Econ 201 Final Exam
Consider the market of new cars. People begin saving for retirement at a much younger age.
Demand decreases.
A monopolist sets price at a point on the ___ curve, corresponding to the rate of output determined by the intersection of____.
Demand; marginal revenue and marginal cost.
In the documentary Sicko, Donna Keyes calls 911...
Donna did not have health insurance for her daughter but the hospital was out of network- she could only be treated at the keiser permanate hospital.
In a perfectly competititve industry, firms are likely to...
Enter when there are economic profits.
The employer mandate of the PPACA requires that
Every firm with 50 or more full time employees must purchase health insurance for their full time employees or pay $2000 fine per employee.
Rising marginal costs result from...
Falling marginal physical product.
After quitting one job, some people with marketable skills find that it takes several months to find a new job.
Frictional unemployent
Refer to the figure that shows the market for U.S . health care. Which of the following would shift t/he supply curve for medical care from S1 to S2
Greater reliance on skilled nurses rather than physicians.
Ben says "an increase in tax on gas will raise its price" Holly argues "Taxes should be increased because car emissions are harmful for the environment." We can conclude that...
Holly's statement is normative and Ben's statement is positive.
How are the fundamental questions of economics answered in a mixed economy?
Households, firms, and the government interact in a market to decide the answers.
The study of economics focuses on...
How best to allocate scarce resources.
Which of the following is a positive economic statement?
If the price of iPhones falls a larger quantity of iPhones will be purchased.
In the documentary Sicko, Tony Benn
If we can find the money to kill people we can find the money to help people.
With a greater amount of consumption, total utility...
Increases as long as marginal utility is positive.
The PPACA was intended to expand the health care coverage to all Americans. Which of the following was not one of the problems with the law in terms of that goal?
Insurance providers are allowed to deny coverage to those with preexisting conditions
The price elasticity of demand for canned soup is estimated at -.62. What happens to the sales revenue if the price of canned soup rises?
It falls.
Which of the following is not true for a monopoly?
It is a price taker
What can we say about the monopolist represented in the diagram?
It is making a negative profit
Which of the following does not occur when a bank makes a loan?
It transfers money from spenders to savers
Which of the following best describes the comparative advantage of the two countries?
Japan has the comparative advantage in motorcycles and the US in DVD players.
on avg, if everyone in the class spends 68 cents out of every extra dollar the class
MPC is .68
If consumers spend 98 cents out of every extra dollar recieved the
MPC is .98
If consumers save 21 cents out of every dollar received the
MPS is .21
Which of the following statements applies to a monopolist but not to a perfectly competitive firm at their profit maximizing outputs?
Marginal revenue is less than price.
The demand for carbonated beverages is likely to be ______ the demand for Dr. Pepper.
More elastic than
Refer to figure 6.2 for a perfectly competitive firm. If the market price is $30
No entry or exit will occur.
Refer to figure 7-1. The firm's profit maximizing price is
P3
Using figure 11.3 assume Q2 represents ful employment.
P3 Q2
Which of the following does not explain why the market sometimes fails to produce the optimal mix of output?
Private goods cannot be consumed jointly
Refer to figure 7-1. To maximize profit, the firm will produce,
Q2
According to the law of supply, if the price of lawn mowing decreases from $50 per lawn to $45 per lawn, then the...
Quantity supplied of lawn mowing will decrease.
Comparative advantage refers to the...
Relative opportunity cost of producing a particular good.
All points on the PPC...
Represent the use of available resources.
Olive oil producers want to sell more olive oil at a higher price. Which of the following events would have this effect?
Research finds that consumption of olive oil reduced the risk of heart disease.
Refer to figure 11.5, an increase in the labor force would be represented by a movement from
SRAS1 to SRAS2
Refer to figure 11.5, an increase in the expected price of an important natural resource would be represented by a movement from
SRAS2 to SRAS1
Suppose a perfectly competitive firm increases its output. In order to sell this additional output the firm...
Should price it at the market price.
which of the following is most likely a public good?
Social Security Payments
Which if the following functions of money would be violated if inflation were high?
