Econ Q
Tom quit his $65,000 a year corporate lawyer job to open up his own law practice. In Tom's first year in business his total revenue equaled $150,000. Tom's explicit cost during the year totaled $85,000. What is Tom's economic profit for his first year in business? (Hint: Be sure to include explicit and implicit costs when calculating economic profit) (4)
$0
A bank has $100,000 in checkable deposits and $30,000 in reserves. If the required reserve ratio is 10%, what is the amount of required reserves? (12)
$10,000
Katherine gives piano lessons for $15 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmer's market. Katherine's accounting profits are (4)
$100, and her economic profits are $25
If Darren sells 300 glasses of iced tea at $0.50 each, his total revenues are (4)
$150
Cody builds mailboxes. If he charges $20 for each mailbox, his total revenue will be (4)
$500 if he sells 25 mailboxes
Suppose the required reserve ratio is 10%. If a bank has total reserves of $80,000 and checkable deposits of $550,000, what is the amount of the bank's required reserves? (11)
$55,000
Zach has decided to start his own photography studio. To purchase the necessary equipment, Zach withdrew $10,000 from his savings account, which was earning 3% interest, and borrowed an additional $5,000 from the bank at an interest rate of 8%. What is Zach's annual opportunity cost of the financial capital(implicit + explicit)that has been invested in the business (4)
$700
Joy sells 200 glasses of iced tea at $0.50 each. Her total costs are $25. Her profits are (4)
$75
In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had cost-of-living adjustments (COLAs) which guaranteed that their wages would keep up with inflation. These contracts were sometimes written as, for example, COLA plus 3%. Thus, if inflation was 6%, the wage increase would automatically be 9%, but if inflation rose to 7%,the wage increase would automatically be________%.COLAs are a form of indexing applied to wages. (11)
10
If the United States, at the point where it is currently producing, must give up the production of 500 bicycles (B) to produce 20 additional tractors (T) with the same resources, the opportunity cost of producing 5 tractors is _______ bicycles. (15)
125
Grace is a self-employed artist. She can make 20 pieces of pottery per week. She is considering hiring her sister Kate to work for her. Both she and Kate can make 35 pieces of pottery per week. What is Kate's marginal product (4)
15 pieces of pottery
Consider the following scenario. In March 2006, 40,000 people are employed, 10,000 people are actively looking for work, and 30,000 people are neither working nor looking for work. In April, 12,000 of the 30,000 people who were not looking for work begin their job search. Holding all else constant, the unemployment rate in April will rise to _____. (11)
35.48%
If the population of the United States is 260 million, the labor force is 130 million, and 120 million workers are employed, the rate of unemployment is _____. (11)
7.69%
Which of the following is true? (12)
A bank is insolvent when its net worth becomes negative.
Which of the following would tend to increase the natural rate of unemployment? (11)
A demographic "bulge" of new entrants into the labor force
Which of the following is an example of structural unemployment? (11)
A geologist is permanently laid off from an oil company due to a new technological advancement
Which of the following statement is correct: (10)
A nation acquires more capital by saving some of its income and uses it to invest in plants and equipments.
Which of the following is counted as consumption expenditure? (9)
A person buying a new car
Which of the following is an example of frictional unemployment? (11)
A real estate agent leaves a job in Texas and searches for a similar, higher paying job in California
Which of the following will result in an increased price of milk (3)
A shift to the right of the demand curve for milk
Bank regulation is intended to maintain the solvency of banks by avoiding excessive risk. Banks can do except (13)
Banks are permitted to invest in the stock market or other assets that are perceived as too risky.
Which of the following individuals benefits from inflation? (11)
Ben, who borrowed $1,000 from a friend and agreed to pay the same amount one year later
Suppose that Brazil and Peru exchange coffee and leather. Brazil can produce both coffee and leather more efficiently than Peru, but Brazil can produce coffee more efficiently than leather. Comparative advantage states that: (15)
Brazil should produce coffee, Peru should produce leather, and both countries should trade.
When society increases the level of capital per person, the result is called______________. It can apply both to additional human capital per worker and to additional physical capital per worker. (10)
Capital Deepening
Two prominent members of the fast growth club are _________, which between them have nearly 40% of the world's population. (10)
China and India
Which of the following statements is true? (15)
Comparative advantage results from a lower opportunity cost of production.
The first determinant of labor productivity is human capital.Human capital is the accumulated knowledge from: (10)
Education and experience, skills, and expertise that the average worker in an economy possesses
Linda sells her Economics textbook to Ejere for $40. Ejere pays Linda with a check, which she deposits in her checking account in West Bank. Which statement below describes the check-clearing process? (12)
Ejere's bank loses $40 in both reserves and checkable deposits. Linda's bank gains $40 in both checkable deposits and reserves.
Which of the following reduces the duration of frictional unemployment? (11)
Establishing employment agencies which give out information about job vacancies
Which of the following statements is true? (15)
Free international trade can increase the availability of all goods and services in the countries that participate in trade.
The Fed seldom uses the reserve requirement ratio to influence the money supply. What is the reason for this? (13)
Frequent manipulation of reserve requirements would require bankers to constantly adjust their lending policies to changing requirements, which could be destabilizing for financial markets.
Let C = consumption, I = private investment, G = government purchases, and Xn = net exports. Which of the following best represents the equation for GDP? (9)
GDP = C + I + G + Xn
In general,If the most prices are falling in the economy it is known as deflation or negative inflation. the period of lowest inflation in twentieth century for U.S was (11)
Great depression of 1930
Critics of growth argues the following, except: (10)
Growth cannot be controlled
Which one of the following is an example of a frictionally unemployed individual? (11)
Helena, who has just graduated from law school and is searching for a job
When economies shift from a controlled economy to a market-oriented economy an outburst of high inflation that is often seen is termed as: (11)
Hyperinflation
What is hyperinflation? (11)
Hyperinflation refers to an inflation rate in excess of 200 percent per year.
Which of the following affect the values of inflation and unemployment? I. changes in government spending II. expectations about the price level III. changes in nominal wages IV. changes in money supply (11)
I, II, III, and IV
Which of the following characterizes the relationship between inflation and unemployment in the United States? I. There have been periods in which a clear tradeoff between inflation and unemployment seem to exist. II. There have been periods in which inflation and unemployment rose together. III. There have been periods in which inflation and unemployment fell together. (11)
I, II, and III ( all of the above)
Which of the following are monetary policy goals? (13) I. maintain high interest rates II. keep unemployment rates low III. reduce the size of the banking sector IV. prevent high rates of inflation
II and IV
All of the following factors are critical for economic growth, except (10)
Imminent domain
Damage to the environment occurs because (7)
In the process of obtaining goods and services we enjoy, pollution occurs.
