econ study guide

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When higher taxes discourage whatever activity is being taxed that is called

A negative incentive effect

consider the cost function above. if this business faces a constant price of $12, then it can reach a maximum profit of ___ by producing ___

$10 ; 20 units

If the spending multiplier is 1.2 then $100 billion increase in government spending will increase GDP by

$120 billion

in 2018, the gross domestic product of the united states was

$20.5 trillion

refer to the table above. what was the real gdp per capita in 1999

$38,551

In the private sector, all transactions are voluntary, so

Presumably all parties benefit

a wage price spiral occurs when

a business boost prices and wages faster and faster to try to stay ahead of higher than expected inflation

the wage and price controls of 1971 were an example of

a command and control approach

which is not an example of intermediate input

a computer chip factory built in arizona

for a given market, a profit maximizing monopolist would always charge ______ a firm in perfect competition

a higher price than

in the past 50 years, the economy of the united states has grown, causing

a higher standard of living for most citizens

a zero sum economy would result from

a lack of real economic growth

a market where there is only one seller, and buyers have no good alternative, is called

a monopoly

output divided by the number of hours worked or by the number of workers is called

average product

the effect of crowding out over the long run is

bad because businesses have less access to loans

why are intermediate inputs left out of gdp calculations

because intermediate inputs are part of final goods and services

why do individuals and businesses have to make decisions

because resources are scarce

imposing a tax on a market generally hurts

both buyers and sellers

The excess of the federal government's spending over its revenues is called the

budget deficit

the technology or knowledge necessary for a production process is called

business know how

which is not a category of goods included in the BLS's consumer market basket

business office supplies

the individual quantity demanded is the amount of _______ is willing to ______ at a given price

buyer ; purchase

who competes with whom in a market

buys compete with other buyers and sellers compete with other sellers

which component of gdp captures goods that are produced but not sold in a given year

changes in private inventories

if two or more oligopolistic companies work together to keep their prices high and split the market between them, this is called

collusion

what is the cpi

consumer price index

if tax cuts are stimulative, tax increases are

contractionary

nonresidential investment does not include

copy paper

rent seeking behavior can sometimes cause

corruption in public officials

what word describes the money that a business pays for its inputs

cost

goods that are produced but not immediately sold

count in the GDP as a change in private inventories

if an american company, such as intel, produced output in ireland, this output

counts in the irish gdp

suppose the government decides to eliminate some, but not at all, of the rules that govern how investment banks conduct their business. this would be an example of

deregulation

if you add too much of any one input, your business is likely to experience

diminishing marginal product

Amount of income people have left over after taxes is called

disposable income

The law of demand suggests that most demand curves will be

downward sloping

which of the following is an example of a negative network externality

driving on a crowded highway during rush hour

the education and skills of works are factors driving

economic growth

The price at which quantity supplied equals quantity demanded is the

equilibrium price

on the basic supply demand graph, the point at which the demand curve and the supply curve intersect is located at

equilibrium price and equilibrium quantity

globalization is the exchange of ________ among countries

goods, services, ideas, and people

GDP per capita means

gross domestic product per person

Economic growth generally leads to

higher living standards

which of the following is not mentioned in the textbook as a constraint that affects the economy

households must make purchasing choices based on government regulations

The Keynesian recommendation for a policy response to a recession consists of

increase government spending with tax cuts

If a foreign car manufacturer builds a plant in the United States, the new plant will

increase the US GDP by the value of the cars produced

as one of the new deal programs, the WPA was a government agency that

increased employment through construction projects

which of the following is not an example of a barrier to entry

lower costs

marginal revenue is generally ________ for businesses that do not operate under conditions of perfect competition

lower than the price

the demand schedule reports the quantity demanded at

many different prices

in perfect competition, a profit maximizing business will expand production until its ______ equals the market price

marginal cost

As the market price of a good rises, businesses will respond by producing more of that good because

marginal revenue exceeds marginal cost after the price increase

what will happen as a result of a decrease in demand

Equilibrium price and quantity both fall

core inflation is defined as

Inflation that does not take energy and food into account

Supply side economics theory focuses on the

Marginal tax rate

The overall boost to economic activity that results from a government spending increase is called the

