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Economics MCQs

Option A: interest

Option B: dividends

Option C: increases in stocks of goods

Option D: retained earnings

Correct Answer: increases in stocks of goods


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Option A: have skills that are in relatively scarce supply

Option B: produce output for which there is great demand

Option C: usually have little capital with which to work

Option D: are usually highly paid

Correct Answer: usually have little capital with which to work


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Option A: decrease the prosperity of the firm but increases the prosperity of the factors hired by the firm

Option B: decreases the prosperity of both the firms and the factors hired by the firm.

Option C: increases the prosperity of both the firm and the factors hired by the firm.

Option D: increases the prosperity of the firm but decreases the prosperity of the factors hired by the firm.

Correct Answer: increases the prosperity of both the firm and the factors hired by the firm.


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Option A: an amount equal to the price of output times total output

Option B: the amount allocated by the political process

Option C: an equal share of output

Option D: the value of its marginal product

Correct Answer: the value of its marginal product


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Option A: a decrease in the number of apple pickers employed

Option B: an increase in the value of the marginal product of apple pickers

Option C: an increase in the price of apples

Option D: an increase in the wage of apple pickers

Correct Answer: a decrease in the number of apple pickers employed


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Option A: decrease the value of the marginal product of fishermen reduces their wage, and reduces employment in the fishing industry

Option B: increase the value of the marginal product of fishermen increase their wage, and increase employment in the fishing industry.

Option C: decrease the value of the marginal product of fishermen, reduces their wage, and increases employment in the fishing industry

Option D: increase the value of the marginal product of fishermen increase their wage and decreases employment in the fishing industry

Correct Answer: decrease the value of the marginal product of fishermen, reduces their wage, and increases employment in the fishing industry


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Option A: the price of the output times wage of labor

Option B: the price of the output times the marginal product of labor

Option C: none of these answers

Option D: the wage of labor times the quantity of labor

Correct Answer: the price of the output times the marginal product of labor


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Option A: labor, land, and capital

Option B: water, earth and knowledge

Option C: money, stocks and bonds.

Option D: management finance and marketing

Correct Answer: labor, land, and capital


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Option A: monopolistically competitive firms

Option B: a cartel

Option C: perfectly competitive firms

Option D: a monopoly.

Correct Answer: monopolistically competitive firms


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Option A: entry to it and exit from it are both costless

Option B: entry to it and exit from it are both costly

Option C: entry to it costless, but exit from it is costless

Option D: entry to it is costly, but exit from it is costless

Correct Answer: entry to it and exit from it are both costless


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Option A: in response to a price increase is less elastic than the elasticity of demand in response to a price decrease

Option B: is perfectly elastic if price increases and perfectly inelastic if price decreases

Option C: is constant regardless of whether price increase of decrease.

Option D: in response to a price increases is more elastic than the elasticity of demand in response to a price decrease

Correct Answer: in response to a price increases is more elastic than the elasticity of demand in response to a price decrease


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Option A: The market for copper, where there are very few producers and the product is standardized.

Option B: The fast-food market where there are a large number of producers but the demand for fast food is inelastic

Option C: The coffee market where the product is standardized and there are a large number of coffee growers.

Option D: The automobile industry, where there are few producers but there is great product differentiation.

Correct Answer: The market for copper, where there are very few producers and the product is standardized.


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Option A: price leadership

Option B: price concentration

Option C: collusion

Option D: game theory,

Correct Answer: collusion


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Option A: a colluding industry

Option B: a merged industry

Option C: a concentrated industry

Option D: a natural monopoly

Correct Answer: a concentrated industry


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Option A: perfect competition

Option B: monopolistic competition

Option C: oligopoly

Option D: monopoly

Correct Answer: oligopoly


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Option A: It is efficient because the right amount of output is produced, but not efficient in that the output produced is produced at a cost above minimum average total cost

Option B: It is efficient because entry is free and economic profits are eliminated in the long run.

Option C: It is not efficient because too little output is produced and the output that is produced is produced at a cost above minimum average total cost

Option D: It is not efficient because too little output is produced but is efficient in that the output produced is produced at minimum average total cost.

Correct Answer: It is not efficient because too little output is produced and the output that is produced is produced at a cost above minimum average total cost


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Option A: sells a fixed amount of output regardless of price.