Institutional structure which promotes "Modern Economic Growth" are except (10)
Inefficient Financial institutions.
A period marked by ongoing rise in the level of prices in an economy is : (11)
Inflationary phase
How would a sustained increase in the market price of its shares directly benefit a publically traded company? (8)
It could sell any shares it owns in itself at the higher valuation.
Consider the following scenario: In January, 8 million people were seeking jobs but did not succeed. In February, 2 million of these people gave up and stopped looking for work. Holding all else constant, what happened to the unemployment rate in February? (11)
It decreased.
Which of the following is not a function of the Federal Reserve System? (13)
It determines tax levels in conjunction with the U.S. Treasury.
Which of the following is true of a price index that uses a fixed market basket? (11)
It excludes new goods and services.
Which of the following is true of unanticipated inflation? (11)
It helps borrowers because they repay their debts with money that is now worth less.
Which of the following is NOT a consequence of unanticipated inflation? (11)
It increases the purchasing power of money.
What is a sub-prime mortgage? (11)
It is a mortgage loan made to a buyer whose credit or income would not ordinarily qualify for a mortgage loan.
Which of the following is (are) true concerning monopoly (5)
It is at the opposite end of the spectrum from a perfectly competitive firm. A monopoly has no rivals. A monopoly does not need to worry about other firms entering the industry.
What is a business cycle? (11)
It is the economy's pattern of fluctuations in economic activity: expansion followed by contraction and then by another expansion.
The price index for 2007 is 1.28. What does this mean? (11)
It means that the average price level has increased by 28 percent over the base year.
Which of the following is true of cyclical unemployment? (11)
It occurs only during a recession.
The CPI is used for calculating payments from the U.S. government to individuals. To the extent that it is biased upward, which of the following is likely to occur? (11)
It raises government expenditure on programs such as Social Security.
What does the phrase "jobless recovery" refer to? (11)
It refers to a situation where an economy is moving out of a recession without a significant increase in employment.
Which of the following statements is true of inflation? (11)
It refers to an increase in the average level of prices.
Which of the following individuals would NOT be included in the labor force? (11)
Kit, who has retired and is not looking for work
The Fed's narrowest measure of money supply is (13)
M1
Which of the following is true? (7)
Measuring the costs and benefits of pollution is generally more difficult than measuring the prices of marketable goods
Only national governments have the power to cause hyperinflation. Hyperinflation typically happens when government faces extraordinary demands for spending, which it cannot finance by taxes or borrowing. The only option is to : (11)
Print more money
The principle measurement of the economic success of a nation is: (10)
Real GDP per capita
Area of a country, usually with access to a port where, among other benefits, the government does not tax trade: (10)
SEZ (Special economic Zone)
Te quality of "human Capital" includes all of the following except: (10)
Size of population.
_______________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process. (7)
Social costs
Which of the following is an example of an intermediate good or service? (9)
The purchase of lumber by a construction company
If all prices experience an increase of 4 percent in one year, then which of the following is necessarily true? (11)
The rate of inflation for that year is 4 percent.
scarcity exists when
a choice must be made among two or more alternatives
Increasing the reserve requirement ratio is (12)
a contractionary policy because it lowers the amount of excess reserves in the banking system.
Increasing the reserve requirement ratio is (13)
a contractionary policy because it lowers the amount of excess reserves in the banking system.
If the Fed increases the discount rate, it is pursuing (13)
a contractionary policy because it will be more costly for banks to borrow funds and this puts upward pressure on interest rates in the economy.
A decrease in demand, with no change in supply, will lead to ________ in equilibrium quantity and ________ in equilibrium price (3)
a decrease; a decrease
An unemployed person is: (11)
a person without a job who is actively seeking and available for work.
if the government sets out to help low-income people by establishing a maximum amount for rent (3)
a price ceiling has been set and a shortage of rental units may occur
Since stock prices will shift in response to unpredictable future news, these prices will tend to follow what mathematicians call __________ (8)
a random walk with a trend
The functions of money are (12)
a store of value, a unit of account, and a medium of exchange.
An activity performed by commercial banks that is not performed by insurance companies is (12)
accepting deposits and offering checking accounts.
A primary function of a central bank is to (12)
act as a regulator of banks.
A primary function of a central bank is to (13)
act as a regulator of banks.
China's gross national product can be calculated from China's GDP by: (9)
adding the income earned by China's residents from the rest of the world and subtracting payments made by China's residents to the rest of the world.
A source of economic growth is
advances in technology
The market basket used for computing the implicit price deflator for a particular period includes (11)
all final goods and services produced in that period.
The problem of scarcity is confronted by
all societies
A study of advertising and the prices of eyeglasses found that the cost of prescription eyeglasses in states that _______ advertising was _______ than in the states that ________ advertising (6)
allowed; lower; did not allow
Banks are permitted to invest in the stock market or other assets that are perceived as too risky. (13)
True
In the late nineteenth and early twentieth century, bank runs were typically not the original cause of a recession—but they could make a recession much worse. (13)
True
Treasury bonds are issued by the federal government through the _____ (8)
U.S. Department of the Treasury
A resident of San Diego, California, owns and operates a garage across the U.S.-Mexican border in Tijuana, Mexico. The value of the garage services produced at the shop would be counted in _____. (9)
U.S. GNP
Which is not component of Aggregate production function (10)
Unemployment
The unemployment rate is not the percentage of the total adult population without jobs, but rather the percentage of adults who are in the labor force but who do not have jobs: Which is correct? (11)
Unemployment rate =( Unemployed people/ Total labor force) × 100
Velocity is a term that economists use to describe how quickly money circulates through the economy. The velocity of money in a year is defined as: (13)
Velocity = nominal GDP/ money supply
Suppose that voters in your community pass a one-cent sales tax increase to fund education, knowing full well they will have to forgo other goods they typically consume. This primarily addresses the economic question of
What goods and services should a society produce
When would an economist focus on GNP rather than GDP? (9)
When the economist wants to measure total income earned or total amount of factors of production supplied by the residents of a country
The United States experienced______________ workers tend to have higher unemployment. (11)
Younger age
When a country specializes in the production of a good that is relatively cheaper for it to produce than other goods, it is because of: (15)
comparative advantage.
