ECON ALL HOMEWORK AND QUIZZES
To enhance their prestige, some country clubs like to point to the fact that they have a waiting list for new members. Even at clubs with high initiation fees, it is common that prospective members have to wait three or more years before there is room for them on the membership rolls. How do these country clubs set the price of membership to ensure that they have a waiting list?
. Set the membership price below the market clearing price.
The marginal tax rate is
. change in taxes due OVER change in taxable income .
A city councilwoman has proposed amending the living wage law. She suggests reducing the minimum wage to $6 per hour. Assuming that the labor demand and supply curves were to remain in their present positions, how many people would be unemployed at a $6 minimum wage?
0 thousand workers
Month/Yr Cyclical Rate of Unemployment (percent) Apr/2015 ______ Suppose it is claimed that actual real GDP deviates from potential real GDP by 2% for every percentage point of cyclical unemployment. In other words, assume that actual real GDP falls below (or rises above) potential real GDP by 2% when the rate of unemployment rises above (or falls below) the natural rate of unemployment by 1%. LOADING...
0.6
This year's value of the economy's price index is 101, and people anticipate that next year's value will be 105. The current nominal interest rate is 5.9 percent. What is the real interest rate? The real interest rate is ___.
1.9%
Assume that there was a 5 percent increase in the price of all goods in 2015; if the base year is 2014, then the price index in 2015 will be
105
Commodity Market Basket Quantity 2001 price 2002 price Corn 40 lbs. $4.00 $4.75 Cherries 35 lbs. $5.00 $5.50 Assuming that 2001 is the base year, calculate the price index for 2002. In 2002, the price index is ______ The inflation rate between 2001 and 2002 is ______
114.18 14.18%
When income is $15,000, the amount of income taxes owed is $2,000; when income increases to $20,000, the amount owed increases to $3,000. The average income tax rate when a person earns $15,000 is
13.3 percent.
2007 Market Basket Commodity Quantity 2007 Price 2017 Price A 40 5 7 B 30 6 8 Refer to the above table. You are given information on Collin's consumption for 2007 and 2017. Using 2007 as the base year compute the price index for 2017. The index equals
136.842.
Consider the following hypothetical data for the U.S. economy in 2020 (in trillions of dollars), and assume that there are no statistical discrepancies, zero net incomes earned abroad, and zero taxes on production and imports of net subsidies. Category Value Category Value Corporate profits before taxes deducted $2.7 Exports $1.5 Proprietorial income 0.9 Net transfers and interest earnings 2.1 Rent 0.7 Nonincome expense items 1.9 Interest 0.7 Imports 1.5 Wages 8.3 Corporate taxes 0.3 Depreciation 1.3 Social security contributions 1.8 Consumption 10.4 Government spending 1.6 a. Calculate the gross domestic income LOADING.... $ 15.2 trillion. (Enter your response rounded to one decimal place.) Calculate GDP. $ 15.2 trillion. (Enter your response rounded to one decimal place.) b. Calculate gross private domestic investment LOADING.... $ 3.2 trillion. (Enter your response rounded to one decimal place.) c. Based on the above information, calculate personal income. $ 13.9 trillion.
15.2 15.2 3.2 13.9
Given the cyclical unemployment rate recorded above, this translates into actual real GDP deviating from potential real GDP by $_______ billion place and use a minus sign if necessary. If actual GDP is below potential GDP, enter your answer as a negative value.)
198.5
In which of the following periods did nations of the European Union experience the highest average annual rate of growth of per capita real Gross Domestic Product (GDP)?
1981-1990
In the figure at right, how many bushels of corn are produced at point "a"?
2,500
Price Quantity Demanded Quantity Supplied Quantity Supplied After Tax $5 10 40 30 $4 15 35 25 $3 20 30 20 $2 25 25 15 $1 30 20 5 The demand and supply of a product is given in the above table. A unit tax of $2 is imposed on the product. The equilibrium quantity for this product after the tax is imposed is equal to
20 units
Suppose that the government sets a minimum wage of $7 per hour. The graph on the right shows this situation. The number of workers who would have been employed at the equilibrium wage but who will now lose their jobs is ________. The number of new workers who will now be willing to supply labor at the new wage but who will not be able to find jobs is _______. Thus total unemployment created by the minimum wage is _____ workers.
200 200 400
How many people are unemployed at this wage?
4
Civilian Labor Force Level (thousands) Unemployment Rate (percent) Men: 85,931 _____ Women: 75,183 _____ Suppose that a deep and prolonged recession induces some job seekers to discontinue their job search efforts due to the belief that no jobs are available for them. These individuals are known as ________workers, and an increase in their numbers, all else constant, will cause the unemployment rates computed above to ________.
4.3 4.0 discouraged decrease
The table to the right shows the distribution of the population aged 16 and older into three groups: people who are employed, those who are unemployed, and those not in the labor force. Suppose that among the 17.0 million unemployed people, currently 6.7 million are frictionally unemployed, 8.3 million are cyclically unemployed, and 2.0million are structurally unemployed. What is the natural rate of unemployment? If among the 17.0 million unemployed people, 6.7 million are frictionally unemployed, 8.3 million are cyclically unemployed, and 2.0 million are structurally unemployed, then the natural rate of unemployment is _____percent. (Enter your response rounded to one decimal place.)
5.1
For all employee earnings subject to Social Security taxes, what is the current Social Security tax rate for employers?
6.2%
How much should a bank charge for a loan, if the anticipated inflation rate is 4 percent, and the bank wants to earn 3 percent on this $1,000,000 loan?
7 percent
Lissa purchased stock valued at $30,000 in 2000. In 2005, she sold the stock for $37,500. Lissa's capital gain, for tax purposes, is $______, which is a ______ gain on her investment. Over the period during which Lissa owned her stock, asset prices rose by 8% due to inflation. Thus Lissa's real capital gain is ______ , or $ _______.
7500 25% 17% 5100
A councilman has offered a counterproposal. In his view, the current minimum wage is too low and should be increased to $10 per hour. Assuming that the labor demand and supply curves were to remain in their present positions, how many people would be unemployed at a $10 minimum wage?
8 thousand workers.
The following table indicates the supply schedules for four types of producers: A, B, C, and D and the number of producers in each group (top row). The quantity supplied by each type of producer (QA, QB, QC, and QD) is shown for market prices ranging from $8 down to $2. What is the combined quantity supplied at a market price of $5? Number of producers A = 50 B = 60 C = 30 D = 20 Market Price QA QB QC QD $8 6 14 7 13 7 5 12 6 11 6 4 10 3 9 5 3 8 4 7 4 2 6 3 5 3 1 4 2 3 2 0 2 1 1
890
Suppose you are given the following information about a country: Frictional unemployment rate 1.04% Seasonal unemployment rate 0% Cyclical unemployment rate 3.97% Structural unemployment rate 4.38% What is the total unemployment rate for this country? _________(Enter your response as a percentage rounded to two decimal places.)
