ECON 1040 Final Ch. 1, 3, 4, 7, 6
Refer to the graphs shown. If the quantity demanded by consumers is the same for every price, then the demand curve would look like:
II
Which curve depicts the market demand from the following individual demand tables?
III
The law of supply states that, other things constant, there is:
a direct relation between price and the quantity supplied.
Microeconomics includes the study of:
a firm's pricing policies.
Prior to the Industrial Revolution, unemployment was not generally considered a social problem because:
a reduction in spending would cause wages and income to fall rather than unemployment to rise.
A cultural norm is:
a social force.
Socialists saw state socialism as:
a transition stage to pure socialism.
In a market economy:
businesses design their plans to maximize their profit and the market is relied upon to see that individual self-interest is consistent with society's interest.
The distinction between demand and the quantity demanded is best made by saying that:
demand is represented graphically by a curve and quantity demanded as a point on that curve.
Some nutritionists consider junk food or eating junk food an example of:
demerit goods or activities.
Normative economics seeks to:
determine the most appropriate economic goals for a society.
In the United States, government performs all of the following functions except:
determining production levels.
The Classical economists argued that:
if unemployment occurs, it will cure itself because wages and prices will fall.
Gross private investment minus depreciation equals:
net private investment.
"Government should not use price controls" is an example of:
normative economics.
Refer to the graph shown. If the marginal cost of each weekend trip this year is $600 no matter how many trips Rodney takes, assuming he is rational, Rodney will:
not take any trips this year.
Great Basin National Park, the only national park wholly within the borders of Nevada, occupies 77,180 acres and contains 42 known caves. In 2003, it had 25 permanent staff who with the seasonal staff collected $281,241 in fees for 2003, mostly for the 2,344 cave tours they gave during that year. The park also had 79 volunteers contribute 9,410 hours of work during 2003. No acres of land were burned in 2003, a year in which the park was surveying for springs in the 25 watersheds. During 2003, 87,679 people visited the park. Some of the data in the paragraph shown are flow measurements and some are stock measurements. An example of a stock measurement is:
number of watersheds.
Given the graph shown, the quantity that would be associated with the price of $1 in a supply table would be:
o
When your wages rise, the:
opportunity cost of an hour of leisure increases.
More than 10,000 visitors waited in line up to two hours to see the rare flower titan arum at the Cambridge Botanic Gardens. Before the decision to wait in line is made, economists consider the two-hour waiting time part of the:
opportunity cost of viewing the flower.
In order of their occurrence, the phases of the business cycle are:
peak, downturn, trough, upturn.
If an economy produces 100 pencils and 100 pens, and pencils sell for twice as much as pens:
pencils are weighted as twice as important in the economy compared to pens.
Frictional unemployment is a result of:
people quitting a job just long enough to look for and find another one.
Many drugs are illegal in the United States. Despite this law, illegal drugs are usually available at a price many times higher than they would be if the drugs weren't illegal. The high price of illegal drugs is an example of:
political forces affecting the market.
Even though 60,000 individuals in the United States wait for kidney transplants and, for a price, there are many individuals who would be willing to supply a kidney (a healthy person can donate one kidney without any problems), it remains illegal to buy and sell organs in the United States. A market for kidneys does not exist because of:
political forces.
Identifying the effect of an increase in the money supply on prices requires the use of:
positive economics.
When my neighbors benefit from my cleaning up of my yard, they are experiencing a:
positive externality.
A policy rule that concludes that a particular course of action is preferable is known as a(n):
precept.
According to the text, economics is the study of how:
human beings coordinate their wants and desires.
Refer to the table shown. What are the economy's net exports?
$0.2 trillion
Suppose the supply and demand tables shown reflect the supply and demand for milk per week. What is the equilibrium price and quantity of milk?
$2 per gallon and 1,500 gallons per week.
Use the following information to answer the question: There are three firms in an economy: X, Y, and Z. Firm X buys $200 worth of goods from firm Y and $300 worth goods from firm Z; and produces 250 units of output at $4 per unit. Firm Y buys $150 worth goods from firm X, and $250 worth goods form firm Z; and produces 300 units of output at $6 per unit. Firm Z buys $75 worth goods from X, and $50 worth goods from firm Y; and produces 500 units at $2 per unit. Given this information, what is the economy's GDP?