Countries that engage in trade will tend to specialize in goods in which they have a(n) _______ and will _______ those goods. (15)
comparative advantage; export
When the price of gas goes up and the demand for tires goes down, this means tires and gas are (3)
complements
The percentage of total industry output accounted for by the largest firms in the industry is the (6)
concentration ratio
A decrease in the demand for eggs caused by concerns over cholesterol is most likely attributable to which demand shifter? (3)
consumer preferences
An example of a demand shifter is (3)
consumer preferences
The substitution bias in the construction of the CPI arises because: (11)
consumers alter the goods they buy, switching from relatively high priced goods toward lower-priced alternatives.
If inflation is a threat, then the Fed will be expected to engage in (13)
contractionary monetary policy.
The scientific method is more difficult for economists than, say, chemists, because
controlled laboratory conditions are more problematic in economics. it is difficult to hold other factors that may affect the variables being studied constant in economics. economic conditions may change quickly and unexpectedly
How has the widespread adoption of debit cards as the preferred method of payment for consumer purchases likely affected bank administration costs? (8)
costs are reduced because the cost of purchase is immediately debited from purchaser's checking account
M1 includes (13)
currency in circulation plus checkable deposits plus traveler's checks.
The formula for calculating a price index is: (11)
current cost of basket ÷ base-period cost of basket.
A monopoly (5)
determines its own price, given its demand curve
To practice effective price discrimination, a firm must have (6)
differences in demand elasticity among buyers
Gains of trade are possible for two countries if they have: (15)
different opportunity costs.
The old proverb: "Don't put all your eggs in one basket" is synonymous with which of the following? (8)
diversified investments
A ________ is a direct payment from a firm to its shareholders. (8)
dividend
Price indexes that employ fixed market baskets: (11)
do not incorporate responses to changing relative prices.
If your ticket wins the lottery, the earnings you receive: (9)
does not affect GDI or GNP.
The law of demand is illustrated by a demand curve that is (3)
downward sloping
People in the eastern part of Beirut are prevented by border guards from traveling to the western part of Beirut to shop for food. This situation violates the perfect competition assumption of (5)
ease of entry and exit
If the United States decides to allocate more resources to capital goods and less to consumer goods, the United States will obtain a greater degree of
economic growth
Money that some authority, generally a government, has ordered to be accepted as a medium of exchange is called _______ money. (12)
fiat
Currency in the United States today is (12)
fiat money.
Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Now suppose that the price of sugar rises, increasing the marginal and average total cost of producing candy canes by $0.05; there are no other changes in production costs. Based on the information given, we can conclude that once all the adjustments to long-run equilibrium are achieved, the price of candy canes will equal (5)
fifteen cents
A bond is a form of ___________ through which a corporation agrees to repay the amount that was borrowed together with ___________ over a period of time in the future. (8)
financial contract; a rate of interest
A ________________ operates directly between a saver with financial assets to invest and an entity who will receive those assets in exchange for paying a ________________ (8)
financial intermediary; rate of return
During the U.S. stock market collapse of 2007, Paula's financial advisor recommended that she invest in a number of pharmaceutical companies while their stock values were down considerably. He expected these companies to maintain high dividend yields, making them attractive to investors. If Paula follows her financial advisor's recommendations, she is (8)
following fundamental trading advice.
Because commodity money is not uniform in quality, there is a tendency (12)
for lower quality commodity money to drive higher quality commodity money out of circulation.
A system in which banks hold reserves whose value is less than the sum of claims on those reserves is called (12)
fractional reserve banking.
Workers who are in the process of changing jobs are counted as being: (11)
frictionally unemployed.
if an economy is producing a combination of goods that places it on the production possibilities curve, then it has
full employment
An analytical framework used in the analysis of strategic choices is (6)
game theory
Since 1980 in the United States, air quality has _______ , and water quality has _______ (7)
generally improved; improved in some areas and deteriorated in others
Public goods may be efficiently provided if they are financed through (7)
government tax revenues
A perfectly competitive firm will earn a profit and will continue producing the profit- maximizing quantity of output in the short run if price is (5)
greater than average total cost
The value, at current market prices, of the final goods and services produced during a particular period is: (9)
gross domestic product.
Disposable personal income is that part of income that households: (9)
have available to spend on goods and services.
A criticism of oligopolistic firms is that they (6)
have high concentration ratios
Members of the EU (European Union): (15)
have virtually eliminated all trade barriers within the community.
Nontariff barriers often take the form of: (15)
health and/or safety restrictions.
The bottom line on investing in individual stocks is: _______________ on average over lengthy periods of time; ________________, especially in the short run; _______________, since stock does need to be sold to turn gains into spendable money. (8)
high rate of return; moderate risk; low liquidity
An assumption of the model of perfect competition is (5)
identical goods
According to the Coase theorem, the private market can achieve an efficient outcome (7)
if property rights are well defined and bargaining is costless
A tradeoff between two economic goals means that
if you achieve more of one, you will achieve less of the other
Production possibilities curves: (15)
illustrate the production choices available to an economy.
The time between recognizing the existence of a problem and adopting a course of action to deal with the problem is called the (13)
implementation lag.
A difference between explicit and implicit costs is that (4)
implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do
Goods and services produced abroad and sold in the domestic economy are called _____. (9)
imports
If the price level in the United States decreases relative to prices in foreign countries, then (15)
imports of the United States will decrease and exports of the United States will increase.
If the U.S. exchange rate increases relative to currencies in other countries, then (15)
imports of the United States will increase and exports of the United States will decrease.
The natural rate of unemployment: (11)
includes frictional and structural unemployment.
The insider-outsider model of the labor force, in simple terms, argues that those already working for firms are "_______," while new employees, at least for a time, are "________" A firm depends on its ____________to grease the wheels of the organization, to be familiar with routine procedures, to train new employees, and so on. However, cutting wages will alienate the insiders and damage the firm's productivity and prospects. (11)
insiders, outsiders , insiders
Oligopoly is a market structure characterized by (6)
interdependence in decisionmaking
A liquidity trap is said to exist when a change in monetary policy has no effect on (13)
interest rates.
The world of imperfect competition (6)
lies between the extremes of perfect competition and monopoly. is a world where firms battle over market shares. is a world where economic profits may or may not persist in the long run
The _________ of an investment is determined by how easy it is to sell an asset at any given time (8)
liquidity
The ease with which an asset can be converted to money is its (12)
liquidity.