Option B: must raise price to sell more output

Option C: can sell an infinite amount of output at the market-determined price

Option D: must lower price to sell more output.

Correct Answer: must lower price to sell more output.


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Option A: by producing differentiated products

Option B: because of barriers to exit from the industry

Option C: by virtue of size alone

Option D: because of barriers to entry into the industry

Correct Answer: by producing differentiated products


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Option A: perfectly competitive firms

Option B: a cartel

Option C: a monopoly

Option D: monopolistically competitive firms.

Correct Answer: monopolistically competitive firms.


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Option A: produced less and charged a higher price

Option B: produced more and charged a higher price

Option C: produced more and charged a lower price

Option D: produced less and charged a lower price.

Correct Answer: produced more and charged a lower price


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Option A: maximized its total revenue

Option B: set price equal to its average cost

Option C: equated marginal revenue and marginal cost

Option D: maximized the difference between marginal revenue and marginal cost.

Correct Answer: equated marginal revenue and marginal cost


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Option A: always equal to one.

Option B: half as steep as the demand curve

Option C: the same as the slope of the demand curve

Option D: twice as steep as the demand curve

Correct Answer: twice as steep as the demand curve


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Option A: the difference between total revenue and total costs.

Option B: anything greater than the normal opportunity cost of investing

Option C: the opportunity costs of all inputs

Option D: a rate of profit that is just sufficient to keep owners and investors satisfied

Correct Answer: anything greater than the normal opportunity cost of investing


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Option A: Is the rate of return on investments over the interest rate on risk-free government bonds.

Option B: is the rate that is just sufficient to keep owners or investors satisfied.

Option C: is the difference between total revenue and total costs

Option D: is zero in a perfectly competitive industry.

Correct Answer: is the rate that is just sufficient to keep owners or investors satisfied.


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Option A: immediate run

Option B: intermediate run

Option C: long run

Option D: short run

Correct Answer: short run


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Option A: there are many EU and government health controls on cosmetic products

Option B: there are a very large number of firms in the industry

Option C: firms spend a large amount of money on advertising

Option D: profit margins are very high for both producers and retailers

Correct Answer: firms spend a large amount of money on advertising


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Option A: no longer influences the amount demand of the firm’s product

Option B: becomes a decision variable for the firm

Option C: is guaranteed to be above a firm’s average cost.

Option D: is determined by the actions of other firms in the industry

Correct Answer: becomes a decision variable for the firm


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Option A: a firm’s ability to monopolies a market completely.

Option B: a firm’s ability to raise price without losing all demand for its product

Option C: a firm’s ability to sell any amount of output it desires at the market-determined price.

Option D: a firm’s ability to charge any price it likes

Correct Answer: B. a firm’s ability to raise price without losing all demand for its product


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Option A: fixed costs exceed revenues.

Option B: it is suffering a loss.

Option C: variable costs exceed revenues

Option D: total costs exceed revenues

Correct Answer: variable costs exceed revenues


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Option A: £35

Option B: £15

Option C: £30

Option D: £60

Correct Answer: £35


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Option A: DTVC/Dq

Option B: q/TVC

Option C: Dq/DTVC

Option D: TVC/q

Correct Answer: TVC/q


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Option A: expenditure set

Option B: isocost line.

Option C: budget constraint

Option D: isoquant

Correct Answer: isocost line.


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Option A: an indifference curves.

Option B: an isoquant.

Option C: an isocost line

Option D: a production functions

Correct Answer: an isoquant.


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Option A: downward sloping to the right

Option B: U-shaped

Option C: Horizontal

Option D: upward sloping to the right

Correct Answer: U-shaped


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Option A: 160; 270

Option B: 10; 30

Option C: 10; 3.33

Option D: 30; 10

Correct Answer: 30; 10


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Option A: decreasing average fixed costs.

Option B: decreasing marginal costs.

Option C: decreasing average variable costs.

Option D: increasing marginal costs.

Correct Answer: increasing marginal costs.


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Option A: total fixed cost only.

Option B: total variable costs only.

Option C: both total variable costs and total costs.

Option D: total costs only

Correct Answer: both total variable costs and total costs.


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Option A: Fixed costs are zero if the firms is producing nothing.

Option B: Fixed costs are the difference between total costs and total variable costs

Option C: There are no fixed costs in the long run

Option D: Fixed costs do not depend on the firm’s level of output

Correct Answer: Fixed costs are zero if the firms is producing nothing.