Multiplier effect

The total of all past government borrowing minus government budget surplus is called the

Public debt

Market equilibrium is the point where quantity supplied and_______are equal

Quantity demanded

what word describes the money that customers pay for the output of a business

revenue

in a market where businesses are earning high profits, new entrants will cause the supply curve to shift to the ____ and thus cause the market price to ________

right ; fall

one of the purchases a business can make that would count directly in the gdp is

software

what might happen if the market price for haircuts increased

some hair salons might hire more stylists

what will happen in the long run if businesses in perfect competition are experiencing losses

some sellers will go out of business, causing supply to decrease and prices to rise

In a movement along the demand curve, the demand schedule

stays the same, but the price changes

the airline deregulation act

subjected new airlines only to safety regulations

If a new major oil field is discovered in Africa, world _____ curve for oil woud shift to the ______

supply ; right

Inflation can be defined as

sustained upward movement in the average level of prices

the real growth rate is calculated by

the BEA adjusting the GDP for inflation

one of the biggest benefits of a market based economy is

the ability to adapt quickly to change

which of the following is not an example of a good or service provided by a market

the air we breathe

on a PPF with two products, health care and housing, what would occur in a stagnant economy if the amount of health care output increased

the amount of housing would decrease

the production possibility frontier represents

the different possible combinations of output

according to the aggregate production function, when inputs increase

the economy grows

most markets if left alone or trend towards

the equilibrium price

imposing a tax on a market typically hurts sellers because

they receive less than they would in a competitive equilibrium

a demand schedule illustrates the quantities of a particular product or service that are demanded at different prices

true

advertising a brand can help create a reputation effect

true

economics is the study of how individuals, businesses, and governments make decisions and trade offs in the face of scarce resources

true

history suggests that economic competition is the most consistent force for economic growth and progress

true

variable costs are short term costs, and fixed costs are long term costs

true

world war II increased the amount of government spending and economic intervention in the united states

true

consider the cost function above. if the price that this business faces is $25, how much output should this business produce in order to maximize profit

two units

offficial gdp numbers do not include the activity of the _________ economy, which includes illegal activities and off the book transactions

underground

a laissez-faire economy has

very little government regulation of the economy

hyperinflation is

very rapid increase in prices from year to year

Simon Kuznets

was the first economist to construct an overall measurement of the US economy

between 2000 and 2018, which of the following experienced a negative inflation rate

wireless phone service

money illusion occurs when we compare dollar amounts

without adjusting for inflation

Closed economies generally do ______ open economies, in the _______ run.

worse than; long

suppose kyra purchases and downloads an eBook from Amazon.com does this count as a market transaction

yes because there is voluntary exchange of money for a good or service

refer to the table, which shows the number of energy drinks demanded per day by the students at a certain university. does this demand schedule conform to the law of demand?

yes, because as the price falls, the quantity demanded rises

From World War II to the early 1970s, GM, Ford, and Chrysler enjoyed

market power

_____________ is the ability to raise prices above the level that perfect competition would produce by restricting the quantity supplied

market power

the main objective of a business in a market economy is to

maximize profit

as of 2014, the average household earned $53,657. in 1979 the average household earned $16461. although it appears as though incomes have more than tripled, other prices have risen too. this illustrates a concept known as

money illusion

in recent years, china and india have prospered economically by introducing

more competition through markets

A good example of monopolistic competition is

neighborhood restaurants

which of the categories of gdp were negative for the united states in 2018

net exports

A profitable business will attract

new competitors

opportunity cost is defined as the value or benefit of the

next best alternative

volunteers in the workforce have what effect on the GDP

none because they are not counted

financial markets do not include which of the following

nonprofit organizations

what is one negative effect of growth

obesity due to falling food prices

raw materials include which of the following

oil

Inflation

one of the key measures of the health of an economy

when you have to give up one opportunity in order to choose another, the value of the opportunity not chosen is called the