A checking account typically pays __________________, but gives easy access to your money, either by writing a check or by using ______________. (8)
little or no interest; a debit card
Which of the following is an example of a bank's assets? (12)
loans made to customers
An overall pattern of convergence is clear. The _______ countries have GDP growth that is_____ than that of the middle-income countries, (10)
low-income ,Faster
In December 2008, the Federal Reserve announced that it would take extraordinary measures to address the financial crisis in the economy. These measures include all of the following except (13)
lowering the reserve requirement to encourage banks to create loans.
Unemployment and inflation are
major topics in macroeconomics
The Federal Reserve does all of the following except (13)
make loans to individuals
If banks were required to keep 100% of deposits in reserves, they could (12)
make no loans.
Suppose that the market for computers is dominated by a single firm, like Dell, that is able to exert influence over prices and output. This situation violates the perfect competition assumption of (5)
many buyers and sellers
It means comparing the benefits and costs of choosing a little more or a little less of a good. When many choices are involved with in budget constraint framework (2)
marginal analysis
A perfectly competitive firm's short-run supply curve is its (5)
marginal cost curve above the average variable cost curve
The profit-maximizing level of output for a perfectly competitive firm in the short run (5)
marginal cost equals price
If marginal cost is rising, (4)
marginal product must be falling
For a firm in a perfectly competitive market (5)
marginal revenue equals price and average revenue
A concentration ratio is used to measure (6)
market dominance
The term ____________ refers to a market exchange that affects a third party who is outside or external to the exchange (7)
market failure
Total cost is the (4)
market value of all inputs that a firm uses in production
GDP can be calculated by totaling either the: (9)
market values of all final goods and services or the value added at all stages of production.
An incentive approach to pollution control is (7)
marketable pollution permits
Economists assume that the typical person who starts her own business does so with the intention of (4)
maximizing profits
An increase in real GDP (9)
may or may not correspond to an increase in human happiness.
Disposable personal income is calculated as personal income (9)
minus taxes.
Stock markets often experience a frenzy of buying or selling when investors are ___________________ by following the current trend in a very actively traded company. (8)
momentum trading
Any item that serves as a medium of exchange is called (12)
money.
An industry characterized by many firms, producing similar but differentiated products, in a market with easy entry and exit is called (6)
monopolistic competition
The Case in Point on Craft Brewers suggested that this industry is an example of (6)
monopolistic competition
The two theoretical extremes of the market structure spectrum are occupied on one end by perfect competition and on the other end by (5)
monopoly
The power a firm has to set is own price is called (5)
monopoly power
The effort to change people's behavior by appealing to their sense of values is (7)
moral suasion
A decrease in the price of a good will, all other things unchanged, will not result in (3)
more being supplied
Economists agree that, in general, a world with advertising is _______ than would be a world without advertising (6)
more competitive
Suppose that the market for haircuts in a community is a perfectly competitive constant- cost industry and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the long run, we expect that (5)
more firms will enter the market, driving the price of haircuts down and the profits of individual firms back down to zero
A nation records a trade surplus when: (9)
net exports are positive.
Gross private domestic investment includes purchases of: (9)
new factory equipment
The market for plumbing services in a city can be characterized by the model of monopolistic competition. Suppose that the market is initially in long-run equilibrium, and then there is an increase in demand for plumbing services. We expect that in the long run (6)
new firms will enter the plumbing market.
According to the Bureau of Labor Statistics, a person who is not working and is not looking for work is: (11)
not a member of the labor force.
Suppose that a monopoly firm is required to pay a new annual license fee just for the privilege of doing business in its fair city; the fee is somewhat less than the economic profit the firm is now earning. In response to the increase in fees, the firm will (5)
not change its price
Debit cards are (12)
not considered money because they merely show that their owners have a relationship to money.
According to the text, the command-and-control approach to pollution abatement is (7)
not favored by economists
Credit cards are (12)
not money.
A feature of monopolistic competition that makes it different from monopoly is the (6)
number of firms in the industry
example of a natural resource is
oil in the ground
The three main monetary policy instruments are (13)
open market operations, reserve requirement ratio, and the discount rate.
The Fed's most important and most frequently used tool of monetary policy is (13)
open-market operations.
The monetary policy tool that involves the buying and selling of government bonds is (13)
open-market operations.
If the _______ differ between two countries, this suggests the possibility for mutually advantageous trade. (15)
opportunity costs
The value of the next best alternative things that must be lost to acquire a good are called (4)
opportunity costs
Wiladee used to work as an office manager, earning $45,000 per year. She gave up that job to start a tailoring business. In calculating the economic profit of her tailoring business, the $45,000 income that she gave up is counted as part of the tailoring firm's (4)
opportunity costs.
All possible combinations of consumption that someone can afford given the prices of goods and the individual's income (2)
opportunity set
A cartel is an example of (6)
overt collusion
Which of the following will provide an investor with a legally valid claim of partial ownership of a firm? (8)
ownership of stock
Transfer payments are: (9)
payments that do not require a good or service in exchange.
GDP is the sum of: (9)
personal consumption, private investment, government purchases, and net exports.
Would a research study on the effects of soft drink consumption on children's cognitive development be considered a positive or normative statement (2)
positive
The theory underlying demand and supply curves assumes that, all other things unchanged, the primary variable that assures the equality of the quantities demanded and supplied is (3)
price
The practice of selling the same product at different prices in different markets, without corresponding differences in costs, is (5)
price discrimination
A minimum price set above the equilibrium price is a (3)
price floor
A(n) _____ shows the movement in the average level of prices. (11)
price index
If the United States imposes a tariff of $5 per bottle on French wine, the most likely effect will be to raise the: (15)
price of wine in the United States by less than $5 per bottle, and lower the price of wine in France by less than $5 per bottle.
A price that the government guarantees farmers will receive for a particular crop is a (3)
price support
A perfectly competitive firm is a (5)
price taker
In order to be classified as a _______________, a firm must be owned by the people who run it on a day-to-day basis. (8)
private company
An economy is said to have a comparative advantage in the production of a good if it can
produce the good at a lower opportunity cost than another economy.
What Does a Central Bank Do? (13)
provide banking services to commercial banks and other depository institutions, and to provide banking services to the federal government. conduct monetary policy promote stability of the financial system ANSWER: ALL OF IT
Defenders of advertising argue that it (6)
provides education and information about products.
