ECN211 Ballinger

The table below displays data from the Bureau of Economic Analysis for the United States in 2009. Expenditure category Trillions of U.S. Dollars Consumption 9.87 Investment 1.55 Government Purchases 2.92 Exports 1.58 Imports 1.98 Calculate nominal GDP in 2009.

$13.94 Trillion Nominal GDP= Qty product 1 x Price Product 1 + qty P2 x Price P2

Below is a production possibilities schedule for Jay and Lulu. Each row represents a combination of scarves and mittens for Lulu and Jay that are feasible if they fully and efficiently use resources. Lulu Jay Scarves Mittens Scarves Mittens 200 0 100 0 160 40 80 30 120 80 60 60 80 120 40 90 40 160 20 120 0 200 0 150 Lulu's opportunity cost of producing one scarf is 1 mittens Jay's opportunity cost of producing one scarf is 1.5 mittens Lulu has a comparative advantage in the production of Scarves Jay has a comparative advantage in the production of Mittens Suppose Lulu produced 120 scarves and 80 mittens before she and Jay decided to trade. Jay produced 60 scarves and 60 mittens. Lulu and Jay decide to change their production plans and specialize completely and trade. As a result, total scarf production increases by 20 and total mitten production increases by 10 .

1, 1.5, Scarves, Mittens, 20, 10

year Nominal GDP Real GDP 2000 $9,952 $11,216 2005 $12,623 $12,623 2008 $14,292 $13,162 2009 $13,939 $12,703 2010 $14,527 $13,088 2011 $15,088 $13,313 Refer to the table above. What is the value of the GDP deflator in 2008?

109 GDP DEflator= NGDP t/RGDPt x 100

Refer to the figure above. Suppose the economy is using its resources fully and efficiently and producing only consumption goods. What is the opportunity cost of producing 75 units of capital goods?

25 units of consumption goods.

Which of the following would lead to a leftward shift in the demand curve for iPads (a normal good)?

A decrease in household income.

Suppose the government has imposed a price ceiling on sliced sandwich bread. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

A decrease in the price of unsliced bread, which people consider as a substitute for sliced bread.

Which the following in an example of positive economic analysis?

A simple study is conducted that shows annual earnings increase with education level.

Refer to the figure above. Suppose apple farmers decide to sell some of their orchard land for housing developments. What best describes the effect in the market for fresh apples? A Correct! B C D E F

B

Which of the following statements about comparative advantage is not true? Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources. The principle of comparative advantage applies to countries as well as to individuals. Economists use the principle of comparative advantage to emphasize the potential benefits of free trade. A country may have a comparative advantage in producing a good, even though it lacks an absolute advantage in producing that good.

Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources.

Suppose the figure above represents the market for peaches. Who is helped by a price ceiling of $1 per pound?

Consumers who purchase peaches at the controlled price.

Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

Refer to the figure above. What best describes the change in the diamond market if both consumers and diamond producers expect the price of diamonds to rise in the future.

F

Which of the following would lead to an increase in GDP for the United States in 2013?I. GM produces and sells cars in Mexico in November 2013. II. A Ford Fiesta produced in 2012 is sold off a dealer lot it June 2013.III. $10,000 worth of new crop Washington-grown wheat is exported to Japan in October 2013.IV. An international student purchases a ham sandwich from a Tempe Subway sandwich shop in May 2013 I and II I, II, and III II and III Correct Answer III and IV You Answered I, II, III and IV

III and IV

What would happen to the equilibrium price and quantity of lattés if the cost of producing steamed milk, which is used to make lattés, rises?

The equilibrium price would increase, and the equilibrium quantity would decrease.

Assume the figures above represent the market for sports cars. Which of the following best describes graph C? You Answered The price of gasoline falls. Correct Answer The price of full size sedans falls. Income increases. The number of firms producing sports cars decreases. none of these.

The price of full size sedans falls.

Which of the following would lead to a leftward shift in the supply curve for iPads (a normal good)? A decrease in the price of the applications that run on iPads A decrease in the value of household wealth A decrease in the price of laptop computers Correct! The price of silicon, an input in production, increases A decrease in the price of iPads

The price of silicon, an input in production, increases

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs.. Given this, we know that

Traci has an absolute advantage in chairs.

A price ceiling is often imposed on markets in which "cutthroat competition" would prevail without a price ceiling. Correct! a legal maximum on the price at which a good can be sold. often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling. All of the above are correct.

a legal maximum on the price at which a good can be sold.

A price ceiling is often imposed on markets in which "cutthroat competition" would prevail without a price ceiling.

a legal maximum on the price at which a good can be sold.

The gains from trade are

a result of more efficient resource allocation than would be observed in the absence of trade.

If mayonnaise and Miracle Whip are substitutes, then which of the following would increase the demand for Miracle Whip?

an increase in the price of mayonnaise

A leftward shift in the supply curve for cars would most likely be caused by an increase in income a decrease in the price of steel used to make cars an increase in the price of bus tickets, a substitute good Correct! an increase in the wage rate paid to the workers that produce cars all of these

an increase in the wage rate paid to the workers that produce cars

At a product's equilibrium price

any buyer who is willing and able to pay the price will find a seller for the product.

Figure 4-1 Refer to Figure 4-1. The movement from point A to point B on the graph is caused by a(n) increase in price. Correct! decrease in price. decrease in the price of a substitute good. increase in income.

decrease in price.

Figure 4-10 Refer to Figure 4-10. The movement from Point A to Point B represents a(n) increase in the price. Correct! decrease in the quantity supplied. shift in the supply curve. Both a and b are correct.

decrease in the quantity supplied.

Which of the following events must cause equilibrium quantity to rise?

demand and supply both increase

In the circular-flow diagram, which of the following items flows from firms to households through the markets for goods and services?

goods and services

As households in an economy become richer, they purchase less powdered laundry detergent and switch to more expensive liquid detergent. Powdered laundry detergent is a(n)

inferior good

The statement, "There is no such thing as a free lunch," is used to illustrate the principle that

people face tradeoffs.

Refer to Figure 2-20. According to the graph, the correlation between years of education and annual income is Correct! positive negative inverse normative

positive

Suppose there is a decrease in the price of corn. If corn is an input into the production of ethanol, we would expect the supply curve for ethanol to Correct! shift rightward. shift leftward. become flatter. remain unchanged.

shift rightward.

Johnny spends an hour studying. He could instead watch TV with his friends. The opportunity cost to him of studying is the improvement in his grades from studying for the hour. The improvement in his grades from studying minus the enjoyment of watching TV.

the enjoyment he would have received if he had watched TV with his friends.

Suppose new information is available that suggest the price of gold will be higher in the future than previously expected. As a result of this new information,

there is a rightward shift in the current demand curve for gold.

Suppose the figure above represents the market for apples. Suppose a price floor of $3.75 per pound is imposed. As a result,

there is a surplus of about 45 thousand pounds of apples.

The French have lower GDP per capita relative to the United States and spend more time producing goods in the home for consumption. French real GDP per capita _____ the standard of living in France relative to the United States.

underestimates

Factors of production are

used to produce goods and services.

Rational individuals have complete and correct information make the same decisions as other rational individuals are right most of the time are all of these

weigh the costs and benefits of every action

Who gets scarce resources in a market economy?

whoever is willing and able to pay the price