9.39%
Market Price A B C D $10 0 0 1 1 $9 0 1 3 3 $8 1 3 6 5 $7 5 6 9 10 $6 7 7 10 11 $5 10 9 12 15 $4 14 11 16 20 The table above indicates the demand schedules for four types of consumers. Suppose there are 12 comma 000 consumers, evenly divided between the four types of customers above (A-D). The quantity demanded at a price of $7 is
90,000
Suppose there are 100 million in the labor force, and 6 million unemployed people. During the next month, 200,000 people lose their jobs and 300,000 find jobs. The new total of employed is ________ and the new unemployment rate is ________.
94.1 million; 5.9 percent.
Which of the following is not a key feature shared by nations that attain higher levels of economic development?
A large presence of military personnel to ensure that the government's views are supported
Which of the following is a final good?
A lawn mower purchased by a household
Consider the figure 4B-2. If the price is $20, find the area that represents producer surplus.
A+B+C
What is the difference between absolute advantage and comparative advantage?
Absolute advantage is when someone can produce more of a good using a given quantity of inputs while comparative advantage is when someone can produce a good at a lower opportunity cost.
Which of the following is a true statement about comparing world incomes?
Adjusting world incomes for purchasing power gives a more accurate view than using market foreign exchange rates.
A production possibilities curve
All of the above
Demand applies to which of the following?
All of the above
Which of the following might be considered a positive externality?
All of the above are correct
Which of the following is an example of an application of the ceteris paribus assumption?
An analysis of how price changes affect how much of a good people will purchase when all other factors are held constant
Which of the following is true of an excise tax?
An excise tax is levied on purchases of particular good or service.
Which of the following is consistent with dynamic tax analysis?
An increase in the tax rate will likely cause a decrease in the tax base.
Which of the following is a true statement about self-interest as used in the study of economics?
Any action can be based on self-interest if the person has some reason for the action.
Refer to the figure at right. Which arrows represent items that are measured in dollar terms?
Arrows A and D
According to the table at right, net domestic product is
$11,811 billion.
In the first stage of manufacturing each final unit of a product, a firm purchases a key input at a price of $5 per unit. The firm then pays a wage rate of $2 for the time that labor is exerted, combining an additional $3 of inputs for each final unit of output produced. The firm sells every unit of the product for $12. What is the contribution of each unit of output to GDP in the current year? The contribution of each unit of output to GDP in the current year is
$12
A town in New York currently has a $1.50 per unit tax on sales of wine. Annually, 50,000 bottles of wine are sold, and so the town collects $75 comma 000. The mayor proposes that the tax be increased to $2.50 per bottle. If the mayor uses static tax analysis, he expects that the new tax revenue will be $_______(Round your answer to the nearest dollar.) Using dynamic tax analysis, it is likely that the tax base will ______ if the tax is imposed, and thus the new tax revenue will be _____the tax revenue based on the assumptions of static tax analysis.
$125000 decrease less than
According to the above table, Gross Domestic Product is
$14,140.
If Ed had hired the painter and the landscaper, how would Ed's improvements to the cottage have added to GDP this year? The increase in GDP would be
$2250
The cost of a nation's market basket in the base year is $1 comma 970, and the current year's price index equals 180. What is the cost of the market basket in the current year? The cost of the market basket in the current year is $_____ (Enter your response as a whole number.)
$3546
Commodity Market Basket Quantity 2005 Price per Unit Cost of Market Basket in 2005 2015 Price per Unit Cost of Market Basket in 2015 Milk 10 gallon 2.00 20.00 2.50 25.00 Eggs 10 dozen 2.00 20.00 3.00 30.00 Bread 10 loaves 2.00 20.00 3.00 30.00 In the table shown above, the total cost of the market basket of commodities in 2005 was
$60.00
The information contained in the table to the right applies to the market for a particular item in the absence of a unit excise tax. (Throughout this exercise all numerical responses should be entered as whole numbers). According to this information, in the absence of a unit excise tax, the market price is $____ and the equilibrium quantity is _____units. Suppose that the government decides to subject producers of this item to a unit excise tax equal to $2 per unit sold. The new equilibrium market price will be $___and the new equilibrium quantity is _____
$7 125 $8 100
Suppose you purchased 100 shares of stock in 2010 for $25 a share and you sell them today for $50 a share. If the capital gains tax is 28 percent, your tax liability is
$700
Ed has a summer beach cottage that he has owned for many years. The cottage is valued at $ 125 comma 000. This year, Ed spends $350 on paint and $500 on trees, and then paints the exterior of the cottage and plants the trees himself. If he had hired a professional painter, it would have cost $1 comma 000 to paint the cottage (not including the cost of paint), and if he had hired a professional landscaper, it would have cost $400 (not including the cost of the trees) to do the planting. How much does Ed's improvements to the cottage add to GDP this year? The increase in GDP would be
$850
The following table lists the costs incurred by a student attending a public university for one semester. (Note: By attending college, the student will have to work fewer hours but will stay in his current apartment.) Tuition and Fees $4 comma 000 Room and Board $1 comma 000 Books and supplies $ 550 Lost wages $4 comma 500 What is the total opportunity cost that the student incurs by attending college for one semester?
$9,050
The following table gives categories for income and expenditures for a representative country: Net exports of goods and services negative 450 Net interest paid by business nbsp 360 Government purchases of goods and services 1 comma 350 Gross private domestic investment 1 comma 800 Indirect business taxes nbsp 360 Rental income of individuals plus implicit rent on owner-occupied housing nbsp 180 Wages, salaries, employee compensation 5 comma 400 Personal consumption expenses 6 comma 300 Depreciation nbsp 720 Proprietorial income nbsp 900 Corporate profits 1 comma 080 Use the data in the table to calculate Gross Domestic Income (GDI) for this country. GDI is equal to
$9000
Increasing the earnings of minimum wage employees is desirable, and raising the minimum wage is the best way to accomplish this.
Normative economics
Which of the following statement is false?
Only the price system can be used to ration goods.
Which of the following would least likely be, for the typical student, the opportunity cost of attending a class at 11:00 a.m.?
Partying with a close circle of friends.
Which of the following is best characterized as a public good?
Police protection
economics is value-free and relates to statements that can be refuted, such as "If A, then B."
Positive
A higher minimum wage will reduce employment opportunities for minimum wage workers.
Positive economics
Heathcare subsidies will increase the consumption of health care
Positive economics
Refer to the figure at right. How do you describe what is happening as the economy moves from point C to point B?
Previously unemployed resources are now being devoted to the production of wool.
Which of the following statements is consistent with a decrease in supply?
Prices of raw material inputs have increased.
Which of the following is correct?