A _____________ is a firm that has sold its stock by making it available to be bought and sold by outside investors. (8)
public company
These costs are excluded from future business decision, because the cost will be the same regardless of the result of the decision. This cost has already been incurred and thus cannot be recovered. (2)
sunk cost
A curve that shows the relationship between the price and quantity supplied during a particular period, all other things unchanged, is the (3)
supply curve
Factor prices, returns from alternative activities, technology, number of firms, producer expectations, and natural events are often termed (3)
supply shifters
Which of the following belongs in the range of financial investment options available to U.S. households? (8)
tangible assets
A tax imposed by a government on imported goods or services is a: (15)
tariff.
An example of a tariff is a: (15)
tax of 10 percent of the value of each Honda automobile imported from Japan.
Structural unemployment exists because (11)
technological changes make the skills of the workers incompatible with the skills used on the job
an example of a supply shifter is (3)
technology
The supply curve for the firm in perfect competition (5)
tells the quantity produced at each price
An increase in demand in a perfectly competitive market will cause a (5)
temporary increase in price in a constant-cost industry
The rate at which a country can trade domestic products for imported products is its: (15)
terms of trade.
The competitive model assumes all of the following EXCEPT (5)
that firms attempt to maximize their total revenue
Falling inflation means (11)
that the price level is increasing at a decreasing rate.
Rising inflation means (11)
that the price level is rising at an increasing rate.
In oligopoly, a firm must realize (6)
that what it does affects the other firms in the industry. that it must pursue policies always remembering there will be a reaction to those policies by other firms in the industry. that it is in an industry in which one major firm may dominate and the firm will need to judge its actions accordingly
For a construction company that builds houses, which of the following costs would be a fixed cost? (4)
the $30,000 per year salary paid to the company's bookkeeper
At the national level who runs the Federal Reserve? (13)
the Board of Governors
What are the two policy making bodies of the Federal Reserve? (13)
the Board of Governors and the Federal Open Market Committee
If the Fed raises its target for the federal fund rate, this indicates (13)
the Fed is pursuing a contractionary monetary policy.
According to the text, in many respects, the single most powerful economic policymaker in the United States is (13)
the Federal Reserve.
The terms inflation and deflation refer to changes in: (11)
the average level of prices.
The Federal Depository Insurance Corporation (FDIC) has the power to close a bank when (12)
the bank's net worth falls below a certain level.
The costs of the market basket in the current period will be compared against the costs of the market basket in _____ when computing a price index. (11)
the base period
The consumer price index (CPI) reflects: (11)
the changes in the prices of goods and services typically purchased by consumers.
When the media reports the U.S. inflation rate, the number cited is usually a rate computed using: (11)
the consumer price index.
The cost of producing goods and services includes (9)
the cost of factors of production, depreciation, and other production-related taxes.
The excess capacity in monopolistic competition may be viewed as (6)
the cost of product diversity
Opportunity cost reflected on a production possibilities curve is (15)
the cost of reducing the output of one good in order to increase the output of another.
Plastic and steel are substitutes in the production of automobiles. If steel prices go up, all other things unchanged (3)
the demand curve for plastic will shift to the right
Which of the following is an interest rate that is set directly by the Fed? (13)
the discount rate
In choosing between the range of alternative investments typically available to U.S. households, which of the following will play a role in influencing their selection of a particular investment type? (8)
the expected rate of return, risk, and liquidity of each kind of investment
The time it takes for the Fed or government policymakers to enact policies to correct unemployment or inflation problems is a source of which lag? (13)
the implementation lag
The shortest of the three lags for monetary policy is (13)
the implementation lag.
Perfect competition is characterized by (5)
the inability of any one firm to influence price
In the 1980s, the federal government undertook a major build-up of the military sector, leading to reports that prices charged by military contractors were spiraling upward. According to production possibilities analysis, this result is not surprising due to
the law of increasing opportunity costs
The gross national product (GNP) of the U.S. measures: (9)
the market value of final goods and services produced using factors of production owned by U.S. residents during a particular period.
If a nation liberalizes its immigration laws and receives a significant influx of young workers: (11)
the natural rate of unemployment is likely to increase
The expression "gains from trade" refers to: (15)
the net benefits a country receives from trade.
The inflation rate in the year 2007 is defined as: (11)
the percentage of change between the price index in 2007 and the price index in 2006.
If the Fed's primary goal is price stability which macroeconomic variable should it target? (13)
the price level itself or a particular rate of change in the price level
Which of the following is perhaps the greatest obstacle facing the Fed in discharging monetary policy? (13)
the problem of monetary policy lags
The efficient level of pollution is (7)
the quantity at which its total benefits exceeds its total costs by the greatest possible amount.
What are the three types of monetary policy lags? (13)
the recognition lag, the implementation lag, and the impact lag
The lag in realizing that a macroeconomic problem exists is called (13)
the recognition lag.
The lowest wage that a worker would accept, if offered a job, is called (11)
the reservation wage.
Factors of production are
the resources the economy has available to produce goods and services
Government purchases are defined as: (9)
the sum of purchases of goods and services from firms by government agencies and the total value of output produced by government agencies.
Suppose Jan started up a small lemonade stand business last month. Variable costs for Jan's lemonade stand now include the cost of (4)
the wages paid to her hourly workers, lemons and sugar, paper cups
People participate in international trade basically because: (15)
they are better off by doing so.
What do stocks, bonds, securitized mortgage assets and other financial investments all have in common? (8)
they can only be purchased in financial markets
A shift in the demand curve to the left, all other things unchanged (3)
will cause a movement downward along the supply curve and a lower equilibrium quantity
Price ceilings which lead to shortages will impose costs on society because they (3)
will lead to waiting lines. may result in black market prices, which are higher than the market-determined price would be. lead to a smaller quantity offered on the market
Different points on a production possibilities curve: (15)
yield different values of total output.
Trevor's Tire Company produced and sold 500 tires. The average cost of production per tire was $50. Each tire sold for a price of $65. Excuding any other costs, Trevor's Tire Company's total profits are (4)
$7,500
Human effort that can be applied in the production process is called:
labor
Economist use the term __________________ to indicate what must be given up to obtain something that is desired (2)
opportunity cost
Would an op-ed piece in a newspaper urging the adoption of a particular economic policy be considered a positive or normative statement (2)
normative
what would not cause the supply curve to shift? (3)
a change in the price of a good
Economic resources used in the production process are called
factors of production
Increasing the level of education in the United States will:
lead to workers possessing greater human capital
According to the textbook, economics is a
social science
Macroeconomics deals with
the analysis of the aggregate values in the economy
The opportunity cost of something is
what is given up to acquire it
if U.S can produce the cars at lower cost than bikes.U.S has (2)
comparative advantage
Which of the following is a shortcoming of GDP accounts? (9)
They ignore the impact of pollution on the environment.
