ECO 202 Final

Which of the following would most likely cause the supply of wheat to increase?

a technological advance that lowers the cost of producing wheat

Economics is primarily the study of

the choices we must make among alternatives because of scarcity.

Banks are considered a safer place to deposit money now than they were prior to 1933 because

the creation of the FDIC reduced the likelihood of bank runs.

The actual incidence (or burden) of a tax refers to

who actually bears the burden of a tax once changes in market prices are taken into account.

Your grandmother gives you a $100 savings bond that will mature in 15 years. The bank tells you that they will buy it from you today at a price of $24. If interest rates rise in the near future, the value of your bond...

will fall, and it will be worth less than $24

Which of the following is the primary tool the Fed uses to control the supply of money?

Open market operations.

Which of the following events would increase producer surplus?

Sellers' costs stay the same and the price of the good increases.

Say you are in the mood for the third-best Cincinnati-style chili, so you go to Skyline. You usually get a 4-way bean, which costs $6.69. Today you're thinking about getting a 3-way, which is $6.49. (If you are unfamiliar, a "3-way" is a dish with spaghetti, chili, and cheese. A "4-way bean" has spaghetti, chili, cheese, and beans.) What is the marginal benefit of choosing the 3-way instead of the 4-way?

$0.20

If Maeby bought nine gallons of gasoline at $1.50 per gallon, a car wash costs $1. If she bought ten gallons of gasoline, a car wash is free. Given that Maeby is going to get the car wash, the marginal cost of the tenth gallon of gasoline is...

$0.50

Sebastian drinks Mountain Dew. He can buy as many cans of Mountain Dew as he wishes at a price of $0.50 per can. On a particular day, he is willing to pay $0.95 for the first can, $0.80 for the second can, $0.60 for the third can, and $0.40 for the fourth can. Assume Sebastian is rational in deciding how many cans to buy. His consumer surplus is

$0.85.

Suppose a country had $3.5 billion of net exports and bought $6.8 billion of goods and services from foreign countries. This country would have

$10.3 billion of exports and $6.8 billion of imports.

Suppose the CPI was 95 in 1955, and suppose currently the CPI is 475. According to the CPI, $100 today purchases the same amount of goods and services as

$20.00 purchased in 1955.

When an economy is operating well below its full-employment capacity and the marginal propensity to consume is 3/4, a $10 billion increase in investment will cause the equilibrium income to rise by

$40 billion.

Figure 17-9 Refer to Figure 17-9. The amount of revenue collected by the government from the tariff is

$400.

Assume IBM decides, despite an ongoing recession, to build a new branch for computer analysis in Bozeman, Montana. The plant expects to spend $12 million to hire the necessary employees, all of whom move in from out of state to take the jobs. If the marginal propensity to consume of the newly employed workers was 3/4, what would be the total change in income that would result from the operation of the plant for one year?

$48 million

The economist Bryan Caplan recently found a pair of $10 arch supports that saved him from the pain of major foot surgery. As he stated on his blog (econlog.econlib.org), he would have been willing to pay $100,000 to fix his foot problem, but instead he only paid a few dollars. How much consumer surplus did Bryan enjoy from this purchase?

$99,990

Over time, GDP may increase as the result of either (i) expansion in the quantities of goods produced or (ii) higher prices. Which of the following is true?

(i) will generally increase living standards, but (ii) will not.

Use the table to calculate net exports. Do not enter a dollar sign ($). Only enter the number. For example, if your answer is $10, you should enter "10" and if your answer is negative 10 dollars, you should enter "-10" (without the quotation marks). Personal consumption expenditures$900Personal taxes$180Government consumption and gross investment$300Interest income$60Exports$40Imports$75Depreciation$60Gross investment$200

-35 (with margin: 0)