Real rate of interest = (Nominal rate of interest minusAnticipated rate of inflation)
_______ prices perform three functions: (1) allocating existing scarce housing among competing claimants, (2) promoting efficient maintenance of existing houses and stimulating new housing construction, and (3) rationing the use of existing houses by current demanders.
Rental
Which one of the following is true?
Saving enables economic growth by providing for investment in the capital stock.
Why are politicians and economists concerned about the economic growth rate in the U.S.?
Small differences in the rate of economic growth can make large differences in the standard of living over time.
Which of the following can cause official unemployment figures to underestimate the true unemployment rate?
Some people get discouraged and quit looking for a job.
Which of the following is not a source of funding available to governments?
Stock sales.
Which of the following statements is NOT true?
Terms of exchange only include situations of barter where the market price is irrelevant.
Which of the following is NOT a criticism of the CPI?
The CPI ignores the changes of prices of goods that firms produce and sell to each other.
The table on the right shows four major price indices of the US economy: the Consumer Price Index (CPI), the Producer Price Index (PPI), the Personal Consumption Expenditure Index (PCE) and the GDP deflator. All four indices are used to measure inflation. Based on the data from the four indices in the table, which price index suggests the highest rate of inflation between the years 2000 and 2004, and between 1998 and 1999. What were the corresponding rates suggested by these indices?
The PPI indicating the highest inflation rate of 10.5% for 2000-2004; the CPI indicating the highest inflation rate of 2.19% for 1998-1999.
What is the structure of the U.S. income tax system?
The U.S. income tax system is a progressive tax system where the marginal tax rate exceeds the average tax rate.
Which one of the following is an example of a positive statement?
The amount of financial assistance given to farmers is higher this year than it was 10 years ago.
An excise tax of 60 cents is levied on a product. As a result of the tax, the price of the product goes from $1 to $1.40. Which of the following is true?
The consumer pays the majority of the tax but not the entire tax.
Suppose that you are investigating the market for aluminum. The price of steel, a substitute good, has decreased. Which of the following would best describe the market reaction to this event?
The demand for aluminum decreases, which creates a surplus of aluminum, causing the price of aluminum to decrease.
Which of the following checks issued by the government represents a transfer payment?
The federal government pays a retiree her Social Security benefits.
All of the following are characteristics of public goods EXCEPT
The goods are perfectly divisible.
Which of the following characterizes the largest difference between the way decisions are made in the private sector versus the public sector?
The incentive system for individuals to perform efficiently are vastly different.
Money Prices 2003 2004 Hospital Room (1 day) $250 $275 Hotel Suite (1 night) $350 $375 Based on the table above, which of the following is true?
The money prices of both goods increased, the relative price of hospital rooms increased, and the relative price of hotel suites decreased.
What happens when the government imposes a unit excise tax on a good?
The newly taxed good's supply curve shifts vertically upward by the amount of the per-unit tax being levied.
The market for corn is initially in equilibrium. Suppose the production of biofuels, which use corn as an input, increases, and at the same time, increases in the price of oil cause farm production costs to rise. Which of the following explains the effect on equilibrium price and quantity in the corn market?
The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information.
A fall in the demand for e minus book readers follows a change in the price of e minus books comma which are complements. A rise in the demand for tablet devices follows a change in the price of ultrathin laptop computers comma which are substitutes.
The price of the complement increased. The price of the substitute increased.
If the price changes, we move along a curvelong dashthere is a change in quantity demanded or supplied. If some other determinant changes, we shift a curvelong dashthere is a change in demand or supply.
The supply curve is drawn with other things held constant. If these ceteris paribus conditions of supply change, the supply curve will shift. The major ceteris paribus conditions are (1) input prices , (2) technology and productivity , (3) taxes and subsidies , (4) expectations of future relative prices , and (5) the number of firms in the industry .
What condition exists in this city's labor market at the present minimum wage of $9 per hour?
There is a surplus of labor .
Which of the following statements about taxation is TRUE?
There is a tax rate at which tax revenues are maximized.
Which of the following statements is FALSE?
Transactions in which households buy final goods and services occur in the factor market.
_____________ are payments made to individuals for which no services or goods are rendered in return, compared with ___________ , which people must direct to spending on specified goods.
Transfer payments income transfers in kind
A model is considered "good" if it yields usable predictions that are supported by real-world observations.
True
Absolute advantage refers to the ability to produce more units of a good or service using a given quantity of labor or resource inputs.
True
According to economist Paul Romer, ideas are what drive economic growth.
True
An import quota is a supply restriction that prohibits the importation of more than a specified quantity of a particular good in a one-year period.
True
Corporate profits are subject to double taxation.
True
Much of our legal system is involved with defining and protecting property rights.
True
Rationing by the price system leads to the most efficient use of available resources.
True
The price at which quantity demanded equals quantity supplied and at which the demand curve intersects the supply curve is called the market clearing price.
True
The shapes of the market demand and supply curves determine who pays most of a tax.
True
Unemployment due to the fact that workers must search for appropriate job offers is called frictional unemployment.
True
Voluntary exchange refers to an act of trading between individuals that makes both parties to the trade subjectively better off.
True
A rise in demand is represented by a leftward shift in the demand curve, and a fall in demand is represented by a rightward shift in the demand curve.
False
An innovation is the same thing as an invention.
False
Governments that wish to maximize their tax revenues need to assess a high tax rate.
False
Individuals who have stopped looking for a job because they are convinced they will not find a suitable one are classified as unemployed.
False
Scarcity is the same as a shortage.
False
Today's secular stagnation trend first began in the United States.
False
Labor is a key input at fast-food restaurants. Suppose that the government boosts the minimum wage above the equilibrium wage of fast-food workers. Which of the following best describes the response of the quantity of labor employed at restaurants?
Fewer workers will be employed since the wage increase will induce managers to seek to substitute other inputs for the now relatively more expensive labor.
A true public good must be provided by the government. Which of the following goods provided by the government is a true public good?
Flood control
Which of the following statements is correct?
GDP excludes nonmarket production and is not a measure of a nation's overall welfare.
Which of the following statements is not true about the use of GDP as a measure of national welfare?
GDP is a useful measure of national welfare since it excludes nonmarket transactions.
John increases his consumption of Good X and Good Y when his income increases. For John
Good X and Y are normal goods
Refer to the figure at right. Which of the following would allow society to move to point d?
Increasing the quantity of labor
Which of the following statements best demonstrates the concept of bounded rationality?
Individuals make short-run choices that are not consistent with their long-term goals.
Which of the following is NOT a stage of development that modern rich nations have gone through?
Inflation stage
Which one of the following is true?
Investments in secondary education produce gains in the form of economic growth.
