ECON205
A small nation produces and consumes only cookies and milk. Assuming that the average market basket of goods contains 1 box of cookies and 3 containers of milk, calculate the CPI for Year 2. Assume Year 1 is the base year. Year Year 1 Year 2 Price of Box of Cookies $40 $10 Price of Container of Milk $60 $12 The value of the CPI in Year 2 is ______, and the annual rate of inflation (annual percentage increase in CPI) in Year 2 is _______. Select one: a. 137.14, 37.14% b. 188, 88% c. 176, 76% d. 500, 5%
a. 137.14, 37.14%
Which most likely has a greater effect on the U.S. CPI: a 10% increase in the price of chicken or a 10% increase in the price of caviar? Why? Select one: a. a 10% increase in the price of chicken since chicken would be a greater component of the average consumer's market basket b. a 10% increase in the price of chicken since chicken has a more inelastic demand c. a 10% increase in the price of chicken since chicken is relatively inexpensive compared to caviar d. a 10% increase in the price of caviar since caviar is relatively expensive compared to chicken
a. a 10% increase in the price of chicken since chicken would be a greater component of the average consumer's market basket
The existence of economic losses in a perfectly competitive market induces firms to __________ the market, which shifts the market supply curve to the__________ and __________ market price. Select one: a. exit, left, increases b. enter, right, decreases c. enter, left, decreases d. enter, right, increases
a. exit, left, increases
In recent decades Americans have increased their purchase of stocks in foreign-based companies. The Americans who bought these stocks were engaged in Select one: a. foreign portfolio investment b. foreign direct investment c. natural resources d. human capital
a. foreign portfolio investment
List the four determinants of labor productivity. Select one: a. physical capital per worker, human capital per worker, natural resources per worker, technological knowledge per worker b. physical capital per worker, portfolio investment per worker, natural resources per worker, technological knowledge per worker c. physical capital per worker, human capital per worker, natural resources per worker, direct investment per worker d. physical capital per worker, human capital per worker, natural resources per worker, infrastucture per worker
a. physical capital per worker, human capital per worker, natural resources per worker, technological knowledge per worker
Financial markets and financial intermediaries are different types of financial institutions. Two types of financial markets are ______ and ______, two types of financial intermediaries are ______ and _______ Select one: a. stock market and bond market, banks and mutual funds b. banks and mutual funds, stock market and bond market c. securities and exchange, stocks and bonds d. stocks and bonds, securities and exchange
a. stock market and bond market, banks and mutual funds
Because consumers can sometimes substitute cheaper goods for those that have risen in price, Select one: a. the CPI can slightly overvalue inflation b. the CPI can slightly undervalue inflation c. the GDP deflator can slightly overvalue inflation d. the GDP deflator can slightly undervalue deflation
a. the CPI can slightly overvalue inflation
If the government attempts to break up a natural monopoly to enforce competition in a market, Select one: a. the average cost of producing the good will increase. b. the smallest firm will have a significant cost advantage over the larger, less efficient firms. c. the average cost of producing the good will decrease. d. the price paid by consumers will be expected to remain the same.
a. the average cost of producing the good will increase.
Suppose a Japanese company opens a factory in South Korea Select one: a. this is an example of foreign direct investment and will lead to increased GDP in South Korea b. this is an example of foreign direct investment and will lead to increased GDP in Japan c. this is an example of foreign portfolio investment and will lead to increased GDP in South Korea d. this is an example of foreign portfolio investment and will lead to increased GDP in Japan
a. this is an example of foreign direct investment and will lead to increased GDP in South Korea
Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the quantity produced is 5 bars and the price is $6. Year 1 is the base year. What is nominal GDP for year 1, year 2, year 3? Select one: a. $4, $5, $6 b. $12, $20, $30 c. $12, $16, $20 d. $15, $20, $25
b. $12, $20, $30
What is the relationship between price P, marginal revenue MR, and marginal cost MC for a profit maximizing monopolist? Select one: a. P = MR and MR = MC b. P > MR and MR = MC c. P = MR and MR > MC d. P > MR and MR > MC
b. P > MR and MR = MC
When a monopolist practices price discrimination Select one: a. it sets the price and quantity where market MR = MC b. it charges different consumers different prices for the same good c. it does not allow its good to be sold to certain undesirable groups d. it is selling a good at a point where P < MC
b. it charges different consumers different prices for the same good
A competitive firm maximizes profit by choosing the quantity at which Select one: a. average total cost is at its minimum b. marginal cost equals price c. average total cost equals the price d. marginal cost equals average total cost
b. marginal cost equals price
If a popular show on personal finance convinces Americans to save more for retirement, the ______ curve for loanable funds would shift, driving the equilibrium interest rate ______. Select one: a. supply, up b. supply, down c. demand, up d. demand, down
b. supply, down
