8. Diminishing marginal returns occur when ________.
(A) the average product of the variable input eventually diminishes
(B) the marginal product of an additional worker is less than the marginal product of the previous worker hired
(C) the firm hires cheap less-skilled workers in place of expensive high-skilled workers
(D) total product eventually diminishes

9. An industry is perfectly competitive if(A) each firm in it can influence the price of its product.(B) there are many firms in it, each selling a slightly different product.(C) there are many firms in it, each selling an identical product.(D) there are few firms in the industry.

10. In a perfectly competitive industry, the industry supply curve is the sum of the(A) supply curves of all the individual firms. (B) average variable cost curves of all the individual firms.(C) average total cost curves of all the individual firms.(D) average fixed cost curves of all the individual firms.

11.Item DollarsNet interest 239Government expenditure on goods and services 136Compensation of employees 1,715Rental income 37Proprietors' income 128Indirect taxes minus subsidies 259Corporate profits 194Exports of goods and Services 249Imports of goods and services 289Depreciation 333Using the data in the above table, gross domestic product as calculated by the income approach equals ________.(A) $2,333 (B) $2,592 (C) $2,905 (D) $2,205

12. In the post World War II period, considerable growth in total production took place in the U.S. But at the same time, businesses were dumping their waste into the Great Lakes with minimal cost to themselves, significantly polluting the bodies of water as a result. This occurrence is an example where (A) real GDP gives an overly positive view of economic welfare.(B) real GDP gives an overly negative view of economic welfare.(C) investment would have been a better measure of total production.(D) the pollution counts as a final good.

13.Item 2009 2010Quantity Price Quantity PriceBooks 10 $30 8 $50Pens 20 $1 15 $2In 2009, consumers in Dexter consumed only books and pens. The prices and quantities for 2009 and 2010 are listed in the table above. The reference base period for Dexter's CPI is 2009. What is the cost of the CPI basket in 2009?(A) $430 (B) $335 (C) $320 (D) $540

14. According to the story, "China intends to massively increase its scientific prowess and lift its population out of poverty by 2050.... A strategy issued by the State Council will increase annual investment in research and development to 900 billion yuan (US$112 billion) by 2020.... This would boost the proportion of China's gross domestic product spent on research from today's 1.3 per cent to 2.5 per cent."(www.scidev.net, 2/10/2006)China's plans to speed the pace of technology growth(A) is negatively related to real GDP growth according to the classical growth theory.(B) will create a positive relationship between population growth and real GDP growth according to the neoclassical growth model.(C) will positively affect real GDP growth according to the neoclassical growth theory.(D) will cause the population to increase and the real wage to fall according to the new growth theory.

15. Which of the following items are considered physical capital?i. shares of Ford traded on the NYSEii. the production line at the Saturn plant in Tennesseeiii. the windshields at the Saturn plant in Tennesseeiv. the salaries paid to Ford executives(A) ii and iii (B) i and iv (C) i, ii and iii (D) i, ii and iv

16. In 2010, the United States had a budget deficit of 1.29 trillion dollars. This will budget deficit ________ the supply of loanable funds and ________ the real interest rate.(A) increased; lowered (B) decreased; raised(C) decreased; lowered (D) increased; raised

17.Which of the following will lead to a depreciation of the dollar against the British pound?(A) an increase in British demand for U.S. imports (B) an increase in U.S. interest rates(C) a decrease in British demand for U.S. assets (D) a decrease in U.S. demand for British goods

18. China is one of the world's largest exporters. As the world's economies slipped into a worldwide recession in 2008, there will be a ________ China's aggregate demand curve as China's exports ________.(A) rightward shift of; decrease (B) movement upward along; increase(C) leftward shift of; decrease (D) movement upward along; decrease

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