A city government imposes a proportional income tax on all people who earn income within its city limits. In 2004, the city's income tax rate was 0.05 (5 percent), and it collected $20.00 million in income taxes. In 2005, it raised the income tax rate to 0.06 (6 percent), and its income tax collections declined to $19.20 million. What happened to the city's income tax base between 2004 and 2005? What would cause a fall in the tax base?
It fell by $80 million. Either of the above
How should per capita real Gross Domestic Product (GDP) be used?
It is a reasonably good measure of productive activity.
The law of supply predicts the supply curve will be
upward sloping
In the labor market, adjustments to changes in supply and demand
usually take time to occur.
The dollar value of an industry's sales minus the value of intermediate goods is
value added.
Net exports equal the
value of exports minus the value of imports.
Consumer surplus at any specific quantity is measured as the ________ distance between the demand curve and the level of the market clearing ________.
vertical; price
To derive GDP using the income approach, we add up all factor payments, including ________, ________ , ________ , and _______ .
wages profit interest rent
The largest component of gross domestic income is
wages.
All of the following pairs of goods are substitutes except
we observe the price of bacon increases and the demand for eggs decreases.
All of the following pairs of goods are complements except
we observe the price of coffee decreases and the demand for tea decreases.
The three basic economic questions are __________ will be produced, __________ will items be produced, and for __________ will items be produced?
what and how much; how; whom
When constructing economic models, economists are more concerned with
what people do than what they say
Efficiency is achieved
when producers are getting the maximum possible output from the available resources.
Of the following, which country has the highest annual real GDP per capita according to the International Monetary Fund and World Bank?
United States
Refer to the figure at right. A unit tax has been placed on the good. What is the total amount of the tax?
Upper P 2minusUpper P 0.
A shift from Upper S 1 to Upper S 2 reflects the change that happens when a negative externality is taken into account. A shift from Upper D 1 to Upper D 2 reflects the change that happens when a positive externality is taken into account. Refer to the above figures. If a positive externality that existed becomes corrected, price and quantity will become
Upper P 4 and Upper Q 4.
Consider the market for a health care service displayed in the figure to the right, in which the government currently pays a per-unit subsidy, M. If the government raises the value of M to a larger dollar amount per unit of service, what will happen to the out-of-pocket price paid by consumers, the price required to induce suppliers to provide services, and the quantity of services provided? Will the government's total expense for this health care service rise or fall? The per-unit subsidy, M, that the government currently provides for the health-care service is equal to the difference between ________
Upper P Subscript s Baseline and Upper P Subscript d
Suppose that the government has raised by $10 a per-carat tax rate it imposes on diamonds in an effort to influence production of this particular good by each of the firms that produce it and purchases by individual consumers. Would we apply microeconomic or macroeconomic analysis to analyze this policy action?
We would apply microeconomic analysis because this policy action would affect decision making undertaken by individuals (or households) and by firms.
Which of the following is an example of a positive statement?
When the price of an item increases, people respond by reducing their consumption of the item.
Price per Constant-Quality Unit Quantity Demanded of Constant-Quality Units per Year Quantity Supplied of Constant-Quality Units per Year $1.00 1,000 200 2.00 800 400 3.00 600 600 4.00 400 800 5.00 200 1,000 According to the above table, at a price of $1 per unit, which of the following would exist?
a shortage of 800 units
Strawberries (pounds) Price Qd Qs $2 5,000 1,000 $4 4,000 2,000 $6 3,000 3,000 $8 2,000 4,000 $10 1,000 5,000 Consider the above table. Assuming the government imposes a price ceiling on strawberries of $4 per pound, what would be the likely result?
a shortage of 2,000 strawberries
A small reduction in a country's growth rate is a concern to policy makers because
a small change can have large effects on per capita GDP over time.
Which of the following is the best example of a public good?
a streetlight
Inflation is best defined as
a sustained increase in the average of all prices of goods and services in an economy.
Entrepreneurship functions better when
a system of private property rights permits entrepreneurs to capture the rewards from their entrepreneurial activities.
National income accounting is
a system utilized to measure macroeconomic activity.
A specified interval of income to which a specific and unique marginal tax rate is applied is called
a tax bracket.
All of the following will decrease the supply of train trips except
a technological change that makes trains safer and more fuel-efficient.
Refer to the figure at right. Point B is known as
a trough
Scarcity implies that
a way of rationing supplies of goods must be found.
A market demand curve is found by
adding the quantities demanded for each individual consumer at each price.
Economists assume that when there is a change in demand and/or supply, that prices reach a new equilibrium
after an adjustment period that varies.
Governments may intervene in private markets through
all of the above
Specialization and comparative advantage
all of the above
Scarcity affects
all people
According to the figure at right, if the government set a price floor of $3.50 per gallon, there would be
an excess quantity supplied equal to 100,000 gallons.
Pollution produced by a factory is being dumped into a local river. The community uses local funds to clean the river. This is an example of
an external cost as the community, not the factory, is paying for the clean up.
A situation in which a benefit or a cost associated with an economic activity spills over to third parties is called
an externality.
Which of the following will NOT cause market supply to increase?
an increase in the costs of resources used to produce the product
An increase in the price of labor used to produce good A will lead to
an increase in the market clearing price of good A.
Two goods are substitutes when
an increase in the price of one raises the demand for the other.
A production possibilities curve will shift outward or to the right for all of the following reasons EXCEPT
an increase in the unemployment rate.
The law of demand posits ______ relationship between the quantity demanded of a good and its price, other things being equal.
an inverse
A point inside a society's production possibilities curve represents
an underutilization of productive resources.
To be considered officially unemployed, a person must be at least 16 years old
and not working but is actively seeking employment.
Rational behavior for an economist means that individuals
are motivated by selfminus−interest.
Discouraged workers
are not considered part of the unemployed because they are not actively seeking work.
The law of demand states that
as price increases, quantity demanded decreases, all other things equal.
The law of supply states that
as price increases, quantity supplied increases, all other things equal.
When did the United States register its lowest unemployment rate?
at the end of World War II
The text argues that if avocado growers in Mexico can produce avocadoes cheaper than avocado growers in the United States, this will not reduce total jobs available in the United States. The logic underlying this argument is that
avocado growers in the United States will switch to specializing in a crop in which they hold the comparative advantage.
Once we pick a market basket of goods, we can construct a price index that compares the cost of that market basket today with the cost of the same market basket in a _____year. The ________Index is the most often used price index in the United States. The _______measures what is happening to the average price level of all new, domestically produced final goods and services in our economy. The __________ Index uses annually updated weights from consumer spending surveys to measure average prices faced by consumers.
base Consumer Price GDP deflator Personal Consumption Expenditure
Public schools provide educational services at a price
below the market price.
To an economist, a free rider is a person who
benefits from consuming public goods without paying for them.
The opportunity cost of attending a class at 11:00 a.m. will likely differ from the opportunity cost of attending a class at 8:00 a.m. because
both A and C are correct.
