Market Failure
Non-diminishability means:
A) Consumption by one reduces availability for others
B) Consumption by one does not reduce availability for others
C) The good has external costs
D) It cannot be taxed
B) Consumption by one does not reduce availability for others
Viewing GDP in terms of earnings derived or created by producing something is called the __________ approach.
A) Expenditure
B) Resource
C) Income
D) Production
C) Income
Why might exports not rise during a boom in the UK?
A) UK firms cannot export goods
B) Exchange rates always rise
C) Exports depend on demand in other countries
D) Import tariffs block exports
C) Exports depend on demand in other countries
Quantity indices are used to:
A) Measure changes in prices only
B) Replace weighted price indices
C) Track CPI only
D) Measure changes in physical quantities of goods or output
D) Measure changes in physical quantities of goods or output
Some months have 31 days. How many have 28 days?
A) 1
B) 12
C) 6
D) 0
12
A factory produces textiles but releases untreated wastewater into a river. This is an example of:
A) Social cost is greater than private cost
B) Private cost is greater than social cost
C) Social benefit exceeds private benefit
D) A non-excludable good
A) Social cost is greater than private cost
Real GDP can be measured by:
A) Multiply the current year’s output by the price of the output in the base year
B) Nominal GDP divided by the price index
C) GDP per capita adjusted for inflation
D) Current output times current price
A) Multiply the current year’s output by the price of the output in the base year
Automatic stabilisers include:
A) New infrastructure projects
B) Unemployment benefits
C) Defence spending
D) Interest rate changes
B) Unemployment benefits
The Laspeyres price index:
A) Ignores quantities altogether
B) Uses current-year quantities and tends to understate inflation
C) Uses base-year quantities and tends to overstate inflation
D) Only works for chain-base indices
C) Uses base-year quantities and tends to overstate inflation
A farmer has 10 sheep, and all but 7 run away. How many are left?
A) 3
B) 7
C) 10
D) 0
7
If the government sets a minimum price on milk above equilibrium, the likely outcome is:
A) A surplus of milk
B) A shortage of milk
C) Equilibrium is maintained
D) Higher consumer welfare
A) A surplus of milk
Imports must be subtracted from GDP because they are goods and services __________ the borders of the United States.
A) Imported from
B) Produced within
C) Exported to
D) Produced outside
D) Produced outside
The Phillips curve suggests:
A) No link between inflation and unemployment
B) A trade-off between unemployment and inflation
C) Inflation and unemployment always rise together
D) Inflation is caused only by imports
B) A trade-off between unemployment and inflation
For a basket of two goods:
Base-year prices: Good A = $10, Good B = $20
Current-year prices: Good A = $12, Good B = $24
Base-year quantities: Good A = 5, Good B = 10
What is the base-weighted (Laspeyres) price index?
A) 130
B) 125
C) 120
D) 115
C) 120
If it takes 3 people 3 days to dig 3 holes, how long would it take 1 person to dig 1 hole?
A) 1 day
B) 3 days
C) 9 days
D) 6 days
1 day
The government provides funding so that public libraries can be used free of charge. The main aim of this policy is to:
A) Encourage the consumption of merit goods
B) Increase the consumption of demerit goods
C) Reduce market prices
D) Increase producers’ profits
A) Encourage the consumption of merit goods
Estland has recently experienced increased levels of spending on imports in place of domestically produced goods and services. Which of the following will result?
A) Aggregate supply in Estland will shift to the right; National income will fall
B) Aggregate supply in Estland will shift to the left; National income will rise
C) Aggregate demand in Estland will shift to the right; National income will rise
D) Aggregate demand in Estland will shift to the left; National income will fall
D) Aggregate demand in Estland will shift to the left; National income will fall
If the economy is overheating, automatic stabilisers will:
A) Withdraw more money through taxes
B) Increase unemployment
C) Reduce government income
D) Increase welfare spending
A) Withdraw more money through taxes
Last year, the CPI was 200. This year, it is 210.
What is the inflation rate?
A) 5%
B) 10%
C) 4.76%
D) 7%
A) 5%
If there are 6 eggs in a basket and 6 people each take one egg, how is it that one egg remains in the basket?
A) Eggs are imaginary
B) One person took the basket with the last egg
C) Miscount
D) Impossible
B) One person took the basket with the last egg
Which best describes a market failure?
A) When the market operates under perfect competition
B) When resources are allocated inefficiently
C) When Pareto efficiency is achieved
D) When prices are flexible
B) When resources are allocated inefficiently
Country Y produces $12,000m worth of goods and services within its borders.
Citizens earn $1,000m from foreign investments
Foreign companies earn $500m in the country
Depreciation = $1,200m
GDP = ? | GNP = ? | National Income = ?
A) GDP = $12,000m; GNP = $12,500m; National Income = $11,300m
B) GDP = $12,000m; GNP = $13,000m; National Income = $11,800m
C) GDP = $12,000m; GNP = $12,500m; National Income = $12,500m
D) GDP = $12,000m; GNP = $12,000m; National Income = $11,300m
A) GDP = $12,000m; GNP = $12,500m; National Income = $11,300m
Which statement is correct about the trade cycle?
A) The economy always stays in boom
B) It shows regular fluctuations in economic activity
C) GDP only falls in the long run
D) Unemployment never changes
B) It shows regular fluctuations in economic activity
The process of adjusting a nominal time series for inflation gives:
A) Nominal values
B) Real values (which remove the effect of price changes)
C) CPI values only
D) A base-weighted index
B) Real values (which remove the effect of price changes)
13. A cowboy rode into town on Friday, stayed 3 nights, and left on Friday. How is this possible?
A) Time travel
B) Miscalculation
C) His horse’s name is Friday
D) Impossible
C) His horse’s name is Friday