Econ Midterm 1

Rachel agrees to lend Phoebe $100 for six months and charges her interest of 2 percent. At the end of the six-month period, prices have risen by 4 percent.

Purchasing power has been redistributed to Phoebe.

When GM advertises its cars, the company is trying to cause a ?

Rightward shift in demand

For the purpose of our class, "scarcity rent" can be defined as:

The amount a seller can charge for a good, over and above his cost of producing it.

Which of the following groups would most likely be harmed by inflation?

retirees

The economic benefits of owning a home are greater when home prices are

rising and interest rates are low.

Which of the following is likely to affect the position and shape of society's production possibilities frontier?

volume of physical resources, level of labor skills, level of technology

Public goods are not sold in efficient quantities in the marketplace because:

once supplied to a buyer, they are made available at no cost to someone else.

GDP equals hours of work times

output per hour

Which of the following is a good example of efficient specialization and voluntary exchange?

A college professor hires someone to rototill a garden for spring planting.

In the 60 Minutes Story The Price of Oil Steve Croft argues that the sudden rise in the price of oil was not due to supply and demand. This statement is

False, because the opportunity to profit by re-selling the oil at a later time increased buyers demand for it.

We observed that the price of a good rises and the quantity purchased also rises. Everything else being equal, it is consistent that

Income Rose

Which of the following services have experienced declines in relative prices due to productivity increases?

Internet access services

Firms often seek to borrow money to expand their capital stock, and the price they pay for that money is the interest rate. What happens to quantity of money demanded if the interest rate increases?

It decreases

If the price of pizzas has risen from $4 to $5 at the same time that the price of an hour of spinning class has risen from $20 to $30, then

aerobics' classes have become relatively more expensive

Combining various goods and services into a convenient grouping is called

aggregation

The demand for computers has risen dramatically at the same time that the unit cost of production has decreased. As a result, we can expect ?

an increase in output with no predictable change in price.

Last year your job at the university cafeteria paid you $9 an hour and the price of a ten-minute long distance call to your girlfriend in California was $4. This year your cafeteria job pays $9.90 per hour and the ten-minute phone call now costs $4.10. You are clearly

better off because the phone call now costs less work

As the term "opportunity cost" is defined in the text, the opportunity cost of going to college includes

both tuition and the value of the student's time.

the best example of a common resource is

clean water

In economics, aggregation refers to

combining many markets into one overall economy.

The idea of diminishing returns to an input in production suggests that if a local college adds more custodians, the marginal product of labor for the custodial staff will

decrease

If consumers is sensitive to changes in the price of a good, the good is ?

elasticity is less than -1

A shift in the supply curve of bicycles resulting from higher steel prices will lead to?

higher prices of bicycles.

A shift in the demand curve for sailboats resulting from an increase in incomes will lead to?

higher prices of sailboats.

If the population increase in India is smaller than the increase in Indian real GDP, then GDP per capita will

increase.

If Marie Marionettes is operating under conditions of diminishing marginal product, the marginal costs will be:

increasing

The total amount of consumption of a society can be increased if

individuals engage in specialization and voluntary trade.

An externality is said to exist when:

individuals impose costs or benefits on others but have no incentive to take these costs and benefits into account.

The growth rate of potential GDP is the sum of the growth rates of

labor force and labor productivity

Potential GDP is an estimate of the economy's ability to produce goods and services if the

labor force is fully employed.

The growth rate of potential GDP is the sum of two other growth rates. These other growth rates are

labor input and labor productivity.

If left to the private market, the amount of police protection provided in a city would be ________ than it is now, and free riders would pay ________ for police protection.

less, nothing

If the capital stock increases, then the economy can produce _____output with the _____amount of labor.

more, same

The slope of a demand curve is almost always

negative(downward), because with everything else equal, the same people will buy more of a good when its price is lower.

The quantity of newspapers sold will decline if ?

newsprint becomes more expensive.

The rate of interest written on a contract between a borrower and a lender is the

nominal interest rate.

Americans viewed the 12 percent mortgage interest rates of the 1980s as exorbitantly high while they considered the 7 percent mortgage interest rates of the late 1990s as reasonable. This represents a confusion of

real versus nominal interest rates.

If aggregate demand shifts inward, with aggregate supply held constant, the economy should experience

recession.

Which retail operation would have the highest costs per book sold?

small independent bookstore

If a Florida strawberry wholesaler operates in a perfectly competitive market, that wholesaler will have a ________ share of the market, and consumers will consider her strawberries to be ________. Therefore, ________ advertising will take place in this market.

small; standardized (commodity); little, if any

GDP per capita is the best measure of an economy's

standard of living

Perfect competition is characterized by:

the inability of any one firm to influence price.

If two firms are identical in all respects except that one has more capital than another, the marginal product curve for the firm with more capital:

will lie above the marginal product curve for the firm with less capital.

Ex-London School of Economics student Mick Jagger sang, "You can't always get what you want, but if you try sometimes you just might find you can get what you need." Another statement of the basic economic principle expressed in this lyric is that

you can allocate your resources to what gives you the highest value.

Why does quantity demanded decrease when price increases?

People choose to reduce consumption of the item, People "drop out" of the market for the item, People find substitutes for the item.