If the government imposes a price ceiling that is lower than the market clearing price, then
both consumer surplus and producer surplus will decrease.
According to dynamic tax analysis, continually increasing the tax rate will eventually
cause a decrease in the tax base.
An effective price _________ is an enforced regulation that sets the legal price below the market clearing price, which often leads to nonprice rationing devices and _______ markets.
ceiling black
Governments sometimes impose price controls in the form of price __________and price ___________
ceilings floors
Cyclical unemployment is caused by
changes in an economy's overall condition.
The two opposing sets of answers are offered by alternative economy systems: (1) centralized ___________ and (2) the ________ system.
command and control price
We measure the demand schedule in terms of a time dimension and in ______ -quality units.
constant
One of the most important factors for economic growth to take place is that a society must
consume less than they produce.
If a household purchases a new car and a new refrigerator, this would be classified as spending on
consumer durables
The use of goods and services for personal satisfaction is known as
consumption
When economy-wide business fluctuations are negative, they are referred to as
contractions/recessions.
Effective rent ________ impede the functioning of rental prices. Construction of new rental units is discouraged.
controls
Consider an economy where the natural rate of unemployment is equal to 4%. If the actual unemployment rate is equal to 8%, then
cyclical unemployment rate is 4% .
Microeconomics focuses on
decisions made by individual households and firms.
The sales tax rate applied to all purchases within a state was 0.04 (4 percent) throughout 2016 but increased to 0.05 (5 percent) during all of 2017. The state government collected all taxes due, but its tax revenues were equal to $40 million each year. Within this state, the sales tax base from 2016 to 2017 must have _______
declined
Publishers expect that the market price of economics textbooks will increase next month. This will cause a(n)
decrease in supply
The market price of paper increases. This will cause a(n)
decrease in supply
Consider the coffee market shown in the graph at right. An increase in the supply of coffee will ________ the equilibrium price and _________ the equilibrium quantity.
decrease, increase
The price of a new textbook is $120 in one year and is $150 two years later, while the price of a used copy of the text increased from $40 to $60. The relative price of a new textbook The relative price of a new textbook
decreased from 3 to 2.5.
The U.S. government spends considerably less on antipollution efforts this year than it did in recent years. As a result of this, GDP
decreases
The quality of cancer treatments increases, so patients undergo fewer treatments, which hospitals continue to provide at the same price per treatment as before. As a result of this GDP
decreases
The law of ______ applies when other things, such as income and the prices of all other goods and services, are held constant.
demand
According to the text, firms encounter rising costs when they attempt to produce more in the same time period. As a consequence, they must be offered a higher price to be willing to incur these higher costs. The resulting relationship between price and quantity supplied is
direct (or positive) and is called the law of supply.
A person who is currently not working and has stopped looking for a job because he or she is convinced there is no job available is classified as a
discouraged worker
The difference between personal income and disposable personal income is
disposable personal income is what is left after personal income taxes have been paid while personal income includes personal income taxes.
If an analyst has concluded that tax revenues may eventually decline if the tax rate is raised sufficiently, this analyst is using
dynamic tax analysis.
New growth theorists conclude that
economic growth can continue as long as we keep coming up with new ideas.
An educated populace contributes to economic growth because
education allows workers to develop skills that increase their productive capabilities.
Gig-economy employees are considered
employed
The labor force is defined as the number of
employed plus the number of unemployed.
Regarding the figure at right, at a price of three cents, a(n) ________ of bubble gum will exist in the market.
equilibrium quantity
Another name for a shortage is
excess quantity demanded.
The _______ approach to measuring GDP requires that we add up consumption expenditures, gross private investment, government purchases, and net exports. Consumption expenditures include consumer ______, consumer ________, and _______.
expenditure durables nondurables services
The relative price of a good is that price
expressed in terms of the price of another good.
Costs that spill over to third parties are called
external costs
The economic activities of government include (1) correcting for _________, (2) providing a _______, (3) promoting _______, (4) producing ________ goods, and (5) ensuring _________________ .
externalities legal system competition public economywide stability
Two factories make wooden chairs. If the workers in factory A make each chair from start to finish and the workers in factory B divide labor, one would assume
factory B can take advantage of division of labor and produce more efficiently.
Real-Time Data Analysis Exercise The following table gives unemployment level data by gender from FRED* for January of 2018. *Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis. Title Value (thousands) Unemployment Level - Men 3 comma 658 Unemployment Level - Women 3 comma 027 Given that the unemployment level of men exceeds the unemployment level of women, it follows that the unemployment rate for men will be higher than the unemployment rate for women. This claim is
false
Many state governments claim a shortage of funds because there are "unmet needs." This claim is
false because of scarcity.
In economic terminology, a normal good is a good
for which demand increases when income increases.
The natural rate of unemployment when seasonally adjusted includes
frictional and structural unemployment but not cyclical.
After completing college, John Smith spent two months looking for a job. During this period he would be classified as
frictionally unemployed.
Heroin, cigarettes, gambling, and cocaine are examples of
government-inhibited goods.
When state and local governments provide public schools with a per-unit subsidy to provide educational services, the price that the schools providing these services receive is
greater than the market clearing price without the subsidy.
In public education, the value of the services provided is
greater than the value that parents and students place on the services.
A family sells the house they have lived in for two years to a friend. They received $300,000 and paid $200,000 three years ago. This transaction
has no effect on GDP because the house was not made this year
Human beings
have unlimited wants
By using the ceteris paribus assumption in conjunction with a model, economists can
hold certain factors constant.
Total market supply can be derived by
horizontally summing individual supply curves at each and every price level.
Because resources are scarce relative to wants, the study of economics concerns
how individuals, businesses, and governments make choices.
The knowledge and skills that people in the workforce acquire through education, on-the-job training, and self-teaching is referred to as
human capital
All of the following are ways the government can correct positive externalities except
imposing positive taxes.
During the time period assumed by a production possibilities curve, it is ________ to be at a point outside the curve and ________ to be at a point beneath the curve.
impossible; possible
Economic analysis is used
in all decision making
Goods and services are sold
in the product markets.
The potential rewards that are available to an individual if a particular activity is undertaken are known as
incentives.
The two main approaches to measuring GDP are the
income approach and the expenditure approach.
Which of the following does NOT involve transfers in kind?
income tax refund
Suppose that the figure to the right applies to the labor market in the state of Ohio, in which Upper W Subscript m is the minimum wage established by the federal government, and Upper Q Subscript sminusUpper Q Subscript d is therefore Ohio's excess quantity of labor supplied as a result of the federal wage minimum. What would happen to Ohio's excess quantity of labor supplied if the state were to decide to establish its own minimum wage at a level above the federal minimum? If the state of Ohio were to establish its own minimum wage at a level above the federal minimum, the excess quantity of labor supplied would
increase
The market price of economics textbooks increases. This will cause a(n)
increase in quantity supplied
The number of publishers of economics textbooks increases. This will cause a(n)
increase in supply
Consider the following: Item Price/Last Year Price/This Year Hamburgers $3.00 $4.00 Movies $5.00 $6.00 The relative price of hamburgers this year has
increased.
