Basic Economics
Midterm Exam
Course Introduction
Basic Economics introduces students to the fundamental principles and concepts underlying the functioning of modern economies. The course covers key topics such as supply and demand, market structures, the role of government in the economy, the basics of macroeconomic and microeconomic theory, and the factors influencing economic decision-making by individuals and businesses. Through real-world examples and problem-solving exercises, students develop an understanding of how economic agents interact, how markets operate, and how scarce resources are allocated to fulfill unlimited wants. This foundational course equips students with analytical tools necessary for informed economic reasoning and decision-making in both personal and professional contexts.
Recommended Textbook
Economics 10th Edition by Stephen Slavin
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Page 2
Chapter 1: A Brief Economic History of the United States
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Sample Questions
Q1) The Great Depression began in
A)the second half of 1929.
B)the middle of 1930.
C)early 1932.
D)march 1933.
E)may 1937.
Answer: A
Q2) The Age of the great industrial capitalist was
A)the last quarter of the 18th century.
B)the first quarter of the 19th century.
C)the second quarter of the 19th century.
D)the third quarter of the 19th century.
E)the fourth quarter of the 19th century
Answer: E
Q3) The South's economy was based on production of
A)iron,steel and textiles.
B)corn,wheat and soybeans.
C)tobacco,cotton and rice.
D)iron,wheat and cotton.
Answer: C
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Chapter 2: Resource Utilization
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Sample Questions
Q1) According to the law of increasing costs,as the United States expends more of its resources on reducing air pollution,
A)the quantity of other goods that must be given up for further reductions in air pollution will decrease.
B)the quantity of other goods that must be given up for further reductions in air pollution will increase.
C)the social cost of additional air pollution will increase.
D)there will be no change in the marginal cost of reducing air pollution.
Answer: B
Q2) Referring to a production possibilities curve and the goods being compared,depict the economic event.Millions of immigrants came to the United States in the second half of the 19th century to work on the transcontinental railroad (capital goods vs.consumer goods).
A)A movement from a point inside the curve to a point on or near the curve
B)A movement from a point on or near the curve to a point inside the curve
C)A shift in the entire curve to the right (outward)
D)A shift in the entire curve to the left (inward)
E)A movement along the curve
Answer: C
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Page 4
Chapter 3: The Mixed Economy
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Sample Questions
Q1) The government uses two measures,_____________________________ regulations and ____________________________ regulations to curb pollution.
Answer: command-and-control;incentive-based
Q2) A $3 increase in the federal gasoline tax would
A)reduce air pollution.
B)very likely be voted for by most Representatives and Senators.
C)convince many Americans to buy SUV's.
D)have little effect on the number of miles driven.
Answer: A
Q3) Modern mixed economies
A)generally alter the outcome of market processes in a manner that is believed to be in the social interest.
B)attempt to redistribute income to make the distribution of income more equitable. C)rely on the government as well as the market to effect the distribution of goods and services.
D)undertake all of the actions listed.
Answer: D
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Chapter 4: Supply and Demand
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Sample Questions
Q1) Price ceilings keep market price
A)above the equilibrium price and create surpluses.
B)above the equilibrium price and create shortages.
C)below the equilibrium price and create surpluses.
D)below the equilibrium price and create shortages.
Q2) What happens to quantity demanded when price is lowered?
A)It rises
B)It falls
C)It stays the same
D)It cannot be determined if it rises,falls,or stays the same
Q3) When the market price is above equilibrium price,the market price will be driven
A)up by buyers.
B)up by sellers.
C)down by buyers.
D)down by sellers.
Q4) When demand falls and supply stays the same,equilibrium price ______ and equilibrium quantity ________.
Q5) Equilibrium price is _____.
Q6) The supply curve displays the wishes of _____________.
Q7) The supply curve slopes or curves _____.
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Chapter 5: The Household Consumption Sector
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Sample Questions
Q1) Saving is negative when disposable income is less than A)2000.
B)3000.
C)4000.
D)5000.
E)6000.
Q2) The lunch you buy in your school cafeteria is classified as A)a consumer durable.
B)a consumer nondurable.
C)a service.
D)either a consumer nondurable or a service because it fits into both categories.
Q3) Saving is negative below a disposable income of A)0.
B)1500.
C)2000.
D)2500. E)3000.
Q4) The term "conspicuous consumption" was coined by ___________________.
Q5) How much is the MPS?