Store of value
when the price of potato chips rises the demand for pretzels also rises. This indicates potato chips and pretzels are...
Substitutes.
Consider the market of all laptop computers. There is a decrease in the price of computer micro chips...
Supply increases
Which of the following statements concerning the relationship between total product and marginal physical product is not correct?
TP falls if MPP is falling.
Using all available resources, the US can produce 30 burgers and 20 tacos. Mexico can produce 10 burgers and 18 tacos.
The US as an absolute advantage in producing both goods.
Suppose 1st national bank has zero excess reserves. if the required reserve ratio increases, which of the following will happen immediately?
The bank will not have enough required reserves.
which of the following is an economic justification for policy of laissez-faire?
The efficiency of the market mechanism
Assume the market for organic produce old at Farmers' markets is perfectly competitive. What is likely to happen to the equilibrium price of the produce and profits of the organic farmers in the long run?
The equilibrium price is likely to decrease and profits are likely to decrease.
suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen?
The firm will not sell any output.
Assume a toy company hires an additional worker to assemble toys and the size of the factory and amount of equipment remains constant. As a result, the level of output increases but by a smaller amount than when the previous additional worker was hired. This is an example of...
The law of diminishing returns.
Based on figure 9.2
There are external costs associated with cigarette smoking.
A monopoly is characterized by all of the following except...
There are only a few sellers each selling a unique product.
With which unit of labor does diminishing marginal returns first appear?
Third
Externalities are a type of market failure because...
Third parties bears the costs or benefits of a market activity
Which of the following will always increase as output increases?
Total cost.
If a perfectly competitive firm produces and sells more output, its _____ will definitely increase.
Total revenue.
If the economy relies on entirely markets to answer the WHAT question, it tends to ____ goods with external benefits and ____goods with external costs.
Underproduce/ overproduce
If a consumer receives 20 total units of utility from consuming two candy bars, and 25 total units from consuming three candy bars, the marginal utility of the second candy bar is...
Unknown.
A merger between U.S. steel and GM would be an example of a
Vertical Merger
which of the following could indicate we are moving toward a recession
a decrease in unemployment
____ in consumer confidence will cause ____ in agg demand.
a decrease, a decrease
Suppose you go toa doctor but your health insurance plan does not reimburse you because you have not yet paid enough out of pocket. for the year to qualify for insurance benefits.
a deductible.
The quantity demanded of a good will decrease in response to...
a higher price for the good
The consumer price index is
a measure of changes in the average price of consumer goods and services.
Which of the following is likely to be a monopolist?
a small firm with a patent granting it the exclusive right to produce a dug?
The statement "My iPhone is worth 300"
a standard of value
If the 1st 2nd 3rd and 4 th worker employs by the firm add 15, 21, 12. and 8 units of total product respectively, we can conclude that...
after the 2nd worker, marginal product declines.
At macro equilibrium
agg demand = agg supply
The difference between market demand and aggregate demand is that
agg demand applies to all goods and market demand applies to a specific good.
given an upward sloping agg suplpy curve, attempts to reduce unemployment through monetary policy could result in inlfation when...
agg demand shifts too far to the right
Which of the following is likely to occur if people reduce their spending because they are worried about an economic downturn?
agg demand will decrease or shift to the left
using the agg supply and demand curves drawn according to the Keynesian view...
agg demand will shift to the right and the unemployment rate will fall
The term externalitites refers to
all costs and benefits of a market activity borne by a 3rd party.
market failure occurs when
an imperfection in the market mechanism prevents an optimal outcome
fiscal policy includes
an increase in gov. spending
Fiscal stimulus is
an increase in gov. spending.
if agg supply is upward sloping, an increase in agg demand will result in
an increase in prices and an increase in output
which of the following is likely ti cause a left shift in the agg supply curve?
an increase in the cost of natural gas.
if agg supply is upward sloping fiscal stimulus causes ____ in output and ___ in prices
an increase, increase
The money supply becomes smaller when
an individual repays the money that he borrowed from a bank.