To get an accurate measure of GDP using the income approach, we must also add ___________ and __________ to those total factor payments.
indirect business taxes depreciation
The largest share of federal government tax receipts is derived from
individual income taxes.
Inflation can cause a misallocation of resources because
inflation doesn't proceed evenly which means that people have a difficult time determining when a price change signals a change in relative prices.
An example of an increase in gross private domestic investment spending that also increases Gross Domestic Product (GDP) is when
inventories of new cars accumulate on the lots of car dealers.
A production point that lies outside the Production Possibilities Curve (PPC)
is currently not attainable.
According to the Bureau of Labor Statistics, an unemployed individual whose employment was involuntarily terminated is classified as a
job loser
Natural gas found in Oklahoma is an example of
land
Naturally occurring diamonds are an example of
land
Suppose the price of crude oil used to produce gasoline rises significantly. At the same time, consumers purchase hybrid cars in great numbers. In the market for gasoline, demand shifts to the ________ and supply shifts to the ________.
left, left
In a small town, a steel mill produces air pollution. If the government does not intervene, the equilibrium price of steel will be __________, and the equilibrium quantity of steel will be __________.
less than the socially optimal price, greater than the socially optimal quantity
Economics is an empirical science, which means that economists
look for evidence to determine whether the model is useful or not.
A friend wants to learn how the unemployment rate is calculated and how inflation is measured. He asks you which economics course to take and you advise him to enroll in
macroeconomics.
In constructing models, economists
make simplifying assumptions.
Voluntary exchange
makes both parties to a trade better off.
Suppose the tax rate on the first $10,000 income is 0 percent; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $30,000; and 40 percent on any income over $80,000. Family A has income of $40,000. What is the marginal and average tax rate for Family A?
marginallong dash20 percent; averagelong dash10 percent
Prices provide signals about resource allocation to all individuals in a ________ system.
market
The ____________ curve is derived by summing the quantity demanded by individuals at each price.
market demand
Innovation typically increases when
market incentives and private property rights are encouraged.
Consider a nation with a government that does not provide people with property rights for a number of items and that fails to enforce the property rights it does assign for remaining items. Externalities would be ________ common in this nation than in a country such as the United States.
more
The protection of property rights leads to
more capital formation.
Typically, nominal interest rates and anticipated inflation rates
move in the same direction.
The approach used in the U.S. to measure the economy's aggregate performance is
national income accounting.
Public goods are
neither exclusive nor rival.
According to new growth theory, economic growth is driven by
new ideas
Opportunity cost is best defined as the _________ alternative(s) that must be sacrificed to obtain something or to satisfy a want.
next best
Which of the following is a characteristic of a public good?
no individual can be excluded from the benefits of consuming it
Which of the following represents how real GDP is calculated?
nominal GDP divided by the GDP deflator
Measuring total aggregate production in current dollars uses which of the following measures?
nominal gross domestic product
"We ought to do more for the education of our children." Statements using words like ought or should are
normative statements
In determining how to allocate your time,
only comparative advantage, but not absolute advantage, matters.
Public goods have two characteristics: (1) Once they are produced, there is no additional _________ when additional consumers use them, because your use of a public good does not deprive others of its simultaneous use; and (2) consumers cannot conveniently be ________on the basis of use.
opportunity cost charged
Economic growth can be defined as the increase in ________real GDP, measured by its rate of change per year. The _______ of economic growth are reductions in illiteracy, poverty, and illness and increases in life spans and political stability. The _______ of economic growth may include environmental pollution, alienation, and urban congestion. Small percentage-point differences in growth rates lead to _______ differences in per capita real GDP over time.
per capita benefits costs large
Patents stimulate technological advance by
permitting inventors to capture significant economic rewards through their inventions.
The largest component of GDP by far is
personal consumption expenditures.
The income households actually receive before they pay personal income taxes is:
personal income
Incentives are
potential rewards available if a particular activity is undertaken.
Market failures
prevent the price system from attaining economic efficiency.
All of the following cause a shift in the demand curve EXCEPT a change in the
price of the good or service
Suppose Cameron earns $ 100,000 per year but must pay income taxes according to the tax schedule given in the table to the right. According to the chart, the income tax Cameron faces is a _________ tax. Assume Cameron has no tax exemptions or deductions. How much in income taxes must Cameron pay? Cameron must pay $ _________ in income taxes. (Enter your response as a whole number.) Assume Cameron has no tax exemptions or deductions. What is his marginal tax rate? What is his average tax rate? Cameron's marginal tax rate is ______and his average tax rate is _______. (Enter your responses as whole numbers.)
progressive 23000 30% 23%
The economic development of a country is dependent on all of the following except
promoting protectionist barriers.
Key taxes at the federal level do not include:
property taxes
When comparing per capita GDP across countries, GDP should be adjusted for
purchasing power parity.
Import quotas are an example of government-imposed
quantity restrictions
When the current price of an item is greater than the item's market clearing price,
quantity supplied is greater than quantity demanded.
Labor productivity is computed as
real GDP divided by the number of workers.
The price-corrected value for Gross Domestic Product is
real Gross Domestic Product (GDP).
A tax system that applies a lower marginal tax rate at higher levels of income is
regressive
Comparative advantage is always a(n) ________ concept.
relative
Air quality improves significantly throughout the United States, but there are no effects on aggregate production or on market prices of final goods and services. As a result of this, GDP
remains the same
In a rent controlled market, we would expect to observe
renters moving into the market to take advantage of the lower rents.
A point inside the PPC means that
resources are not being fully utilized due to unemployment or inefficiency.
The concept of opportunity cost exists because
resources are scarce.
The earnings that a corporation saves for investment in other productive activities are
retained earnings.
The principle of _________ does not apply to public goods as it does to private goods.
rival consumption
State and local governments receive most of their revenue from
sales and excise taxes, revenue from the federal government, and property taxes.
For substitutes, a change in the price of a product will cause a change in demand in the ________ direction for the other good. For complements, a change in the price of a product will cause a change in demand in the ________ direction for the other good.
same; opposite
If economists are making the assumption that business people try to maximize profits, the best way to determine whether this assumption is useful or not is to
see whether it generates accurate predictions about the choices of business people.
The division of productive activities among persons and regions so that no one individual or region is totally self-sufficient is known as
specialization
Which of the following is NOT a transfer payment?
spending on national defense
The federal corporate income tax structure results in double taxation because
stockholders pay taxes on dividends that were already taxed as profits of the corporation.
If a person loses her job because her abilities and skills are a poor match with current requirements of employers, this person is considered
structurally unemployed.
