ECON 2100 Final Exam
Your company sells 19 units at a price of $10 and must change price to $9.90 in order to sell 20 units. What is the marginal revenue of the twentieth unit?
$8.00
The income effect would cause him to _____ his work hours.
increase
Spending on rebuilding an interstate highway connecting New York City and Hartford, Connecticut, is an example of...
government expenditure
Countries benefit from trade by importing goods in which their opportunity costs are relatively _____ and exporting goods in which their opportunity costs are relatively _____.
high, low
With a progressive tax, those with more income tend to pay a _____ share of their income in taxes.
higher
A market has 10 sellers. The fifth and seventh in size merge, becoming the largest seller in the market. How can this merger support competition in the market?
if the newly merged seller becomes more efficient and offers lowers prices
In 2007, a U.S. forever stamp cost $0.41. In 2019, a U.S. forever stamp cost $0.55. In January 2007, the consumer price index was 207.34. If in January 2019, the consumer price index 251.1, what is the approximate price of the 2007 forever stamp in 2019 dollars?
$0.50
In 2014, the action movie John Wick made about $14.5 million in its opening weekend. In 2017, John Wick: Chapter 2 made about $30.5 million in its opening weekend. The consumer price index in 2014 was 236.7. If the consumer price index in 2017 was 245.1, how much did the first John Wick movie make in 2017 dollars?
$15 million
The cost of your favorite coffee is $5 per cup at the coffee shop. The marginal cost of each cup you drink is _____.
$5
How can high government debt lead to slow economic growth in the future?
- governments may find it hard to fund other spending such as infrastructure projects - governments may increase future taxes to pay interest payments on rising debt - governments borrow funds that might otherwise have been used for investment
The price of milk at the local grocery store is cut by 25%. In response to this price cut, the quantity of milk demanded increases by 10%. What is the absolute value of the price elasticity of demand for milk?
0.4
You open an investment account that earns a nominal interest rate of 4.2% a year. The current consumer price index is 108. In one year, the consumer price index is expected to go to 112, What is your expected real rate of return?
0.5%
The price of product A is cut by 30%. As a result, the quantity demanded of product B falls by 20%. The cross-price elasticity of demand between product A and product B is _____.
0.66
Total consumption is $1,800 when income is $2,000, and total consumption increases to $2,600 when income is $3,000. What is the marginal propensity to consume?
0.8
During 1994 and 1995, nominal GDP in the United States grew by 4.8%, and the rate of inflation was 2.1%. What was the growth rate of real GDP between the two years?
2.7%
What kind of interest rates does forward guidance accept?
30-year mortgage rates, 10-year business loans
Suppose that one hour of labor in Singapore can produce 20 computers or 40 cellphones. Further, suppose that one hour of labor in Ireland can produce 10 computers or 15 cellphones. _____ has a comparative advantage in the production of computers.
Ireland
If Frank is a hand-to-mouth consumer and he has just received a permanent 10% increase in salary, we can expect Frank to exhibit...
a large change in consumption
Which of the following people can be classified as unemployed?
Laura, who has been seeking employment for two months
_____ has a comparative advantage in the production of cellphones.
Singapore
Many governments require companies that produce drugs to obtain government approval before selling a new drug. This is done to ensure public safety, and it leads to _____ in the market for the new drug.
a barrier to entry
Which of the following statements supports the idea that price changes are not externalities?
a change in price adversely affects all suppliers in the market
Rapid growth in poorer countries leads to...
a reduction in inequality between poorer countries and richer countries
Which of the following would be both nonrival and nonexcludable?
a siren tornado warning system
Southeast Asian countries experience high temperatures and high humidity during the monsoon seasons. This makes working conditions difficult. Because air conditioners are expensive and consume a lot of electricity, an alternative air cooler called an Eco-cooler was invented. This device does not use electricity, is made from readily available soda bottles, and works by funneling air into a room. This scenario is an example of...
a technological innovation that can increase labor productivity and thus increase economic growth
Which of the following market changes would lead to the supply curve shifting left?
an increase in price of an input used in production
Movement up a given demand curve (downwards sloping) is caused by...
an increase in the price of the item
The cost-benefit principle states that a decision should be pursued only if the...
benefits are greater than the costs
Harry is an engineering student taking an economics elective in his senior year. He has the option after college to work as a petroleum engineer or to design rollercoasters. He thinks many engineers would prefer to design rollercoasters and expects a lower salary in this field. With this analysis, he is acknowledging the dependencies that exist...
between people or businesses in the same market
Labor and shovels are _____.
complements
Marginal benefit minus price equals...
consumer surplus
A negative shock causes a decrease in the level of technology in a country. Which of the following production functions shows the impact of this shock?
curve shifts downward
Damon's wage falls. The substitution effect would cause him to _____ his work hours.
decrease
Government revenue will automatically _____ during a recession and automatically _____ during an economic boom.
decrease, increase
Regardless of the price of Kit-Kats, Damien has decided to eat five Kit-Kats every day. Which of the figures shows Damien's daily demand curve for Kit-Kats?
demand is a horizontal line
The city of Vaughan in Ontario, Canada, opened a new subway line that extended the existing subway system between the greater Toronto area and the city of Vaughan. The route previously only had bus service. Which of the following graphs depicts the effect you would expect to see on the demand for bus rides on this route after the introduction of the subway?
