Busa 201 Final

23. Job search

-is one reason economies always experience some unemployment. -is the process of matching workers with appropriate jobs. -would not be a problem if all -workers and all jobs were the same. *All of the above are correct.*

70. Absolute advantage is found by comparing different producers'

input requirements per unit of output.

What word do economists use to refer to the purchase of goods that will be used in the future to produce more goods and services?

investment

22. A person who is counted as "unemployed" by the Bureau of Labor Statistics

is also in the labor force. must have recently looked for work or be on temporary layoff. must be at least 16 years old. *All of the above are correct.*

29. The long-run aggregate supply curve

is vertical. is a graphical representation of the classical dichotomy. indicates monetary neutrality in the long run. *All of the above are correct.*

13. Productivity is defined as the quantity of

goods and services produced from each unit of labor input

61. If an externality is present in a market, economic efficiency may be enhanced by

governement intervention

36. In which case can we be sure real GDP rises in the short run?

government purchases increase and taxes fall

19. The catch-up effect refers to the idea that

it is easier for a country to grow fast and so catch up if it starts out relatively poor.

26. Which of the following causes of unemployment is not associated with a wage rate above the market equilibrium level?

job search

Human capital is the

knowledge and skills that workers acquire through education, training, and experiences

Which of the following are residents of rich countries likely to have in greater quantities, or better quality, than residents of poor countries?

housing healthcare life expectancy *All of the above.*

30. The long-run aggregate supply curve shifts right if

immigration from abroad increases. the capital stock increases. technology advances. *All of the above are correct.*

73. Goods produced abroad and sold domestically are called

imports

U.S. GDP

includes production of foreigners working in the U.S. but excludes production by U.S. residents working in foreign countries.

If an economy's GDP rises, then it must be the case that the economy's

income and expenditure both rise

gross domestic product measures

income and expenditures

77. An increase in the price of a good will

increase quantity supplied

Recessions are not associated with which of the following?

increased bankruptcies falling profits falling incomes *falling unemployment*

14. Which of the following items plays a role in determining productivity?

physical capital natural resources technological knowledge *All of the above are correct.*

47. A corrective tax

places a price on the right to pollute

33. The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected,

production is more profitable and employment rises.

16. Historically, the market prices of most natural resources (adjusted for inflation) have

remained stable or decreased.

59. The phenomenon of scarcity stems from the fact that

resources are limited

One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs. The growth that arises from capital accumulation is not a free lunch. It requires that society

sacrifice consumption goods and services now in order to enjoy more consumption in the future.

27. During recessions

sales and profits fall

74. The two words most often used by economists are

supply and demand

31. The aggregate supply curve is upward sloping in

the short run, but not the long run.

42. Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is

$150

Suppose a gardener produces both tomatoes and squash in his garden. If he must give up 16 bushels of squash to get 4 bushels of tomatoes, then his opportunity cost of 1 bushel of tomatoes is

4 bushels of squash

18. Which of the following is an example of the "brain drain?"

A country's most highly educated workers emigrate to rich countries.

41. Which of the following is correct?

Efficiency deals with the size of the economic pie, and equality deals with how fairly the pie is sliced.

Two firms, A and B, each currently emit 100 tons of chemicals into the air. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution emitted into the air. The government gives each firm 40 pollution permits, which it can either use or sell to the other firm. It costs Firm A $200 for each ton of pollution that it eliminates before it is emitted into the air, and it costs Firm B $100 for each ton of pollution that it eliminates before it is emitted into the air. It is likely that

Firm A will buy all of Firm B's pollution permits. Each one will cost between $100 and $200.

For an economy as a whol

Income must equal expenditure

Grapes are considered intermediate goods

If the purchaser uses them to make wine to sell to others but not if the purchaser eats them.

Amy is working part-time. Tavaris is on temporary layoff. Who is included in the Bureau of Labor Statistics' "employed" category?

Only amy

58. Resources are

Scarce for households and scarse for econmies

71. If Shawn can produce more donuts in one day than Sue can produce in one day, then

Shawn has an absolute advantage in the production of donuts.

20. In the long run the unemployment rate equals

The natural rate of unemployment

35. If aggregate demand shifts left, then in the short run

The price and real gdp both fall

60. The opportunity cost of an item is

What you give up to get that item

50. A city street is

a common resource when it is congested, but is a public good when it is not

53. A price floor is

a legal minimum on the price at which a good can be sold. often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price floor. a source of inefficiency in a market. *All of the above are correct.*

76. In a competitive market, the quantity of a product produced and the price of the product are determined by

all buyers and sellers

72. Trade can make everybody better off because it

allows people to specialize according to comparative advantage

32. Wages tend to be sticky

because of contracts, social norms, and notions of fairness.

66. A demand curve shows the relationship

between price and quantity demanded

75. Which of the following statements is correct?

buyers determine demand, sellers determine supply

The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate

decreases and producer surplus decreases

If total spending rises from one year to the next, then

either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both.

34. Other things the same, if prices fell when firms and workers were expecting them to rise, then

employment and production would fall

Susan is a plant manager in charge of a factory in a relatively poor country. Even though market wages are low, she decides to raise the wages of her workers. Her decision

might increase profits if it means that the wage is high enough for her workers to eat a nutritious diet that makes them more productive.

52. Governments can improve market outcomes for

neither public goods nor common resources

Joe and Jim purchase vegetables at a grocery store, but Jim also grows vegetables in his back yard. Regarding these two practices, which of the following statements is correct?

only joe and jims grocery store purchases are included in the gdp

7. Real GDP will increase

only when output increases

62. Where can an economy not produce?

outside its production possibilities frontier

Assume that your roommate is very messy. Suppose she gets a $25 benefit from being messy but imposes a $50 cost on you. The Coase theorem would suggest that an efficient solution would be for you to

pay your roommate $25 but no more than $50 to clean up after herself

51. A good is excludable if

people can be prevented from using it

A paper plant produces water pollution during the production process. If the government forces the plant to internalize the negative externality, then the

than the supply curve for paper will shift to the left

45. If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,

the country will be an importer of the good

28. The variables on the vertical and horizontal axes of the aggregate demand and supply graph are

the price level and real output

12. A nation's standard of living is determined by

the productivity of its workers

GDP does not reflect

the value of leisure. the value of goods and services produced at home. the quality of the environment. *All of the above are correct.*

67. When can two countries gain from trading two goods?

when the first country can only produce the first good and the second country can only produce the second good when the first country can produce both goods, but can only produce the second good at great cost, and the second country can produce both goods, but can only produce the first good at great cost when the first country is better at producing both goods and the second country is worse at producing both goods *Two countries could gain from trading two goods under all of the above conditions*

40. The marginal seller is the seller

who would leave the market first if the price were any lower, and the marginal buyer is the buyer who would leave the market first if the price were any higher.

24. Frictional unemployment can be the consequence of

workers leaving existing jobs to find ones they like better. one industry declining while another is growing. changes in the working conditions offered by competing firms. *All of the above are correct.*