Below is a supply curve for notebook paper. Use the supply curve to fill in the missing numbers in the table. Be careful to enter the quantities as whole numbers (1, 2, 3, 4, etc.) and the prices in the format 0.X0 (0.10, 0.20, 0.30, etc.). Price per package of notebook paper ($)Quantity of packages of notebook paper supplied (millions)0.10, ___, ___, 3, 0.4, ___, ___, 7, 1.00, ___

1 0.20 5 0.70

The nominal salary paid to the president of the United States and the Consumer Price Index (CPI) are given for various years below.Table 7-9 Year Presidential salary CPI (2000 = 100) 1920 $75,000 11.6 1940 75,000 8.1 1960 100,000 17.2 1980 200,000 47.9 2000 400,000 100.0 Refer to Table 7-9. During which of the above years was the purchasing power of the president's salary highest?

1940

If the amount of money in circulation is $200 million and nominal GDP is $400 million, the velocity of money is...

2

If consumption equals 800 when disposable income is 1,000, and then consumption increases to 1,000 when disposable income increases to 1,300, the marginal propensity to consume is

2/3

A reserve requirement of 5 percent implies a potential money deposit multiplier of

20.

If the MPC is 3/4, the simple expenditure multiplier is

4.00

Say that the following steps are how rubber tires are made. How much do all these actions contribute to GDP? Loggers cut down the Hevea brasiliensis, the tree from which rubber comes. They sell the logs to a rubber producer for $100. The rubber producer turns the logs into rubber. They sell this rubber to a tire company for $200. The tire company imports the rubber and forms it into tires. They sell these tires to Pep Boys for $300. Pep Boys sells the tires to people with flat tires. They sell the tires for $400. For your answer, write a number (no need for the $ sign). These actions contribute $_________ to GDP.

400

If a household has $40,000 in taxable income and its tax liability is $20,000, the household's average tax rate is

50 percent

If the expected rate of inflation is 2 percent, and the expected real interest rate is 4 percent, what is the nominal interest rate? For your answer, just enter the number. Do not write "percent" or the % symbol.

6 (with margin: 0) or 0.06 (with margin: 0)

If the growth rate of real GDP is 3 percent, velocity is constant, and the money supply grows at 9 percent, the rate of inflation will be approximately...

6 percent.

Below is the demand schedule for chicken feet, a dim sum delicacy served at some Chinese restaurants. Although some people find the texture strange, others have developed a taste for it in the past 10 years. Price of chicken feet (per pound)Quantity of chicken feet demanded (millions of pounds) in 2010Quantity of chicken feet demanded (millions of pounds) in 2020$5.003.09.2$2.503.29.9$1.254.112.2$1.004.112.2$0.505.715.0 How many millions of pounds more of chicken feet were demanded in 2020, at $2.50 per pound, than in 2010? (Don't enter a bunch of zeroes for the millions; your answer should be simple, like 6.2, or 8.1.)

6.7 (with margin: 0) or 6,700,000 (with margin: 0)

Use the table below to choose the correct answer. Income Tax Liability (dollars) (dollars) 20,000 1,000 25,000 2,500 30,000 6,000 The marginal tax rate on income in the $25,000 to $30,000 range is

70 percent.

Suppose the population (age 16 and over) of the Philippines is 100 million; 5 million are unemployed, and 70 million hold jobs. The labor force participation rate in the Philippines is

75 percent.

If the consumer price index (CPI) at the end of year one was 100 and was 108 at the end of year two, the inflation rate during year two was

8 percent.

Suppose people anticipate that inflation will be 4 percent during the next several years. If the real rate of interest is 5 percent, the money rate of interest must be

9 percent

Are the following statements true or false? (A) The assumption that politicians behave in a self-interested fashion is premised largely on the fact that politicians who fail to do so will often also fail to be reelected. (B) If domestic citizens live and work in foreign countries, their income is counted as part of GDP.

A is true; B is false

Are the following statements true or false? (A) If the demand for housing increased, the demand for resources used to producing housing (such as lumber) would fall. (B) If a landlord is faced with a government-imposed price ceiling set below the equilibrium level, a common response would be to improve the quality of housing in order to attract new tenants.

