Economics Test 2
Unknown given this data
If a market basket was defined in 2006 and it cost $10,000 to purchase the items in that basket in 2006, while it cost $12,000 to purchase those identical goods in 2007, then the inflation rate from 2005 to 2006 is
(120-100)/100*100%=20%
If a market basket was defined in 2006 and it cost $10,000 to purchase the items in that basket in 2006, while it cost $12,000 to purchase those identical goods in 2007, then the inflation rate from 2006 to 2007 is
(12000/10000)*100=120
If a market basket was defined in 2006 and it cost $10,000 to purchase the items in that basket in 2006, while it cost $12,000 to purchase those identical goods in 2007, then the price index for 2007 is
100
If a market basket was defined in 2006 and it cost $10,000 to purchase the items in that basket in 2006, while it cost $12,000 to purchase those identical goods in 2007, then the price index for the base year is
Cyclically unemployed
If a person is laid-off from a job and told that they will be brought back as soon as the economy picks up and demand for their product rises, then economists call this person.
More than 11 percentage points
If the CPI were fixed then the fact that it is wrong by 0.8 percentage points means that over a ten year period it is wrong by
Discouraged worker effect
If the unemployment rate falls because the number of people not working but searching for work (falls), economists would attribute this to the
Encouraged worker effect
If the unemployment rate rises because the number of people not working but searching for work (rises), economists would attribute this to the
Oligopolists
If you drive on a rural stretch of highway and come upon an intersection in which there are two gas stations and you know them to be the only ones for 100 miles, they are
Monopolist
If you drive on a rural stretch of highway and come upon an intersection in which there is only one gas station and you know it to be the only one for 100 miles, it is a
Structurally unemployed
In 2005, General Motors announced a 20% reduction in its staffing levels and the closure of many assembly plants. Those laid off as a result would likely be classified as
The market supply for the good rises and falls when there is entry and exit, respectively
In a diagram of perfect competition, the marginal revenue line moves up and down when there is exit and entry, respectively, because
Borrowers
In early 2005, inflation increased unexpectedly due to an increase oil prices. This helped
Counted, but goods produced by American firms in foreign countries are not counted
In measuring Gross Domestic Product, goods produced by foreign firms in the United States are
Overstating inflation because they were missing "where people shop"
In the 1970s and 1980s Wal-Mart entered several markets outside of its home base of Arkansas. As a result it brought lower prices on a variety of goods. That the Bureau of Labor Statistics did not send its shoppers into these new stores until there was a new survey led to the CPI
Overstating inflation because they were missing "where people shop"
In the 1990s and 2000s Wal-Mart entered the grocery sector in several U.S. cities and as a result it brought lower prices on food. That the Bureau of Labor Statistics did not send its shoppers into these new stores in a timely fashion led to the CPI
The percentage year-to-year increase
Inflation is measured using _________ in a price index.
A price index
Is a mechanism to compare all prices in two different years b. Is the ratio of the price of a market basket in one year to the price of the market basket in the previous year times 100
Oligopoly
Local telephone service was once an area in which consumers had no choices. Many young people no longer use "land lines" preferring instead to use their cellular phones. This means that the market has moved toward
Perfect competition.
