ECON 103 Midterm 1

A forestry worker who is out of work because of the temporarily low demand for wood products associated with a recession is defined as: A. cyclically unemployed. B. underemployed. C. frictionally unemployed. D. naturally unemployed.

A

A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of: A. the supply curve. B. the demand curve, as consumers try to economize because of the shortage. C. both the supply and demand curves. D. the supply curve and a rightward shift of the demand curve, resulting in a higher equilibrium price.

A

According to the law of supply: A. there is a direct relationship between price and the quantity supplied. B. there is an inverse relationship between price and the quantity supplied. C. there is a direct relationship between price and quantity demanded. D. there is an inverse relationship between price and quantity demanded.

A

Figure 4-1 33. Refer to Figure 4-1. The movement from __________ to __________ is consistent with a decrease in the price of cotton (a substitute). A. Point A; Point H B. Point A; Point D C. Point A; Point F D. Point A; Point B

A

Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market." A. The statement is correct. B. The statement would be correct if "quantity of wheat demanded" were substituted for "quantity of wheat supplied." C. The statement is incorrect because it confuses a change in quantity supplied with a change in supply. D. The statement would be correct if it read that a "decrease in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."

A

On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50. What will the likely effect of this policy be? A. Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate. B. Low income workers will be better able to survive the recession at the new, higher wage rate. C. More people will be hired at the higher wage rate offsetting the effects of the recession. D. The higher wage will increase the supply of labor offsetting the effects of the recession.

A

The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket revenues, an economist would advise: A. increasing the price of game tickets because demand is inelastic. B. not changing the price of game tickets because demand is unit elastic. C. increasing the price of game tickets because demand is elastic. D. decreasing the price of game tickets because demand is elastic.

A

The unemployment rate may underestimate the true extent of unemployment if: A. many part-time employees would like to work fulltime, but are unable to get the additional work. B. employees increase the number of hours they work overtime. C. there are a large number of people working in the underground economy. D. people are pretending to look for work so that they can continue receiving unemployment benefits.

A

Which of the following best describes a monetary policy tool? A. interest rates B. taxes C. household savings D. government spending

A

Which of the following is not counted as a part of GDP? A. the purchase of 100 shares of AT&T stock by your grandfather. B. the purchase of a snow plough by the city of Minneapolis. C. the unsold additions to inventory at an appliances store D. the purchase of a loaf of bread by a consumer

A

___________ is a small category that refers to the goods produced by one business that have yet to be sold to consumers, and are either still sitting in warehouses and on store shelves. A. Inventories B. Services C. Structures D. Durable goods

A

A 10 percent decrease in the price of potato chips leads to a 30 percent increase in the quantity of soda demanded. It appears that: A. elasticity of demand for potato chips is 3. B. cross-price elasticity of demand for soda is -3. C. elasticity of demand for potato chips is 3. D. elasticity of demand for soda 3.

B

A price ceiling is A. often imposed on markets in which "cutthroat competition" would prevail without a price ceiling. B. a legal maximum on the price at which a good can be sold. C. 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. D. All of the above are correct.

B

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is: A. no change; only the supply curve for beef is likely to be affected. B. a shift of the demand curve for beef to the left. C. a movement down along the demand curve for beef to the right. D. a shift of the demand curve for beef to the right.

B

Any given demand or supply curve is based on the ceteris paribus assumption that ___________________. A. everything is variable. B. all else is held equal C. no one knows which variables will change and which will remain constant. D. what is true for the individual is not necessarily true for the whole.

B

Figure 4-1 32. Refer to Figure 4-1. The movement from __________ to __________ is consistent with a successful advertising campaign that claims wool keeps you warm. A. Point A; Point B B. Point A; Point F C. Point A; Point D D. Point A; Point H

B

If a firm faces ________________________, while the prices for the output the firm produces remain unchanged, a firm's profits will increase. A. higher input costs B. lower costs of production C. equilibrium D. a shift in demand

B

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ___________________ A. excess supply B. excess demand C. ceteris paribus D. a price ceiling

B

In November 2010 the labor force in Rivertown, was 14,800. There were 14,483 persons employed. The local unemployment rate: A. was 1.2%. B. was 2.1%. C. was 5.6%. D. was 7.1%.

B

In order to avoid double counting, statisticians just count the __________________. A. final inventories B. final goods and services C. intermediate goods and services D. durable goods and nondurable goods

B

Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel? A. There is an increase in the cost of producing steel, which shifts the supply curve of steel to the right, thereby increasing the price of steel. B. There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel. C. There is a decrease in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel. D. The increase in wage costs will shift the demand curve for steel to the left, increasing the cost of steel.

B

The _________________ argument points out that if an employer reacts to poor business conditions by reducing pay for all workers, then the best workers, with the best employment alternatives at other firms, are the most likely to leave and the least-attractive workers, with fewer employment alternatives, are more likely to stay. A. efficiency wage theory B. adverse selection of wage cuts C. equilibrium wage theory D. employer wage theory

B

The development of a nationwide computerized job bank listing of all job openings would be most likely to reduce: A. natural unemployment. B. frictional unemployment. C. seasonal unemployment. D. cyclical unemployment.

B

The supply curve of textbooks (which are produced using paper made from trees) will shift to the left in response to: A. a decline in college tuition. B. a sharp increase in the demand for and construction of wood-frame homes. C. an increase in the supply of lumberjacks. D. an end to government regulations that limit timber harvesting in national forests.

