Economics Final 2011

Front 1

Wage differentials exist in the long run because

Back 1

not all workers are equally qualified to perform every job

Front 2

Which of the following is a reason why a particular job may pay a higher-than-average wage rate?

Back 2

high risk

Front 3

A difference in wage rates that results from a difference in working conditions

Back 3

is known as a compensating wage differential

Front 4

Unions attempt to raise wage rates for their members by

Back 4

negotiating a higher-than-competitive wage rate

Front 5

A labor market is divided into two segments. All workers have the same qualifications and find jobs in either segment equally attractive. Initially, both segments are in competitive equilibrium. If the development of employer prejudice then reduces the employment of minorities in one segment, there will be a

Back 5

temporary drop in labor supply to the discriminating segment

Front 6

A car rental company will earn a net income of $6,000 per year on a new car for the first three years of its life. After three years, the car will be worthless. If the interest rate is 10 percent (0.10) per ear, what is the present value of the car to the car rental company? (Assume that each year's income is received at the end of the year.)

Back 6

$14,921.11

Front 7

According to the principle of asset valuation, the value of any asset is equal to

Back 7

the sum of the present values of all the future net benefits it generates

Front 8

A higher interest rate will lead a firm to purchase less capital because the higher interest rate

Back 8

lowers the present value of capital goods

Front 9

What is the value of a newly issued 10-year bond with face value of $10,000 and no coupon payments? Assume the interest rate is 7 percent (0.07) per year.

Back 9

$5,083.49

Front 10

When the market estimate of a company’s riskiness decreases the market adjusts by

Back 10

having the demand for that bond increase

Front 11

Stretchy Socks, Inc., is expected to earn $2,000,000 in after-tax profits each year forever. The interest rate is 0.1. What is the total value of all shares of stock in Stretchy Socks?

Back 11

$20,000,000

Front 12

Travel Expert is a corporation that specializes in selling vacation packages in Transylvania and Stansylvania. There are a fixed number of shares of Travel Expert's stock available to the public. If the two countries go to war, making it much more dangerous to travel there, what will most likely happen to the Travel Expert's share price and the number of shares outstanding?

Back 12

Price will fall; number of shares will remain the same.

Front 13

Which of the following must be true in order to engage in advantageous international trade?

Back 13

It must have a comparative advantage in producing one of the goods being traded.

Front 14

For each watch Denmark produces, it gives up the opportunity to produce 50 pounds of cheese. France can produce two watches at a cost of 150 pounds of cheese. Which of the following is true?

Back 14

Denmark has the comparative advantage in producing watches.

Front 15

When a nation begins to export a good,

Back 15

the domestic producers are made better off

Front 16

When a nation begins to import a good

Back 16

the domestic price of that good will fall

Front 17

Politically, one reason trade restrictions are common is that

Back 17

the many beneficiaries of free trade each gain a small amount whereas the few losers, lose enough to lobby for restrictions.

Front 18

What will happen to the equilibrium price and quantity of traditional camera film if traditional cameras become more expensive, digital cameras become cheaper, the cost of the resources needed to manufacture traditional film falls, and more firms decide to manufacture traditional film?

Back 18

Price will fall and the effect on quantity is ambiguous.

Front 19

Hours Needed
to Make 1 Quantity Produced
in 2400 Hours
Car Airplane Cars Airplanes
Japan 30 150 80 16
Korea 50 150 48 16

Japan has an absolute advantage in the production of

Back 19

cars and a comparative advantage in the production of cars

Front 20

Hours Needed
to Make 1 Quantity Produced
in 2400 Hours
Car Airplane Cars Airplanes
Japan 30 150 80 16
Korea 50 150 48 16

Japan’s opportunity cost of one airplane is

Back 20

5 cars and Korea’s opportunity cost of one airplane is 3 cars.

Front 21

All of the following, except one, would increase the demand for a particular model of a Ford automobile. Assume that this model is a normal good. Which is the exception?

Back 21

a decrease in the price of steel

Front 22

Under market capitalism, resources are allocated primarily through

Back 22

Prices

Front 23

What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages?

Back 23

Quantity will fall and the effect on price is ambiguous

Front 24

If Mary has an absolute advantage over Bill in performing each of two tasks, then

Back 24

Mary should specialize in the one in which she has a comparative advantage

Front 25

Suppose that a market is initially in equilibrium. Then the government imposes a price floor above the equilibrium price. Which of the following will occur in the absence of a black market?

Back 25

The quantity sold will drop

Front 26

The ultimate purpose of building an economic model is to

Back 26

predict behavior

Front 27

Because resources are scarce, if society produces more of one commodity, it has to sacrifice some amount of another commodity. The amount sacrificed is

Back 27

the opportunity cost

Front 28

Price ceilings are primarily targeted to help _____, while price floors generally benefit _____.

Back 28

consumers; producers

Front 29

Whether a subsidy for a certain good is given to a demander or supplier is irrelevant because

Back 29

in either case, the price that the demander has to pay will decrease; while the price the supplier receives will increase

Front 30

the supply of coffee falls due to bad weather conditions in coffee-exporting countries, then the

Back 30

price will rise and quantity will fall

Front 31

If Japan could produce more steel in a year than the United States using the same amount of resources, then

Back 31

Japan must have an absolute advantage in producing steel

Front 32

A physician's knowledge and skills are referred to by economists as

Back 32

human capital

Front 33

Procter & Gamble Co. is a major soap producer. All of the following, except one, would shift its supply curve of liquid soap to left. Which is the exception?

Back 33

a decrease in the price of liquid soap

Front 34

Pens are normal goods. What will happen to the equilibrium price of pens if the price of pencils rises, consumers experience an increase in income, writing in ink becomes fashionable, people expect the price of pens to rise in the near future, the population increases, fewer firms manufacture pens, and the wages of pen-makers increase?

Back 34

Price will rise.

Front 35

Which of the following would lead to a change in both the quantity of a good buyers wish to purchase and in the quantity sellers wish to sell?

Back 35

a change in the expected future price of the good

Front 36

Holding everything else constant, as the price of natural gas rises, selling natural gas becomes

Back 36

more profitable, and the quantity supplied rises

Front 37

Excess demand occurs when

Back 37

the actual price is less than the equilibrium price