Lumber Products can be modeled best using the model of
Needs to make to maintain the incentive to remain in the industry
Normal Profit is what a firm
-Social Security taxes are higher than they would otherwise be -Personal Income taxes are lower than they would otherwise be - The poverty line is higher than it would otherwise be -Social Security payments are higher than they would otherwise be
One of the consequences of the overstatement of the CPI is that
-Domestic production (cooking, laundry and such) are not counted -It ignores the value of leisure -It treats all spending the same (spending on military hardware is treated the same as spending on education) -Environmental quality is ignored -The underground economy (unreported and illegal income and sales) is not counted
One of the reasons that Real Gross Domestic Product is not synonymous with social welfare is
It fails to count home production
One problem with using Real Gross Domestic Product as a measure of social welfare is that
Inflation Unemployment Economic growth
One subject of study for macroeconomics is
-The personal exemption to rise too quickly -Social Security's Maximum Taxable Earnings to rise too quickly -The poverty line to rise too quickly -Standard deduction to rise too quickly -Tax brackets cutoffs to rise too quickly
A CPI miscalculation that overstates its increase by 0.8 percentage points will cause
A depression is much worse
A depression is different from a recession in that
Inadequately deals with updates in product lines for existing goods
A reason given why the CPI overstates the cost of living is it
Makes no attempt to control for quality improvements except in consumer goods
A reason given why the CPI overstates the cost of living is it
Makes no attempt to control for substitution to cheaper goods
A reason given why the CPI overstates the cost of living is it
Makes no attempt to control for the fact that sales often occur on holidays
A reason given why the CPI overstates the cost of living is it
Updates the market basket infrequently thereby missing the steep price decline in the early adoption period
A reason given why the CPI overstates the cost of living is it
BLS audits prices in the same types of stores, rather than shift to cheaper outlets
A reason given why the CPI overstates the cost of living is that the
Never intended to measure increases in the cost of living but many use it that way
According to the Bureau of Labor Statistics, the Consumer Price Index was
Real Gross Domestic Product is Gross Domestic Product
Adjusted for inflation
Perfect competition
Agricultural Products can be modeled best using the model of
The percentage of sales in the industry by the largest firms
An indicator of the degree of competition in an industry is the concentration ratio. It measures
Oligopoly
An industry in which there are just a few large firms is likely to be characterized by
Monopolistic competition
An industry in which there are many competitors with specific marketing niches is likely to be characterized by
Cause these wages to rise more quickly that they otherwise would
Because the CPI overstates the rate of inflation, Cost of Living Adjustments for wages that are based on it will
Leads to the CPI overstating the rate of inflation
DVD writers allow people to record TV shows in a high quality format. They entered the market in 2002 at a price of $1000. By 2003 they were under $500. By the time they had become part of the CPI market basket they are likely to be less than $250. Economists will argue that this type of issue
The average price level (CPI) falls
Deflation occurs only when
A firm makes more than the minimum required to maintain the incentive to remain in the industry
Economic Profit exists whenever
Inversely related to the number of firms competing in the industry
Economic theory would suggest that the profitability of an industry would be
Dangerous, as it can lead to a depression
Economists consider deflation
Overstates it by a difference of about .8% (meaning that an official inflation rate of 1.8% is really only about 1%)
Economists generally believe that relative to the true cost of living, the CPI
1.0 percentage points
Estimates of the overstatement of cost of living by the CPI suggest the magnitude of the overstatement is roughly
A single seller
For a market to be characterized by monopoly, there must be
Barriers to entry and exit
For a market to be characterized by monopoly, there must be
-large number of firms with no one able to influence price - Freedom of entry and exit -Indistinguishable products being sold (All of the above)
For a market to be characterized by perfect competition, there must be
Earn, spend
Gross Domestic Product is counted using two methods: one which counts all the ways people _____ money and another which counts all the ways people _____ money.
Profit will increase
If MR>MC then when an additional unit is sold the firm's
2006
If a market basket was defined in 2006 and it cost $10,000 to purchase the items in that basket in 2006, while it cost $11,000 to purchase those identical goods in 2007, then the base year is
(110-100)/100*100%=10%
If a market basket was defined in 2006 and it cost $10,000 to purchase the items in that basket in 2006, while it cost $11,000 to purchase those identical goods in 2007, then the inflation rate from 2006 to 2007 is
(11000/10000)*100=110
If a market basket was defined in 2006 and it cost $10,000 to purchase the items in that basket in 2006, while it cost $11,000 to purchase those identical goods in 2007, then the price index for 2007 is
100
If a market basket was defined in 2006 and it cost $10,000 to purchase the items in that basket in 2006, while it cost $11,000 to purchase those identical goods in 2007, then the price index for the base year is
There are too frequent updates of the market basket
Which of the following is not a reason that the CPI overstates the cost of living?