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Option A: participants in a contestable market are continuously faced with competition or the threat of competition because entry is cheap

Option B: In a contestable market, economic profits cannot persist in the long run.

Option C: In a contestable market forces will guarantee that the firms produce efficiently or be driven out of business

Option D: For a market to be contestable, the product must be produced with a labor-intensive technology

Correct Answer: For a market to be contestable, the product must be produced with a labor-intensive technology


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Option A: it assumes that firms believe that their rivals will not respond to any price change they initiate

Option B: it fails to explain how a firm arrived at its price and output decision initially

Option C: The model cannot be tested empirically.

Option D: Real-world pricing strategies are more simple than those assumed in this model

Correct Answer: it fails to explain how a firm arrived at its price and output decision initially


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Option A: equal to what a monopolist would choose in the same industry

Option B: between that which would prevail under competition and that which a monopolist would choose in the same industry

Option C: that would prevail under competition

Option D: between that which would prevail under competition and that which a monopolistic competitor would choose in the same industry.

Correct Answer: between that which would prevail under competition and that which a monopolist would choose in the same industry


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Option A: a concentrated industry.

Option B: a cartel

Option C: price leadership

Option D: an oligopoly.

Correct Answer: a cartel


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Option A: decrease; decrease

Option B: increase; decrease

Option C: decrease; increase

Option D: increase; increase

Correct Answer: decrease; increase


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Option A: monopolistically competitive

Option B: oligopolistic

Option C: perfectly competitive

Option D: indeterminate from this information

Correct Answer: oligopolistic


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Option A: In monopolistic competition, there are too many firms and each firm produce a slightly different product at a scale that is less than optimal

Option B: In monopolistic competition there are too few firms and each firm produce a slightly different product at scale that is greater than optimal

Option C: in monopolistic competition there is the correct number of firm and each firm produces a slightly different product at an optimal scale.

Option D: In monopolistic competition there are too many firms and each firm produce a slightly different product at the optimal scale

Correct Answer: In monopolistic competition there are too few firms and each firm produce a slightly different product at scale that is greater than optimal


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Option A: the efficient output level will be produced in the long run

Option B: firms will only earn a normal profit

Option C: firms realize all economies of scale

Option D: firms will be producing at minimum average cost

Correct Answer: firms will only earn a normal profit


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Option A: marginal costs

Option B: fixed costs

Option C: variable costs

Option D: advertising costs

Correct Answer: variable costs


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Option A: in monopolistic competition entry into the industry is blocked

Option B: in monopolistic competition there are relatively few barriers to entry.

Option C: in monopolistic competition, firms can differentiate their products

Option D: in perfect competition firms can differentiate their products

Correct Answer: in monopolistic competition, firms can differentiate their products


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Option A: entry to it is costly but exit from it is costless

Option B: entry to it and exit from it are both costless

Option C: entry to it and exit from it are both costly

Option D: entry to ti costless but exist from it is costly

Correct Answer: entry to it and exit from it are both costless


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Option A: a fixed cost monopoly

Option B: a natural monopoly

Option C: a government franchise monopoly

Option D: a economies of scale monopoly

Correct Answer: a natural monopoly


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Option A: lower than price for all units other than the first

Option B: less than price at low levels of output and greater than price at high levels of output

Option C: always greater than price

Option D: always equal to price

Correct Answer: lower than price for all units other than the first


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Option A: approximately one-half

Option B: smaller than

Option C: larger than

Option D: approximately equal to

Correct Answer: approximately equal to


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Option A: normal profit is zero

Option B: total costs exceed total revenue

Option C: total costs exceed normal profit

Option D: the firm is earning are economic profit

Correct Answer: the firm is earning are economic profit


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Option A: all firms must make economic profits.

Option B: there are no fixed factors of production

Option C: a firm can vary all inputs, but it cannot change the mix of inputs it uses.

Option D: a firm can shut down, but it cannot exit the industry

Correct Answer: there are no fixed factors of production


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Option A: a period where the law of diminishing returns does not hold.

Option B: at least one fixed factor of production and firms neither leaving nor entering the industry

Option C: all inputs being variable

Option D: no variable inputs – that is all of the factors of production are fixed

Correct Answer: at least one fixed factor of production and firms neither leaving nor entering the industry


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Option A: Produces less output, charges higher prices and earns economic profits.

