Assuming a firm would not survive without protection, what should the government do if the present value of the profits and value added from operating an infant industry firm exceed the deadweight loss of imposing protection?
a. It should impose the tariff—the gains exceed the losses.
b. It should not impose the tariff—the losses exceed the gains.
c. If it imposes the tariff, it may actually create more problems that cannot be foreseen—do not impose the tariff.
d. The government should just ban all imports of that product until the "infant" is able to compete on its own.
Ans: a. It should impose the tariff—the gains exceed the losses.
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Applying elementary economics, mismatch unemployment should fall when relative wages
A) rise. B) fall. C) are more flexible. D) are less flexible.
If the marginal product of capital is greater than the rental cost of capital in terms of goods and services, then ________
A) the firm should continue to produce using that same amount of capital B) the firm should add additional capital C) the firm should reduce the amount of capital is using D) diminishing returns have been avoided
A surplus in a country's balance of trade occurs whenever the country
A. has money outflows that exceed its money inflows. B. refrains from trade with OPEC countries. C. exports more goods than it imports. D. imports more financial capital than it exports.
Based on the figure below. Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating _____gap. 
A. D; an expansionary B. B; no output C. B; expansionary D. A; a recessionary