A is false; B is false

Are the following statements true or false? (A) If you paid $800 for a used motorcycle last year, the sale contributed $800 toward last year's GDP. (B) Gross investment measures all expenditures on investment, while net investment subtracts depreciation to arrive at only expenditures on new investment. Thus, net investment excludes expenditures for replacement of worn-out capital equipment.

A is false; B is true

Are the following statements true or false? (A) Crony capitalism is the term used to refer to an economic system in which the institutions of markets are generally maintained, but the allocation of resources and business activity is determined by political favoritism and political decision making rather than consumer purchases, market prices, and profits and loss. (B) Scarcity is not present in the public sector because the government pays for all goods and services it provides free to citizens.

A is true; B is false

Are the following statements true or false? (A) The minimum wage increases unemployment among unskilled workers according to economic theory. (B) If the government imposed a price ceiling of $1 on webcams, there would be a surplus of webcams.

A is true; B is false

Indicate whether the following statements are true or false. (A) Ricardian equivalence holds that an increase in government spending financed by borrowing (debt) has an identical effect on the economy as if the spending were financed by an increase in current taxes instead. (B) Fiscal policy is not subject to timing problems - it has an immediate effect on the economy.

A is true; B is false

Are the following statements true or false? (A) The actual burden of a tax does not depend on the original legal (or statutory) assignment of the tax, but it does depend on the elasticities of demand and supply. (B) Because taxes reduce the number of mutually beneficial trades in a market, they create an excess burden (or deadweight loss) in addition to the direct revenue burden of the tax.

A is true; B is true

Which of the following properly describes the interest-rate effect of aggregate demand?

A lower price level leads to lower money demand, lower money demand leads to lower interest rates, a lower interest rate increases the quantity of goods and services demanded.

Figure 3-15 Refer to Figure 3-15. Which area represents producer surplus when the price is P2?

ACF

Which of the following are true? Economists use the criterion of economic efficiency to judge the merit of alternative outcomes. Undertaking an economic action will be efficient if it produces more benefits than costs for the individuals of the economy. Undertaking an economic action will be inefficient if it produces more costs than benefits to the individuals. All of the above are true.

All of the above are true.

Which of the following statements is true? The quality of products sold in black markets tends to be less reliable than the quality of products in legal markets. For otherwise identical products, the price of products in black markets tends to be higher than in legal markets. The rate of violence is higher in black markets than in legal markets. All of the above are true.

All of the above are true.

What is meant by the expression, "There is too much money chasing too few goods"?

An expansion in the supply of money relative to the availability of goods and services is causing an increase in the general level of prices.

Within the framework of the AS/AD model, which of the following is a true statement regarding short-run aggregate supply?

An increase in prices temporarily improves profit margins because important components of costs are fixed in the short run.

Andrew buys yogurt, and he would be willing to pay more than he now pays. Suppose that Andrew has a change in his tastes such that he values yogurt more than before. If the market price is the same as before, then

Andrew's consumer surplus would increase.

Use the table below to calculate Gross Domestic Product (GDP) and net exports (NX). Government expenditures$120 billionConsumption$400 billionInvestment by private businesses$60 billionExports$100 billionImports$120 billion GDP is $___ billion and NX is $___ billion.

Answer 1: 560 Answer 2: -20

For each of the situations listed, look at the data given and classify the economy as either in a recession (R), at full employment (F), or in an economic boom (B). R A. An economy with a natural rate of unemployment of 5% currently has an actual unemployment rate of 7 percent. R B. An economy with a full employment (or potential) level of GDP equal to $5 billion has an actual GDP of $4 billion. F C. An economy with a natural rate of unemployment of 5% currently has an actual unemployment rate of 5 percent. B D. An economy with a potential GDP of $2 billion has an actual GDP of $3 billion.

