**** ECON 1A

65. Refer to Table 13-6. Assume the Wooden Chair Factory currently employs 2 workers. What is the marginal product of labor when the factory adds a 3rd worker?

10 chairs per hour

67. Refer to Table 18-11. What is the fifth worker's marginal product of labor?

120

73. A tax accounting firm produces 500 tax returns units when the market price is $150 per return and produces 700 tax returns when the market price is $170 per tax return. Using the midpoint method, for this range of prices, the price elasticity of supply is about

2.67

45. For the general population, a 10 percent increase in the price of cigarettes leads to a

4 percent reduction in the quantity demanded of cigarettes.

14. At any meeting of the Federal Open Market Committee, that committee's voting members consist of

5 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors.

21. Which of the following actions best illustrates adverse selection?

A person who has narrowly avoided many accidents applies for automobile insurance.

Which of the following would cause a movement along the supply curve for cupcakes?

a decrease in the price for cupcakes

All else equal, which of the following would increase the unemployment rate?

a preference among older men to retire early an increase in the maximum number of weeks for which someone can receive government unemployment benefits

Which of the following would cause the demand curve to shift from Demand A to Demand B in the market for oranges in the United States?

an announcement by the FDA that oranges prevent heart disease

The movement from Db to Da could be caused by

an increase in the price of a complement.

this table describes the number of baseballs a manufacturer can produce per day with different quantities of labor. Each baseball sells for $5 in a competitive market. For which level of employment is the marginal product of labor greatest?

b

One disadvantage of government subsidies over price controls is that subsidies

make higher taxes necessary

Arlo is offered a job in Des Moines, where the CPI is 60, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $48,000. How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?

$48000*125/60= $ 100,000.

46. Refer to Figure 6-6. Which of the following price ceilings would be binding in this market?

$6

If the economy starts at C and 1, then in the short run, an increase in government expenditures moves the economy to

. B and 2.

Which of the following would shift of the labor demand curve from D1 to D2?

. a. technological progress b.an increase in the price of firms' output c.an increase in the supply of a relevant factor of production other than labor All of the above are correct.

47. Which of the following statements about costs is correct?

As the quantity of output increases, marginal cost eventually rises

Both Diana and Sarah like jazz music and music by the Beatles. Diana likes music by the Beatles much better than jazz music, whereas Sarah prefers jazz music to music by the Beatles. If we were to graph an indifference curve with CDs by the Beatles on the horizontal axis and jazz CDs on the vertical axis, then

Diane's indifference curve would be steeper than Sarah's indifference curve

13. Unexpected and large deflation is desirable, according to the Friedman rule.

False

A tax on buyers shifts the demand curve and the supply curve.

False

Economists have found that union workers earn about 30 to 40 percent more than similar workers who do not belong to unions.

False

In the presence of inflation in the U.S., accountants incorrectly measure firms' earnings but the tax code correctly measures real incomes.

False

Inflation is costly only if it is unanticipated.

False

Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

False

The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes.

False

The unemployed who quit their jobs, were fired for cause, or just entered the labor force are eligible for unemployment insurance.

False

When the government imposes a binding price ceiling on a competitive market, a surplus of the good arises, and sellers must ration the scarce goods among the large number of potential buyers.

False

If the equilibrium wage is $4 per hour and the minimum wage is $5.15 per hour, then a shortage of labor will exist.

False. There will be no shortage of labour since equilibrium wage is $4 and the firm will have to pay $5.15 so more labour will be available.

Which famous company executive introduced an innovative pay system that is consistent with the theory of efficiency wages?

Ford

Suppose that as a result of a stock market boom, consumers become less concerned about saving for retirement and increase their current consumption expenditures. Which of the following would you expect to occur as a result of this change?

In the short run, unemployment will decrease and inflation will rise.

Which of the following would we not expect if government policy moved the economy up along a given short-run Phillips curve?

Jackie gets fewer job offers.

61. Suppose Japan exports televisions to the United States and imports sugar from Argentina. This situation suggests

Japan has a comparative advantage relative to the United States in producing televisions, and Argentina has a comparative advantage relative to Japan in producing sugar.

Jenna is searching for a job that suits her tastes about where to live. Mary is looking for a job that makes best use of her skills.

Jenna and Mary are both frictionally unemployed.

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

M1 increases by $2,500 and M2 stays the same.

value of the marginal product of the third worker?

MP(n)=(TP(n)-TP(p))/(n-p)MP(n)=marginal product of n th unit of inputTP(n)= total product of n inputsTP(p)=total product of p inputsit is true for n>p MPL(2)=(220-150)/(3-2)=50VMPL=MPL*price=50*20=$1000 option c

. In which of the following cases was the inflation rate 12 percent over the last year?

One year ago the price index had a value of 134 and now it has a value of 150. Inflation rate for c = (( 150 - 134) / 134 )* 100 = 11.9 %

63. Which of the following is correct?

People working part time are counted as "employed" by the Bureau of Labor Statistics.

Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?

Reserve requirement = Reserve x100 / deposits = $3,000 x100 / $50,000 = 6% Money multiplier = 1/ Reserve requirement = 1/ 0.06 = 16.7

71. Gina, a U.S. citizen, works only in Bermuda. The value of Gina's production is included in

U.S. GNP and Bermudan GDP.

Suppose OPEC is unable to come to an agreement regarding oil production and as a result the price of oil drops. Which of the following would you expect to occur as a result of this favorable supply shock?

The short-run Phillips curve will shift to the left and the unemployment rate will decrease.

As the interest rate increases, the present value of future sums decreases, so firms will find fewer investment projects profitable.

True

At a rummage sale, you buy two old books and an old rocking chair; your spending on these items is not included in current GDP.