B

When quantity demanded increases at every possible price, the demand curve has A. shifted to the left. B. shifted to the right. C. not shifted; rather, we have moved along the demand curve to a new point on the same curve. D. not shifted; rather, the demand curve has become steeper.

B

Which of the following is true? A. A depression is a recession that is mild and relatively brief. B. The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude. C. The timing of business fluctuations is regular and therefore easily predictable. D. During the contractionary phase of the business cycle, the rate of unemployment is generally quite low.

B

Which of the following would reduce the supply of microcomputers? A. a technological improvement that lowers the cost of producing the computers B. higher wage rates for the workers that assemble the computers C. a reduction in the price of computer chips used to produce the computers D. a reduction in the price of computers.

B

A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the __________________ . A. demand curve to the right B. supply curve to the left C. supply curve to the right D. demand curve to the left

C

A more efficient means of processing algae to produce an anticancer drug is discovered. As a result, the supply curve for the drug will: A. shift to the right, increasing the price of the drug. B. shift to the left, increasing the price of the drug. C. shift to the right, decreasing the price of the drug D. shift to the left, decreasing the price of the drug.

C

A perfectly elastic supply curve is: A. upward sloping to the right. B. downward sloping to the left. C. horizontal. D. vertical.

C

Equilibrium price must decrease when demand A. increases and supply does not change, when demand does not change and supply decreases, and when demand decreases and supply increases simultaneously. B. increases and supply does not change, when demand does not change and supply decreases, and when demand increases and supply decreases simultaneously. C. decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously. D. decreases and supply does not change, when demand does not change and supply increases, and when demand increases and supply decreases simultaneously.

C

Figure 3-2 16. Refer to Figure 3-2. A change from Point A to Point B represents a(n): A. increase in demand. B. decrease in demand. C. decrease in quantity demanded. D. increase in quantity demanded

C

Ignoring signs (positive, negative), the slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. A. Opportunity cost B. productive efficiency C. budget constraint D. production possibilities frontier

C

Suppose that Bobo purchases 1 pizza per month when the price is $19 and 3 pizzas per month when the price is $15. What is the price elasticity of Bobo's demand curve? A. 0.235 B. 2.00 C. 4.25 D. 6.33

C

The difference between nominal GDP and real GDP is: A. nominal GDP measures actual productivity B. nominal GDP adjusts for inflation C. real GDP adjusts for inflation D. real GDP excludes imports and exports

C

______________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling. A. Rent controls B. Price ceilings C. Price floors D. Subsidies

C

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is: A. $0 B. $4 C. $40 D. $44

D

A movement along the supply curve might be caused by a change in A. production technology. B. input prices. C. firms' expectations about future prices. D. the price of the good or service that is being supplied.

D

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect: A. Andy's demand for pizza to increase. B. Andy's demand for pizza to decrease. C. Andy's quantity of pizza demanded to decrease. D. Andy's demand for beer to increase.

D

Demand is said to be price elastic if A. the price of the good responds substantially to changes in demand. B. demand shifts substantially when income or the expected future price of the good changes. C. buyers do not respond much to changes in the price of the good. D. buyers respond substantially to changes in the price of the good.

D

If the supply curve for housing is perfectly inelastic, then a reduction in demand will cause the equilibrium price to: A. rise and the equilibrium quantity to fall. B. rise and the equilibrium quantity to stay the same. C. fall and the equilibrium quantity to fall. D. fall and the equilibrium quantity to stay the same.

D

In the circular flow diagram model: A. households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses. B. businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households. C. households receive revenue for selling goods and services to businesses, and use that revenue to buy inputs from businesses. D. Both (a) and (b) are correct.

D

Refer to Table 4-3. If these are the only four buyers in the market, then the market quantity demanded at a price of $1 is A. 4 units. B. 7.75 units. C. 14 units. D. 31 units.

D

The difference between economists speaking as scientists or policy advisers boil down to the difference between A. assumptions and theories. B. true statements and false statements. C. specific statements and general statements. D. positive statements and normative statements.

D

The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if: A. the economy moves along the production possibilities in the direction of a greater quantity of defense. B. the economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve. C. the production possibilities frontier shifts outward due to an improvement in technology. D. either b) or c) occurs, but not as a result of a).

D

The market demand curve A. is found by vertically adding the individual demand curves. B. slopes upward. C. represents the sum of the prices that all the buyers are willing to pay for a given quantity of the good. D. represents the sum of the quantities demanded by all the buyers at each price of the good.

D

Whenever there is a surplus at a particular price, the quantity sold at that price will equal: A. (quantity demanded plus quantity supplied)/2. B. the quantity supplied at that price. C. the quantity supplied minus the quantity demanded. D. the quantity demanded at that price

D

Which of the following is included in GDP calculations? A. sales revenue received from a yard sale B. cash income received by a self-employed landscaper that is not reported to the IRS C. a crisp $50 bill received on your birthday D. the university tuition paid to enroll in a course

D

Which of the following is most likely a topic of discussion in macroeconomics? A. an increase in the price of a hamburger B. a decrease in the production of DVD players by a consumer electronics company C. an increase in the wage rate paid to automobile workers D. a decrease in the unemployment rate

D

Which of the following results in a rightward shift of the market demand curve for labor for a given firm? A. a decrease in labor productivity B. a decrease in the firm's product price C. an increase in the wage rate D. an increase in demand for the firm's product

D