To maintain a monopoly a firm must have...
an insurmountable barrier to entry
Insurance exchanges:
are government-regulated markets where individuals can purchase health insurance to satisfy the personal mandate provision of the PPACA.
money creation occurs when
banks make loans to borrowers.
professors sims tutors her next-door neighbor's son is econ.
bartering
A private good is a good that
can be denied to those who do not pay for it.
A public good is a good that
can be jointly consumed
In a market economy, producers will produce the goods and services that
consumers demand
The basic money supply includes
currency, transactions accounts, traveler's checks
Money is functioning as a store of value when you
decide to save your cash to pay for tuition next semester
if the fed sells more bonds to the public then the money supply will
decrease and agg demand curve will shift left.
Suppose the price elasticity of demand for tacos is .80. If the price of tacos increases by 10% the the demand for tacos should...
decrease by 8%
When income decreases the demand for most products...
decreases and the demand curve shifts to the left.
consider the market fro desktop computers. Consumers decide they like laptops better...
demand decreases
a monopolist sets price at a point on the ____ corresponding to the rate of output determined by the intersection of ____.
demand marginal revenue and marginal cost.
Social demand is equal to market
demand plus externalities.
The purpose of fiscal stiu=mulus is to shift agg
demand to the right.
If an economy is ecperiencing a recession, the classical approach to achieving full employment is to
do nothing
Both buyers and sellers are price takers in a perfectly competitive market because
each buyer and seller is too small relative to others to independtly affect the market price.
If an increase in the size of a factory results in reductions in minimum average costs, this is known as
economies of scale.
If a firm finds that it can sell 20000 units at a price of $5 per inot and 25000 units at a price of 4 per unit in the price range is
elastic
A tax subsidy is involved in employer financed health insurance because
employer payments for health insurance are not subject to income or payroll taxes.
If the Fed raises the reserve requirement then
excess reserves increase
US monetary policy relies on the
fed reserve system's control over the money supply
a tax cut is known as
fiscal stimulus
The communal nature of a highway means that no one indivisual is motivated to pay for it because even those who don't will still benefit from using it. This is an example of the...
free rider dilemma
One reason our full employment goal is not zero % is because
frictional unemployment will always exist.
The Money multiplier
gets smaller as the required reserve ratio increases
Which of the following is not an example if market failure?
gov. intervention
Which of the following is not a monetary policy tool for shifting the agg demand curve?
gov. spending
What fiscal policy tools are used to shift the agg demand curve?
gov. spending and taxes
Which of the following is a basic measure of macroeconomic performance...
growth in output
Which of the following is characteristic of a downturn in the business cycle?
higher unemployment rates
WHich of the following helps explain the multiplier effect in gov. spending or changes in the tax policy?
income is spent and respent in the circular flow model
Which of the following is an appropriate fiscal policy response during a recession?
increase gov. spending and decrease taxes
if Q3 represents full employment what is the possible explanation for the current economic situation shown by the intersection of the AD AS curves in figure 11.1?
increase in consumer confidence
If the unemployment rate is lower than the full employment rate and prices are higher than normal, what may have caused this?
increase in consumer confidence.
When the economy overheats the gov sometimes cools it down with fiscal policy.
increase in income taxes to get the agg demand to shift left
if for a competitive firm price exceeds the marginal cost of production, the firm should...
increase output.
if labor productivity in the health care industry rises very slowly relative to wages and salaries in the industry this would tend to
increase the cost of health care.
the availability of health insurance tends to
increase the quantity of health care demanded and cause an over allocation of resources to the health care industry.
A leftward shift of the aggregate supply curve will cause the equilibrium price level to ___ and the equilibrium real output to____.
increase, decrease
Suppose the banks in the fed reserve system have $100 million in transactions accounts and are currently holding the minimum reserve requirement of .10.
increased by 3 million
if you move along the agg supply curve, when the price level ___ the quantity of real output ____ increases
increases produced
monetary policy affects agg demand
indirectly through the interest rate.
the consumer price index is used specifically to measure the...
inflation rate for a basket of consumer goods and services in the economy.