$2,775
Given nominal GDP of $4.2 trillion and a GDP deflator which is 40 percent greater than the base year, we can conclude that real GDP is equal to:
$3.0 trillion.
Suppose a market has an excess demand and price starts to rise. What will the rise in price cause?
A rise in quantity supplied and a fall in quantity demanded.
What turns a business cycle into a structural stagnation?
A slow expansion that keeps the economy below trend.
How does stock differ from flow?
A flow concept has meaning over a specified period of time, while a stock concept is a value at a point in time.
Refer to the table shown. What is the economy's net domestic product?
$6.2 trillion.
Refer to the table shown. What is the economy's GDP?
$6.7 trillion
If the nominal interest rate is 2 percent and the real interest rate is 1 percent, inflation is:
1 percent
Who probably would argue that you need to study the trees before you can understand the forest?
A microeconomist
The longest business-cycle expansion in U.S. history occurred during the ten years from:
1991 until 2001.
Given the graph, the quantity that would be associated with the price of $4 in a demand table would be:
2
Refer to the graph shown. The quantity demanded when price is $16.00 per week is:
2 CDs per week.
The secular trend growth rate in the United States is approximately:
2.5 to 3.5 percent per year.
All levels of government (federal, state, and local) consume about what percentage of the total output of the United States?
20 percent
If the real interest rate is 2 percent and inflation rate is 1 percent, what is the nominal interest rate?
3 percent
If percent change in nominal GDP is 6 percent and percent change in real GDP is 2 percent, inflation is:
4 percent
Given the graph, the quantity that would be associated with the price of $1 in a demand table would be:
5
Services make up about what percentage of the U.S. economy?
85 percent
If nominal GDP is $10 trillion and real GDP is $11 trillion, the GDP deflator is:
91
Which of the following would cause quantity demanded to change without changing the demand curve?
A change in the price of the good
Refer to the graph shown. A shift from S0 to S1 would most likely occur for what reason?
A decrease in the cost of producing CDs
Which of the following would not move either the supply or the demand curve in the market for housing?
An increase in real-estate prices
Which of the following institutional changes would tend to reduce the target rate of unemployment?
An increased number of people reaching the age at which they are more employable
Which of the following statements best depicts laypeople's explanation of the Great Depression at that time?
An oversupply of goods had glutted the market.
You bought one share of McDonald's stock for $10, one share of Coca-Cola for $15, and one share of Pepto-Bismol for $20. Currently, each stock is priced at $15. Assuming that there are no tax issues and that you cannot predict the future price of any of the stocks, if you needed $15, which stock would you sell?
Any one of them
Refer to the graphs above. The market is fat-free potato chips that contain olestra. Which graph best represents the impact of increased consumer concern about the effects of olestra on long-term health?
B
Refer to the graphs shown. The market is salmon steaks. Which graph best represents the impact of increased concern that salmon is becoming endangered?
B
Which of the following countries, or groups of countries, has grown at the fastest rate in the last twenty years?
China.
Growth in the graph shown is depicted by:
D
Refer to the graphs shown. The effect of an increase in price is best shown by which arrow?
D
Refer to the graph shown. A recession occurs when the economy moves from point:
D to point G.
Deion Sanders is a two-sport athlete who plays both pro football and pro baseball. He could earn $1,000,000 playing either sport. Troy Aikman is also a two-sport athlete who plays both football and auto racing. He could earn $1,000,000 playing football or $200,000 racing cars. Garo Yepremian can play both football and soccer. He could earn $1,000,000 playing football or $50,000 playing soccer. Assuming that all three men have only two options for work and can pursue only one sport full-time, who has the highest opportunity cost of playing football?
Deion Sanders
Using the supply and demand model, what is the best way to show the effects on the plywood market of households preparing for a hurricane? (Note: people use plywood to board up their homes to protect them from damage from a hurricane.)
