Basic ECON Final

Economy with a base of GDP of 100 and a 4 percent growth rate

108.6

Brazil's GDP is 4,403, exchange rate is 1.869, calculate Brazil's real GDP in US Dollars

2,355.8 Billion

Calculate net exports

20 Billion

Look at the table Production Possibilities Schedule 1. If the economy produces 2 units of consumer goods per period, it also can produce at most ___ units of capital goods per period. (Word for Word)

24

Producer surplus is represented by the area ___ the supply curve and ____ the price

Above; below

When the economy suffers a downturn and the incomes of many people decrease vacationers are more likely to take car trips than fly. Which is a possible explanation?

Air travel is a normal good and vacation travel by car is an inferior good

Quantitive easing is

All of the Above

The law of demand states that other things equal

As the price increases, the demand will decrease

A choice made _____ is a choice whether to do a little more or a little less of something

At the margin

To calculate the price levels economists begin with concept of the different items individuals and businesses buy

Basket of goods and services

Look at the figure Guns and Butter. This production frontier is

Bowed out from the origin because of increasing opportunity costs

The components of GDP on the demand side is composed of

C+I+G+(X-M)

According to the text, how well does GDP measure the well being of society?

Captures some of what we mean by the phrase "standard of living" reasonable and rough-and-ready measure of standard of living

Three traditional tools for the federal reserve to implement monetary policy include

Changing Reserve Requirements, changing discount rate and open market operations

A central bank, especially the federal reserve does all but the following

Conduct fiscal policy

Look at the Figure Long-Run Average Cost. The firm has ___ in the output region from A to B

Constant returns to scale

All else equal, if a price floor that is above the equilibrium price is imposed on a market and the government buys the surplus, what will happen to consumer and consumer producer surplus?

Consumer surplus will fall and producer surplus will rise

The government decides to impose a price ceiling on a good because it thinks the market determined price is "too high". If the government imposes the price ceiling below the equilibrium price

Consumers will respond to the lower price and wish to purchase more of the good than at the equilibrium price

You are analyzing a trade-off when you compare the __ and __ of doing something

Costs and benefits

Figure estimated Price elasticity

D4

Expansionary monetary policy tends to

Decrease interest rates and increase aggregate demand

If goods A and B are substitutes, a decrease in the price of good B will

Decrease the demand for good A

If goods A and Z are complements, an increase in the price of good Z (Word for Word)

Decrease the demand for good A

Expansionary fiscal policy is followed with the following government policies

Decreased taxes and increased spending

To protect against bank runs, congress put two strategies into place

Deposit insurance and lender of last resort

The components of GDP on the producer side is

Durable goods, non-durable goods, services, structures and changes in...

The Macroeconomic goals are

Economic Growth, low unemployment, and inflation

Core inflation index calculated by taking CPI and excluding volatile economic variables

Energy and Food prices

Anna is willing to sell her 2-year-old boat, but not for less than $2300. The cost of selling this boat is ____ $2300

Equal

Accounting profit takes into account depreciation but economic profit does not

False

Critics of the pharmaceutical industry often argue that price ceilings should be imposed on the drug manufactures, if this happened the quality of drugs would improve

False

For a tax system to achieve equity, it must first achieve efficiency

False

If a perfectly competitive firm reduces its output, the market price will increase

False

If the United States is more productive than Mexico in all lines of production, then the United States cannot benefit from trade with Mexico

False

In cities, a mile road lane may cost $30 million or more, while in rural areas a mile of rad lane may cost only $5 million. This means there should be more road lanes in rural areas than urban

False

In the US, Economy, oligopoly is rare

False

In the United State, poor people and the middle class pay the largest share of income taxes

False

Lawn-mowing service is a perfectly competitive industry. Alex's lawn mowing service should close if Alex expects his long-run economic profits to equal zero

False

Marginal analysis should be used in "either-or" decisions

False

National budget deficits have no impact on long term interest rates

False

Oligopolists will earn zero pro its unless they can collude

False

Policy tools include aggregate demand and aggregate supply

False

Sara spends $25 for an all day ticket to an amusement park. After on ride, it begins to rain and she wishes she had never come. Since she has already paid for her ticket, she should stay at the amusement park until it closes or she has wasted her $25

False

Suppose the beef industry is perfectly competitive and the demand for beef rises. As long as the demand does not subsequently fall beef producers can expect to earn economic profits both the short run and the long run

False

Tax structure refers to what a tax is levied on (income, property, profits) and tax base refers to the base (or lowest) rate of taxation on a particular tax structure

False

The FICA tax falls most heavily on workers because the price elasticity of demand for labor is greater than the price elasticity of supply of labor

False

The administrative cost of a tax include the costs structured by the government its collecting the tax (such as the costs of operating the Internal Revenue Service) but exclude the costs increased by individuals in paying the tax

False

The rule of law and contractual rights are important so that markets can work effectively, but not protection of property rights

False

The short run individual supply curve for a perfectly competitive firm is given by the marginal cost curve above minimum average total cost

False

The terms decrease in demand and decrease in quantity demand can be used interchangeable

False

When making decisions, it is important to consider those costs that actually involve explicit money outlay. This is because such costs actually have to be paired whereas implicit costs are national or hypothetical

False

When economists Alexander Gershenkron speaks of advantages of "backwardness" he is speaking of

Favoring convergence

The Macroeconomic perspectives are

Framework, policy tools, and economic growth

What remains our basic measure of Macroeconomic activity?

