Which of the following is TRUE regarding the quantity theory of money?
I. The theory predicts that in the long run the inflation rate equals the money growth rate minus the growth rate of real GDP.
II. The theory predicts that countries with high growth rates of money will have high inflation rates.
III. The theory predicts that increases in the growth rate of velocity lowers the inflation rate.
A) I and II
B) II and III
C) I and III
D) I, II and III
Ques. 2Public goods create a free-rider problem because the quantity of the good that a person consumes ________ for that good.
A) does not depend on the amount that the person pays
B) increases as that person pays less
C) increases as that person pays more
D) decreases as that person pays more
Ques. 3In the nation of Transporta, the income elasticity of demand for used cars is -2.66. So when incomes in this nation increase by 10 percent
A) the quantity of used cars demanded will increase by 26.6 percent.
B) used cars will be normal goods.
C) the quantity of used cars demanded will decrease by 26.6 percent.
D) the demand curve for used cars will shift rightward.
Ques. 4The table above shows Tom's total utility from milkshakes and sodas. A milkshake costs 2.00. How much marginal utility per dollar would Tom get if he purchased the ninth milkshake?
A) 1728 units per dollar
B) 20 units per dollar
C) 10 units per dollar
D) none of the above
Ques. 5What area in the above figure is the consumer surplus at the efficient quantity?
A) A
B) A + B + C
C) F
D) D + E + F
Ques. 6Generating electricity creates air pollution. This industry, if left unregulated, will produce at an inefficient market equilibrium because
A) there is a deadweight loss.
B) supply is not equal to demand.
C) too little output is produced.
D) the marginal social benefit is greater than the marginal social cost.
Ques. 7The above table has the total product schedule for Joe's Barber Shop. Joe charges 6 per haircut. If the wage rate is 24 per worker, what quantity of labor will maximize profits?
A) 1 worker
B) 2 workers
C) 4 workers
D) 5 workers
Ques. 8Which of the following statements is CORRECT for a monopolistically competitive firm in the short run?
A) Its total revenue is maximized.
B) Its total fixed cost is 0.
C) Its marginal cost is equal to its marginal revenue.
D) Its price is equal to its marginal cost.
Ques. 9Ernie's Earmuffs produces 200 earmuffs per year at a total cost of 2,000 and 400 of this cost is fixed. If he increases output to 220 earmuffs, his total cost increases to 2100, and his fixed cost remains 400.
What is Ernie's marginal cost per earmuff? A) 105
B) 35
C) 9.55
D) 5
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