Econs 1.12 09.02

Q. Normal profit is best described as:

• A. zero economic profit.
• B. total revenue minus all explicit costs.
• C. the sum of accounting profit plus economic profit.

Given stable aggregate supply, which of the following changes in aggregate demand is most likely to cause economic expansion?

• A. An increase in corporate income tax
• B. An increase in foreign currency per unit of domestic currency
• C. An increase in capacity utilization

A gourmet pizza restaurant did very well in the first six months it was open, with tables full and waiting lines during peak periods. The owner realized that if the table turnover rate were higher, he could serve more dinners every evening and increase profits. He added two servers, and both revenues and profits increased. Adding an additional two servers, however, did not increase revenues and profits proportionately, because the serving staff now had to wait longer for the kitchen to cook the orders. Which of the following best describes the problem the restaurant is experiencing and the potential solution? The restaurant is experiencing diminishing returns to:

• A. labor and should expand the kitchen capacity.
• B. capital and should expand the kitchen capacity.
• C. labor and should reduce the number of servers.

None

• A. 40 .
• B. 64 .
• C. 80 .

Q. Movement along the demand curve for good X occurs due to a change in:

• A. income.
• B. the price of good X.
• C. the price of a substitute for good X.

None

• A. 2 .
• B. 3 .
• C. 4 .

None

• A. 11 .
• B. 8 .
• C. 7 .

A decrease in the price of a good will most likely be reflected in a:

• A. change in the intercept of the demand curve.
• B. change in the slope of the demand curve.
• C. downward movement along the demand curve.

Q. One of the reasons aggregate demand curve is downward sloping is because a lower price level means that the real exchange rate:

• A. depreciates, making domestic goods cheaper in other countries and imports less competitive, resulting in a higher level of net exports.
• B. appreciates, making domestic goods more expensive in other countries and imports more competitive, resulting in a higher level of net exports.
• C. appreciates, making the country’s exports and imports less competitive and leading to lower net exports.

None

• A. 13.0.
• B. 3.5.
• C. 9.3.