On Green Island, the demand for pencils is perfectly elastic and the supply of pencils is perfectly ...

On Green Island, the demand for pencils is perfectly elastic and the supply of pencils is perfectly inelastic. If a sales tax on pencils is introduced
 
  A) the tax is split evenly between the buyers and sellers.
  B) the buyers pay the entire tax.
  C) no one pays the tax.
  D) the sellers pay the entire tax.

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Ques. 2

What could Keynes have meant by his now famous statement, in the long run we are all dead?
 
  A) Government intervention is destabilizing, will lead to slower growth in the long run, and will prevent an economy from self-regulating.
  B) Government intervention in the economy is necessary in times of recession because an economy rarely restores itself to full employment.
  C) Government intervention in the economy is useless because it takes too long to take effect.
  D) Government intervention in the economy is only effective if it is not erratic.

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Ques. 3

Brand names are an example of
 
  A) economies of scale.
  B) product differentiation.
  C) oligopoly.
  D) illegal barriers to entry.

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Ques. 4

Suppose the United States initially has a trade deficit. Then U.S. firms increase their imports from Canada, financing that increase by borrowing from Canada.
 
  The current account deficit is now ________ and the capital and financial account surplus is now ________. A) larger; larger
  B) larger; smaller
  C) smaller; larger
  D) smaller; smaller

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Ques. 5

In the quantity theory of money, the quantity of money is assumed to
 
  A) not influence the velocity of circulation.
  B) rise during recessions.
  C) fall during recessions.
  D) be constant.

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Ques. 6

Michelle spends all of her income on mangos and rice. Mangos cost 2 per pound and rice costs 1.50 per pound.
 
  If Michelle is spending all of her income and the marginal utility per dollar spent is 20 for the last pound of mangos purchased and 10 for the last pound of rice purchased, then A) Michelle is maximizing utility from her present consumption bundle.
  B) Michelle should buy more rice and fewer mangos in order to maximize utility.
  C) Michelle should buy more mangos and less rice to maximize utility.
  D) None of the above answers is correct.

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Ques. 7

Given the budget line in the figure above, the combination of chips that is NOT affordable is
 
  A) a.
  B) b.
  C) c.
  D) d.