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Chapter 6: The Business Investment Sector
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Sample Questions
Q1) During periods of time when a corporations is earning large returns,the increased value of the firm accrues to
A)common stockholders
B)bondholders
C)management
D)preferred stockholders
Q2) Statement I.Inventory investment can be negative. Statement II.Inventory investment in the U.S.fluctuates a great deal from one year to the next.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Q3) How much is its capitalization?
Q4) If a group of investors wanted to gain control of a publicly held corporation,it would buy that corporation's ________.
Q5) The quest for __________ drove many Europeans to the United States during the 19<sup>th</sup> century.
Q6) A firm that invests its own funds incurs an _________ cost.
Page 8
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Chapter 7: The Government Sector
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Sample Questions
Q1) Most sales taxes are ___________;most excise taxes are _________.
A)progressive,progressive
B)regressive,regressive
C)progressive,regressive
D)regressive,progressive
Q2) Presidents _____________ and _____________ will go down in history as the two greatest tax cutters.
Q3) Statement I: The payroll tax and the Social Security tax are not identical.
Statement II: The wage base for the Social Security tax is raised each year to keep pace with inflation.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Q4) The highest marginal tax bracket today for the federal personal income tax is _____ percent.
Q5) Because of the Great Recession of 2007-2008,we are currently collecting _________ per year in social security funds than we are distributing to recipients.
Q6) We spend _____ of our GDP on foreign aid.
Page 9
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Chapter 8: The Export-Import Sector
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Sample Questions
Q1) Prominent among the protesters at the WTO meeting in Seattle in late 1999 were these three groups: (1)_________________; (2)__________________; (3)___________________.
Q2) Recently we have run a _________ balance of trade on goods and a ___________ balance of trade on services.
Q3) Statement I: Adam Smith believed the key to wealth for a nation was self-sufficiency.
Statement II: Adam Smith believed what made sense in the conduct of a private family's economic endeavors also made sense for those of a nation.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Q4) The big increase in the U.S.trade deficit in the mid-1970s was mainly due to __________.
Q5) International trade is ________ important to the Netherlands than it is to the United States.
Q6) If exports exceeded imports it would be called a trade _________.
Q7) Hourly wages and fringe benefits average about _______ an hour in Mexico.
Page 10
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Chapter 9: Gross Domestic Product
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Sample Questions
Q1) National income accountants can avoid multiple accounting by
A)including transfers in their calculations.
B)counting both intermediate and final goods.
C)only counting final goods.
D)only counting intermediate goods.
Q2) If net investment were negative,then depreciation would be greater than ___.
Q3) GDP is $7 trillion.If consumption is $4.2 trillion,investment is $1.4 trillion,and government purchases are $2.1 trillion,then
A)exports are equal to imports.
B)exports exceed imports by $0.7 trillion.
C)imports exceed exports by $0.7 trillion.
D)exports are equal to $0.7 trillion.
Q4) Under what conditions would real GDP increase more than nominal GDP?
A)Price inflation
B)Rapidly increasing interest rates
C)Price deflation
D)A major decline in the stock market
Q5) The two things we want to avoid doing when compiling GDP is _____ and including ___.
Q6) As long as there is some inflation,GDP will rise _____ than real GDP.
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Chapter 10: Economic Fluctuations, unemployment, and Inflation
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Sample Questions
Q1) Statement I: When the unemployment rate is 7% there is some cyclical unemployment.
Statement II: Most of the unemployed are collecting unemployment insurance benefits.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Q2) The business cycle dating committee determines when peaks and troughs occur by looking at
A)mainly at real GDP figures.
B)mainly at the unemployment rate.
C)data from our economy and comparing it to data from other major nations.
D)mainly at employment,industrial production,personal income,and manufacturing and trade revenue.
Q3) If the Consumer Price Index decreases,who will be harmed?
A)Savers
B)Creditors
C)Debtors
D)Savers and creditors
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Chapter 11: Classical and Keynesian Economics
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Sample Questions
Q1) An increase in aggregate demand in the classical range of the aggregate supply curve will
A)increase the price level,but not affect the real domestic output.
B)increase real domestic output,but not affect the price level.
C)decrease both real domestic output and the price level.
D)increase both real domestic output and the price level.
Q2) The interest rate effect states that ____________.
Q3) When the economy is in the Keynesian range,an increase in aggregate demand will increase _____ without increasing ____.
Q4) At equilibrium GDP
A)Savings = investment,but aggregate demand does not equal aggregate supply.
B)Savings = investment and aggregate demand = aggregate supply.