Answer 1: R Answer 2: R Answer 3: F Answer 4: B

Consider a coffee shop that has two inputs, labor wages and coffee supplies. The coffee shop has a contract with its coffee supplier for 5 years that fixes the price of coffee for the length of the contract. Labor wages are more flexible. Deflation hits the economy. The effect will be a(n) decrease in profits for the coffee shop. This example illustrates why the SRAS curve is upward sloping .

Answer 1: decrease in profits Answer 2: SRAS Answer 3: upward sloping

Consider the market for soda in Philadelphia. The equilibrium price is $1.10 and the equilibrium quantity is 1.4 million bottles. The city government implements a sales tax of $0.30 (in other words, buyers pay the tax). What effect is this going to have? The demand curve will shift down by the amount of the tax.

Answer 1: demand Answer 2: down

The more elastic the supply of a product, the more likely it is that the burden of the tax will fall on buyers. . The more elastic the demand of a product, the more likely it is that the burden of the tax will fall on sellers.

Answer 1: fall on buyers. Answer 2: fall on sellers.

Use the figure below to answer the following question(s).Figure 10-1 At which point in Figure 10-1 is the economy experiencing an economic boom?

B

Which of the following would cause the actual deposit expansion multiplier to be less than its potential? a. The general public holding of funds in the form of currency rather than bank deposits b. The holding of excess reserves by commercial banks c. The general public holding of funds in the form of coins rather than bills Both a and b

Both a and b

People are more likely to purchase a consumer ratings magazine that reviews new automobiles before buying a new car than they are to purchase a consumer ratings magazine that reviews pens and pencils before buying a new pen or pencil. Which of the following best explains this behavior?

Because the value of the information, in terms of avoiding a mistake on the purchase, is much higher for an automobile than for a pen or pencil, it is more worthwhile to gather this information.

Consider the following statements: (I) When individuals engage in a voluntary exchange, both parties expect to be made better off. (II) By channeling goods and resources to those who value them most, trade creates value and increases the wealth created by a society's resources.

Both I and II are true

Which of the following is an implication of the law of comparative advantage?

Countries that are low opportunity cost producers of timber products should trade those products for goods they can produce only at a high opportunity cost.

Consider the following scenario: Ana is training for a triathlon, a timed race that combines swimming, biking, and running. While Ana usually practices swimming for two hours per day, she decides to continue for an additional hour because the pool is less crowded than usual today, allowing her practice time to be more productive. Which basic principle of individual choice does Ana's plan best illustrate?

Decisions are made at the margin.

Josephine teaches economics, and makes about $110,000 per year doing so. If she couldn't teach economics, she would be doing economic consulting for a major bank for $150,000 per year. If she couldn't work as an economic consultant, she would go back to school and study history. If she couldn't do that, she would stay at home and take care of the kids (her husband currently does this, but could go back to work if she couldn't find a job she liked). Which of the following is Josephine's opportunity cost of teaching economics?

Doing economic consulting.

Relative to a no-trade situation, what effect will importing a good from a foreign nation have on the domestic market for the good?

Equilibrium price will fall and total domestically produced output will fall.

Which of the following is true of exchange?

Exchange permits trading partners to expand their total output of goods and services as the result of greater specialization in areas where each has a comparative advantage.

If the price index rose from 120 to 132, the inflation rate would be 12 percent.

False

True or False: The GDP of an economy can never exceed the potential GDP level.

False

True or false: Government spending contributes to GDP through government employee wages, social security payments, and tanks purchased by the military.

False

Which of the following is a major insight of the Keynesian view?

Fluctuations in aggregate demand are an important potential source of business instability.

Use the figure below to answer the following question(s).Figure 10-4 Starting from long-run equilibrium at point F in Figure 10-4, at which of the following points would short-run equilibrium occur following a decrease in resource prices?

G

One bag of flour is sold for $1.50 to a bakery, which uses the flour to bake bread that is sold for $4.00 to consumers. A second bag of flour is sold to a consumer in a grocery store for $2.00. Taking these three transactions into account, what is the effect on GDP?

GDP increases by $6.00.