In any given market, prices are determined by
supply and demand
A decrease in the number of pizza producers or an increase in the cost of mozzarella cheese used to make pizza will shift the
supply curve for pizza inward.
If producers must receive a higher price to be induced to produce any quantity, we can conclude that
supply decreased
Which of the following is an effect of a minimum wage law that establishes a wage floor above the current market clearing wage?
surplus labor, or unemployment
A proportional tax, or flat-rate tax
takes the same percentage of a person's taxable income in tax regardless of their level of income.
The distribution of tax burdens among various groups in society is known as
tax incidence.
Over the long run, the fundamental funding sources for the government are
taxes
The government could best correct this externality by _____________
taxing the production of steel
The new growth theory argues that
technology must be considered a separate factor of production that is sensitive to economic incentives.
According to data shown on the graph on the right, it is clear that the labor force participation rates for men and women in the US
tended to converge over almost the entire period.
Economics is concerned with choices
that involve the wants of individuals.
A student has a job that pays a wage rate of $10 per hour. The night before an economics exam, the student has set aside four hours to study for the exam, estimating that for each hour spent studying, her grade will rise by 5 points. That night, she gets a call from her employer to come to work for a wage rate of $15 per hour for that night. She decides to work for three hours and earn an extra $45.00. The next day she takes the test and gets a grade of 75. The opportunity cost for her work is
the 15 extra points she estimates that she could have earned on the exam if she had studied the extra three hours.
When determining the production possibilities curve
the amount of productive resources remains constant.
The division of labor refers to
the assignment of different workers to different tasks.
To determine the amount of time that a person will decide to devote to watching online videos each week, an economist makes the assumption that the individual will feel overwhelmed by the sheer volume of videos available online and will respond by using a rule of thumb. In examining the above decision-making process, the approach that the economist is following can best be described as the one that relies on
the assumption of bounded rationality.
An economic model is developed from a set of assumptions about consumer behavior and predicts that people will buy less of a good the higher the price of the good. Empirical testing of this model would involve
the collection of data to evaluate the usefulness of the model.
The menu cost of inflation involves
the costs associated with changing price lists.
An increase in demand occurs when
the demand curve shifts to the right.
When income falls,
the demand for an inferior goods rises.
Greater economic growth is shown as
the distance the production possibilities curve shifts outward.
An import quota for sugar results in an increase in
the domestic market price of sugar.
Production is efficient when
the economy cannot produce more of one good without giving up the production of another good.
If demand decreases and supply increases,
the equilibrium price will decrease, but the change in the equilibrium quantity cannot be determined without more information.
Gross Domestic Product (GDP) figures may understate the value of goods and services due to
the exclusion of the underground economy.
If the farmer is producing 5,000 bushels of soybeans at point "b" in the figure at right, we know that
the farmer is not using his resources efficiently.
An effective price ceiling occurs when
the government sets a maximum price for a good below the equilibrium price.
Which of the following is NOT studied in microeconomics?
the impact of government spending on the unemployment rate
According to the theory of public choice, the employees of Kodak and employees of the State of Washington should act differently because
the incentives facing them are different.
Some people claim that the "economic way of thinking" does not apply to issues such as health care. All of the following choices clearly demonstrate how economics applies to this issue, except when
the individual decides against health care as it may make him better off.
Structural unemployment results when
the introduction of a product substitute leads to a large decline in the market demand for a product so that workers specializing in the production of that product find themselves out of work.
Human capital is
the knowledge and skills that people in the work force acquire through education and training.
According to new growth theorists, increased population growth rates can lead to faster economic growth because
the larger the market the more incentive there is to innovate.
Under progressive taxation, as a person's taxable income increases,
the marginal tax rate is always above the average tax rate.
Scalping and other black market activities arise when
the prices of goods are restricted to levels below equilibrium prices.
The theory of public choice is the study of
the process through which voters, politicians, and other interested parties interact to influence nonmarket choices.
The curve that represents all possible combinations of goods that can be produced is called
the production possibilities curve.
This is because at a wage of $6 per hour
the quantity demanded of workers is higher than the quantity supplied of workers.
In evaluating the price that an individual will be willing to pay for a given quantity of a particular type of health care service, a researcher assumes that the person considers all relevant health care options in pursuit of his own long-term satisfaction with resulting health outcomes. In examining the above decision-making process, the approach that the researcher is following can best be described as the one that relies on
the rationality assumption.
Which of the following transactions is included in GDP?
the sales of houses produced in that given year
When a government increases an effective price ceiling for a product
the shortage in the market will be reduced.
Economics is
the study of how limited resources are allocated to satisfy unlimited wants.
Personal income is
the sum of all incomes received by households.
Consumer surplus is
the total difference between the total amount that consumers would have been willing to pay for an item and the total amount that they actually pay.
As more new domestic oil production has occurred, demand for oil storage space has increased because
the traditional means of domestic transport have proved insufficient to handle the expanded flow of domestic oil production.
A direct relationship occurs when
the two variables being compared change in the same direction, or when one goes up the other also goes up
Labor productivity can be increased if
there is an increase in capital goods.
Refer to the figure at right. If a price ceiling of $3 was set,
there would be a shortage of 20 units.
Entrepreneurs are important to market economies because
they engage in risk taking and innovation.
Opportunity cost is defined as
the highest-valued, next-best alternative that must be given up to obtain something.
Everyone should enjoy open access to healthcare.
Normative economics
A price ceiling set below the market clearing price will tend to cause which of the following?
a shortage
Regarding the law of supply, which of the following statements is correct?
As the price of a good or service rises, the quantity supplied will increase.
Using the figure at right, which of the lines in the above diagram represents a proportional tax?
B
Using the figure at right, if the government levies a new unit tax in this market, S represents the original supply curve, and Upper S Subscript t represents the after-tax supply curve, then the revenues that the government collects from imposing this tax is represented on this graph by
BAEC
Why do very small differences in annual growth rates amount to big differences in the degree of long-term economic growth?
Because the annual growth rate is compounded over time.
Which of the following could account for this change in the tax base?
Both A and C
Which of the following are examples of the gross private domestic investment component of Gross Domestic Product (GDP)? I. The purchase of production machinery II. An increase in finished goods inventory
Both I and II
Which of the following is a true statement concerning economic growth?
Changes in per capita real GDP are used to measure economic growth because inflation and population growth can distort nominal GDP figures or total GDP figures.
Who is most likely to benefit from rent controls?
Consumers who are able to obtain apartments at the controlled rents
Following adjustments to a new equilibrium in a market, the equilibrium quantity remains unchanged, but the market clearing price is now lower. Which of the following could definitely have caused this outcome?
Demand decreased, and supply increased.
Which of the following statements is NOT true about inflation?
During an inflationary period, the prices of all goods will increase.