C)Savings does not equal investment and aggregate demand does not equal aggregate supply.
D)Savings does not equal investment,but aggregate demand = aggregate supply.
Q5) Full employment GDP is the level of spending ___________.
Q6) Manufacturing employment in the United States went from ________ percent of our work force in 1979 to _______ percent today.
Q7) The centerpiece of classical economics is ____.
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Chapter 12: Fiscal Policy and the National Debt
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Sample Questions
Q1) Governmental assistance to the unemployed
A)was advocated by classical economists.
B)is taxed as regular income by the federal government.
C)is opposed by Keynesian economists.
D)was abolished under the 1986 Tax Reform Act.
E)may increase unemployment because it enables the jobless to take more time to look for employment.
Q2) Which of the following can be called a "crowding-out" effect?
A)Government borrowing crowds out private saving.
B)Exports crowd out government borrowing.
C)Government borrowing crowds out private investment.
D)Private consumption crowds out private investment.
Q3) If full employment GDP is greater than equilibrium GDP there is
A)an inflationary gap.
B)a deflationary gap.
C)both an inflationary gap and a deflationary gap.
D)neither an inflationary gap nor a deflationary gap.
Q4) In the event of a recession,the fiscal policy measures favored by most liberals would involve _______.
Q5) Is this an inflationary gap or a recessionary?
Page 14
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Chapter 13: Money and Banking
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Sample Questions
Q1) Interstate banking
A)used to be legal but is now illegal.
B)used to be illegal but is now legal.
C)is illegal today and has always been illegal.
D)has always been legal.
Q2) Statement I: Over 99% of all banks are members of the FDIC.
Statement II: The savings and loan debacle had its origins in the late 1980s.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Q3) The largest United States bank in 2010 was
A)BankAmericA.
B)Citigroup.
C)J.P.Morgan Chase.
D)Security Pacific.
Q4) The opportunity cost of holding money varies with the _________.
Q5) A goldsmith with 100 gold coins in his safe and 100 receipts in circulation has a reserve rate of ________%.
Q6) Money is channeled from savers to borrowers by banks and other ______.
Page 15
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Chapter 14: The Federal Reserve and Monetary Policy
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Sample Questions
Q1) A money supply that expands when the economy is growing rapidly and businesses need more money is known as an ______________.
Q2) From the late 1990s through the first 3 or 4 years of this decade,_____ has been caught in a liquidity trap.
Q3) A reduction in the required reserve ratio would cause the interest rates to
A)increase only if the level of investment is low relative to historic levels.
B)decrease.
C)increase.
D)increase only if the level of unemployment is high.
E)remain the same.
Q4) The discount rate is the interest
A)rate at which the central banks lend to the United States Treasury.
B)rate at which the Federal Reserve Banks lend to commercial banks and thrift institutions.
C)yield on long-term government bonds.
D)rate at which commercial banks and thrifts lend to the public.
Q5) How much is the interest rate on a bond that has a face value of $1,000,a selling price of $800,and pays $80 interest?
Q6) The reserve ratio is equal to required reserves divided by __________.
Page 16
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Chapter 15: A Century of Economic Theory
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Sample Questions
Q1) When the money supply is increased,what do monetarists expect to happen to the nominal or market rate of interest?
A)It will rise immediately.
B)It will fall in the short run,then rise in the long run.
C)It will rise in the short run,then fall in the long run.
D)It will fall and remain lower.
E)It will be unchanged.
Q2) During the 19<sup>th</sup> century,____ was the mainstream school of economics.
A)classical
B)Keynesian
C)monetarism
D)supply-side
E)rational expectationist
Q3) The _________ hypothesis is based on the assumption that the best indicator of the future is what has happened in the past.
Q4) In order to create economic expansion supply-siders propose to
A)cut tax rates.
B)encourage saving.
C)hasten deregulation.
D)All of the choices are correct.
Page 17
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Chapter 16: Economic Growth and Productivity
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Sample Questions
Q1) Spending on health care per capita in the United States is almost _________ that of other rich nations.
A)half
B)one-fourth Mozambique
C)twice
D)three times
Q2) The introduction of ____ had a long delayed effect on raising productivity growth in the late 1990s.
Q3) Which statement is FALSE?
A)Our average workweek has declined by more than one third since 1900.
B)Americans work more hours per year than workers in most other industrial nations.
C)The number of paid holidays enjoyed by American workers has increased since the 1950s.
D)American workers get more vacation time than workers in other industrialized nations.