Which of the following is a market in which banks lend reserves to one another? (13)
federal funds market
Which of the following is an example of cyclical unemployment? (11)
An autoworker is temporarily laid off from an automobile company due to a decline in sales
Modern Economic growth began with: (10)
Around 1776 when James Watt perfected the steam engine.
The ability of low GDP/capita countries to "catch up" with high GDP/capita countries is called: (10)
Convergence
The economy in a particular country is booming. Real GDP is growing at a rate of 6% per year, well above the average growth rate. Under these circumstances, which of the following types of unemployment is most likely to be the lowest? (11)
Cyclical unemployment
The variation in unemployment caused by the economy moving from expansion to recession or from recession to expansion is known as: (11)
Cyclical unemployment.
Which of the following is NOT a consequence of deflation?
Deflation causes the real value of money to fall.
What is Bank run? (13)
Depositors racing to the bank to withdraw their deposits
Which of the following is not an assumption economists make when using the model of perfect competition (5)
Each firm sets it price equal to its average total cost
Which of the following is a major problem with deflation? (13)
Economic agents tend to put off purchases in anticipation of lower prices for goods and services,leading to a downward spiral in economic activity.
What Causes Changes in Unemployment over the Long Run (11)
Economic and social Political forces Structural unemployment ANSWER: ALL OF THEM
Attending college is another case where the Opportunity cost exceeds the __________ cost. The out-of-pocket costs of attending college include tuition, books, room and board, and other expenses. But in addition, during the hours that you are attending class and studying, it is impossible to work at a paying job. Thus, college imposes both an out-of pocket cost and an __________ cost of lost earnings (2)
Monetary ,opportunity
Which of the following is true regarding monopoly (5)
Monopolies produce too little and charge too much from the standpoint of efficiency
In large shopping areas, the retail market is most illustrative of (6)
Monopolistic
A country's exports minus its imports measures: (9)
Net exports
A well-known example of an international cartel is (6)
OPEC
Which of the following is (are) true (6)
One can criticize monopolistic competition because it falls short of the efficiency standards of perfect competition. Monopolistic competition is inefficient because of product differentiation. According to the text, the inefficiency of monopolistic competition may be a small price to pay for the wide range of product choices it offers.
Consider a bakery that buys flour to bake cakes. Which of the following statements is true? (9)
Only the value of the cake is counted in GDP.
Which of the following statements is false? (11)
Out of labor force: Out of paid work and looking for a job.
Individuals fall under the umbrella of the term"hidden unemployment are except: (11)
Permanent employed
Which is not one of important areas that governments around the world have chosen to invest in to facilitate capital deepening and technology: (10)
Pollution control
The largest contributor to productivity growth are: (10)
Technological advances.
The development of new _________can provide a way for an economy to sidestep the diminishing marginal returns of capital deepening. (10)
Technology .
The "substitution bias" (11)
Tends to overstate the rise in a consumer's true cost of living.
Suppose the clothing manufacturer, Eddie Bauer, produced 10,000 pairs of jeans in 2005 but sold only 9,200 pairs. How will this be recorded in GDP accounts? (9)
The 9,200 pairs sold will be counted as consumption and the 800 pairs that were not sold will counted as investment and both items will be included in GDP in 2005.
Which of the following statements is true? (11)
The CPI and the implicit price deflator can be used to calculate inflation.
How does the Fed decide which monetary measure should be the focus of its monetary policy choices? (13)
The Fed would like to track a monetary measure that is most closely related to the level of real GDP and the price level.
The following are all determinants of growth except: (10)
The allocation factor.
Given that milk and cookies are complements, suppose the price of flour (an ingredient in cookies) rises. What happens in the market for cookies (3)
The equilibrium price rises, and the equilibrium quantity falls
Given the events listed below that take place in the bread market, decide if demand changes or quantity demanded changes and determine the direction of change The economy prospers and incomes increase dramatically (3)
The price of bread increases
Which statement best illustrates complementary goods (3)
The price of tennis rackets declines so your economics instructor decides to take tennis lessons and purchases several cans of new tennis balls
Which of the following statements about the structure of the Fed is an advantage from the perspective of conducting monetary policy? (13)
The two policymaking bodies of the Fed are small to allow deliberations in private and they work relatively independently of other political institutions.
As households eat out more, purchase more prepared foods at the grocery store, hire out child care services that they once performed themselves, what is likely to happen to the value of GDP? (9)
The value of GDP is likely to increase.
to say that coins are " token money" means that (13)
Their face value is more than their commodity value..
Which of the following is NOT true of price indexes? (11)
They are used to compute the growth rate of real output in the economy.
In the federal penitentiary at Lompoc, California, inmates used packages of mackerel to buy items such as haircuts at the prison barber shop and laundry services. What function do these packages of mackerel serve? (12)
They functioned as money.
Small companies typically prefer____________ to borrowing from a bank because it is a source of funding where the company is not obligated to _____________________ (8)
an IPO; make interest payments
Decreasing the reserve requirement ratio is (12)
an expansionary policy because it raises the amount of excess reserves in the banking system.
Using the term "spillover" is a less formal means of describing (7)
an externality
The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is (4)
an implicit cost
An example of a positive statement is
an increase in investment spending tends to reduce unemployment
Assuming that pizza is a normal good, if students' income at your college increases substantially, there would be (3)
an increase in the demand for pizza
Two goods are substitutes if (3)
an increase in the price of one leads to an increase in demand for the other
A shift to the left of a supply curve is caused by (3)
an increase in the returns from other supply possibilities
A mutual fund that seeks to imitate the overall behaviour of the stock market is called __________ (8)
an index fund
A new industry with potential economies of scale is called: (15)
an infant industry.
An entrepreneur's motivation to start a business could arise from (4)
an innate love for the type of business that he or she starts, a desire to earn a profit, an altruistic desire to provide the world with a good product
The Board of Governors of the Federal Reserve System is (13)
appointed by the president of the United States and confirmed by the Senate.
Price takers (5)
are those individuals in a competitive market who must accept the market price as given
The unit-of-account function of money means that money is used (12)
as a consistent means of measuring the value of things.