opportunity cost

In a simple lawn-mowing business where you have a push mower and labor as inputs, what would the impact on output of adding an additional unit of capital in the form of a gas powered self propelled mower

output would increase

The transfer of domestic economic stimulus to foreign markets is known as

overseas leakage

in the long run, monopolistic competition starts to look like

perfect competition

which of the following is not part of an economy's financial markets

political action committees

which of the following is mentioned in the textbook as a deficiency in private markets for which government action can provide a remedy

pollution

the potential profit from new technological advancements and innovations

gives the private sector a better incentive to commercialize new technologies

some goods have become less expensive due to

globalization and technology

the textbook provides examples of markets that are

local, national, and global

refer to the table above, which gives farmer mccolls's marginal cost function for barley. if farmed mccoll is currently production 25 bushels of barley, which of the following could be the market price for a bushel of barley

$0.75

the CPI in november 2015 was equal to 237.3, and in 2016 it was equal to 241.4. this means that the inflation rate between november 2015 and november 2016 was equal to

1.7 percent

according to most estimates, the size of the underground economy in the united states could be as large as

10 percent of GDP

in order to create an index for consumer prices, the BLS chose

100 to represent the average 1982 1984 price level

refer to the table above, which gives the daily supply and demand schedules for cups of coffee at a kiosk in a shopping mall. if there is not tax placed on coffee, how many cups of coffee will be bought and sold?

120

the governments share of unemployment peaked during the

1940's

the bureau of labor statistics has chosen the price level from ___________ to be the base price level used in calculating the CPI

1982 to 1984

Stricter loan standards in the mortgage Lending sector could cause

A demand shift to the left in the housing markets

In recent years the demand curve for IT workers has moved to the right. what does this mean?

At any price, the quantity demanded is now higher

It's a portion of each additional dollar of income that household spend is called

Marginal propensity to consume

In a growing economy ________enjoy a rising standard of living

Both rich and poor

Hurricane Katrina cost refineries and oil rigs in New Orleans and in the Gulf of Mexico to close down. In the market for gasoline, hurricane Katrina caused

Decrease in supply

Tax cuts tend to boost

Disposable income

Some economists argue Tap the spending multiplier is actually less than one dollar if the spending multiplier is 0.8 then a $200 billion Increase in government spending will cause private sector spending to

Fall by 40 billion

if the supply of a good increases, the equilibrium price of that good

Falls while quantity demanded rises

GDP stands for

Gross Domestic Product

An increase in government spending is likely to lead to increasing inflation

If the economy is doing well

Inferior goods are characterized by________demand as a result of increased income

Lower

After Hurricane Katrina, the supply curve for gasoline

Shifted to the left

The main statistical agencies in Washington are

The bureau of economic analysis, the bureau of labor statistics, the census bureau, and the federal reserve board

The inputs used in the aggregate production function do not include which of the following?

average price levels

a relative price shift occurs when

The inflation rate of a good or service is significantly higher or lower than the overall inflation rate

during a recession, the budget deficit generally increases because tax revenues weaken while expenditures rise. this increase is known as the

automatic stabilizer

who makes decisions and trade offs in the face of scarce resources

all of these choices are correct

the number of markets is

always changing

an increase in living standards is shown by which of the following

an increase in real gdp per capita

Besides the gross domestic product, another measure of how well an economy is doing is:

annual household income

the federal trade commission is responsible for enforcing

antitrust law

global markets consist of buyers and sellers

anywhere in the world

an oligopoly occurs when there

are only a few sellers in a market

questions of exactly where to draw the line on government interference in the economy

are the subject of intense political and economic dispute

if the interest rates on a new car loans increase, the quantity of new cars supplied will

decrease

When the demand curve shifts right

demand has increased, so equilibrium price increases, and equilibrium quantity increases

the demand curve is the graphical counterpart to the

demand schedule

differentiating ones product from the products of ones competitions is a way to

escape perfect competition

refer to the table, if the current price in the market is $3, then there is

excess supply and pressure on the price to fall

in a market, buyers and sellers

exchange goods and services for money

Net exports are

exports minus imports

Cost is what a business receives after subtracting expenses from revenue.

