Survey of Econ Final Exam study guide

If advertising is successful,

the demand curve shifts to the right and becomes steeper.

Consumer surplus measures

the difference between the maximum price a consumer is willing to pay and the price actually paid.

A mathematical summary of inequality based on the Lorenz curve is known as the

Gini coefficient.

If price is greater than marginal cost, a perfectly competitive firm should increase output because

additional units of output will add to the firm's profits (or reduce losses).

An initial public offering

allows a company to raise money without increasing debt.

Most goods can yield

both positive and negative marginal utility.

A price decrease will cause total revenue to fall if the

demand is inelastic.

A corporation can elect to allocate corporate profits into either

dividends or retained earnings.

Studies have shown that unemployment causes

increased health problems.

Additional loopholes in the personal income tax law tend to

make the system less progressive.

Maximum utility is achieved when

marginal utility is zero.

The effective tax rate is

never higher than the nominal tax rate.

If income is distributed equally, the

Lorenz curve is a straight line.

A competitive firm should always continue to operate in the short run as long as

MR > AVC.

A grocery store put salt on sale but found that total revenues fell. This can be explained by which of the following?

The demand for salt is inelastic.

The long run is

a period long enough for all inputs to be variable.

Wealth is measured as

a stock only.

Unemployment was lowest during

World War II.

According to the classical view, if consumer demand slowed down,

aggregate prices would decrease and the economy would return to its long-term growth trend.

Capital gains are

an increase in the market value of an asset.

When an economy enters a recession, the

duration of unemployment rises.

Someone 18 years old who is not employed and is not actively seeking work is considered

not in the labor force.

Outsourcing is the

relocation of production from domestic companies to foreign countries.

Income elasticity measures the

responsiveness of quantity demanded to a percentage change in income.

The demand for normal goods

rises when incomes rise.

The nominal tax rate is

taxes paid divided by taxable income.

A short-run supply determinant includes

technology.

Total revenue is equal to

the income from sales.

If the population of a country is 250,000 people, its labor force consists of 145,000 people, 35,000 people are unemployed, 10,000 are unable to work, and 5,000 are unwilling to work, the unemployment rate is

24.1 percent.

A demand curve that is perfectly elastic is

horizontal.

Elasticity of supply tells us

how much sellers will increase production in response to a change in price.

A payroll tax

increases the nominal cost of labor.

A price change will have no effect on total revenue if the demand is

inelastic.

Market structure is determined by the

number and relative size of the firms in an industry.

Flat tax critics

object to the elimination of tax deductions and credits.

Interest rates are the _____ cost of money.

opportunity

How income is distributed is typically measured using

personal income.

A firm maximizes profit when

total revenue exceeds total cost by the greatest amount.

Fixed costs

are constant in the short run.

A competitive firm

is a price taker

A consumer maximizes total utility from a given amount of income when the

marginal utility per dollar obtained from the last unit of each good is the same.

A perfectly competitive firm will maximize profits by choosing an output level where the

price equals marginal cost.

Total revenue is

quantity sold times price.

According to Keynes, which of the following should the government do when the economy overheats?

raise taxes

A sudden increase in inflation, ceteris paribus,

raises the CPI and reduces real income.

A tax is progressive if it takes a

smaller fraction of income as income falls.

According to the profit effect,

some costs do not rise when average prices rise.

Financial intermediaries

spread the risk of investment failure over many individuals.

If there is a prolonged recession and, at the same time, technological advances change the skill sets of some jobs and eliminate others, what type of unemployment gets larger?

structural

To find the percentage change in price,

the change in price is divided by the average price.

If two goods are complementary goods, then

the cross-price elasticity sign will be negative.

If price is less than marginal cost, a perfectly competitive firm should decrease output because

the firm is producing units that cost more to produce than the firm receives in revenue, thus reducing its profits (or increasing its losses).

Wealth refers to

the market value of assets people own.

Supply is very inelastic when

the quantity supplied changes little when the price increases.

Cost-of-living adjustments

allow individuals to maintain their purchasing power during inflation.