Which of the following best illustrates the difference between GDP and GNP?

GDP measures the output produced within the borders of a country, while GNP measures output produced by the citizens of a country.

Which of the following examples illustrates a progressive income tax?

I earn $500 and pay $50 in taxes; you earn $1,000 and pay $125 in taxes.

Which of the following most accurately indicates the implications of an economy's production possibilities curve?

If all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.

Which of the following is true?

In recent decades, the volume of U.S. international trade has been increasing as a share of the economy.

Which one of the following is a major difference between market and collective action through government?

In the market sector, there is generally a one-to-one link between payment and consumption; this link is often absent in the government sector.

Suppose the demand for tacos decreases. What will happen to producer surplus in the market for tacos?

It decreases.

An American-owned McDonald's opens in Russia. How would the net revenue earned by this restaurant affect the GDP and GNP of the United States?

It would increase GNP and leave GDP unchanged.

Which of the following compose the M2 money supply?

M1 plus savings deposits, small-denomination time deposits, and money market mutual funds (retail)

A member of Congress is feeling pressure to get re-elected, so they're deciding between two programs. - Option A: Airport Security: it costs $50 million and saves 10 lives - Option B: Lead Cleanup: it costs $70 million and saves 12 lives What is the marginal benefit (MB) and marginal cost (MC) of the lead cleanup, compared to the airport security?

MB=2 more lives saved; MC=$20 million

If Mateo is paid $25,000 to sell his crop of tomatoes even though he would have been willing to have sold the crop for as little as $20,000, this indicates that

Mateo received $5,000 of producer surplus from the transaction.

Which of the following most accurately states the function of middlemen?

Middlemen create value by arranging trades and providing information to buyers and sellers.

Assume that you are a member of the U.S. House of Representatives from your home state and district. Which of the following best explains why you have a strong incentive to get the federal government to finance pork-barrel projects in your district?

Most of the benefits of pork-barrel projects within your district will accrue to your constituents, whereas most of the costs will be imposed on voters from other districts.

If a country's currency appreciates, which of the following will most likely happen?

Net exports will fall and aggregate demand will decrease.

If expansionary monetary policy reduces real interest rates in the United States, which of the following is most likely to occur?

Net foreign investment will decline, causing the dollar to depreciate and net exports to increase.

Suppose an economist and trade advisor to a politician says the following: "My function, really, as an economist is to try to provide the underlying analytics that confirm his intuition. And his intuition is always right in these matters." Is this consistent with the economic approach described in Chapter 1?

No

Which of the following is counted in United States GDP? a. A new video game made in China but purchased in the United States b. New growth in rainforests c. A new quilt made by Jane and given to her grandmother for her 80th birthday a & c only None of the above

None of the above

Which of the following is a distinguishing characteristic of a user charge?

Persons pay roughly in proportion to the extent that they use the good or service.

Use the figure below to answer the following question(s).Figure 9-2 Which of the following is true for the economy depicted in Figure 9-2?

Potential output equals y1.

If an economy is at its potential output level, which of the following is not true?

The price level is zero.

Which of the following is a valid reason for government provision rather than market provision of certain economic goods and services?

Public goods tend to be undersupplied through the market since it is difficult for potential suppliers to withhold such goods from nonpaying consumers, while the government can use taxes to overcome this problem.

Which of the following occurs when a shortage occurs in the market for a good?

Quantity demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption.

A price ceiling set below an equilibrium price tends to cause persistent imbalances in the market because

Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage.

Groupon (remember Groupon? Does anyone still use that?) has a coupon for $6 off the price of laser tag. What happens to the quantity of laser tag demanded while the coupon is valid?

Quantity demanded rises.

Which of the following is a positive economic statement?

Raising the federal minimum wage to $6.50 per hour will cause the rate of unemployment to increase.

Which of the following about unemployment is true?

Some unemployment will be present even when a dynamic labor market is operating efficiently.

Suppose both the equilibrium price and quantity rise for a particular product. Which of the following best explains this situation?

