls from 15 to 5 cups per hours. The elasticity of demand isA. 3B. 2C. -2D. -311. Suppose a producer is able to separate customers into two groups, one having a price inelastic demand and the other having a price elastic demand. If the producers objective is to increase total revenue, she shouldA.charge the same price to both groups of customers.B.increase the price for both groups of customers.C.increase the price charged to customers with the price elastic demand and decrease the price charged to customers with the price inelastic demand.D.decrease the price charged to customers with the price elastic demand and increase the price charged to customers with the price inelastic demand.12. Suppose that an increase in the price of carrots from $1.20 to $1.40 per pound raises the amount of carrots that carrot farmers are willing to supply from 1.2 million pounds to 1.6 million pounds. Using the midpoint method, what would be the elasticity of supply?A.0.50B.0.54C.1.86D.2.0013. Exchange rates are 1200 yen per dollar, 0.8 euro per dollar, and 10 pesos per dollar. A bottle of beer in New York costs 6 dollars, 1200 yen in Tokyo, 50 pesos in Canon. Where is the most expensive and the cheapest beer that order?A. Cancun, New YorkB. New York, TokyoC. Tokyo, CancunD. Munich, NewYork14. When we want to measure and record economic value, we use money as theA. Liquid assetB. Medium of exchangeC. Unit of accountD. Store of value15. The discount rate isA. The rate at which public banks lend to other public banks.B. The rate at which the Central bank lends to banks. C. The percentage difference between the face value of a Treasury bond and what the Fed pays for it.D. The percentage of deposits banks hold as excess reserves.16. If the GDP deflator is 150 and the nominal GDP is $9000 billion, then the real GDP isA. $135 billionB. $1350 billionC. $600 billionD. $6000 billion17. Which of the following lists 2 things that both increase the money supply?A. raise the discount rate, make open market purchasesB. raise the discount rate, make open market salesC. lower the discount rate, make open market purchasesD. lower the discount rate, make the open market sales.18. Unemployment data is collected A. from firms and unemployment insurance claimsB. through a regular survey of about 60000 householdsC. from payroll data received for tax purposesD. None of the above is correct19. Who is price taker in a competitive marketA. buyers onlyB. sellers onlyC. both buyers and sellersD. Neither buyers nor sellersThe demand and supply schedules for wheat in a free market are as follow:Price per tonne ( $)120160200240280320360400