Which of the following infor about fiat money is false?
is backed by gold.
monetary policy
is controlled by the fed reserve
One of the reasons the US gov. does not print high denominations of bills
it makes it more difficult for those involved with illegal trade
Let's say that instead of using money you can trade two packs of cigarettes to get an apple pie...
it serves as a store of value.
Refer to figure 6 - 1. If the firm is producing 700 units,
it should cut back its output to maximize profit.
which of the following is not an essential characteristic of money?
it's backed by gold or silver.
Since a monopoly has market power,
its marginal revenue is below its demand curve.
Assuming the level of resources and technology are constant, if france decreases the size of its military then...
its production of military goods can increase.
Factors of production include...
land labor capital and entrepreneurship.
in a graph of the agg demand curve, a decrease in investment by businesses is represented by
leftward shift of the curve.
A perfectly competitive firm produces 3,000 units of a good at a total cost of 436000. The price of each good is $10. Calculate the firm's short- run profit or loss.
loss of $6000
The intersection of the agg demand and supply curves always establishes
macro equilibrium
refer to 7-1. If the firms average total cost curve is ATC1, the firm will
make a profit
The price of a seller's product in perfecct competition is determined by...
market demand and suppply
How will an increase in the reserve requirement affect the economy?
money supply will decrease
The unemployed are disproportionately represented among the uninsured because...
most workers obtain health insurance through their employers.
A private good is unique because
nonpayers can be prevented from consuming it
If an increase in income leads to an increase in the demand for PB, then PB is a...
normal good.
when the fed makes bonds more or less attractive it influences the
open market decision
the purchase and sale of gov. bonds by the fed for the purpose of altering bank reserves is referred to as
open-market operations
Given that resources are scarce...
opportunity costs are experienced whenever choices are made.
if the gov. increases taxes and the MPC is .5, how will this effect the economy.
output decreases
Real GDP measures changes in...
output not prices
Defensive medicine refers tot he idea that
physicians may require unnecessary testing as a means of protecting themselves against malpractice suits.
Refer to figure 11.4. An increase in business taxes can be represented by a movement from
point B to A
Refer to figure 11.2 A decrease in the labor supply would be represented by a movement from
point B to point A
the fed increased the amount of reserves in US banks overnight by billions of dollars immediately following 9/11 in order to
prevent a bank panic since many people reacted by withdrawing money from their US accounts.
In which of the following instances will total revenue decline?
price rises and demand is elastic.
If the CPI had a value of 128 in year Z this means that during the period between the base year and year Z
prices of goods and services that the typical consumer buys increased by an average of 128%
if a perfectly competitive seller is producing at an output where price id $11 and the original marginal cost is 14.54 then to maximize profits a firm should...
produce a smaller level of output.
Which of the following is true for a monopolist?
profit is maximized where marginal cost equals marginal revenue.
The aggregate supply curve is positively sloped because as the price level increases
profit margins increase in the short run
The free rider problem arises because
public goods can be jointly consumed
since those who do not pay for the goods still get to benefit, ____ goods have ____.
public; free riders
if the Fed wants to increase bank reserves it can
raise the reserve requirement
To decrease the money supply, the fed can
raise the reserve requirement raise the discount rate or sell bonds.
A good measure of the standard of living is
real GDP per capita
a period of inflation requires the gov. to
reduce its spending and increase tax rates.
The price elasticity of demand of health care is
relatively inelastic
Which of the following will cause an increase in agg demand?
restrictive monetary policy
When there is a shortage in the market, prices are likely to...
rise because some buyers will offer to pay a higher price.
If the fed wants to decrease the money supply it can
sell gov. bonds.
which of the following is an example of structural unemployment
shelly is looking for work but never finished high school so her skills are perceived as limited by employers.
monetary policy involves the use of money and credit controls to
shift the agg demand curve.
Whenever external costs in consumption exist...
social demand is less than market demand
Wherever external benefits exist,
social demand will exceed market demand.