GDP

Which of the following is not a characteristic of monopolistic competition

Tacit Collusion

Because monopoly firms are price-setters

They can sell more only by lowering price

In the short run, if a perfectly competitive firm chooses to produce, then its profits are maximized by producing the quantity of output where marginal cost equals marginal revenue

True

Lump-sum taxes promote economic efficiency but violate the ability-tax-pay principle

True

Oligopolist firms often choose not to compete on price

True

Since the mass use of fossil fuels and the Individual Revolution GDP per capita increased at a tremendous rate

True

Statisticians who calculate GDP must avoid mistakes of double counting as it travels through stages of production

True

Suppose all firms in an industry form a cartel and succeed in raising the price to the monopoly level by reducing output. Any single firm will find that it can increase its profits by cheating on the cartel agreement

True

The argument for progressive taxes is based on the ability-to-pay principle

True

The deadweight loss of an excise tax arises because the tax prevents some mutually beneficial transactions

True

The noncooperative equilibrium of a prisoner's dilemma kind of game can be avoided if the game is played repeatedly and firms engage in strategic behavior

True

The power of inflation does not affect just goods and services but wages and income levels as well

True

The study of economics arises because of the necessity for choice, and the necessity for choice arises because of the fundamental problem of scarcity of resources

True

The total product curve for the Wal-Mart Greeting Card Company shows how the quantity of output depends on the quantity of the variable input for a given amount of the fixed inputs associated with producing greeting cards

True

To minimize deadweight loss, excise taxes should be levied on goods with inelastic demand and inelastic supply rather than good with elastic demand and elastic supply

True

Examples of automatic stabilizers

Unemployment insurance and food stamps

Scarcity in economics means

We do not have sufficient resources to produce all the goods and services we want

A good is inferior if which of the following is true

When income increases, demand decreases

The text emphasizes the following US population who have experienced increase unemployment

Women, young, and African Americans

One of the consequences of the minimum wage has been

Workers offering to work off the books for less than the minimum wage

Which of the following two statements is a positive statement? Which is a normative statement? X. The federal minimum wage is increasing to $7.50 an hour. Y. The minimum wage should be high enough that families will not live in poverty

X is positive and Y is normative

Look at the figure Consumer Surplus III. In the figure total consumer surplus is ____ when the price is $10

$124

Look at Figure The Demand Curve. If the price is $3, total revenue is ____. If the price is $4, total revenue is ___

$21;$24

Look at the table Cost Date, which shows data for a designer purse factory. The average total cost of producing 6 purses is

$50

The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water form underground springs. At the profit-maximizing output, profit is

$7.00

Calculate real growth between 1985 and 1995

34.45

Calculate GDP

560 Billion

The text addresses typical GDP per capita range of middle-income countries as

6,000-12,000

Calculate real GDP for 1985

6,977 billion

Calculate real GDP for 1995

9,380.7 Billion

Which of the following statement is correct? (Ch. 3)

A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift of the demand curve

The primary difference between a change in supply and a change in the quantity supplied is that (Word for Word)

A change in quantity supplied is a movement along the supply curve, while change in supply is a shift in the supply curve

The pricing in a monopoly prevents some mutually beneficial traders. The values of these unrealized mutually beneficial trades is called

A deadweight loss

A newspaper typically consume a smaller fraction of a consumer's budget than its home entertainment system. Therefore you would expect the demand for

A home entertainment system to be more price-elastic

A price controlled is

A legal restriction on how high or low a price in a market may go

Which of the following statements concerning monopoly is true

A monopoly has no rivals

Monopolistic competition describes an industry characterized by which of the following

A product with many close substitutes

A factor of production whose quantity can be changed during the short run is

A variable factor of production

An economy is said to have a comparative advantage in the production of one good if it

Has the lowest opportunity cost for producing a particular good

The production possibility frontier illustrates that

If all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced

The text recommends that fiscal policy to be used

In extreme economic situations-Blunt instrument

The period of modern economic growth occurred

In the last two centuries-200 years

In an attempt to reduce shooting deaths, some cities have offered money to people who turn in illegal guns. This program is an example of the government using ___ to influence behavior.