Tonnes demanded per week725700675650600550500425

Tonnes demanded per week22530040050060075010001300

20. Refer to this table. What is the equilibrium price?A. 280B.160C. 200D. 40021. Refer to the table above. Suppose the government fixes a maximum price of 200 per tonne. What will be the effect?A. SurplusB. ShortageC. Nothing happenD. Neither surplus nor shortage22. When the Fed increases the discount rate, banks will borrow A. less, banks will lend more, and the money supply will decrease.B. less, banks will lend less, and the money supply will decrease.C. more, banks will lend more, and the money supply will increase.D. more, banks will lend less, and the money supply will decrease.23. Which of the following is an example of U.S Foreign direct investment?A. A Swedish car manufacturer opens a plant in TennesseeB. A Dutch citizen buys shares of stock in a U.S companyC. A U.S based restaurant chain opens new restaurants in ChinaD. A U.S citizen buys stock in companies located in Japan.24. Which of the following is an example of U.S foreign portfolio investment?A. Toni, a U.S citizen, buy bonds issued by a Swedish corporationB. Randall, a U.S citizen, opens the cheesecake factory in ItalyC. Both A and B are examples of U.S portfolio investmentD. Neither A nor B are examples of U.S portfolio investment25. If the exchange rate is 125 yen = $1, a bottle of rice wine that costs 2500 yen costsA. $ 20B. $ 25C. $ 22D. None of the above is correct.26. The basket of goods in the consumer price index changesA. occasionally, while the basket of goods in the GDP deflator changes each time it is computed.B. each time it is computed, while the basket of goods in the GDP deflator changes occasionallyC. occasionally, as does the basket of goods in the GDP deflator.D. each time it is computed, as does the basket of goods in the GDP deflator.27. Babe Ruth's1931 salary was $80000. The price index for 1931 is 15.2 and the price index for 1999 is 166. Ruth's salary was equivalent to a 1999 salary of aboutA. $8700B. $87000C. $870000 D. $870000028. A COLA automatically raises the wage rate when A. real GDP increasesB. the labor force increasesC. taxes increaseD. The consumer price index increases29. Which of the following people is counted as employed according to official statistics?A. Nancy, who is on temporary layoffB. Gary, who has retired and is not looking for workC. Brian, a full- time student who is not looking for workD. All of the above are correct30. Suppose a stock market crash makes people feel poorer. This decrease in wealth would cause people to A. decrease consumption, which shifts aggregate supply left.B. decrease consumption, which shifts aggregate demand left.C. increase consumption, which shifts aggregate supply right.D. increase consumption, which shifts aggregate demand right.31. For a monopoly firm, which of the following equalities is always true?A. Price=Marginal revenueB. Price=Average revenueC. Price= Total revenueD. Marginal revenue= marginal cost32. Transfer payments areA. inclued in GDP because they represent income to individuals B. not included in GDP unless they represent unemployment compensationC. included in GDP because the income will be spent for consumptionD. not included in GDP because they do not represent payments for currently produced goods or services.33. When the consumer price index rises, a typical familyA. can spend fewer dollars to maintain the same standard of livingB. finds that its standard of living is not affectedC. has to spend more dollars to maintain the same standard of livingD. none of the above answers is necessarily correct.

Gallo Cork FactoryNumber of WorkersNumber of MachinesOutput(Corks produced per hour)Marginal Product of LaborCost of workersCost of machinesTotal Cost

125512$40$52$

22101024$40$64$

32201536$40$76$

42352048$40$88$

52551550$40$90$

62701072$40$112$

728084$40$124$

Table 13-4Refer to Table 13-4. Each worker at Gallo's factory costs 12 per hour. The cost of each machine is $20 per day regardless of the number of corks produced34. If Gallo's produces at a rate of 70 corks per hours and operates 8 hours per day, what is Gallo's total cost per day?A. $72B. $112C. $576D. $61635. If Gallo's produces at a rate of 78 corks per hour, what is the total machine cost per day?A. $20B. $40C. $240D. We are unable to determine total machine costs from the information given36. If Gallo's produces at a rate of 35 corks per hour, what is the total labor cost per hour?A. $40B. $48C. $384D. $42437. Assume Gallo's currently employs 5 workers. What is the marginal product of labor when Gallo's adds a 6 worker?A.5 corks/hourB.15 corks/hourC.25 corks/hourD.70 corks/hour38. Suppose we are analyzing the market for hot chocolate. How the equilibrium price and equilibrium quantity would change if the price of tea, a substitute for hot chocolate, falls.A. Price fall, quantity fallsB. Price rise, quantity raisesC. Prices fall, quantity raisesD. Price rise, quantity fall.III. Karaoke Machines CDs Quantity Price Quantity Price 2011 10 $40 30 $10 2012 12 60 50 1239. Using a method similar to the consumer price index, compute the percentage change in the overall price level. Use 2011 as the base year, and fix the basket at 1 karaoke machine and 3 CDs.Percentage change in overall price level : (CPI 2012 CPI2011)/CPI2011 * 100% = 31,7% 40. Using a method similar to the GDP deflator, compute the percentage change of the overall price level. Also use 2011 as the base year.No GDP 2011 = 700$, Real GDP 2011 = 700$No GDP 2012= 1320$, Real GDP 2012= 980$ Deflator 2011= 100 Deflator 2012= 134,7 Price of lv change = 34,7 %