Demand curve shifted to the right, supply curve did not shift.
In September 2010, the NBER's Business Cycle Dating Committee decided that the recession that began in December of 2007 had ended in July of 2009. The NBER does not use a popular definition of recession—two quarters of falling GDP—but looks at a variety of monthly statistics to date business cycles. Read the paragraph shown. When the NBER says that a recession is over, what are they saying?
Economic activity is no longer declining
Which of the following is not an example of government's role as an actor?
Equal opportunity and labor laws that restrict businesses' freedom to hire and fire whomever they want
Which of the following statements best characterizes the Keynesian view of business cycles?
Expansions and contractions of the business cycle are symptoms of underlying problems and should be dealt with through activist government policies.
Which of the following is a flow concept?
Expenditures
In recent years, many environmentalists have proposed changes to GDP accounting that would take into account the impact of economic activity on the environment. Which of the following economic activities that affect the environment is currently included in GDP?
Expenditures on pollution control technology
If Saudi Arabia has invested substantially more money in foreign countries than foreigners have invested in Saudi Arabia, then we might expect Saudi:
GDP to exceed Saudi GNP.
Which of the following is not a characteristic of pure capitalism?
Government ownership of capital
Which of the following will move the supply curve for housing in Florida, a popular retirement state, to the left?
Higher construction costs
Which of the following was not a solution to the Great Depression favored by Classical economists?
Hire unemployed workers for public works programs
Which of the following is an international financial institution concerned primarily with monetary issues and international financial arrangements?
International Monetary Fund
In what category is the purchase of a computer by a business in national income accounting?
It is a form of investment spending.
Which of the following statements about aggregate accounting is false?
It provides the only way to measure social welfare.
"Classical economist" is often used interchangeably with which term?
Laissez-faire economist
Which of the following is a good example of government's attempt to correct for macroeconomic externalities?
Maintaining full employment
Microsoft filed a lawsuit against people who sent spam (junk e-mail) and a website owner who hosted spam services. A spokesman for Microsoft said that Microsoft was "trying to change the economics of spam" by increasing the cost of being a spammer. An economist most likely would agree with which statement about Microsoft's actions?
Microsoft's approach of trying to change the costs of spamming is the most effective way to change behavior.
For which of the following markets would the fallacy of composition least likely apply?
Poultry market
Sometimes price cuts can have an unintended result of consumers waiting for deeper discounts. What does this waiting suggest about supply and demand?
Price cuts have changed buyers' expectations, and the change in expectations has moved the demand curve left.
Enron executives were charged with numerous counts of corporate fraud and corruption. Among the charges was insider trading, which involves the trading of a corporation's stock by insiders who may have access to information that the public does not. Which role is the government playing when it makes insider trading illegal?
Promoting effective and workable competition
Which of the following is one of the macroeconomic goals established by the 1946 Employment Act?
Providing an economic environment conducive to growth
Which of the following economic activities would be included in U.S. gross domestic product (GDP)?
Pure services, such as haircuts
The business cycle consists of several stages or phases. Which is the accurate sequence?
Recession, trough, expansion, peak
Aggregate accounting emerged from the work of two economists for which they received the Nobel Prize. The two economists are:
Simon Kuznets and Richard Stone.
For the purposes of calculating GDP using the expenditure approach, which of the following payments is not included in the government purchases component?
Social security payments
State and local governments do not receive income directly from which source?
Social security taxes
Workers at a car-manufacturing plant are let go because automated machinery has been installed that requires fewer employees to operate. What type of unemployment describes the workers' situation?
Structural unemployment
What relates positive economics to normative economics?
The art of economics
Which of the following is a normative statement?
The governments should spend more to aid the poor.
In September 2010, the NBER's Business Cycle Dating Committee decided that the recession that began in December of 2007 had ended in July of 2009. The NBER does not use a popular definition of recession—two quarters of falling GDP—but looks at a variety of monthly statistics to date business cycles. Read the paragraph shown. In July 2009 a recession ended. In business cycle terminology, what does July 2009 mark?
The trough of the cycle
Which of the following is a part of GDP?
