Macro quiz answers

*Figure 2-5* Refer to Figure 2-5. The opportunity cost of obtaining 20 *additional dryers* by moving from point D to point A is

0 washers

*Refer to Table 6-3*. Following the imposition of a price floor $2 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is

3

*Refer to Figure 6-26*. The effective price received by sellers after the tax is imposed is

8

If nominal GDP is $10 trillion and real GDP is $12 trillion, then the GDP deflator is

83.33, and this indicates that the price level has decreased by 16.67 percent since the base year.

If *macaroni and cheese* is an inferior good, what would happen to the equilibrium price and quantity of macaroni and cheese if consumers' incomes rise?

Both the equilibrium price and quantity would decrease

*Refer to Figure 5-2.* As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

D3

*Refer to Table 5-9*. Along which of the supply curves does quantity supplied move proportionately more than the price?

None. Quantity supplied moves proportionately less than the price along all of the three supply curves.

*Refer to Figure 4-26*. Which of tterm-5he followterm-13ing movements would illustrate the effect in the market for orange juice of an announcement by the *American Dental Association* that orange juice erodes tooth enamel?

Point C to Point B

What would happen to the equilibrium price and quantity of *peanut butter* if the price of peanuts went up, the price of jelly fell, fewer firms decided to produce peanut butter, and health officials announced that eating peanut butter was good for you

Price will rise, and the effect on quantity is ambiguous.

Which of the following was not a reason *OPEC failed* to keep the price of oil high

The agreement OPEC members signed allowed each country to produce as much oil as each wanted.

What would happen to the equilibrium price and quantity of *lattés* if the cost to produce steamed milk, which is used to make lattés, increased, and scientists discovered that lattés cause heart attacks?

The equilibrium quantity would decrease, and the effect on equilibrium price would be ambiguous.

Which of the following events would cause the price of *oranges* to fall?

The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges.

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good

There are many close substitutes for this good.

Net exports equal

Y - (C + I + G)

A linear, upward-sloping supply curve has

a constant slope and a changing price elasticity of supply.

In which of the following situations will total revenue increase

all of the above

Which of the following is an example of depreciation?

all of the above

Consider the market for portable air conditioners in equilibrium. When a heat wave strikes the equilibrium price

and quantity both increase

Suppose the demand for *macaroni* is inelastic, the supply of macaroni is elastic, the demand for cigarettes is inelastic, and the supply of cigarettes is elastic. If a tax were levied on the sellers of both of these commodities, we would expect that the burden of

both taxes would fall more heavily on the buyers than on the sellers.

If a firm is a price taker, it operates in a

competitive market

If the government removes a binding price floor from a market, then the price received by sellers will

decrease, and the quantity sold in the market will increase.

A *newspaper article* informs you that most businesses reduced production in the last quarter but also sold from their inventories during the last quarter. Based on this information GDP likely

decreased

A tax on the sellers of *coffee mugs*

decreases the size of the coffee mug market.

Holding all other forces constant, if increasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

elastic

A decrease in demand will cause a decrease in price, which will cause a decrease in supply.

false

If a line passes through the points (20,5) and (10,10), then the slope of the line is -2.

false

Refer to Figure 2-14. Unemployment could cause this economy to produce at *point B*.

false

The slope of a horizontal line is infinite, and the slope of a vertical line is zero.

false

When quantity supplied exceeds quantity demanded at the current market price, the market has a surplus, and market price will likely rise in the future to eliminate the surplus.

false

Which of the following is likely to have the most price inelastic demand?

gasoline in the short run

*Joe and Fred* are economists. Joe thinks that the wealthiest 10% of the US population should be taxed a rate higher than the rest of society because they can better afford it.

have different normative views about tax policy.

A minimum wage that is set below a market's equilibrium wage will

have no impact on employment.

Another term for factors of production is

inputs

When demand is perfectly inelastic, the price elasticity of demand

is zero, and the demand curve is vertical

*Refer to Figure 5-3*. Which demand curve is unit elastic?

none of the above

Economists view normative statements as

prescriptive, making a claim about how the world ought to be.

Suppose *roses* are currently selling for $40 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a

surplus to exist and the market price of roses to decrease.

In the *circular-flow diagram*, in the markets for

the factors of production, households are sellers and firms are buyers.

A U.S. firm produces *nail guns* in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the nail guns to a U.S. construction company. In which quarter(s) does(do) these transactions raise investment?

the first but not the second

In the circular-flow diagram, households and firms are the decision makers.

true

The *production possibilities frontier* is a graph that shows the various combinations of outputs that the economy can possibly produce given the available factors of production and the available production technology.

true

The concept of slope can be used to answer questions about how much one variable responds to changes in another variable.

true