Which of the following statements is FALSE?
Economic goods are available in desired quantities at a zero price.
The modification of manufacturing processes so as to reduce the resulting environmental damage is an endeavor that requires capital investment, labor inputs, and technology. What then follows from this statement?
Economic growth can benefit the environment.
Which of the following is not a true statement about the impact of immigration on economic growth?
Economists agree that population growth through immigration is a drain on the economy because it lowers per capita GDP.
economics involves people's values and typically uses the word should.
Normative
Until 2008, the people of the fictitious nation of Dor relied mainly on private car companies to determine how many automobiles to produce. After 2008, the people of Dor have been relying on the Dor government to determine how many automobiles to produce. This represents a shift in the economic system of Dor from
Market System to Central Planning.
In the widget market, it is known that producers are relatively responsive to price changes, as compared to consumers. The government places a $5 per unit tax on sales of widgets. Which of the following is the most likely result?
Most of the tax will be paid by consumers.
Directions: Click on the graph to the right and select Multiple Plots. Then select RGDP (real chain weighted GDP) for Y1 and NGDP (nominal GDP) for Y2. Roll your cursor over each plotted line to identify the data. The values of NGDP for the years 1981 and 1982 are $3.1284 and $3.255 trillion, respectively. The values for RGDP for 1981 and 1982 are $5.2917 and $5.1893 trillion, respectively. According to the graph of NGDP and RGDP and the values of the two time series variables for 1981 and 1982, it is correct to state that
NGDP has always been increasing, but RGDP has been both increasing and decreasing. Between 1981 and 1982, NGDP increased by $.1266 trillion, corresponding to a rate of growth of 4.05%. RGDP decreased by $.1024 trillion, corresponding to a negative rate of growth of 1.94%.
Gross Domestic Product (GDP) = $13.0 trillion, consumption = $9.5 trillion, depreciation = $1.8 trillion, other business income adjustments less indirect business taxes = $0.2 trillion, and net U.S. income earned abroad = $0.1 trillion. Use this information to calculate national income (NI).
NI = $11.5 billion
What economic growth theory examines the factors that determine why technology, research, and innovation are undertaken and how they interact?
New growth theory
An external cost, such as the cost generated by pollution, is
a cost paid by a third party or by society at large.
All of the following reduce the transaction costs for consumers EXCEPT
a court decision regarding product safety.
Other things held constant, an increase in consumption spending implies
a decline in saving.
Suppose we observe the following two simultaneous events in the market for fish. First, there is a decrease in the demand for fish due to changes in consumer tastes. And second, there is a reduction in seafood supply due to oil spills in the oceans. We know with certainty that these two simultaneous events will cause which of the following?
a decrease in the equilibrium quantity and an indeterminate change in the equilibrium price
An increase in demand for a good can be caused by
a decrease in the price of a complementary good.
Consider in the graph to the right the demand curve for bananas. The movement from point A to point B could have been caused by
a decrease in the price of bananas.
An increase in quantity demanded is caused by
a decrease in the price of the good.
High economic growth of a country refers to
a large increase in per capita real Gross Domestic Product (GDP).
An example of ad valorem taxation is
a luxury tax
The impact of an increase in the gasoline tax on SUV sales is
a microeconomics topic because it deals with one industry
When the president says that "High inflation rates are a much more serious economic problem than high unemployment rates," it is an example of
a normative statement.
Orchards provide services to beekeepers because the bees use the pollen to make honey. This is an example of
a positive externality, and too few orchards exist in society.
A ad valorem sales tax can be thought of as
a proportional tax.
All other factors held constant, a reduction in price tends to cause which of the following?
a reduction in quantity supplied and an increase in quantity demanded.
When an employee at a grocery store scans the price of your items, bags the groceries, and collects your paper, the individual has provided
a service
Suppose that in the figure to the right, a nation currently has sufficient resources to produce combinations located along only the innermost production possibilities curve, labeled A. In addition, suppose that the nation's residents have determined that smartphones function mainly as consumption goods while tablet devices function primarily as capital goods. If the nation produces no additional tablets this year, will the intermediate-shifted PPC resulting from minimal economic growth, labeled B, or the farthest-shifted PPC caused by more significant economic growth, labeled C, be more likely to apply next year? If the nation produces no additional tablets this year, the PPC that will be more likely to apply next year will be
the intermediate-shifted PPC because there would be relatively fewer capital goods available to produce larger quantities of consumer goods next year.
Other things being constant, the only way to move along a given supply curve for a product is for
the product's relative price to change.
When a Canadian citizen enjoys military protection in Canada without contributing to the cost of Canada's defense budget, then
this Canadian citizen is a free rider.
Widespread measles vaccinations provided a significant external benefit because
those who failed to obtain vaccinations remained unexposed to measles as a result of others getting vaccinated.
Durable consumer goods are goods that last more than
three years.
A government subsidy is typically used
to correct a positive externality.
The simple circular flow model shows that
total income received by households must be equal to the dollar value of all goods and services produced.
National income is income earned by all U.S. factors of production.
true
A key limitation of using GDP to gauge the overall flow of economic activity occurs because of
underground transactions such as exchanges that people intentionally attempt to hide.
Unemployment statistics are often criticized for
understating the number of people out of work, because discouraged workers are excluded in the statistics.
A government is considering two alternative plans for providing subsidy to private schools. Under the first plan it offers to let a number of students at a public school transfer to a private school under two conditions: It will transmit to the private school the same per-pupil subsidy it currently provides the public school, and the private school will be required to admit the students at a below market tuition rate. Under the second plan, the government will simply provide the students with grants to cover the current market tuition rate at the private school. ( Hint: Does it matter if schools receive payments directly from the government or from the consumers?) The outcomes of the two plans
will be different; under the first plan where a private school directly receives the subsidy, it will provide a quantity of educational services in excess of the market equilibrium quantity.
Saving is important for economic growth because
without saving, there cannot be investment, and without investment, there will be less economic growth.
For modern, rich nations, the three stages of development (in order of occurrence) are
agriculture, manufacturing, and services.
Since the 1960s, public spending on education has _________, while student performance has ______________.
increased, remained constant or declined
Factors of production include
land, labor, physical capital, human capital and entrepreneurship.
Economics is the study of how people allocate their ________ resources in an attempt to satisfy their ________ wants. As such, economics is the study of how people make choices.
limited; unlimited
Which group of individuals most likely benefits from rent controls?
upper-income professionals who rent apartments at the price ceiling rate
You can wash, fold, and iron a basket of laundry in two hours and prepare a meal in one hour. Your roommate can wash, fold, and iron a basket of laundry in three hours and prepare a meal in one hour. The absolute advantage in laundry is held by ____ and in meal preparation by ____
you; neither.
The comparative advantage in laundry is held by ____ and in meal preparation by ____
you; your roommate.