Econ exam 1

5600 1200 200 100 115 (Table: Measuring GDP). In the table, GDP is equal to:

$1,095 billion

Below is U.S. economic data for 2018. What was total spending? Consumption $13.999 trillion Investment $3.628 trillion Government spending Exports $3.591 trillion $2.510 trillion Imports $3.148 trillion

$20.58 trillion

Gary Parker is willing to pay $700 for a new iPad. Apple (the producer of iPads) is selling a new iPad for $600. It costs Apple $400 to produce this iPad. How much economic surplus does Apple receive if Gary purchases this iPad?

$200

Consider the data shown in the table. Assume that the economy produces only textbooks. What is the nominal GDP for this year? Last year This year Textbooks Sold 5.000 5,250 Actual Price $50 $55

$288,750

Maria's Pizza offers one slice for $2, two slices for $3.50, three slices for $4.50, and four slices for $5.00. Gil orders two slices. From this information, we know that the marginal benefit to Gil of a second slice is at least - and the marginal benefit to Gil of a third slice is less than

$3.50: $4.50

In 2010, Canada's GDP was approximately $1,357 billion, and its population was about 34.12 million. What was Canada's approximate GDP per person in 2010?

$39,770

At what price does this market experience a surplus of zero units?

$50

Amanda Mendez goes to a local café and orders a sandwich. Her willingness to pay for that sandwich is $10. The price of the sandwich is $4. The cost to the cafe to produce that sandwich is $1. How much economic surplus does Amanda receive when she purchases the sandwich?

$6

Amul Food Factory in India makes ice cream and produces processed and condensed milk. In the factory, the firm's employees use milk and sugar. The firm runs on electricity and purchases raw milk every day. Large robotic assembly lines fill and package the ice cream containers. Large industrial freezers store the ice cream. Which of the following are variable costs for Amul Food Factory? (i) The cost of the raw milk purchased from farmers. (ii) The cost of buying the robotic assembly lines. (iii) The cost of buying electricity. (iv) The cost of buying industrial freezers. (v) The cost of sugar.

(i). (iii), and (v)

Based on the following statistics, how much are net exports? Consumption S13.312 trillion Investment S3.371 trillion Government spending $3.412 trillion Exports S2.357 trillion Imports S2.932 trillion

-$0.575 trillion

As a part of a market research project, you survey six food trucks across the city to gather data on how many meals they would plan to sale at various prices. The data you collect is in the accompanying table. What is the total supply of meals in your survey at $10 per meal?

1,485 meals

According to the rule of 70, if GDP per person is growing at a rate of roughly 4%, approximately how many years will it take for average income to double?

18 years

During 2017 and 2018, nominal GDP in the United States grew by 4.3%, and the rate of inflation was 1.9%. What was the growth rate of real GDP between the two years?

2.4

You are thinking of starting a tutoring service. You already have a part-time job on campus that pays $20 per hour. You think you can tutor fellow students for five hours each Saturday at $25 per hour, and you have already printed $10 worth of flyers to hang on campus for advertising. If you were not tutoring, you could work another five hours at your campus job. How much economic surplus will you generate each week if you start tutoring?

25

Consider the data shown in the table. Assume that the economy produces only barrels of oil. What is the growth rate of real GDP between the two years? Barrels of Actual Oil Sold Price Last year This year 80,000 $60 83.000 $63

3.75%

Nerida Kyle is thinking of buying a car to avoid taking Lyft to work. She is using the cost-benefit principle to evaluate this decision and is calculating the costs and benefits to owning the car over the next year. She's gathered the following information to help her make her decision: • The car costs $15,000 to purchase, but she can resell it after a year of use for $13,500 • She thinks gas will cost her about $1,200 for the year. • The annual insurance premium for her car is $800. • Maintenance and repairs will cost about $300 for the year. • Using Lyft to get to work would cost her $4,000 for the year.

3800

Which of the following taxes is regressive? Raj pays a 10% tax on the first $10,000 he earns plus a tax on any additional income.Which of the following taxes is regressive? Raj pays a 10% tax on the first $10,000 he earns plus a tax on any additional income.

5%

Suppose that, in year 1, an economy produces 200 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year, the economy produces 210 golf balls that sell for $3.50 each and 80 pizzas that sell for $9 each. Using year 1 as the base year, the growth rate of real GDP from year 1 to year 2 is .

5.83%

As part of a market research project, you survey six random people to see how much gas per week they would buy at various prices. The data you collect is in the accompanying table. What is the total demand for gasoline at $2.50 per gallon in your survey?

51 gallons

Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose the Surgeon General announces that eating potato chips causes heart disease. Which panel BEST illustrates how this announcement will affect the market for potato chips?

