Practice Exam 1- Spring 2012

In the closed economy the economy stays at a where

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Unformatted text preview: ould be counted in GDP is: A) $20,000. B) $20,000 less the automobile company's profit on the car. C) $20,900. D) $20,900 less the profits of all three companies on the items that they sold. 32. An example of increasing returns to scale is when capital and labor inputs: A) both increase 10 percent and output increases 5 percent. B) both increase 10 percent and output increases 10 percent. C) both increase 5 percent and output increases 10 percent. D) do not change and output decreases 5 percent. 33. The marginal product of capital A) is additional output produced when one additional unit of labor and one additional unit of capital are added. B) must be equal to the marginal product of labor. C) decreases as capital input increases. D) equals real wage for a profit- maximizing firm. 34. A depreciation of the real exchange rate in a small open economy could be the result of: A) a domestic tax cut. B) an increase in government spending. C) a drop in the world interest rate. D) the expiration of an investment tax- credit provision. 35. For K, L ≥ 1, consider the following production function: Y = F(K, L) = (K2 + K1/2) + (L2+ L1/2). This function exhibits A) economies of scope. B) decreasing returns to scale. C) constant returns to scale. D) increasing returns to scale. Short- answer Questions [30 pts] I. [6 pts] Consider a small island economy in t...
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This document was uploaded on 03/18/2014 for the course ECON 4710 at LSU.

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