The value of a haircut
Which of the following was a Marxist prediction?
There would be significant differentiation between workers and owners of factories.
For the purposes of calculating GDP using the expenditure approach, which of the following is not included in the government purchases account?
Welfare payments to the poor
Which of the following is not one of the three central coordination problems of the economy given in the book?
Whether
Experimental economics is:
a branch of economics that studies the economy through controlled lab experiments.
Marginal analysis suggests that you will engage in more of an activity if the:
additional benefit from the activity exceeds the additional cost.
Social forces:
affect the price mechanism through cultural norms.
An economic policy is:
an action taken to influence the course of economic events.
A recession is often considered to be:
an economic downturn that persists for more than two consecutive quarters of the year.
Dorm rooms usually are not allocated by markets. Allocating dorm rooms is:
an economic problem.
That price tends to fall when quantity supplied is greater than quantity demanded is an example of:
an economic theorem.
The model of supply and demand leads to the prediction that low interest rates cause:
an increase in housing prices, especially in cities with limited land.
When applied to labor markets, the law of supply suggests that:
an increase in the wages earned by nurses will cause the quantity of nurses supplied to increase.
The United States provides less than 10 cents for every dollar of income as foreign aid even though it is the richest country in the world. This is:
an objective statement.
Market failures:
are sometimes made worse by government failures.
if nominal wealth increases faster than real wealth:
asset inflation has occurred.
In principle, households ultimately control:
both businesses and the government.
Fluctuations around the long-term growth rate are called:
business cycles.
Refer to the graphs shown. Higher costs of production combined with an expectation on the part of consumers of higher prices in the future would result in the shifts depicted in:
c
Economic forces:
can be more or less powerful than political and social forces depending on the circumstances.
Great Basin National Park, the only national park wholly within the borders of Nevada, occupies 77,180 acres and contains 42 known caves. In 2003, it had 25 permanent staff who with the seasonal staff collected $281,241 in fees for 2003, mostly for the 2,344 cave tours they gave during that year. The park also had 79 volunteers contribute 9,410 hours of work during 2003. No acres of land were burned in 2003, a year in which the park was surveying for springs in the 25 watersheds. During 2003, 87,679 people visited the park. Some of the data in the paragraph shown are flow measurements and some are stock measurements. An example of a flow measurement is:
cave tours given.
Frictional unemployment:
comes from people constantly entering the labor force and changing jobs.
When Coca Cola introduced a new, low-calorie version of Coca Cola called C2, despite a major marketing effort, sales of C2 were weak and many doubted that the product would last. Coke's experience with C2 illustrates the economic concept of:
consumer sovereignty.
The explanation for the law of demand involves:
consumers' ability to substitute different goods.
The two economic groups competing for power during the transition from mercantilism to capitalism were:
craft guilds and industrialists.
In the early 2000s, the United States went through what many economists described as a jobless recovery, which is a situation in which real output grows but the unemployment rate does not fall. Normally, an increase in real output affects:
cyclical unemployment more than structural unemployment.
According to the law of demand an increase in the price of gasoline will:
decrease the quantity demanded of gasoline, other things constant.
One advantage of a sole proprietorship over a corporation is:
ease of formation.
Most economists agree that during a depression:
economic policy should be used to improve economic conditions.
Aggregate income is the sum of:
employee compensation, rent, profits, and interest.
The ability to organize and meet an objective, such as meeting regulatory and financial requirements to start and run a business, is known as:
entrepreneurship.
If depreciation is zero, then net domestic product:
equals gross domestic product.
The point at which the supply curve and the demand curve intersect is called:
equilibrium, because quantity demanded equals quantity supplied so there is no tendency for price to change.
Depreciation:
estimates the decrease in value of capital goods due to wear and tear over the year.
An economist secures volunteers from her college campus and divides them into two groups that are ushered into different rooms. Both groups are given a test. Those in the first group who score 90 percent or more receive an Apple iPod. Upon exiting the room, those given iPods are offered the choice of receiving $150 in exchange for the iPod. Only a few take the exchange. Those in the second group who score 90 percent are offered either an Apple iPod or $150. About half the students choose $150. The professor uses these data to support a principle known as the endowment effect. The professor is engaging in:
experimental economics.