A

Which of the following lists only factors that would cause an increase in the supply of an item?

A decrease in input prices; a technological innovation; a fall in the price of a substitute-in-production.

Which of the following market changes would lead to a shift of the demand curve from Old demand to New demand?

A fall in the price of a complementary product.

Real GDP tends to overstate economic well-being because it includes:

All of these answers are correct

If an economy is a closed economy, then the equation for total spending is:

C + I + G

You just bought two used textbooks for $25 each. How much does GDP change because of your purchase?

GDP does not change

Which graph shows what will happen in the market for luxury vehicles if a recession is imminent?

Graph A

Tropicana produces both orange juice and lemonade. What will happen to the supply of Tropicana orange juice when the price of lemonade rises in the market and the price of orange juice stays the same?

Graph C

(Figure: Butter and Jam) Some people like to eat jam and butter sandwiches, and for them, these two foods are complementary goods. For these people, which of the graphs illustrates the impact of a fall in the price of butter on the jam market?

Graph D

A campus bookstore sells both new and used books and rents them as well. In a particular semester, the percentage of students who opt for used books and rentals increases, and the percentage of students who opt for new books decreases. Which graph shows the new equilibrium that would result in the market for used books?

Graph a

For which item(s) does diminishing marginal utility provide a good justification? I. the social safety net I. government transfers Ill. the income tax structure IV. Pigouvian subsidies

I, II, III, and IV

Which of the following are correct about fixed costs? (i They do not change with the level of production in the short run. (ii) They include variable costs. (iii) They are present even when the firm is producing zero units. (iv) They are irrelevant to marginal cost.

I, III, IV

What is the difference between income from a microeconomic standpoint versus income from a macroeconomic standpoint?

In microeconomics, income refers to one individual's income, whereas in macroeconomics, income refers to the total income in the entire economy.

Over the past few years, the technology associated with producing flat-screen televisions has improved. This has led to a(n) in the flat-screen televisions

Increase; supply of

Which of the following lists only factors that would cause an increase in the demand for an item?

Information on possible side effects of using an item; a rise in income (if the good is a normal good); a fall in the price of a substitute good

Asking "What else?" allows the principle to be boiled down to a simple question.

Interdependence

What is a progressive tax system?

It is a system where those with more income pay a higher share of their income in taxes than those with lower incomes.

According to diminishing marginal utility, which of the following people would gain the highest marginal benefit from an extra $100 of income?

Julia, a single mother of three young children with an annual household income of $18,000

Which of the following scenarios does NOT depict a rational seller?

Main Street Bakery calculates the marginal cost of a multilayer red velvet cake sd $9 and sells it for $8.

Malia and Asi have a household income that is insufficient to pay for both food and shelter, with no funds available for other types of expenses. However, their household income is higher than 75% of the households in their developing nation. Malia feels that they are poor, and Asi feels that they are prosperous. Their feelings are consistent with which views of poverty?

Malia focuses on absolute poverty, and Asi focuses on relative poverty.

(Figure: Major U.S. Redistribution Programs) Use Figure: Major U.S. Redistribution Programs. The figure lists welfare programs available to individuals. Panel B represents programs that are means-tested and provide in-kind benefits. Which program fits this description?

Medicaid

A new study discovers the health benefits of eating fish regularly. At the same time, some consumers decide to become vegetarians. What is the effect of these events on the equilibrium price and quantity in the fish market?

The change in both the equilibrium price and quantity is ambiguous.

Consider the market for quinoa. What happens if there is an increased demand for quinoa cereal, while at the same time, a new quinoa seed that dramatically increases yield per acre becomes available?

The change in price is indeterminate; quantity increases

If Canadian consumers expect the value of the Canadian dollar to depreciate against the US dollar (the Canadian dollar becomes weaker against the dollar), what impact would we expect this to have on Canadians' demand for American made products?

The demand for American-made items would fall.

Due to uncertainty around Brexit, the value of the British pound has been falling against the Euro. How will this affect the demand for German goods in the UK?

The demand for German goods would fall.

What happens to the equilibrium price and quantity when demand decreases and at the same time supply increases, but the relative size of the shifts are not known?

The equilibrium price falls, and the change in the equilibrium quantity is ambiguous.

Which of the following is NOT a factor that can shift supply?

The market price of a product.

Suppose you manage a convenience store. If macaroni and cheese is an inferior good, what do you suppose would happen to the price and quantity sold of macaroni and cheese as incomes fall during a recession?

The price and quantity would both increase

How will the supply of clothing change if the forecast is that clothing prices will fall in the next few months?

The supply of clothing will increase in the market today

A large amount of harvested grain used to make flour grows mold due to flooding. How will this affect the supply of flour in the market?