Incentives

Expansionary monetary policy sequence is

Increase M (Money), Decrease I (interest rate), increase investment and consumption, increased price level and real GDP

Contractionary fiscal policy is followed with the following government policies

Increased taxes and decreased spending

Look at the figure Consumer Surplus III. In the figure when the price falls from $30 to $25, consumer surplus ___ for a total consumer surplus of ____

Increases by $15; $64

Look at the figure Guns and Butter. On this figure, points A, B, E, and F

Indicate combinations of guns and butter producing efficiently

Microeconomics deals with

Individual decision makers in the economy

General and ongoing rise in level of prices in the entire economy

Inflation

Budweiser is a brand name that many people recognize. During the Super Bowl each year this beer company has many of the most successful ads. Which of the following true about advertising for Budweiser?

It is designed to increase the demand for Budweiser

The firm shown in the figure Monopolistic Competitor may engage in advertising because

Its price is greater than its MC

The current chair of the federal reserve board is

Janet Yellin

Price discriminating firms will impose a price structure that offers customers with a ___ demand, a ___ price and offers customers with a ____ demand, and a ___ price

Less elastic; higher; more elastic; lower

In China, which of the following would not be a resource in the production of rice

Money

A feature of monopolistic competition that makes it different form monopoly is the

Number of firms in the industry

The government economists at the Bureau of Economic analysis within the US department of commerce

Pieces together estimates of GDP from a variety of sources

A minimum price set above the equilibrium price is a

Price floor

When a public transit system (such as a subway) raises its fares, it may experience an increase in total revenue. This suggests that demand is

Price-inelastic

Tax rates that increase as a household's income increase is called

Progressive tax

Look at the figure A Rock Climbing Shoe Monopoly. If the firm acts to maximize profit, the firm will sell ___ pairs of shoes at a price of ___ per pair

Q2; P1

The system of taxicab medallions in New York City is an example of a

Quality control

A significant decline in real GDP is called a

Recession

Technological improvements will

Shift the production possibility frontier outward

When building a model, economists

Simplify reality in order to highlight what really matters

If an increase in the price of cotton increase total revenue then the price effect is ____ the quantity effect

Stronger than

Budget deficit is

The amount of spending that exceeds income

The velocity equation: money X velocity=nominal GDP is called

The basic equation of money

Consumer surplus for an individual buyer is equal to

The consumer's willingness to pay for the good minus the price of the good

A consumer's willingness to pay reflects

The maximum price at which he or she would buy the good or service

We can measure total consumer surplus for good X as

The sum of the individual consumer surpluses for all buyer s of X

The total producer surplus in the Wisconsin milk market is represented by

The sum of the individual producer surpluses in this market

Opportunity cost is

The value of the best alternative forgone in making any choice

Labor force references to

Those employed and unemployed

Suppose the price elasticity of demand for blueberries is 1.5. If climate change destroys one-fourth of the nation's blueberry crop (and reduces supply) how will that affect total revenue, all other things unchanged?

Total revenue will fall

The income elasticity of demand for peaches has been estimated to be 1.53. If income grows by 15% in a period how will that affect total revenue from peaches in that period all other things unchanged?

Total revenue will rise

Gap between exports and imports is trade balance, exports larger than imports is

Trade surplus

A Nash equilibrium results when each player chooses the action that maximizes his or her payoff given the actions of other players

True

A binding minimum wage will generally cause increase unemployment for low-workers

True

A market that is in long run equilibrium must also be in short run equilibrium

True

A perfectly competitive firm demand curve is perfectly elastic at the market determined price

True

A perfectly competitive firms supply curve is its marginal cost curve above the average variable cost curve

True

A situation in which each firm acts in order to raise the profits of its rivals without any formal agreement between firms is known as tacit collusion

True

A strategy of tit-for-tat involves playing cooperatively at first, then doing whatever the other player did the previous period

True

A tax system causes a loss in efficiency because taxes destroy incentives

True

A trade-off involves weighing the costs and the benefits

True

An "either-or" decision is a choice between two activities

True

Any expense that is not recoverable is considered a sunk cost

True

Because resources are scare, the true cost of anything is its opportunity cost

True

Cindy's nails operates in the perfectly competitive industry. The city is considering requiring nail salons to be certified by a health inspector. The certification will cost $1000 annual and is a fixed cost. The certification will affect Cindy's decision to operate, not the number of pedicure she chooses to perform if she operates

True

Competitive market occurs when there are many buyers and sellers

True

Economic profits can be negative even if accounting profits are positive

True

Efficiency exists when there is no way to make someone better off without making someone else worse off

True

If the marginal cost of any activity is constant at $4, then at the optional quantity of the activity, the marginal benefit will be $4

True

In the 1960s and 1970s General Motors often set prices for the new model year and Ford and Chrysler would follow.This was a form of tacit collusion known as price leadership

True

In the long-run equilibrium in a perfectly competitive market, all firms will be operating at their lowest possible total cost

True

You can spend $100 on either a new economics textbook or a new CD player. If you choose to buy the new economics textbook, the opportunity cost is:

Your enjoyment of the new CD player