Q4) As economic development progresses,eventually birth rates ____.
Q5) There are two basic ways to build up capital: (1)_____ and (2)____.
Q6) Between 1900 and the mid-1970s the average workweek fell from ____ hours to less than ____ hours.
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Chapter 17: Demand,supply,and Equilibrium
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Sample Questions
Q1) The market demand for most goods will
A)increase if the prices of substitutes fall.
B)decrease if the price of complementary goods fall.
C)increase if consumers expect prices to be higher in the future.
D)decrease if consumers expect the goods to become less available.
Q2) A shift in the supply curve for gasoline in the United States would result if
A)magnet-lift trains,that were capable of going 300-miles-per-hour,were built connecting all major cities in the AmericA.
B)the price of gasoline decreased.
C)a new method for drilling through rock opened up vast new oil reserves in Wyoming.
D)electric cars became inexpensive and popular.
Q3) As price rises,quantity demanded gets _______ and quantity supplied gets
A)larger;larger
B)smaller;smaller
C)larger;smaller
D)smaller;larger
Q4) If the price of DVD rentals doubles,the quantity demanded will _____ and the quantity supplied will ____.
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Chapter 18: The Price Elasticities of Demand and Supply
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Sample Questions
Q1) If a decrease in price leads to a decrease in total revenue,
A)demand is elastic.
B)demand is inelastic.
C)demand is unit elastic
D)there is not enough information to determine the elasticity of demand.
Q2) Total revenue will increase if price
A)rises and demand is elastic.
B)rises and demand is unit elastic.
C)falls and demand is inelastic.
D)falls and demand is elastic.
Q3) If the income elasticity for Ramen Noodles is -3.0,we may conclude that Ramen Noodles are _________.
A)a normal good
B)an inferior good
C)both a normal good and an inferior good
D)neither a normal good nor an inferior good
Q4) In the short run,the demand for gasoline today is
A)unit elastic.
B)very inelastic.
C)very elastic.
Page 20
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Chapter 19: Theory of Consumer Behavior
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Q1) The law of diminishing marginal utility states that as we consume increasing amounts of a good or service,________________________.
Q2) We are maximizing our utility when the marginal utility of each good or service we purchase is _________ to its price.
Q3) The additional utility derived from consuming one more unit of some good or service is called ___________.
Q4) The Adonis Tanning Salon is running a special this month of $1 a session.Lothario Goodman goes there 15 times,instead of his customary 5.
A)His consumer surplus is larger.
B)His consumer surplus is smaller.
C)His consumer surplus is the same.
D)It cannot be determined if his consumer surplus is larger,smaller,or the same.
Q5) Alfred Marshall discovered the concept of A)utility.
B)consumer surplus.
C)diminishing marginal utility.
D)the diamond-water paradox.
Q6) Total utility is at a ___________ when marginal utility is zero.
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Chapter 20: Cost
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Q1) Economies and diseconomies of scale explain
A)the distinction between fixed and variable costs.
B)why the firm's short-run marginal cost curve cuts the short-run average variable cost curve at its minimum point.
C)why the firm's long-run average cost curve is U-shaped.
D)the profit-maximizing level of production.
Q2) A firm will operate in the short run as long as it can cover its ______________.
Q3) Jimmy,Walter,Mike,and Bill run a school for political candidates.The school has fixed costs of $10 million,variable costs of $4 million,and total revenue of $15 million.In the short run the school will _____ and in the long run the school will ___.
A)operate;stay in business
B)operate;go out of business
C)shut down;stay in business
D)shut down;go out of business
Q4) Specialization and quantity discounts are examples of ________________.
Q5) If a firm that is losing money and that has variable costs of $2,000,000 continues to operate,we may conclude that its total revenue is _________.
Q6) As output rises,AFC gets _______________.
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Chapter 21: Profit, loss, and Perfect Competition
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Q1) Profit per unit is maximized when the difference between ________ and ________ is at a maximum.
Q2) The firm's most efficient level would be
A)100 units.
B)140 units.
C)160 units.
D)200 units.
Q3) If economic profits are $100,000 and implicit (or opportunity)costs are $60,000,how much are accounting profits?
Q4) Which of the following best describes perfect competition?
A)40 firms producing an identical product.
B)All firms earning an economic profit in the long run.
C)Many firms,some large and some small,with perfect knowledge.
D)Hundreds of very small firms,producing an identical product.
Q5) At an output of 8,MC = $27 and AVC = $32.At an output of 9,MC= $36 and AVC = $33.Estimate the AVC at the shutdown point.
