Econ Exam 2

Market failure is said to occur whenever:

private markets do not allocate resources in the most economically desirable way.

The three statistics that are the main focus for those measuring macroeconomic health are:

real GDP, inflation, and unemployment.

The fact that nominal GDP has risen faster than real GDP:

suggests that the general price level has risen.

Increases in household and business spending are a demand factor in economic growth.

True

Demand-side market failures occur when:

the demand and supply curves don't reflect consumers' full willingness to pay for a good or service.

Supply-side market failures occur when:

the demand and supply curves don't reflect the full cost of producing a good or service.

Negative demand shocks have a more significant impact on output and employment when prices are flexible.

False

What two conditions must hold for a competitive market to produce efficient outcomes?

Supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness to pay.

If the demand curve reflects consumers' full willingness to pay, and the supply curve reflects all costs of production, then which of the following is true?

The benefit surpluses shared between consumers and producers will be maximized.

Which of the following statements is true about computerized inventory tracking systems and the severity of recessions?

While these systems are credited with reducing business cycle severity prior to the recession of 2007-2009, some economists believe that they contributed to the suddenness and severity of the 2007-2009 recession.

Graphically, producer surplus is measured as the area:

above the supply curve and below the actual price.

In national income accounting, consumption expenditures include purchases of:

automobiles for personal use, but not houses.

From society's perspective, in the presence of a supply-side market failure, the last unit of a good produced typically:

costs more to produce than it provides in benefits.

Producer surplus:

is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price.

Which of the following is an example of market failure?

negative externalities positive externalities public goods

In making international comparisons of living standards using GDP, which of the following is not adjusted for in the calculation?

the quantity of resources available to the economy

Graphically, if the supply and demand curves are linear, consumer surplus is measured as the triangle:

under the demand curve and above the actual price.

Shocks to the economy occur:

when expectations are unmet