A feature that distinguishes economists' approach to making choices is (are)
assigning opportunity costs a major role in their analyses of choices. assuming individuals make choices to maximize objectives. emphasizing that choices are made at the margin
All possible consumption combinations of goods that Jackson can afford, given the prices of goods, when all income earned by Jackson is spent; the boundary of the opportunity set (2)
budget constraints
A model or theory in economics is
built using relevant observations, assumptions, and abstractions
Suppose that each of two firms has the independent choice of advertising its product or not advertising. If neither advertises, each gets $10 million in profit; if both advertise, their profits will be $5 million each; and if one advertises while the other does not, the advertiser gets $15 million profit while the other gets $2 million profit. According to game theory, the likely strategy by the firms is (6)
both will advertise
The Federal Reserve System was established in 1913 in response to the (13)
bank panic of 1907.
The principle of fractional reserve banking makes it possible for a (12)
bank to make loans.
Which of the following is not an ironclad rule in the financial markets? (8)
banks fund small business loans and large firms issue bonds to raise money
To calculate price level , economist begin with the concept of a hypothetical group of different items, with specified quantities of each one meant to represent a "typical" set of consumer purchases, used as a basis for calculating how the price level changes over time is : (11)
basket of goods and services
Quotas imposed on U.S. imports into Japan tend to: (15)
benefit U.S. consumers and penalize Japanese consumers.
A tariff imposed on Japanese imports into the United States tends to: (15)
benefit U.S. producers and penalize Japanese producers.
When the Fed buys bonds in the open market, we can expect (13)
bond prices to rise and interest rates to fall.
During the recent U.S. recession, some large automakers required bailouts from the federal government to avoid being forced into bankruptcy by their ________________ (8)
bondholders
When the Fed _______ governments bonds it _______ bank reserves. (13)
buys; increases
The United States can produce both grain and oil more efficiently than Mexico can, but the United States can produce grain more efficiently than oil. Therefore, according to _______ , a basis for trade exists between the two countries. (15)
comparative advantage
A bank that has no excess reserves (12)
cannot create loans
A financial gain earned by purchasing stock in a publically traded company and subsequently selling the investment at higher price is commonly referred to as a _____________ . (8)
capital gain
Rank the following items in terms of most liquid to least liquid. (12)
cash, checkable deposits, savings deposits, an office building your father owns
Which of the following is a store of value and a common medium of exchange? (12)
checking account balances
If the only two firms in an industry agree to fix the price at a given level, this is an example of (6)
collusion
The government attempts to reduce the global warming effects caused by the burning of fossil fuels such as oil, coal, and natural gas by establishing a minimum level of fuel efficiency on new cars. The regulatory approach used in this action is (7)
command and control
If an economy's factors of production were owned by the government sector and the coordinating activity was done by a government planning board, the economy would be called
command socialism
The Federal Reserve System is made up of twelve regional banks owned by (13)
commercial banks in the respective districts that have chosen to be members of the Fed.
If Japan levies tariffs on U.S. goods entering Japan, this will tend in the short run to: (15)
damage U.S. producers and benefit Japanese producers.
If the economy experiences an inflationary gap, a contractionary monetary policy will (13)
decrease real GDP and decrease the price level.
A negative relationship between the quantity demanded and price is called the law of ____ (3)
demand
when economists study the behavior of buyers, they are studying (3)
demand
To maximize profit, a monopoly firm determines its _______ , _______ , and _______ curves and produces an output where _____ (5)
demand; marginal revenue; marginal cost; MR = MC
A bank's reserves are (12)
deposits that banks have accepted from customers but have not loaned out.
A measure of the degree to which capital wears out or becomes obsolete during a period is: (9)
depreciation.
When monopolies exist because economies of scale prevail over the entire range of demand (5)
economists suggest that we may want to regulate their production and pricing, but we may not want to give up their cost advantages
The United States bans most efforts to create a monopoly when (5)
efforts to form a monopoly "unfairly" drive out competitors
Canada, Mexico, and the United States have: (15)
eliminated many trade barriers among themselves.
The largest component of factor income in the U.S. is: (9)
employee compensation.
A bank is "loaned up" when (12)
excess reserves are zero
When banks hold more reserves than are required, such reserves are called (12)
excess reserves.
To measure the "core" inflation rate, the Bureau of Economic Analysis uses a price measure that: (11)
excludes food and energy prices because the prices of these items can be volatile.
The problem of determining what goods and services society should produce
exists because there are not enough resources to provide all the goods and services that people want to purchase
A firm's opportunity costs of production are equal to its (4)
explicit costs + implicit costs
If the opportunity cost of manufacturing machinery is higher in the United States than in Britain and the opportunity cost of manufacturing sweaters is lower in the United States than in Britain, then the United States will
export sweaters to Britain and import machinery from Britain
Goods and services produced in the domestic economy and sold abroad are called __ (9)
exports
Goods and services produced in the domestic economy and sold abroad are called ____ (9)
exports
A trade deficit occurs when: (9)
exports are less than imports.
If income increases in other countries, then U.S. (15)
exports will increase.
Product differentiation under monopolistic competition means that each firm (6)
faces a downward-sloping demand curve
In the circular flow model for an economy that produces only consumption goods: (9)
factors of production flow from households to firms.
Which of the following statements is true? Economists generally agree that (11)
factors other than money growth may influence the inflation rate from one year to the next, but they are not likely to cause sustained inflation.
Market failure describes a situation in which the market itself ______________________ in a way that balances social costs and benefits (7)
fails to allocate resources efficiently
As we consume more of a icecream, the utility we get from additional units of the icecream tend to become larger than what we received from earlier units true or false? (2)
false
The _____ rate is the interest rates charged when a bank lends reserves to another bank. (13)
federal funds
Prosperity in the United States will (15)
increase imports of the United States.
The marginal product of labor is equal to the (4)
increase in output obtained from a one unit increase in labor
Firms in the model of perfect competition will (5)
increase output up to the point that the marginal benefit of an additional unit of output is equal to the marginal cost
Suppose the economy experiences a recessionary gap. Expansionary monetary policy will (13)
increase real GDP and increase the price level.
International trade has the potential to (15)
increase the availability of goods and services to all nations.
Holding all else constant, higher interest rates in the United States would (13)
increase the demand for U.S. dollars in the foreign exchange market. In turn, this will lead to an increase in the exchange rate, and subsequently, U.S. net exports would fall.