Q6) A firm will operate if ________ is greater than _________;a firm will shutdown if ________ are greater than ________.
Q7) Profits are zero when __________ = ___________ = __________.
23
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Chapter 22: Monopoly
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Sample Questions
Q1) Patents function to
A)establish permanent monopolies.
B)temporarily protect monopoly power.
C)encourage firms to reduce output.
D)reduce monopoly power.
Q2) If the marginal cost were $14,output would be A)1.
B)2.
C)3.
D)4.
E)5.
Q3) The marginal revenue that would be derived from producing a fifth unit of output is
A)$18.
B)$16.
C)$14.
D)$12.
E)$10.
Q4) The market will limit monopoly power basically through the development of ________.
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Chapter 23: Monopolistic Competition
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Q1) Statement I: The absence of significant barriers to entry ensures that long run profits will be competed away for the monopolistic competitor.
Statement II: Providing better service,ambience,or a convenient location are all forms of price discrimination.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Q2) You could conclude that
A)new firms will enter the industry.
B)existing firms will leave the industry.
C)existing firms will continue to make a profit,even in the long run.
D)new firms will leave the industry.
Q3) Perfect price discrimination
A)would maximize consumer surplus.
B)would eliminate consumer surplus.
C)would have only a small effect on consumer surplus.
D)would have no effect on consumer surplus.
Q4) Peak efficiency _________ achieved under monopolistic competition.
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Chapter 24: Oligopoly
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Sample Questions
Q1) Which statement is true?
A)Industry X has a Herfindahl-Hirschman Index of 2400.
B)Industry X has an H-H-I of 100.
C)Industry X has an H-H-I of 80.
D)Industry X has an H-H-I of 1,000.
Q2) The demand curve facing an oligopoly will be less elastic
A)the larger its share of the market and the more differentiated the product.
B)the smaller its share of the market and the more differentiated the product.
C)the larger its share of the market and the less differentiated the product.
D)the smaller its share of the market and the less differentiated the product.
Q3) If the firm were a perfect competitor in the long run,what price would it charge?
Q4) This profit-maximizing firm's output is
A)OJ.
B)OK.
C)OL.
D)OM.
Q5) Collusion is most likely to succeed when there are ___________ firms in an industry.
Q6) Calculate the Herfindahl-Hirschman Index in this industry.
Page 26
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Chapter 25: Corporate Mergers and Antitrust
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Q1) Which is the most accurate statement?
A)We have never had corporate corruption until around the year 2000.
B)If you ask the average American if he believed all corporate officers were honest,he would answer "Yes."
C)Enron is the only large corporation that was caught up in a financial scandal since the 1980s.
D)Although it may be years before we know the full damages incurred,it seems very likely that the corporate financial scandals of recent years will end up costing those corporations and the public billions of dollars.
Q2) John D.Rockefeller was the leader of the _____ trust.
A)oil
B)whiskey
C)railroad
D)tobacco
Q3) The deregulation of the long distance trucking,long distance phone calling,banking,and the airline industries was carried out under Presidents ___________ and __________.
Q4) It can be argued that corporate concentration has been growing since the ___________ War.
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Chapter 26: Demand in the Factor Market
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Sample Questions
Q1) Total Revenue Product with six units of labor would be
A)$200.
B)$340.
C)$1,000.
D)$1,200.
Q2) The MRP is the additional ___________ obtained by using one more unit of input.
Q3) The demand for goods and services is called ____ demand,while the demand for resources is called ____ demand.
A)derived;derived B)final;final
C)final;derived D)derive;final
Q4) This producer
A)is a perfect competitor.
B)is an imperfect competitor.
C)could be either a perfect or imperfect competitor.
Q5) Is the firm a perfect competitor or an imperfect competitor?
Q6) The MRP schedule of the perfect competitor declines _____ than that of the imperfect competitor.
Q7) If the wage rate were $335,how many workers would be hired?
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Chapter 27: Labor Unions
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Sample Questions
Q1) The region of the country that is least hospitable to union organizing is the ___________.
Q2) Which is the most accurate statement?
A)Most strikes cause no economic disruption.
B)The job of a mediator is to impose a settlement.
C)Collective bargaining negotiations occasionally end with a strike.
D)The firm with the least ability to withstand a strike would be a manufacturing firm.
Q3) Compared to Italy,the U.S.has a ________ union membership percentage of its labor force.