True

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

True

Changes in monetary policy aimed at reducing aggregate demand involve decreasing the money supply or increasing the interest rate.

True

The logic of the exchange-rate effect begins with a change in the price level changing the interest rate.

True

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

True

U.S. prices rose at an average annual rate of about 3.6 percent over the last 80 years.

True

When you purchase school supplies at the book store using cash, you are using money as a medium of exchange.

True

56. There are large differences in the standard of living

across and within countries over time

If government imposes a price floor at $9, then the price floor causes

all the above

In 1979, Fed Chair Paul Volcker

believed decreasing inflation would temporarily decrease output growth.

Which of the following is bit correct

changes in income effect the slopes of the budget constraint as well as the location on the graph

78. Other things the same, if the price level rises, people

decrease foreign bond purchases, so the supply of dollars in the market or foreign-currency exchange decreases.

If the government changed the per-unit tax from $5.00 to $2.50, then the price paid by buyers would be $7.50, the price received by sellers would be $5, and the quantity sold in the market would be 1.5 units. Compared to the original tax rate, this lower tax rate would

decrease government revenue and decrease the deadweight loss from the tax.

Suppose that efficiency wages become more common in the economy. Imposing efficiency wages

decreases the quantity demanded and increases the quantity supplied of labor.

42. When a tax is imposed on the buyers of a good, the demand curve shifts

downward by the amount of the tax

Which of the following is not an example of a public policy?

equilibrium laws

The Federal Open Market Committee meets approximately

every six weeks

8. The labor-force participation rate tells us the fraction of the population that is able to participate in the labor market.

false

A price floor set below the equilibrium price causes a surplus in the market.

false

The destruction of manufacturing jobs and workers leaving their jobs to find better ones both contribute to structural unemployment.

false

the demand for labor from a certain firm is independent of the demand for that firms product

false

the unemployment rate by the BLS clearly understates the unemployment rate

false

66. An increase in the number of corporations in a portfolio from 110 to 120 reduces

firm-specific risk by less than an increase from 1 to 10.

53. Which of the following do unions not cause?

frictional unemployment

The Federal Reserve was created

in 1913 by Congress

Thomas, a U.S. citizen, works only in Canada. The value of the output he produces is

included in U.S. GNP, but it is not included in U.S. GDP.

59. If the selling price of a bushel of cranberries rises, we would expect the demand for labor in the cranberry industry to

increase

sectoral shifts in demand for output

increase unemployment due to job search.

11. Over one time horizon or another, Fed policy decisions influence

inflation and employment

A bank has a 10 percent reserve requirement, $36,000 in loans, and has loaned out all it can given the reserve

it has 40000 in deposits

21. If a bank desires to hold no excess reserves, the reserve requirement is 8 percent, and it receives a new deposit of $500,

its required reserves increase by $40.

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

job search

48. The Social Security tax is a tax on

labor

The labor supply curve is fundamentally a representation of the trade-off people face between which of the following? a. inflation and unemployment

labor and leisure

ky nominal wages can result in

lower profits for firms when the price level is lower than expected.

64. Drug-interdiction policies that reduce the supply of illegal drugs

may increase drug-related crimes.

When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by

more than $1000

60. When the money market is drawn with the value of money on the vertical axis, a decrease in the price level causes a

movement to the left along the money demand curve.

15. Marginally attached workers are people who are

not working and are not looking for work, but would work if asked.

12. The tool most often used by the Fed to control the money supply is

open market operations

Which of the following is an example of a Giffen good?

potatoes during the Irish potato famine rice in the Chinese village of Hunan

57. According to the assumptions of the quantity theory of money, if the money supply increases 5 percent, then

real GDP would be unchanged and price level would rise by 5 percent

After much anticipation a company releases a new smartphone. The smartphone doesn't work as well as expected and lacks many of the features buyers had been expecting. The unexpectedly negative reaction to the smartphone would

reduce the present value and the price of the corporation's stock

Unemployment insurance

reduces search effort which raises unemployment.

35. A decrease in the expected price level shifts short-run aggregate supply to the

right, and an increase in the actual price level does not shift short-run aggregate supply.

If the wage is kept above the equilibrium wage for any reason, the result is

structural unemployment.

62. Economists generally agree that the most important tax in the U.S. economy is the

tax on labor

58. Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

the FOMC

70. Which of the following is not correct?

the US has never experienced deflation

49. Which of the following pairs of countries experienced approximately the same rate of growth of real income per person over about the last 120 years?

the United States and Argentina

23. When a union bargains successfully with employers, in that industry,

the quantity of labor supplied increases and the quantity of labor demanded decreases.

69. If an increase in the interest rate raises savings, then

the substitution effect is greater than the income effect

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that

the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources.

55. Unemployment data is collected

through a monthly survey of about 60k households

50. Refer to Figure 33-4. If the economy starts at A, a decrease in the money supply moves the economy

to C in the long run.

13. In measuring the stock of money in the U.S., M1 includes

travelers checks

10. Discouraged workers are people who want to work but have given up trying to find a job after an unsuccessful search.

true

9. A firm might offer efficiency wages to reduce worker turnover and thereby reduce production costs.

true

When unions raise wages in one part of the economy, the supply of labor increases in other parts of the economy, which reduces wages in industries that are not unionized.

true

in the US it is illegal for companies to interfere when workers try to unionize

true

money allows people specialize in what they do best

true

the labor force minus the employed equal the unemployed

true

According to 2014 data on the U.S. population, which of the following groups of teenagers (ages 16-19) had the highest labor-force participation rate?

white females

If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $10, then this bank

will be able to make new loans up to a maximum of $9.50.

54. A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

zero