Suppose the market for building new homes is perfectly competitive and one of constant costs. If the demand for new homes increases, Select one: a. the price to build a new home will go up in the short run and the long run b. the price to build a new home will go up in the short run, but not in the long run c. the price to build a new home will go up in the short run, but go down in the long run d. the price to build a new home will go down in the short run and the long run
b. the price to build a new home will go up in the short run, but not in the long run
Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the quantity produced is 5 bars and the price is $6. Year 1 is the base year. What is real GDP for year 1, year 2, year 3? Select one: a. $4, $5, $6 b. $12, $20, $30 c. $12, $16, $20 d. $15, $20, $25
c. $12, $16, $20
Assume a closed economy (no international trade) has government spending of $200 billion, taxes of $150 billion, and investment spending of $250 billion. Calculate the level of private savings. Select one: a. $100 billion b. $200 billion c. $300 billion d. $400 billion
c. $300 billion
Suppose your bank pays you a nominal interest rate of 2% on your savings. If the current rate of inflation is 1%, what is the rate of real interest you earn on your savings? Select one: a. - 1% b. 0% c. 1% d. 2%
c. 1%
Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the quantity produced is 5 bars and the price is $6. Year 1 is the base year. What is the GDP Deflator for year 1, year 2, year 3? Select one: a. 4, 5, 6 b. 400, 500, 600 c. 100, 125, 150 d. 100, 400, 500
c. 100, 125, 150
The graph below shows the average cost, marginal cost, demand, and marginal revenue curves for a market. If the market is perfectly competitive, the price is ___ and the quantity is ____. If the market is monopolized, the price is ___ and the quantity is ____. Select one: a. 8, 30. 6, 45 b. 8, 30. 4, 30 c. 6, 45, 8, 30 d. 8, 30. 6, 30
c. 6, 45, 8, 30
Suppose Ford, an American automobile producer, opens a plant in Canada. Which of the following is true? Select one: a. The cars Ford produces at the Canadian plant are a part of U.S. GNP b. The cars Ford produces at the Canadian plant are a part of Canadian GDP c. Both of the above are true d. Neither of the above are true
c. Both of the above are true
Suppose you are a U.S. citizen living in North Carolina, and you purchase a Maserati produced in Italy. How does your purchase affect U.S. GDP? Select one: a. U.S. GDP will increase b. U.S. GDP will decrease c. U.S. GDP will be unchanged d. all of the above
c. U.S. GDP will be unchanged
Suppose you take a job today in the financial industry earning an annual salary of $90,000. Also suppose your mom had that same job in the year 2000, earning $60,000 per year. If the CPI was 200 in the year 2000, and today's CPI is 300, which of the following is true? Select one: a. in real terms, your salary today is higher than your mom's 2000 salary b. in real terms, your salary today is lower than your mom's 2000 salary c. in real terms, your salary today is equal to your mom's 2000 salary d. none of the above
c. in real terms, your salary today is equal to your mom's 2000 salary
If a perfectly competitive market is one of constant costs, this implies the long run market supply curve is Select one: a. upward sloping b. downward sloping c. perfectly elastic d. perfectly inelastic
c. perfectly elastic
A profit-maximizing firm in a perfectly competitive market is currently producing 500 units of output, at a price of $40 and total cost of $1000. At this current level of output, marginal cost is _______, and average total cost is_________. Select one: a. $8, $6 b. $2, $2 c. $20, $2 d. $40, $2
d. $40, $2
A small nation produces and consumes only cookies and milk. In Year 1, the nation consumes 10 units of cookies at $40 apiece, and 30 units of milk at $10 apiece. In Year 2, the nation consumes 12 units of cookies at $60 apiece, and 50 units of milk at $12 apiece. Assume Year 1 is the base year. The value of the GDP deflator in Year 2 is ______, and the annual rate of inflation (annual percentage increase in GDP deflator) in Year 2 according to the GDP deflator is _______. Select one: a. 137.14, 37.14% b. 1320, 132% c. 980, 98% d. 134.69, 34.69%
d. 134.69, 34.69%
Which of the following is correct? Select one: a. Physical capital represents the stock of plant and equipment used to produce goods and services b. Human capital represents the knowledge and skills workers acquire through education, training, and experience c. Students enroll in college to obtain greater human capital d. All of the above
d. All of the above
Suppose GDP is $8 trillion, taxes (T) is $1.5 trillion, private savings is $0.5 trillion, and public savings is $0.2 trillion. Assuming this economy is closed (no international trade), calculate consumption (C), government purchases (G), national savings (NS), and investment (I). Select one: a. C=$8 trillion, G= $2 trillion, NS= $1 trillion, I= $2 trillion b. C=$8 trillion, G= $2 trillion, NS= $1 trillion, I= $1 trillion c. C=$6.5 trillion, G= $0.3 trillion, NS= $1 trillion, I= $1 trillion d. C=$6 trillion, G= $1.3 trillion, NS= $0.7 trillion, I= $0.7 trillion
d. C=$6 trillion, G= $1.3 trillion, NS= $0.7 trillion, I= $0.7 trillion
Which economic statistic best measures well-being among nations? Select one: a. CPI b. GDP deflator c. GDP d. GDP per capita
d. GDP per capita
In the long-run equilibrium of a perfectly competitive market with identical firms, what are the relationships among price P, marginal cost MC, and average total cost ATC? Select one: a. P > MC and P > ATC b. P > MC and P = ATC c. P = MC and P > ATC d. P = MC and P = ATC
d. P = MC and P = ATC