Option B: Produces less output, charges lower prices and earns only a normal profit

Option C: produces more output, charges higher prices and earns economics profits

Option D: produces less output, charges lower prices and earns economic profits

Correct Answer: Produces less output, charges higher prices and earns economic profits.


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Option A: more; more

Option B: fewer; less

Option C: more; less

Option D: no; infinite

Correct Answer: more; less


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Option A: how much to spend on advertising?

Option B: how much of each input to use?

Option C: What price to charge

Option D: none of these

Correct Answer: how much of each input to use?


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Option A: the MR and MC curves

Option B: the AC and AR curves

Option C: the AC and MC curves

Option D: the MR and AR curves

Correct Answer: the AC and AR curves


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Option A: the additional profit the firms earns when it sells an additional unit of output

Option B: the difference between total revenue and total cost

Option C: The ratio of total revenue to quantity.

Option D: the added revenue that a firm takes in when it increases output by one additional unit.

Correct Answer: the added revenue that a firm takes in when it increases output by one additional unit.


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Option A: Dq/DTFC

Option B: TFC – q

Option C: TFC/q

Option D: q/TFC

Correct Answer: TFC/q


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Option A: marginal rate of factor substitution

Option B: marginal rate of substitution

Option C: law of diminishing marginal returns.

Option D: marginal rate of production

Correct Answer: marginal rate of factor substitution


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Option A: slope up to the right

Option B: are U-shaped

Option C: slope down to the right

Option D: slope down to the right and then level off.

Correct Answer: slope down to the right


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Option A: average costs to remain constant

Option B: average costs to decrease

Option C: average costs to increase

Option D: marginal costs to increase

Correct Answer: average costs to remain constant


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Option A: If TP is declining, then AP is negative

Option B: If AP = MP, then total product is at a maximum.

Option C: If AP exceeds MP then AP is falling

Option D: If AP is at a maximum, then MP is also,

Correct Answer: If AP exceeds MP then AP is falling


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Option A: at least one fixed factor of production and firms neither leaving nor entering the industry.

Option B: no variable inputs – that is, all of the factors of production are fixed

Option C: all inputs being variable

Option D: a period where the law of diminishing returns does not hold

Correct Answer: at least one fixed factor of production and firms neither leaving nor entering the industry.


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Option A: The franchiser’s fee that a restaurant must pay to the national restaurant chain

Option B: The payroll taxes that are paid on employee wages.

Option C: The monthly rent on office space that it leased for a year

Option D: The interest payments made on loans.

Correct Answer: The payroll taxes that are paid on employee wages.


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Option A: marginal revenue and marginal cost.

Option B: total revenue and total cost

Option C: total revenue and marginal cost

Option D: marginal revenue and average cost

Correct Answer: total revenue and total cost


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Option A: wages in the United States will rise relative to Mexican wages

Option B: American jobs will be lost to workers in Mexico

Option C: The environment is not adequately protected by NAFTA

Option D: None of the above

Correct Answer: wages in the United States will rise relative to Mexican wages


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Option A: relatively high; relatively large

Option B: relatively high; relatively small

Option C: relatively low ; relatively large

Option D: relatively low ; relatively small

Correct Answer: relatively high; relatively large


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Option A: trade diversion effect

Option B: increased monopoly power of firms

Option C: decrease customs costs

Option D: economy-of-scale effect

Correct Answer: economy-of-scale effect


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Option A: trade creation

Option B: trade diversion

Option C: trade exclusion

Option D: trade distortion

Correct Answer: trade creation


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Option A: trade creation

Option B: trade diversion

Option C: trade exclusion

Option D: trade distortion

Correct Answer: trade diversion


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Option A: $0

Option B: $10,000

Option C: $20,000

Option D: $40,000

Correct Answer: $0


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Option A: 400 units from B

Option B: 200 units from C

Option C: 200 units from each

Option D: 400 units from B and 200 units from C

Correct Answer: 200 units from C


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Option A: a country moves from autarky to free trade

Option B: a movement to a customs union reduces the costs of trade through standardization economic integration results in a

Option C: economic integration results in a movement in product origin to a lower cost member country

Option D: economic integration results in a shift in product origin from a lower-cost, nonmember country to a member country having higher costs

