Econ 109 Introduction to Economics 1 Final Exam 12 9 2000 Name Part I 40 Points Choose the best answer and mark it on your scantron sheet 1 If the marginal principle were applied to health care costs only health care expenditures in which marginal benefits exceed or equal marginal costs would be implemented b only health care expenditures in which marginal costs exceed marginal benefits would be implemented c we would be provided with unlimited health care d we would adopt all new health care technologies regardless of their cost e only the rich could afford medical care 2 As a percentage of GDP the United States has lower health expenditures than a Canada b Germany c Sweden d Japan None of the above are true 3 Which of the following is not an antipoverty program a Aid to Families with Dependent Children AFDC b Temporary Assistance to Needy Families TANF c Medicaid the Social Security System e one of the above are true 4 According to the Census Bureau a group of related family members and unrelated individuals who live in the same housing unit is known as a a poverty budget b a family c a commune a household e an individual unit 5 The government can encourage and promote the consumption of goods that generate spillover effects through the use of a the free rider problem b the median voter rule c external benefits subsidies e private goods 6 If the public were asked to voluntarily pay for national defense some people would not pay for it even though they would still be consumers of national defense This is an example of the free rider problem b the median voter rule c external benefits Econ 109 Introduction to Economics 2 d subsidies e private goods 7 A tax on a good or a service will result in a a decrease in the equilibrium quantity and a decrease in the equilibrium price b an increase in the equilibrium quantity and a decrease in the equilibrium price a decrease in the equilibrium quantity and an increase in the equilibrium price d an increase in the equilibrium quantity and an increase in the equilibrium price e an ambiguous effect on equilibrium quantity and price 8 Local governments get most of their revenue from a individual income taxes b sales taxes property taxes d corporate income taxes e payroll taxes 9 If the exchange rate was 100 yen per dollar last month and is currently 120 yen per dollar then the yen has and the dollar has a appreciated depreciated b appreciated appreciated depreciated appreciated d depreciated depreciated e depreciated not changed 10 If a nation with a fixed exchange rate has a balance of payment deficit in order to maintain the exchange rate the government must supply foreign exchange to the market b demand foreign exchange from the market c supply domestic currency from the market d neither supply nor demand foreign exchange e neither supply nor demand domestic currency 11 Suppose that interest rates in Germany decrease This will cause the mark to and the equilibrium quantity of dollars on the foreign exchange market to depreciate fall b appreciate fall c depreciate rise d appreciate rise e appreciate remain constant 12 If U S exports are 100 imports are 120 net income from foreign investments is 10 and net transfers from abroad is 20 then the U S has a current account deficit of 30 b surplus of 240 12 9 2000 Econ 109 Introduction to Economics 3 c deficit of 20 d surplus of 100 e deficit of 120 13 If U S exports are 200 imports are 300 net income from foreign investments is 20 and net transfers from abroad is 50 then the U S has a capital account a deficit of 130 b surplus of 20 c deficit of 100 surplus of 130 e surplus of 50 14 Suppose that the demand for U S exports increases This will cause the dollar to and the equilibrium quantity of dollars on the foreign exchange market to a depreciate fall b appreciate fall c depreciate rise appreciate rise e appreciate remain constant 15 According to the theory of purchasing power parity if a basket of goods in the United Kingdom cost 500 while an identical basket in the U S cost 1 000 then the exchange rate between pounds and dollars will be a 2 0 pounds per dollar b 1 5 pounds per dollar c 1 0 pounds per dollar d 0 75 pounds per dollar 0 5 pounds per dollar 16 If the price of a computer is 1 000 dollars in the U S and 4 000 marks in Germany and the exchange rate is 2 marks per dollar then the real exchange rate for computers is a 0 25 0 5 c 0 75 d 1 0 e 2 0 17 A situation in which there is no trade between nations is known as a dumping b absolute advantage c an import quota autarky e an infant industry 18 Suppose the government is considering imposing either a tariff or a quota on an imported good If they use a quota they will distribute the import licenses randomly to importers With a quota the will make money and under a tariff the 12 9 2000 Econ 109 Introduction to Economics 4 will make money a government government b government importers importers government d importers importers e Neither the government nor the importers will make money 19 A tax on an imported good is called a an import ban b an import quota c a voluntary export restraint d the terms of trade a tariff 20 Free trade will a harm workers who make goods that are imported benefit workers who make goods that are exported and harm the nation as a whole b benefit workers who make goods that are imported harm workers who make goods that are exported and harm the nation as a whole harm workers who make goods that are imported benefit workers who make goods that are exported and benefit the nation as a whole d benefit workers who make goods that are imported harm workers who make goods that are exported and benefit the nation as a whole e harm workers who make goods that are imported harm workers who make goods that are exported and harm the nation as a whole 21 If two nations specialize in the production of the good in which they have a comparative advantage and then participate in free trade then for each nation a the consumption possibilities curve will be equal to the production possibilities curve the consumption possibilities curve will be outside of the production possibilities curve c the consumption possibilities curve will be inside the production possibilities curve d the consumption possibilities curve may be inside or outside the production possibilities curve e None of the above are true 22 The Advertiser s Dilemma refers to which of the following a Firms cannot tell what will happen to their sales if they advertise If all