demand shifts left
The ceiling for the federal funds rate is set by the _____.
discount rate
If Bishan wants to capitalize on comparative advantage in his life, then he should....
do more of what he is relatively good at and then trade for other things
True or False: The Federal Reserve directly controls inflation, unemployment, output, and real GDP.
false
Demand for a particular fast-food chain inside an airport is less elastic than outside of the airport because...
fewer choices means more inelastic demand
The existence of automatic stabilizers means that government spending will automatically _____ during a recession and automatically _____ during an economic boom.
increase, decrease
A tax on sellers...
increases the price that buyers pay and decreases the price that sellers receive
As the price of scanners with high-resolution cameras dropped, Ford began using them instead of human inspectors to check the quality of the painted surfaces of its cars. What is the relationship between capital and labor in this example?
labor and capital are substitutes in production
Supermarkets need to hire fewer cashiers, due to self-checkout counters. Which graph shows what happens to the labor market for cashiers?
labor demands shifts left, labor supply stays the same
If demand is elastic, an increase in price yields _____ total revenue.
lower
Suppose the federal minimum wage decreases in the United States. Which of the following graphs shows the correct effect on the consumption function?
movement downwards along the curve
Which of the following is NOT a factor that can shift supply?
price of the product
Junko's car dealership has been suffering from dust on the car in its lots ever since Mak opened his bakery nearby. The bakery's flour deliveries send waves of dust down the block. Junko offers to cover half of the cost of Mak adding a shelter for his delivery area to reduce the blowing of floor dust toward the dealership. This is an example of reducing a negative externality through...
private bargaining
The marginal revenue product is equal to the marginal...
product of labor multiplied by the price of that product
If the output gap is positive, then relative to the neutral interest rate, the Federal Reserve will _____ the real interest rate to drive _____ consumption and investment.
raise, down
Your landscaping company uses labor and shovels. The price of shovels falls, and this _____ your demand for labor.
raises
As wage rises, the opportunity cost principle leads to a _____ in the number of hours supplied and a _____ in the number of hours demanded in the labor market for marketers.
rise, fall
The permanent income hypothesis implies that consumers whose incomes exceed their permanent consumption will engage in _____.
saving
Which of the following is a characteristic of a perfectly competitive market?
sellers are price-takers
Product A and product B are _____.
substitutes
Suppose that a CPI basket includes avocadoes, pineapples and oranges. Avocadoes become very expensive, and consumers substitute away form avocadoes and buy hummus instead. If the CPI basket does not change to reflect the move away from avocados, the result is...
substitution bias
There are four gas stations in your town. Which graph shows the effect on the local supply curve for gasoline if one of them shuts down?
supply shifts left
In 2011, Japan suffered a major earthquake and tsunami. Honda parts that were sourced from Japan could no longer be produced, which caused Honda to cut its production of cars. Which graph shows the effect of this shortfall.
supply shifts left, demand stays the same
Along the same aggregate production function, the level of _____ is the same.
technology
Which of the following is an example of a trade cost incurred when a German citizen imports a bottle of wine produced in France?
the cost of the trucking services used in transportation
What is the relationship between a company's market power and the price that the company's owner can charge for its products
the greater the market power, the higher the price the firm can charge without losing many customers
Joshua is planning on studying late into the night for his economics exam. He is contemplating how many coffees to buy tonight. Joshua should not buy an additional coffee during the evening if...
the marginal benefit of purchasing one more coffee is less than the marginal cost
The socially optimal outcome occurs where the marginal social benefit equals...
the marginal social cost
In a natural monopoly, what deters new sellers from entering the market?
the new seller would have much higher costs than the existing large seller in the market
What happens to a seller's demand curve as the seller gains market power?
the slope of the curve becomes steeper
Why did government spending rise during the 2007 to 2009 period?
the use of expansionary fiscal policy and increased social insurance payments during the Great Recession
An opportunity cost is...
the value of the next best forgone alternative
What happens to average fixed costs as output rises?
they diminish
How is the economic surplus generated by a decision calculated?
total benefits minus total costs arising from the decision
The first cup of coffee you drink gives you a marginal benefit of $8. The marginal benefit from the second cup is $6, $4 from the third, $2 from the fourth, and $0 from the fifth. You should drink _____ cups of coffee.
two
When real interest rates rise, consumption will shift...
upward if the income effect outweighs the substitution effect
An underemployed person is one who is...
working but whose skills are not fully utilized
Which of the following people can be classified as cyclically unemployed?
Ben, who worked in an auto assembly plant but was laid off when the company downsized due to poor market conditions
Mana has a comparative advantage in baking cakes. This means that she...
gives up less to bake a cake than other bakers give up to bake a cake
As real GDP per person rises, maternal and fetal health...
increase due to better health care, education, sanitation, and nutrition
You are the Chair of the Federal Reserve Bank of the United States. The neutral rate of interest is 2%, the inflation rate is 0.75%, and the output gap is -1%. Using the Fed's rule of thumb, what is the appropriate new nominal federal funds rate that you should set for the economy?
1.125%
The world demand curve slopes downward because, as the world price of a product increases...
consumers want to buy a smaller quantity
Why are supply curves typically upward-sloping?
higher prices lead individual businesses to supply a larger quantity and more businesses are willing to supply goods and services
Which of the following statements if FALSE regarding economic efficiency?
if it is efficient, it is also equitable