Each of the following pushes a country inside its production possibilities curve except

an increase in labor force participation.

Explicit costs

are the sum of actual monetary payments made for the use of resources.

The law of diminishing marginal utility states that

as a consumer enjoys successive units of a good, eventually marginal utility will fall.

An increase in the value of an asset, such as a stock, is called

a capital gain.

A bond is

a certificate acknowledging a debt and the amount of interest to be paid each year until repayment.

If a product has a high marginal utility, then

a consumer is willing to pay a high price for it.

If a good is inferior, its

income elasticity of demand is negative.

If a good is normal, its

income elasticity of demand is positive.

Assume the CPI increases from 106 to 125, and an individual's nominal income increases from $100,000 to $125,000 over the same period. This person's real income has

increased by approximately 6.0 percent.

Price discrimination

is a way for sellers to elicit the maximum willingness to pay from buyers.

The marginal cost curve

is the short-run supply curve for a competitive firm at prices above the AVC curve.

Economic profit is

less than accounting profit by the amount of implicit cost.

If peanut butter and jelly are complementary goods, an increase in the price of peanut butter will, ceteris paribus,

reduce the demand for jelly.

If workers do not have the skills that are required in the job market, which of the following will occur?

structural unemployment

A teenager without a high school diploma is unable to find work because all the available jobs require a certain minimum reading skill level that the teenager is not proficient in. Which of the following best characterizes the teenager's circumstances?

structurally unemployed

A U.S. worker who loses his or her job in an import industry because the good is no longer produced would be classified as, ceteris paribus,

structurally unemployed.

Unemployment was low during all of the following periods except

the Great Depression.

Liquidity is

the ability of an asset to be converted to cash.

Dividends are

the amount of corporate profit paid out for each share of stock.

A motivation for holding stock is

the anticipation of capital gains.

If two goods are substitute goods,

the percentage change in quantity demanded for good X will fall if there is a reduction in price of good Y.

According to the law of demand, ceteris paribus,

the quantity demanded increases at lower prices.

Supply is very elastic when

the quantity supplied has a large increase in response to an increase in price.

The market demand for a product is

the sum of all of the individual demands for that product.

Treasury bonds typically have lower coupon rates than corporate bonds because

there is a lower risk that the U.S. Treasury will default.

The _________ of the demand curve corresponds to the idea that the marginal utility for the first few goods is _____________________.

top; higher

Economic profit is the difference between

total revenues and total economic costs.

Internal market forces include all of the following except

trade disruptions.

Part-time workers who desire full-time employment are

underemployed but do not contribute to the unemployment statistic.

A demand curve that is perfectly inelastic is

vertical

The law of diminishing marginal utility gives us a deeper understanding of the downward-sloping demand curve because

when marginal utility is high, we are willing to pay a higher price.

Entrepreneurship

can result in economic losses.

Inflation affects production decisions because it

causes businesses to be more cautious since the future appears more uncertain.

Airline companies engage in price discrimination by

charging higher prices to customers who must travel on short notice.

Each of the following is a detrimental macro consequence of inflation except

COLAs.

A monopoly occurs when

there is only one producer of a good or service.

According to Keynes, which of the following can be used to slow down an overheated economy?

decrease government purchases

Government attempts to create a more equitable income distribution by increasing marginal tax rates will most likely do all of the following except

decrease unemployment.

Price elasticity looks at

how much the quantity demanded or quantity supplied changes after as a result of a change in price.

Elasticity of supply looks at

how responsive sellers are to a change in price.

Each of the following tends to coincide with an increase in unemployment except

decreased stress levels.

The risk premium is the

difference in rates of return on safe and risky investments.

If the Gini coefficient is greater for the United Kingdom than for Japan, we can conclude that the

distribution of income in the United Kingdom is less equal than in Japan.

Horizontal equity can be determined by comparing the

effective tax rates for two taxpayers with the same nominal incomes.

If the cross-price elasticity of demand for SUVs with respect to the price of gasoline is -0.10 and gasoline prices rise by 18 percent, then SUV sales should, ceteris paribus,

fall by 1.8 percent.