A critical macroeconomic controversy is whether a market economy is inherently
stable or unstable
refer to 7-1. If the firms average total cost curve is ATC3, the firm will
suffer a loss
According to supply side theories, if the cost of production rises, then agg
supply shifts left
which of the following is not a basic monetary policy tool used by the fed?
taxes
If a country has an absolute advantage it has...
the ability to produce a specific good with fewer resources than its counterparts.
WHich of the following will occur if the fed raises the reserve requirement?
the agg demand curve should shift leftward.
Which of the following is not a reason for the downward slope of the aggregate demand curve
the cost effect
AN increase in the supply of frozen yogurt will take place when...
the cost of producing frozen yogurt decreases.
Supposed the current market equilibrium output of Q1 is not the economically efficient output because of an externality. The economically efficient output is Q2. In that case, the diagram shows:
the effect of a negative externaility in the production of a good.
Quantitative easing refers to
the fed increasing the money supply by BUYING mortgage-backed securities in addition to bonds.
The marginal propensity to save is
the fraction of each additional dollar of disposable income that goes to saving.
A very large number of small sellers who sell identical products imply
the inability of one seller to influence price.
If the Fed reduces the discount rate. then
the incentive to borrow funds increases
All persons over age 16 who are either working for pay or actively seeking paid unemployment refers to
the labor force.
if the level of productivity for a perfectly competitive firm increases then...
the marginal cost curve shits downward
As more labor is hired in the short run, diminishing returns are observed because...
the new workers have less capital and land to work with.
When economists talk about a trade off between guns and butter, they mean...
the production of more military goods may require fewer consumer goods.
Which of the following determines the amount of money in the banking system as a whole can create?
the quantity of bank reserves
Assume a market for organically-grown produce is perfectly competitive. All else equal, as farmers find it less profitable to produce and sell organic produce in this market...
the supply curve will shift to the left and equilibrium price will increase
the labor force is smaller than the total population because the labor force does not include?
the very young and old
Which of the following is not a characteristic of a perfectly competititve market structure?
there are restrictions on exit of firms.
Refer to figure 6.1 for a perfectly competitive firm. If the market price is $46
there will be economic profits.
which of the following is not true about excess reserves?
they are equal to the required reserve ratio times transactions deposits
Economists make a distinction between changes in quantity demanded and changes in demand...
to distinguish a movement along a demand curve from a shift of the demand curve.
The difference between total utility and marginal utility is that...
total utility id the complete satisfaction from consuming a good while marginal utility is the satisfaction from consuming one additional unit of a good.
If marginal utility is negative then...
total utility will decrease with additional consumption.
nominal GDP is defined as the
value of output in current dollars.
If a firm increases output, total costs will rise because of a change in...
variable costs.
The appropriate amount of tax to account for the externality would be...
$10
Suppose you deposit $8000 into your checking account. If the required reserve ratio is 65% how much can the 4th bank loan?
$120.05
If the perfectly competitive price for a bushel of apples id $17 what will be the profit for the apple farmer in Table 7-1?
$14
Suppose Duc Deposits $5000 into his checking account deposit at Bank A and that the required reserve ration is 30%. WHat is the tital increase in checking accounts?
$16666.67
As a result of Kristy's deposit, Bank A's reserves immediately increase by
$2000
In table 5.5 the total cost of 2 units is...
$22
Suppose that UTFCU has 3.5 million in checking deposits.
$220000
Suppose Duc Deposits $5000 into his checking account deposit at Bank A and that the required reserve ration is 30%. What is the maximim amount that the second bank Bank B can make in loans?
$2450
Calculate the value of the price elasticity of demand going from point f to point e.
$25
Suppose Jun makes a new deposit of $70000 into a bank and the required reserve ratio is 20%. WHat is the change in money supply in the economy?
$280000
In table 5.6, the marginal cost of the third unit of output is:
$3
Suppose a monopoly firm produces software and can sell 10 items per month at a price of $50 each.
$39
What is the marginal cost of the 15th pair of jeans?
$4.00
Suppose a monopoly firm produces a medical device and can sell 15 items per month at a price of $2000 each.
$400
Based on the info in Table 17.1 the opportunity costs of producing 1 tank in the US is...
2 automobiles.
In table 10.2 What is the unemployment rate in Year 1?