6.0% (8/(125+8)*100%
With 125 million people working, 8 million out of work and looking for work, and 147 million neither working nor looking for work the unemployment rate would be
-Part of the 125 million holding part time jobs when they were qualified for full-time jobs -Part of the 125 million holding low-skill jobs when they were qualified for high-skill jobs
With 125 million people working, 8 million out of work and looking for work, and 147 million neither working nor looking for work, "underemployment" would be illustrated by
8 million giving up in their search for work
With 125 million people working, 8 million out of work and looking for work, and 147 million neither working nor looking for work, the "discouraged worker effect" would be illustrated by people in the
147 million seeking but not attaining employment
With 125 million people working, 8 million out of work and looking for work, and 147 million neither working nor looking for work, the "encouraged worker effect" would be illustrated by people in the
Delay their purchases of goods in hopes prices will fall further
With deflation people will
Increase exponentially
Over the years the consequences of the biased-measurement of the CPI
Overstate inflation because of the issue of substitution
Suppose people on diets buy the bulk of the ground chicken and ground turkey sold in the U.S. and they use either interchangeably as a substitute in recipes for ground beef. If the price of ground turkey rises and the price of ground chicken does not the then CPI will
Monopolistic competition.
Suppose ten companies begin introducing new genetically engineered apples. Each has their own distinctive taste and brand name. This market would be described by
Oligopoly
Suppose you can fly from Charlotte to London but only two airlines provide the service. This market would be described by
Monopolistic competition
Suppose you can fly from LA to New York and 15 separate airlines provide the service. This market would be described by
Monopoly.
Suppose you can fly from your home city to New York but only one airline provides the service. This market would be described by
Oligopoly.
Suppose you can get broadband only from your cable company or your phone company. This market would be described by
Oligopoly..
Suppose you can get the typical cable channels (ESPN, MTV, Bravo, etc.) from a cable company, from DIRECTV, or from DISH Network. This market would be described by
It consistently overstates the increase in the cost-of-living
The Consumer Price Index (CPI) is a heavily criticized measure of inflation because
An increase in the number of people who are looking for work & An decrease in the number of people with jobs
Which of the following can make the unemployment rate rise?
Substitution into nearly-equivalent goods is assumed to be more common than it is
Which of the following is not a reason that the CPI overstates the cost of living?
The good one firm produces is exactly the same as the good another firm produces
The assumption under perfect competition of a "homogeneous product" means that
That no buyer will pay more for one firm's good than another's
The assumption under perfect competition of a firm that has no market power means that
Monopolistic competition.
The breakfast cereals industry can be best modeled using the model of
The Bureau of Labor Statistics
The consumer price index is computed by
Monopolistic competition
The fast food industry can be modeled best using the model of
That there are two in oligopoly rather than one competitor in a monopoly
The key difference(s) between monopoly and oligopoly is
The products sold are slightly different in monopolistic competition
The key difference(s) between perfect competition and monopolistic competition is
Monopoly.
The local residential electrical power industry can be best modeled using the model of
One percentage point
The magnitude of the annual overstatement of the CPI is approximately
Overstates the increase in the cost of living
The majority of economists believe that the Consumer Price Index
The inflation rate is
The percentage increase in the price index from one year to the next
Monopoly
The personal computer operating systems industry can be best modeled using the model of
-It would mean that personal income taxes would rise -It would mean that benefits to the poor would fall -It would mean that Social Security benefits would fall
The political problems associated with fixing the CPI are that
To avoid double counting goods that are sold so as to be resold
The reason that only final sales are counted in GDP is
Oligopoly
The soft drink (colas in particular) industry can be best modeled using the model of
Even though, strictly speaking, few industries in the U.S. are governed by perfect competition
The usefulness and relative simplicity of the supply and demand model is often used
Monopoly..
There are hundreds of local water companies but economists insist that in each community they are __________ because consumers have no other choices in the local market in which they live.
P>ATC
There will be long-run pressure on the price to fall whenever
P<ATC & P<AVC
There will be long-run pressure on the price to rise whenever
P>ATC
There will be short-run pressure on the price to fall whenever
P<AVC
There will be short-run pressure on the price to rise whenever
The goods average people buy and the quantities in which they buy them
To an economist a "market basket" is made up of
The marginal cost curve, but only that portion that is above the minimum of average variable cost
Under perfect competition, the supply curve is
Beer industry
Very high concentration ratios characterize the
Furniture industry
Very low concentration ratios characterize the
Economic profit
Whether a firm stays in business or shuts down depends heavily on the concept of
A decrease in the number of people who are looking for work & An increase in the number of people with jobs
Which of the following can make the unemployment rate fall?