Supply and demand simultaneously increased and the shift in supply was less than the shift in demand.

Which of the following indicates the primary mechanism by which the money supply expands?

The Fed purchases additional bonds, which increases the reserves available to the banking system.

Which of the following is responsible for decision making regarding the purchase and sale of bonds by the Fed?

The Federal Open Market Operations Committee.

If Honda (a Japan-based firm) produces a car in Ohio and exports it to Japan, in which country's GDP will the car be counted?

The GDP of the United States because that is where it was built

If there is an increase in both the supply and demand for a good, which of the following will definitely occur?

The equilibrium quantity will increase.

Below is the demand schedule for chicken feet, a dim sum delicacy served at some Chinese restaurants. Although some people find the texture strange, others have developed a taste for it in the past 10 years. Price of chicken feet (per pound)Quantity of chicken feet demanded (millions of pounds) in 2010Quantity of chicken feet demanded (millions of pounds) in 2020$5.003.09.2$2.503.29.9$1.254.112.2$1.004.112.2$0.505.715.0 Based on the demand schedule, you conclude:

The demand curve shifted to the right.

What should happen to the "demand for speed" (measured by the average speed on highways) once airbags are included on cars?

The demand for speed increases

Figure 17-1 In Figure 17-1, in the absence of trade, the domestic price of shoes would be Pn. If the United States moved from a no-trade situation to free trade, which of the following would happen?

The domestic price of shoes would fall, and domestic consumption would rise.

The reporter on one broadcast network says 2011 GDP increased to an all-time high. Commenting on the same figure, a second reporter says GDP in 2011 was less than in 2010. Which of the following explanations is consistent with the statements of both reporters?

The first reporter was referring to nominal GDP, and the second was referring to real GDP.

Which of the following is the best explanation of how expansionary fiscal policy can potentially crowd out net exports?

The higher interest rates associated with expansionary fiscal policy attract foreign investors. To buy U.S. financial assets, foreigners bid up the real exchange rate, which in turn causes net exports to fall.

Which of the following explains why higher prices in the goods and services market will lead to an upward sloping short-run aggregate supply curve?

The higher prices will temporarily improve profit margins because many of the cost components of firms will be fixed in the short run.

Suppose the Fed purchases $100 million of U.S. government securities from the public. How will this affect the money supply and the national debt?

The money supply will increase; the national debt will be unaffected.

Which of the following generalizations about the burden of an excise tax is correct?

The more inelastic the demand for a product, the larger the portion of an excise tax will be paid by buyers.

Which of the following situations would you prefer if you planned to borrow money?

The nominal interest rate is 9%, and expected inflation is 7%.

In which one of the following situations is the political process most likely to result in both the acceptance of efficient (productive) programs and the rejection of inefficient (counterproductive) political activities?

The people who benefit from a government program pay the costs of the program roughly in proportion to the benefits that each receives.

Suppose that the United States eliminated its tariff on automobiles, granting foreign-produced automobiles free entry into the U.S. market. Which of the following would be most likely to occur?

The price of automobiles to U.S. consumers would decline, and the demand for U.S. export products would increase.

In which of the following situations is representative democracy most likely to lead to the adoption of an inefficient government program?

The program provides substantial benefits to a small interest group, and the costs are widespread among voters.

Other things constant, how will a decrease in the wages of teenagers affect the market for fast food hamburgers?

The supply of fast food hamburgers will increase, leading to a reduction in the price of hamburgers.

Which of the following would be expected if the tariff on foreign-produced automobiles were increased?

The supply of foreign automobiles to the domestic market would decline, causing auto prices to rise.

How will an increase in lumber prices influence the home construction market?

The supply of newly constructed homes will decrease.

Suppose the population (age 16 and over) of Indonesia is 200 million; 9 million are unemployed, and 111 million hold jobs. Indicate the rate of unemployment and the employment/population ratio of Madagascar.