false

With inferior goods, demand will increase with an increase in income

false

crude oil is sold in a local market

false

if there is moderate growth, we have a zero sum economy

false

perfect competition requires a non standardized product

false

real gdp per capita is real gdp divided by the number of workers in a country

false

under president lyndon johnson, the federal government actually decreased its involvement in the economy

false

which of the following is not a type of tax

family tax

the single biggest federal tax is the

federal income tax

a growing economy can result in

fewer newborn deaths

what word describes the goods and services that are used to produce outputs for a business

inputs

the goods or services purchased by a business for immediate use in the production process are known as

intermediate inputs

Referred to the table. In this market, the equilibrium price

is between $2 and $3

refer to the table above, which gives hypothetical data on price changes for three goods. which goods became relatively more expensive for buyers

it depends on the overall rate of inflation in the economy

the US tv series survivor has awarded $1 million check to the shows winner for more than 35 seasons, dating back to 2000. which of the following is true about that top prize

it has decreased in value, since there has been overall inflation in the united states since 2000

what happens to the market price that buyers face as a result of taxation

it is greater than before the tax was imposed

if at the market price of $10 price per lawn Maya is willing to mow 15 lawns, and at the market price of $15 per lawn maya is willing to mow 25 lawns, what does maya's supply curves look like

it slopes up and to the right

_________ originally proposed the use of government spending to stimulate the economy in the 1930's during the great depression

john maynard keynes

government social benefits paid to individuals are

known as transfer payments and are typically used to find personal consumption

households are generally buyers in the markets for products and sellers in _______ markets

labor

inputs used by a business in the production process include

labor

the hours of work supplied by various types of workers are referred to by economists as

labor

The time it takes to recognize a recession and implement a spending stimulus is called a

lag

monopolistic competition is characterized by

large numbers of sellers with similar products

Top-down management of an economy by the government generally

leads to low rates of economic growth

the new deal was

legislation passed by the roosevelt administration

what name is given to the process of turning inputs into outputs that a business will sell to customers

production

the ___ summarized the output of the business, given the level of inputs

production function

what is the difference between revenue and cost

profit

which of the following formulas is correct

profit = revenue - cost

investment in physical capital means

purchasing equipment and buildings

a country's standard of living is measured by its

real gdp per capita

the inefficiency of taxation means that imposing a tax on a good or service typically

reduces the amount produced

expected inflation is

the inflation rate that consumers and businesses expect will hold for some time in the future

natural monopolies include

the local water company

the average price level is equivalent to

the price of a market basket of goods

since 2000, the relative price of rental housing has risen because

the price of rental housing has risen faster than the overall price level

demand is inelastic if

the quantity demanded does not change very much even if the price changes dramatically.

what causes the decline in demand for red delicious apples

the taste of the apples

the market for smartphones did not exist 30 years ago because

the technology did not exist to produce smartphones

Supply and demand are examples of

the tools of economics

in a centrally planned economy, decisions are made by

the top level government officials

GDP is defined as the dollar value of _______ in a given year

the total output of the economy

after a tax is placed on a good or service, which of the following does not occur

the total volume of sales of the good or service increases

market price

the typical price at which a good or service sells

which of the following is not one of the programs through which the US government attempts to redistribute income to the poor

the works progress administration WPA

if goods are produced domestically but sold overseas

they are still counted in our gdp


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