20%
As a result of Kristy's deposit, Bank A's required reserves increase by
2000
Consider the following values of the consumer price index for 2010 and 2011. The inflation rater for 2011 =
3.9%
if the market price is $30 and the firm is producing output, what is the amount of its total variable cost?
3960
Based on the information in table 17.1, the opportunity cost of producing 1 bushel of corn in country B is...
4.5 bushels of wheat.
As a result of Kristy's deposit, the money supply increase by
40000
If gov. spending increases by 500 million and the MPS is .8, what will be the total effect of the gov. spending on the economy?
625 million
In Table 1.1 What is the opportunity cost of increasing the help production of missiles from 2 to 3 in terms of houses?
7000 houses
assume an mps of .6. if gov. spending increases by $30 billion what will be the total effect on the economy?
75 billion
Assume an MPC of .75. The change in total spending for the economy as a result...
80 billion
As a result of Kristy's deposit, Bank A's excess reserves increase by
8000
Society might be able to produce this combination if new resources were discovered but cannot produce it with current resources. Select the appropriate point.
A
In Economics, which of the following is an example of capital.
A computer used by a lawyer to prepare legal documents.
A monopolist faces
A downward sloping demand curve.
A Price Floor is...
A lower limit on the price of a good.
Which of the following events would most likely cause the production possibilities curve to shift inward?
A najor earthquake destroys several industrial centers.
Which of the following might be used to protect a monopoly from competition?
A patent
In the documentary Sicko, according to Dr. Linda Penue
A payment made by an insurance company for a claim.
With rent control, the legal rental price if $1000 per month. This will result in...
A shortage of 300 apartments.
How can we describe a typical recession with AD and AS curves?
AD curve shifts left and AS curve is constant
refer to figure 11.1 a decrease in interest rates would be represented by a movement from
AD1 to AD2
Comparitive advantage refers to a country's...
Ability to produce a specific good at a lower opportunity cost than another country.
Marginal utility refers to the...
Additional utility from consuming one more unit of a good.
Which of the following is likely to occur id OPEC increases the amount of oil it supplies and domestic energy prices fall?
Agg supply will shift right
International trade...
Allows all countries to consume beyond their PPC.
Which of the following would shift the demand curve for medical care from D1 to D2?
An aging population
Ceteris Paribus, which of the following will cause the demand for pizza to increase in a college town?
An increase in the number of students who eat pizza
In Table 5.4, fixed costs:
Are equal to $40
According to the law of demand...
As the price of a good falls, the quantity demanded will increase in a given time period.
Society is employing some of the available technology but not all of it. Select the appropriate point.
C
Which of the following is involved n a competitive firm's short run decision?
Choosing a rate of output using existing plant and equipment.
Which of the following statements is true about health care costs in the US?
Costs have risen because both the price of health care and the quantity provided have risen
What is the MPP of the 2nd unit of labor in Table 5.1?
16
In table 10.1 what is the unemployment rate in Year 1?
16.7%
Real GDP for Vicuna for 2009 using 2011 as the base year equals...
$5650
Consider the following for Tyrovia, a country that produces guns and butter.
$690
Suppose that simple economy produces only 4 good and services. sweatshirts and dental exams...
$8750
Refer to figure 11.4. An increase in income taxes can be represented by a movement from
...
which of the following will occur if agg demand is below full-employment GDP?
...
The inflation rate for 1998 was equal to
1.2%
Based on the info in table 17.1 the opportunity cost of producing 1 automobile in Russia is...
1/4 tank
Assume the market basket for the consumer price index has 2 products bread and milk with the following values in 2006 and 2011 for price and quantity. The CPI for 2011 equals
116
In table 11.1 at what price level does macro equilibrium occur?
130
An increase in the price of pickles would be represented by a movement from...
B to A
Specialization and trade benefits:
Both rich and poor countries.
What happens to the money supply as soon as you repay your car loan from the bank?
The money supply will decrease
Competition in a market results in
The optimal mix of goods and servicies being produced.
Which of the following is an example of labor as a factor of production?
The skill and abilities of workers