The unemployment rate is 7.5 percent, and the employment/population ratio is 55.5 percent.

Which of the following will be true when the foreign exchange market is in equilibrium and exports exceed imports?

There will be a net outflow of capital.

Suppose the market equilibrium price of corn is $5 per bushel, and the government sets a price ceiling of $4 per bushel. What is the most likely result of this action?

There will be a shortage of corn.

Consider the supply curve for basketballs. Other things held constant, if the price of basketballs goes up from $7.99 to $14.99, what can we expect from suppliers of basketballs as a result?

There will be an increase in quantity supplied.

Economists have argued that rent control is "the best way to destroy a city, other than bombing." Why would economists say this?

They anticipate that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city.

Which of the following is true of public-choice economists?

They use self-interest and the structure of incentives to analyze political choices and the operation of government.

True or False: Potential GDP is the level of output associated with the full employment of resources.

True

True or False: When the economy is in a recession, unemployment will be higher than the natural rate and actual GDP will be below potential GDP.

True

True or False: Suppose that the hypothetical country of Andesland has a chronic scarcity of quinoa, its staple grain. This implies that if Andesland has a market economy, quinoa will be available only for a price.

True

If U.S. net exports are negative,

U.S. consumers are spending more on foreign goods than foreign consumers are spending on U.S. goods

A decrease in the dollar price of the English pound will make

U.S. exports to England decrease.

Suppose the population (age 16 and over) of France is 50 million; 4 million are unemployed, and 36 million hold jobs. What are the rates of unemployment and labor force participation of France?

Unemployment is 10 percent, and labor force participation is 80 percent.

Which is true regarding the economic impact of a subsidy?

When supply is elastic, the benefits will mainly accrue to buyers.

Which of the following is true regarding private ownership?

With private ownership, owners are held accountable for using their resources in a manner that harms the resources of others.

Keynesian countercyclical budget policy suggests that...

a budget deficit is needed if the economy is operating at less than full employment.

According to the Keynesian model, which of the following policies would be most appropriate during a period of rapid inflation?

a budget surplus

Figure 3-23 Refer to Figure 3-23. The movement from point A to point B on the graph would be caused by

a decrease in price.

If the Fed unexpectedly shifts to a more expansionary monetary policy, which of the following will most likely occur in the short run?

a decrease in the real interest rate

When economic growth (a gradual shift of LRAS to the right) expands the production possibilities of an economy,

a larger output can be attained even if unemployment remains at its natural rate.

The difference between a positive economic statement and a normative statement is that

a positive statement can be proved; a normative statement cannot

Which of the following would lead to an increase in the demand for rental apartments in your area?

a sharp increase in the number of out-of-town students attending the local college

If an increase in the government-imposed minimum wage pushes the price (wage) of unskilled labor above market equilibrium, which of the following will most likely occur in the unskilled labor market?

a surplus of unskilled labor

When Iceland can generate a product using fewer labor hours and resources than the United States, an economist would say that Iceland had

an absolute advantage in production of the product.

Use the figure below to answer the following question(s).Figure 10-17 Suppose an economy is currently operating at output Y1 associated with AD1 and SRAS1, shown in Figure 10-17. Initially, the output of this economy is

above its potential, and the rate of unemployment is less than the natural rate.

In the Keynesian aggregate expenditure model, the equilibrium level of income is achieved when...

actual output equals planned aggregate expenditures.

If the long-run equilibrium of an economy is disrupted by an unanticipated increase in aggregate demand (such as might result from unexpectedly strong demand for exports due to the rapid growth of incomes abroad),

actual unemployment will temporarily fall below the natural rate.

Assume the United States can use a given amount of its resources to produce either 20 airplanes or 8 automobiles and Japan can employ the same amount of its resources to produce either 20 airplanes or 10 automobiles. The U.S. should specialize in

airplanes.

Expansionary fiscal policy financed by government borrowing can lead to... higher interest rates and lower private investment under the crowding-out view. an increase in aggregate demand under the Keynesian view. no change in aggregate demand under the new classical view. all of the above.

all of the above.

