9. In the long run, a firm in a perfectly competitive market operates at
(A) efficient scale and a monopolistically competitive firm operates at excess capacity.
(B) efficient scale and a monopolistically competitive firm operates at efficient scale.
(C) excess capacity and a monopolistically competitive firm operates at excess capacity,
(D) excess capacity and a monopolistically competitive firm operates at efficient scale.

5. According to the Coase theorem, private solutions to externalities can occur when (i) bargaining costs are small. (ii) property ownership/rights cannot be defined. (iii) the number of parties involved is small. (A) All of the above (B) (i) and (ii) only (C) (iii) only (D) (i) and (iii) only

6. Diminishing marginal product suggests that the marginal (A) product of an extra worker is less than the previous worker's marginal product. (B) cost of an extra worker is less than the previous worker’s marginal cost. (C) product of an extra worker is greater than the previous worker's marginal product. (D) cost of an extra worker is unchanged.

7. A U-shaped long-run average total cost curve can be explained by firms increasing their size (i) to take advantage of greater specialization. (ii) to avoid coordination problems. (iii) to avoid fixed costs. (A) (i) and (ii) (B) (ii) and (iii) (C) (i) only (D) all of the above

8. Competitive firms differ from monopolies in which of the following ways? (i) Competitive firms do not have to worry about the price effect lowering their total revenue. (ii) Marginal revenue for a competitive firm equals price, while marginal revenue for a monopoly is greater than the price it is able to charge. (iii) Monopolies must lower their price in order to sell more of their product, while competitive firms do not. (A) (i) and (ii) (B) (ii) and (iii) (C) (i) and (iii) (D) all of the above

10. According to liquidity preference theory, the price level and interest rate are (A) positively related as are the interest rate and aggregate demand. (B) inversely related as are tlie interest rate and aggregate demand. (C) positively related while the interest rate and aggregate demand are inversely related. (D) inversely related wliile the interest rate and aggregate demand are positively related.

11 • Assuming that only the multiplier effect matters, a decrease in government purchases of $10 billion will shift the aggregate demand curve (A) left by $13.5 billion. (B) left by $40 billion. (C) right by $75 billion. (D) None of the above are correct.

12. The logic behind the catch-up effect is that (A) workers in counti ies with low income will work harder than workers in countries with high incomes. (B) the capital stock in rich countries deteriorates more rapidly tlian the capital stock in poor countries. (C) new capital adds more to production in a country that doesn’t have much capital than in a country that already has much capital. (D) None of the above are correct.

13. In the absence of right-to-work laws, workers (A) would not be able to unionize.(B) would not be able to strike. (C) that went on strike could not be permanently replaced. (D) would have to join the union if they worked for a unionized firm.

14. Which of the following is false? (A) In the short run, policymakers face a tradeoff between inflation and unemployment. (B) The decrease in output associated with reducing inflation is less if the policy change is announced ahead of time and is credible. (C) Unemployment can be changed only by the use of government policy. (D) Events that shifts the loag-run Phillips curve right, shift the long-run aggregate supply curve left.

15. In the 1980s the U.S. budget deficit rose. At the same time the U.S. trade deficit grew larger, the real exchange rate of the dollar appreciated, and U.S. net foreign investment decreased. Which of these events is contrary to what the open-economy maci oeconomic model predicts concerning the eilects of an increase in the budget deficit? (A) The U.S. trade deficit grew. (B) The real exchange rate of the dollar appreciated. (C) U.S. net foreign investment fell. (D) None of the above are contrary to the predictions of the model.