The supply of flour will decrease in the market.

What will the impact be on the supply of long-haul truck transportation services if diesel fuel becomes cheaper?

The supply of truck transportation services will increase.

The table contains the monthly demand for soda cans for four students. If these four students make up the entire market, what is the change in the total monthly market demand for soda when the price changes from $3 per can to $2.50 per can?

The total quantity demanded in the market rises by 36 cans.

Which would NOT be classified as a macroeconomic question?

What determines a university's cost of offering a new course?

Which of the following is NOT a correct rationale about why income redistribution programs do not always reduce efficiency?

When incomes are more equal, work incentive grows.

Which of the following is a negative result of redistributing income toward equality?

Work incentives are reduced

In the graph, the movement from point M to point G represents

a decrease in supply

An increase in price and an ambiguous change in quantity are MOST likely caused by:

a shift to the left of the supply curve and a shift to the right of the demand curve.

When quantity demanded exceeds quantity supplied, exists.

a shortage

Which factor is MOST likely to shift the supply curve for milk to the left?

a tax on each gallon of milk produced

The United Nations and the World Bank use poverty lines that are based on:

an absolute poverty measure.

When a U.S. consumer buys Canadian maple syrup at the grocery store, this purchase is:

an import

Consider the market for online video streaming services (Netflix, Apple TV, Amazon Prime, HULU, to name a few). Which statement would cause the equilibrium price of online streaming services to rise with certainty?

an increase in demand combined with a decrease in supply

For normal goods, an increase in income will result in:

an increase in the equilibrium price and equilibrium quantity.

Rising marginal costs imply

an upward sloping supply curve

Use Figure: Demand and Supply of Sugar. A factor that may have shifted the supply from S1 to 52 is:

better technology in the production of sugar.

What happens to the equilibrium price and quantity when demand decreases and at the same time supply increases, but the demand shift is relatively larger than the supply shift?

both equilibrium price and quantity will fall

The cost-benefit principle evaluates evaluate costs and benefits.

both monetary and nonmonetary; only nonmonetary

The poverty line is adjusted each year to reflect:

changes in the cost of living

Price takers

charge the prevailing prices and do not have any effect on the market price.

When there is a high level of intergenerational mobility among the poor in a nation:

children of poor parents do not remain in poverty when they are adults.

The Rational Rule for Buyers

compares the benefit of buying an additional unit of the item to the cost of that item.

Carolyn Bates is a junior in college studying economics. She has created a new software application that applies the four principles of economic decision making to any potential decision that a user faces. She is considering leaving school after this academic year to pursue further development of her app. Carolyn should consider all of the following costs when calculating the opportunity costs of staying in college EXCEPT the

cost of supplies and the technology fees she paid during the first three years of college.

If ramen noodles are an inferior good for Kim, then, holding all other things constant, as Kim's income increases, her demand for ramen noodles will:

decrease

In a supply and demand diagram, if the supply curve is upward sloping, a shift of the demand curve to the left, all other things equal, will:

decrease in equilibrium price and quantity

The Lopez family is a high-income household that pays a high tax rate. The Campbell family is a low-income household that receives financial assistance from the government in the same amount as the tax paid by the Lopez family. The value of the marginal dollar of the financial assistance to the Campbell family and of the taxes paid by the Lopez family is:

different, since the marginal dollar is worth more to the low-income family.

Intermediate goods are NOT counted in GDP because:

doing so would result in double counting.

Diminishing marginal product occurs when:

each additional unit of an input adds less to total output than the previous unit.

"Diminishing marginal product" means that:

each additional unit of an input will increase output but by a smaller amount than the previous unit of the input.

Which of the following is consistent with the view that "fairness" means equality of outcomes?

equal incomes

According to the marginal principle, keep increasing quantity until the marginal benefit of an additional item is the marginal cost of an additional item.

equal to

The circular flow of income shows that total spending is __ total income

equal to

Expenditure on domestically produced final goods and services is:

equal to GDP.

Medicaid is funded by:

federal and state governments

When using the opportunity cost principle, a seller has to

focus on the opportunity cost of producing an item.

The difference between a centralized economy and a market economy is that

governments make production decisions in a centralized economy, and individuals make production decisions in a market economy.

If a product has a large network effect, it will lead to

greater marginal benefits from using the product and increased demand for the product.

The value, at current market prices, of final goods and services produced within a country during a given period is:

gross domestic product.

Over the past 40 years, income inequality in the United States has risen. Which is NOT a plausible explanation for this phenomenon?

higher divorce rates

The rule of 70 tells us roughly;

how long it will take something to double if you divide 70 by its annual growth rate.