What is the name of our federal agency responsible for enforcing regulations in financial markets? Select one: a. Federal Reserve b. National Economic Council c. Central Intelligence Agency d. Securities and Exchange Commission
d. Securities and Exchange Commission
Which of the following is true regarding a monopoly? Select one: a. a monopoly is a socially efficient market structure since prices are maximized where MR=MC b. a monopoly is a socially inefficient market structure since the quantity in the market is too high and price too low c. a monopoly is a socially inefficient market structure since the quantity in the market is too high and price too high d. a monopoly is a socially inefficient market structure since the quantity in the market is too low and price too high
d. a monopoly is a socially inefficient market structure since the quantity in the market is too low and price too high
Which of the following is an international institution devoted to promoting global economic growth? Select one: a. IMF b. World Bank c. GATT/WTO d. all of the above
d. all of the above
Which of the following is true? Select one: a. GDP = C + I + G + (exports-imports) b. GDP = C + S + T c. GDP is a measure of final goods and services produced within an economy d. all of the above
d. all of the above
Which of the following is true? Select one: a. The National Bureau of Economic Research is the agency which reports real GDP and when the economy is in an official recession b. The Bureau of Labor Statistics is the agency which reports the CPI and the inflation rate c. a recessionary economy is one where real GDP is declining d. all of the above
d. all of the above
Which of the following may lead to an increase in interest rates? Select one: a. an increase in the federal budget deficit b. an increase in investment spending c. a decrease in private savings d. all of the above
d. all of the above
Which of the following will promote economic growth within a nation? Select one: a. a policy to promote an increase in savings b. a policy to promote and protect patents and intellectual property c. a policy to promote general levels of health d. all of the above
d. all of the above
Why does a policy to promote free trade lead to economic growth? Select one: a. our trading partners use dollars obtained in the purchase of U.S. goods to invest in U.S. physical assets b. our trading partners use dollars obtained in the purchase of U.S. goods to invest in U.S. financial assets c. foreign direct investment and foreign portfolio investment into the U.S. leads to more jobs in the U.S. in addition to lower interest rates to incentivize further investment d. all of the above
d. all of the above
A significant long-run difference between monopoly and perfect competition is that Select one: a. there's free entry and exit in a perfectly competitive market, while barriers to entry exist in a monopolized market. b. the monopolist controls market supply, while the perfectly competitive firm's influence on market supply is imperceptible. c. the demand curve for the monopolist is the market demand curve, while the demand curve faced by the perfectly competitive firm is perfectly elastic. d. all of the above.
d. all of the above.
Suppose the DeBeers company is a monopolist in its market to sell diamonds. Also suppose this year the company earns economic profits. This implies that the price of diamonds will Select one: a. be equal to the marginal cost of producing diamonds. b. be equal to the average cost of producing diamonds. c. exceed the marginal cost of producing diamonds, but be equal to the average cost of producing diamonds. d. exceed both the marginal cost and average cost of producing diamonds.
d. exceed both the marginal cost and average cost of producing diamonds.
A perfectly competitive firm's short-run supply curve is its _________ cost curve above its _________ cost curve. Select one: a. average total, marginal b. average variable, marginal c. marginal, average total d. marginal, average variable
d. marginal, average variable
Suppose the pretzel market is perfectly competitive and in its long run equilibrium. If then there is a new process that reduces the costs for each firm in the industry, short run economic profits will be _________, though in the long run economic profit will be _____ as firms _______ the industry. Select one: a. negative, zero, exit b. zero, positive, enter c. positive, positive, neither enter or exit d. positive, zero, enter
d. positive, zero, enter
If the federal government collects more in tax revenue than it spends, and households consume more than they receive in disposable income, then Select one: a. private and public saving are both positive b. private and public saving are both negative c. private saving is positive, but public saving is negative d. private saving is negative, but public saving is positive
d. private saving is negative, but public saving is positive
If the price of imported French wine rises, is the CPI or GDP deflator in the U.S. affected more? Why? Select one: a. the GDP deflator since consumers may not drink imported wine b. the GDP deflator since it is a part of net exports c. the GDP deflator since it is a part of investment spending d. the CPI since it would not be a part of the GDP deflator- imported goods are not included in GDP
d. the CPI since it would not be a part of the GDP deflator- imported goods are not included in GDP
Does a college education increase productivity? If so, why? Select one: a. no, it is a form of private investment b. no, it is a form of consumer spending c. yes, it leads to an increase in natural resources d. yes, it leads to an increase in human capital
d. yes, it leads to an increase in human capital