Correct Answer: economic integration results in a shift in product origin from a lower-cost, nonmember country to a member country having higher costs


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Option A: elimination of trade restrictions among member countries

Option B: a common tax system and monetary union

Option C: prohibition to restriction on factor movements

Option D: a common tariff levied in imports from nonmembers

Correct Answer: a common tax system and monetary union


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Option A: dollar

Option B: mark

Option C: franc

Option D: euro

Correct Answer: euro


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Option A: made it harder for Americans of compete against the Germans in the British market

Option B: made it easier for Americans to compete against the Germans in the British market

Option C: made it harder for Americans to compete against the Japanese in the British market

Option D: made it easier for Americans to compete against the Japanese in the British

Correct Answer: made it harder for Americans of compete against the Germans in the British market


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Option A: customs union

Option B: economic union

Option C: common market

Option D: free trade area

Correct Answer: common market


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Option A: adopted a common fiscal policy for member nations

Option B: established a common system of agricultural price supports

Option C: disbanded all tariffs between its member countries

Option D: levied common tariffs on products imported from nonmembers

Correct Answer: adopted a common fiscal policy for member nations


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Option A: amount the which the EU’s support price exceeds the world price

Option B: amount by which the world price exceeds the EU’s support price

Option C: support price of the EU

Option D: world price

Correct Answer: world price


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Option A: a country moves from autarky to free trade

Option B: a movement to a customs union reduces the cost of trade through standardization

Option C: economic integration results in a movement in product origin to a lower-cost member country

Option D: economic integration results in a shift in product origin from a lower cost nonmember country to a member country having higher costs

Correct Answer: economic integration results in a movement in product origin to a lower-cost member country


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Option A: trade creation

Option B: trade diversion

Option C: dynamic welfare effects

Option D: comprehensive welfare effects

Correct Answer: trade diversion


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Option A: free-trade area

Option B: customs union

Option C: common market

Option D: monetary union

Correct Answer: free-trade area


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Option A: free trade area

Option B: customs union

Option C: common market

Option D: monetary union

Correct Answer: monetary union


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Option A: free trade area

Option B: customs union

Option C: common market

Option D: monetary union

Correct Answer: free trade area


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Option A: customs union

Option B: free trade area

Option C: reciprocal trade agreement

Option D: monetary union

Correct Answer: monetary union


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Option A: 400 units from B

Option B: 200 units from C

Option C: 200 units from each

Option D: 400 units from B and 200 units from C

Correct Answer: 400 units from B


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Option A: monetary union

Option B: free trade area

Option C: common market

Option D: customs union

Correct Answer:


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Option A: 700 units from country C

Option B: 700 units from country C and 600 units from country B

Option C: 600 units from country C

Option D: 600 units from country C and 400 units from country B

Correct Answer: 600 units from country C


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Option A: variable levies

Option B: export subsidies

Option C: trigger prices

Option D: countertrade

Correct Answer: export subsidies


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Option A: free trade area

Option B: customs union

Option C: common market

Option D: economic union

Correct Answer: common market


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Option A: increase American farm exports to the EU

Option B: decrease American farm exports to the EU

Option C: lowered the price of American farm exports to the EU

Option D: not affected the price of American farm exports to the EU

Correct Answer: decrease American farm exports to the EU


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Option A: Capital

Option B: land

Option C: skilled labor

Option D: unskilled labor

Correct Answer: skilled labor


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Option A: Spain

Option B: Germany

Option C: France

Option D: Iceland

Correct Answer: Iceland


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Option A: highly competitive

Option B: highly noncompetitive

Option C: small in economic importance

Option D: geographically distant

Correct Answer: highly competitive


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Option A: during periods of extreme pessimism because so many stocks become undervalued

Option B: only when people are irrational

Option C: when stocks are fairly valued

Option D: because rational people may buy an overvalued share if they think they can sell it to someone for even more at a later date

Correct Answer: when stocks are fairly valued


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Option A: Increasing the number of shares from 10 to 20

Option B: All of these answers provide the same amount of risk reduction

Option C: Increasing the number of shares in the portfolio from 1 to 10

Option D: Increasing the number of shares from 20 to 30

Correct Answer: Increasing the number of shares in the portfolio from 1 to 10


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Option A: information analysis

Option B: risk management

Option C: fundamental analysis

Option D: diversification

Correct Answer: fundamental analysis


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