Households do NOT derive income from:

imports

Peanut Butter and Jelly Economy. Between 2018 and 2019, nominal GDP_ by Product 2018 Output 2018 Prices (base year) Product 2019 Output 2019 Prices Peanut butter 200 units $1 per unit Peanut butter 250 $1.10 per unit Jelly 100 units 2 per unit Jelly 100 2.50 per unit

increased; 31.25%

The law of demand refers to

inverse relationship between the price of a good and the quantity demanded

Diminishing marginal benefit:

is when buying an additional item yields a smaller marginal benefit than the previous item.

The cost of postponing the Tokyo Olympics to 2021 in the wake of the Covid-19 virus outbreak an opportunity cost of hosting the 2020 Olympic Games

is; if the cost of postponing the Tokyo games would not occur unless Tokyo was hosting the 2020 Olympic games

Facebook is subject to network effects because:

its value to an individual increases when the number of other people using it increases.

Assuming that iPhones are normal goods, which factor will NOT increase the demand for iPhones?

lower prices for Samsung smartphones

The suggests, decisions about quantities are best made incrementally.

marginal principle

In the circular flow diagram, resources such as capital and labor are bought and sold in:

market for inputs.

Temporary Assistance for Needy Families provides a

means-tested monetary benefit

Social Security is a(n) _ that is

monetary transfer; not means-tested

According to the cost-benefit principle, framing effects or how a choice is described, should

not affect a decision.

(Table: The Market for Salt and Vinegar Chips) Use Table: The Market for Salt and Vinegar Chips. If the price of salt and vinegar chips is $0.60, the price will: Table: The Market for Salt and Vinegar Chips Price (per bag) Quantity Demanded Quantity Supplied (bags per month) (bags per month) $0.90 75 285 0.80 110 250 0.70 145 215 0.60 180 180 0.50 215 145 0.40 250 110 0.30 185 75

not change.

There are eight households in a rural community. Four of the households earn $30,000 each per year, and the other four households earn $40,000 each per year. Suppose that a new resident, with an income of $2 million per year, builds a mansion in the community. After the new resident moves in, the median household income has , and the mean household income has

not changed; increased

Suppose that the price of rare earth metals is increasing this is one of the main components of most smartphones). As a consequence, people expect the price of smartphones to rise next year. Therefore, people will MOST likely:

observe higher prices for smartphones this year.

Refer to the diagram of the circular flow of income. Based on the diagram, the arrow going FROM box 2 to box 1 must be:

output bought by households.

An increase in the nation's is generally accepted as a long-run indicator of a rising standard of living.

output per person

In the graph, a decrease in the price of the item will cause the movement from

point H to point G.

An income level below which a family is defined to be in poverty is known as the:

poverty line

The percent of the population whose household income falls below the poverty line is known as the:

poverty rate

When faced with a quantity decision, the economic surplus is always maximized by following the

rational rule

Olya and her husband share an apartment. He feels prosperous because they have enough income to cover food, shelter, and other basic needs without going into debt. She feels poor because she has less than her sister's family and the families of some of her friends. Olya is defining poverty in terms, while her husband is defining poverty in terms.

relative; absolute

Certain events can trigger a spell of poverty. Which of the following is NOT among the events that normally can trigger a spell of poverty?

retirement

In Douglas County, Washington, apple production is limited by the number of acres available for agricultural production. Which economic concept does this statement BEST represent?

scarcity

If the economy booms and peoples' incomes rise, then the demand curve for a normal good like a new automobile will -, and the equilibrium quantity of new automobiles produced will

shift to the right; increase

Which of the following is a social insurance program in the United States?

social security

The circular flow diagram illustrates:

the key concepts in the national accounts.

Market equilibrium occurs when:

the market clears. there is no incentive for prices to change in the market. quantity demanded equals quantity supplied All of these answers are correct.

GDP is defined as the:

the market value of all final goods and services produced within a country in a given period of time

Which of the following is not a demand shifter?

the price of the product

Suppose there is a surplus of qualified architects in the United States. Over time, we would expect:

the salaries of qualified architects to fall.

The official peverty line depends on living. and is adjusted every year to reflect changes In the cost of

the size and composition of a family

If the state of New York allocates additional spending on after-school programs for at-risk youths, then the opportunity cost of these expenditures is:

the value of alternative expenditures forgone in making this allocation.

An upward-sloping supply curve shows that

there is a positive relationship between price and quantity supplied

If resources are scarce:

they are insufficient to provide enough goods and services to satisfy all human material wants and needs.

Transfer payments are payments that:

transfer income from one person to another.

If a seller expects prices to rise in the future:

will stock up today and sell the goods when the price rises.