Q4) Which union recently agreed to a 3-year wage freeze and the loss of 3,000 jobs in exchange for plant upgrades and limited imports?
A)The United Steel Workers
B)The United Automobile and Aerospace Workers
C)The International Association of Machinists and Aerospace Workers
D)The International Brotherhood of Electrical Workers
Q5) In a labor market,the monopsonist faces the entire ___________.
Q6) The airline pilots' union and the National Education Association are examples of ______ unions.
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Chapter 28: Labor Markets and Wage Rates
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Sample Questions
Q1) Markets in which a handful of top performers command the lion's share of total rewards has been called ____________________ markets by authors Robert Frank and Phillip Cook.
Q2) About 1 out of every ________ workers earns less than $9 an hour.
A)2
B)4
C)7
D)10
Q3) Which statement is true?
A)Virtually everyone agrees that the federal minimum wage rate should be raised.
B)Virtually everyone agrees that the federal minimum wage rate is currently too high.
C)Many people believe that the federal minimum wage rate is too high,while many others believe it is too low.
D)Most people agree that the federal minimum wage rate is just about at the right level.
Q4) Marlene Chow was paid $500 a week in 1999,the base year.By 2009 she was earning $1,000.If the consumer price index was at 125 in 2009,how much were Ms.Chow's real wages that year,and by what percentage had they changed?
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Chapter 29: Rent, interest, and Profit
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Sample Questions
Q1) Increases in capital stock are due to
A)increasing productivity
B)labor saving technology
C)investment
D)depreciation
Q2) The supply of loanable funds slopes upward to the _____________________.
Q3) Which value is higher? a)$1,000 today or b)$10,000 in 20 years if the interest rate is 12%.
Q4) Which of the following is false?
A)The supply of land is fixed.
B)When the demand for a plot of land rises,its supply will rise.
C)Land is most efficiently used in cities.
D)The rent on a particular piece of land is based on the MRP schedule of the highest bidder.
Q5) Statement I: Rents are high because prices are high.
Statement II: Rent on marginal land is very high.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Page 31
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Chapter 30: Income Distribution and Poverty
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Q1) The _____________ program of President Lyndon Johnson was designed to lift people out of poverty.
Q2) Which one of these groups has the highest poverty rate?
A)The elderly
B)Children
C)White males over 50
D)Working class women
Q3) In 2008 about __________% of all Americans lived above the poverty line.
A)12
B)38
C)52
D)72
E)87
Q4) In the 1960s and 1970s there was a large-scale
A)influx of middle-and working-class blacks into the ghettos.
B)outflow of middle-and working-class blacks from the ghettos.
C)movement of middle-and working-class blacks within the ghettos to better housing,but no large-scale movement into or out of the ghetto.
Q5) About one out of every ________ black children under the age of 18 is poor.
Page 32
Q6) In 1993 the poverty rate was about _______;in 2008 it was ______.
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Chapter 31: International Trade
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Sample Questions
Q1) Italy has a comparative advantage in which product?
Q2) The introduction of a tariff will be expected to A)reduce imports.
B)increase the prices of exports but have no effect on the level of imports.
C)reduce the prices of exports but have no effect on the level of imports.
D)increase exports.
E)increase imports.
Q3) Statement I: Our merchandise trade deficit declined in 2009.
Statement II: Our merchandise trade deficit with Japan is rising faster than our merchandise trade deficit with China.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Q4) Assume that Sweden will specialize in either boats or cars.What is their opportunity cost of producing three cars?
Q5) If Germany can make compact cars more efficiently than Russia,it enjoys A)a comparative advantage.
B)an absolute advantage.
C)no advantage.
Page 33
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Chapter 32: International Finance
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Sample Questions
Q1) Which one of these countries has not adopted the euro?
A)Germany
B)France
C)Italy
D)England
Q2) Under a gold standard in which France defined one franc to be worth 1/50<sup>th</sup> of an ounce of gold and the U.S.defined one dollar to be worth 1/10<sup>th</sup> of an ounce of gold,then
A)one U.S.dollar would exchange for five French francs.
B)the French franc is worth only one-tenth as much as the dollar is worth.
C)the U.S.dollar is valued at one-fifth of the French franC.
D)one French franc would exchange for ten dollars.
E)exports would rise in France and decline in the U.S.
Q3) We were on the gold exchange standard from the year ________ to the year
Q4) If the dollar depreciates in value against the euro for an American,the cost of French champagne
A)rises.
B)falls.
C)stays the same.
Page 34
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