GDP is $7 trillion. If consumption is $3.5 trillion, investment is $1.4 trillion, and government purchases are $2.1 trillion, then:
exports are equal to imports.
When quantity supplied is greater than quantity demanded, prices tend to:
fall
When gasoline prices fall, the demand for alternative fuel cars likely:
falls, lowering their equilibrium price and quantity.
Unemployment caused by people entering the job market and people quitting a job just long enough to look for and find another one is called:
frictional unemployment.
Keynesians:
generally favor activist government policies.
Bhutan's government publishes a "gross national happiness" measure that embraces everything from protecting national resources to promoting a strong national culture and ensuring democratic government. This approach to measuring progress is similar to the approach that the text calls:
genuine progress indicator.
The World Values Survey, a group of international social scientists, who ranks the well-being of society based on social indicators ranks Puerto Rico higher than the U.S. This approach to measuring well-being is similar to the approach that the text calls:
genuine progress indicator.
Government regulation of working conditions is an example of:
government as referee.
Keynesian economists believe:
government can implement policy proposals that can positively impact the economy.
The more the current price exceeds the equilibrium price, the:
greater the resulting surplus will be.
The tax revenues of federal, state, and local governments have different sources, in that the federal government relies primarily on:
income taxes; state and local governments rely to a greater extent on sales and property taxes.
Given that diesel cars get much better gas mileage than the typical car, an increase in the price of gasoline would be expected to:
increase the demand for diesel cars.
Using purchasing power parity instead of exchange rates to calculate output will most likely:
increase the relative value of output in developing countries.
The Industrial Revolution was important to the history of economic systems because it:
increased the power of capitalists and eventually led to a revolution instituting capitalism as the dominant economic system.
If real GDP has increased by 3 percent and nominal GDP has increased by 5 percent, then:
inflation is 2 percent.
Macroeconomics includes the study of:
inflation.
If a firm sells bonds on the capital market, the amount the firm must pay for the use of those funds is counted in aggregate accounting as:
interest.
Microeconomics and macroeconomics are:
interrelated because what happens in the economy as a whole is based on individual decisions.
The price mechanism that guides people's actions is called the:
invisible hand.
In contrast to a recession in industrialized nations, a recession in pre-industrial nations:
is less visible in its effects on the unemployment rate but it has a larger effect on wage rates.
Honey and jam are substitute products. If the price of honey increases, the demand for:
jam will increase, causing the price of jam to increase as well.
Classical economists are generally associated with:
laissez faire
The Group of Eight is an informal international institution that is comprised primarily of the:
leading industrial democracies.
The target rate of unemployment is defined as the:
lowest sustainable rate of unemployment achievable under existing conditions.
An economist who is studying the relationship between the money supply, interest rates, and the rate of inflation is engaged in:
macroeconomic research.
The study of inflation is a topic in:
macroeconomics.
If economic activity increases, it follows that economic welfare:
may increase, decrease, or remain unchanged depending on the nature of the increase in economic activity.
The invisible hand theorem relates mostly to:
microeconomics.
Global corporations in general are:
more difficult to regulate than domestic corporations.
Relative to corporations, sole proprietorships are:
more numerous and smaller in size.
If output is below potential output, it is most likely that the economy is:
near a trough.
New developments in computer monitors have made flat panel LCD's cheaper and better than the older CRT models. Given that monitors can contain as much as 8 pounds of lead, disposing of the old monitors creates a:
negative externality.
Refer to the graph shown. The figure shows the demand and supply curves for eggs and shows two equilibrium points, E1 and E2. An increase in demand from D1 to D2 would cause:
price to rise from $1.00 to $1.25 a dozen and equilibrium quantity to be 3,000 dozen eggs per week.
Classical economists believe that in the short-run, in the real world:
prices and wages weren't flexible enough to bring about equilibrium.
Market economies are based upon:
private property and individual planning.