Assume that the United States imposes a quota on Italian shoes. Relative to the equilibrium world price that would exist in the absence of quotas, the equilibrium price of shoes in the United States will most likely _______ , and the equilibrium price of shoes in Italy will most likely _______ . (15)
increase; decrease
Economists know that a particular good can be classified as an inferior good if a(n) ________ in buyers' income causes a(n) ________ (3)
increase; decrease in demand
The purchase of U.S. goods and services by foreigners (15)
increases the demand for U.S. dollars.
A market price floor for wheat (3)
increases the price paid by consumers
If you withdraw currency from your savings account, you are (12)
increasing M1 but not affecting M2.
Opportunities created by trade: (15)
induce a greater degree of specialization
If all firms in a perfectly competitive industry earn zero economic profits, in the long run, the (5)
industry is in long-run equilibrium
After graduation from college you will receive a substantial increase in your income from a new job. If you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger would be considered an (3)
inferior good
Evidence suggests that all countries with very high (11)
inflation rates also have very high money growth rates.
All other things unchanged, a tax on a product that leads to an increase in the cost of production would (3)
result in an increased price
Technological change is combination of (10)
invention advances in knowledge—and innovation advances in knowledge innovation
If the quantity of housing supplied in a community is greater than the quantity of houses demanded, the existing price (3)
is above the market equilibrium price
The demand curve facing a price setter (5)
is downward sloping
The trough of the business cycle: (11)
is the point where a recession ends and an expansion begins.
The City of Washington needs to upgrade its levies and its water drainage systems. The cost will exceed the amount of tax revenue the City expects to receive over the next 10 years. How will the City be able to raise the funds needed to finance this upgrade? (8)
issue municipal bonds
The Aluminum Company of America gained monopoly power because (5)
it had exclusive ownership of a resource required to produce aluminum
Although water is very abundant in most places, it is scarce because
it has two or more alternative uses
If two countries find that neither has a comparative advantage in the production of any good or service: (15)
it is impossible for them to benefit from trade.
When a member bank borrows reserves from the Fed, (13)
it pays an interest rate called the discount rate.
Frictional unemployment exists because (11)
it takes time for people seeking jobs and employers seeking workers to find each other.
In the long run, a country's material standard of living is determined by: (9)
its output relative to its population.
Structural unemployment is best reduced by (11)
job training programs to retool workers with new skills.
Suppose a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short tun, the firm most likely considers (4)
labor to be variable and capital to be fixed
An increase in real GDP from 2002 to 2006 necessarily indicates that (9)
quantities of goods and services produced increased between 2002 and 2006.
A total-cost curve shows the relationship between the (4)
quantity of output produced and the total cost of production
Price discrimination is
quite common in us economy
A regulation that specifies the maximum amount of a good or service that may be imported during a specified period of time is a: (15)
quota.
In the importing country, the most likely effect of a tariff on a good is to: (15)
raise the price and decrease the quantity demanded.
A competitive market with flexible prices and many buyers and sellers will (3)
reach an equilibrium where the market clears
Which of the following is the best measure of a nation's standard of living? (9)
real GDP per capita
The time it takes to collect and process data is the biggest source of which lag? (13)
recognition lag
The seven members of the Board of Governors serve 14-year terms to (13)
reduce political influence.
Double counting in GDP accounting: (9)
refers to the inclusion of both intermediate goods and final goods in GDP.
The concept of comparative advantage is based upon
relative opportunity costs
the analysis of the aggregate values in the economy
relative opportunity costs
Monopolistic competition is an industry characterized by (6)
relatively easy entry and exit
The Affordable Health Care Act of 2010 (3)
requires that individuals purchase health insurance. requires that insurance companies provide coverage for children on their parent's policies up to the age of 26. bars insurance companies from denying coverage based on pre-existing condition
The major tools of monetary policy available to the Federal Reserve System are (13)
reserve requirements, open-market operations, and the discount rate.
Protectionist policies (15)
restrict the importation of foreign goods and services.
Which of the following will not lead to economic growth
restrictions on international trade
Free trade is beneficial because it: (15)
results in a wider array of consumer products.
Critics of advertising argue that it (6)
results in higher prices to consumers
Toward the end of 2008, the U.S. economy was characterized by all of the following except (13)
rising inflation.
Since the civil war, the U.S economy has been trans formed from primarily________________economy to ________and ________. (10)
rural and agriculture, services , technolgy
The relative costs of two goods produced by two countries can be determined by comparing the ________ of their _______ (15)
slopes; production possibilities curves
Inflation reduces the ability of money to function as a (12)
store of value.
A decision based on the recognition that the actions of others will affect the outcome of the choice, and that takes these actions into account, is a (6)
strategic choice
A number of semi-skilled workers in an industry find themselves out of work when improvements in technology render their jobs obsolete. These workers experience _____ unemployment. (11)
structural
Unemployment that results from a mismatch between worker qualifications and the characteristics employers require is called _____ unemployment. (11)
structural
The basic concern of economics is to
study the choices people make
The total labor force comprises: (11)
those who are employed plus those who are unemployed.
When one firm responds to a rival's cheating by cheating and to a rival's cooperation by cooperating, that firm is practicing a
tit-for tat strategy
The Consumer Price Index is NOT used: (11)
to measure the average price level of all final goods and services produced.
If a copper mining operation discharges waste products into a river and causes higher costs and discomfort to downstream users of the water for which they are not compensated, then (7)
too many of society's resources are being used to produce copper
Average total cost is equal to (4)
total cost divided by output
Profit is defined as (4)
total revenue minus total cost
Social Security payments to U.S. citizens are considered: (9)
transfer payments and are not included in GDP
A threat to respond to a rival's cheating by permanently revoking an agreement is a (6)
trigger strategy
A diagram that shows the productively efficient combinations of two products that an economy can produce given the resources it has available is known as Production Possibility Frontier. True or false? (2)
true
The budget constraint diagram containing just two goods, like most models used in this book, is not realistic. After all,in a modern economy people choose from thousands of goods. true or false? (2)
true
Any point inside a production possibilities curve indicates
unemployment and/or inefficiency
Utility is (2)
usefulness satisfaction value one obtains from consuming goods and services
To identify the onset of a recession, the National Bureau of Economic Research (NBER) Business Cycle Dating Committee (9)
uses a range of indicators including real GDP, employment and income.
Humans desire goods and services for the satisfaction those goods and services provide is known as its (2)
utility
Analyzing the behavior of the firm enhances our understanding of (4)
what decisions lie behind the market supply curve