McDonald's Corporation lost a battle to keep a Singapore firm, Future Enterprises, from selling goods under the labels MacNoodles, MacTea, and MacChocolate. In this case, the court system in Singapore was defining:
property rights.
You're deciding whether to install a $400 moonroof and a $200 security system in your car. Suppose the marginal benefit from the moonroof is $350 and the marginal benefit from the security system is $300. The economic decision rule dictates that you should:
purchase only the security system because its marginal benefit exceeds its marginal cost.
Refer to the graph shown. At a price of $0.90 per dozen:
quantity demanded is just equal to quantity supplied.
The relationship between real and nominal interest rates can be expressed by:
real interest rate = nominal interest rate - inflation.
If nominal GDP increased from $4 billion to $5 billion while real GDP increased from $3 billion to $4 billion, it follows that:
real output rose and price level fell.
The value of the productive capacity of the assets of an economy, measured by the goods and services it can produce both now and in the future rather than by the money prices of the assets, is called:
real wealth
Changes in the institutional structure of the U.S. economy following the Great Depression:
reduced the length of business cycles.
When workers are paid higher wages, production costs:
rise, supply shifts leftward, and product prices rise.
Suppose that at the current price producers of CDs offer 5 million CDs for sale but consumers want to buy 6 million. When the market coordinates the demand and supply for CDs, the price of CDs will:
rise.
Potential output in the long run:
rises at a trend rate of 2.5 to 3.5 percent per year.
If supply and demand both shift to the right, equilibrium quantity:
rises, but the equilibrium price may rise, fall, or stay the same.
Adam Smith advocated laissez-faire because he believed it was in the interest of:
society as a whole.
Governments do all of the following except:
supply labor services to businesses in the factor market.
If Argentina imposes a 20 percent tax on natural gas exports to be paid by suppliers. Other things equal, this causes the:
supply of natural gas exports to shift to the left.
Suppose the supply and demand tables shown reflect the supply and demand for milk per week. At a price of $4, there is a:
surplus of 2,000 gallons per week.
The fallacy of composition refers to the false assumption:
that what is true for a part will also be true for the whole.
If allocating dorm rooms changes from allocation by lottery to allocation by the market:
the allocation problem is still an economic problem.
The art of economics is:
the application of the knowledge gained by positive economics to the goals set in normative economics.
A firm's profits equal $100 if
the difference between its total revenue and its total cost is $100.
Net foreign factor income is:
the difference between the income earned abroad by domestic factors and the income earned domestically by foreign factors.
Policies that affect work, capital accumulation, and technological change are primarily relevant to:
the long-run growth framework.
Another term for what the text calls the "target rate of unemployment" is:
the natural rate of unemployment.
Keynesian economists focus their analysis on:
the short run.
The two frameworks conventional economists generally use to analyze macroeconomic issues are:
the short-run and the long-run frameworks.
Business cycles are generally considered in:
the short-run framework.
Macroeconomics is:
the study of aggregate economic relationships.
Using the expenditure approach, gross domestic product equals:
the sum of consumption, investment, government purchases, and net exports.
The business cycle is:
the term used to describe fluctuations in output around its long-term trend.
Propositions that are logically true based on the assumptions of a model are known as:
theorems.
Refer to the graph shown. At a price of $0.60 per dozen:
there is a shortage of 2,000 dozen eggs per week.
In 11th century Europe, the central economic decisions were made by:
tradition and the lord of the manor.
In feudalism, serfdom was maintained primarily through:
tradition.
Market and socialist economies can be contrasted in all the following ways except that:
under a market economy government plays no role in the market; under socialism, government planning boards make most major economic decisions.
Suppose when you are offered $7.00 per hour to work in the campus library, you choose not to work, but when you are offered $10.00 per hour, you accept a part-time position. Your behavior can best be explained by the fact that your supply of labor curve is:
upward-sloping.
Profit is:
what is left over from total revenue after all of the appropriate costs have been subtracted.
The opportunity cost of attending college is likely to be highest for a high school graduate:
who is capable of competing successfully in professional tennis.
The Soviet socialist economy fell apart primarily because:
workers lacked incentives to work and production was inefficient.