Trade creates value by - moving goods from people who value the goods less to people who value the goods more. - permitting trading partners to expand output through specialization in areas where they each have a comparative advantage. - permitting trading partners to expand output through the adoption of mass production methods. - all of the above.

all of the above.

According to the Keynesian view, the large budget deficits of 2008-2015 resulted in

an increase in aggregate demand and higher real output during that period.

Use the figure below to answer the following question(s).Figure 12-1 Refer to Figure 12-1. If the output of the economy is Y1, which of the following would a Keynesian economist be most likely to favor?

an increase in government expenditures

Figure 3-22 Refer to Figure 3-22. Suppose the events depicted in graphs A and C were illustrated together on a single graph. A definitive result of the two events would be

an increase in the equilibrium quantity.

Which one of the following will increase the demand for ice cream?

an increase in the price of frozen yogurt, a substitute for ice cream

An increase in the number of students graduating with a major in psychology would result in

an increase in the supply of psychologists that would decrease the wage of psychologists and increase the number employed.

A special-interest issue is:

an issue that generates substantial personal benefits for a small number of constituents while the costs are spread widely across the bulk of citizens.

Because the height of the demand curve measures the marginal value of the good to consumers, the fact that a demand curve slopes downward to the right illustrates that

as more of a product is consumed, consumers will value additional units less.

A special-interest issue is one that

benefits a small, well-organized interest group at the expense of taxpayers or consumers.

Which of the following is an example of a transfer payment?

benefits paid to Social Security recipients

Crowding out refers to the situation in which

borrowing by the federal government raises interest rates and causes firms to invest less.

When AD is equal to SRAS at an output level equal to the LRAS curve, a. we are at long-run macroeconomic equilibrium b. we are at the natural rate of unemployment both (a) and (b) are true neither (a) nor (b) are true

both (a) and (b) are true

In an informed and voluntary exchange,

both parties receive something they value more than what they gave up.

Crony capitalism is present when

businesses either implicitly or explicitly provide political decision-makers with contributions and other forms of political support in "exchange" for government favors that will improve their profitability.

Consider the market for soda in Philadelphia. The equilibrium price is $1.10 and the equilibrium quantity is 1.4 million bottles. The city government implements a sales tax of $0.30 (in other words, buyers pay the tax). Where is the statutory incidence?

buyers

Which of the following would decrease the demand for movie tickets?

c. An decrease in income and movie tickets are a normal good

Which of the following is counted in the current year's GDP?

c. Drill purchased by a construction company

The long-run aggregate supply curve is vertical, reflecting the fact that...

changes in price have no effect on output in the long run. In the long run, the price of goods and the price of resources move together and firms have no incentive to change their output.

When both exports and imports are considered, the major advantage of international trade is that it allows us to

consume a larger, more diverse quantity of goods and services at lower prices than would otherwise prevail.

Figure 17-8 Refer to Figure 17-8. If this country allows free trade in wagons,

consumers will gain and producers will lose.

Suppose there is an increase in the excise tax imposed on cigarettes, a good for which the demand is relatively inelastic. The short-run burden of the tax increase will be borne primarily by

consumers, because the increase in market price will be large relative to the increase in the excise tax.

Use the figure below to answer the following question(s).Figure 12-1 Refer to Figure 12-1. If the output of the economy is Y1, which of the following would a new classical economist be most likely to favor?

continuation of the current tax and expenditure policies

Fiscal policy designed to increase aggregate demand during economic downturns and decrease aggregate demand during economic booms is called

countercyclical fiscal policy.

When a supply and demand model is used to analyze the market for labor, a. demand is generally no longer downward sloping. b. the wage rate is used on the vertical axis as the market price. c. employment is used on the horizontal axis as the market quantity. d. both b and c.

d. both b and c.

An excise tax levied on a product will impose a smaller relative burden on consumers (and a larger relative burden on sellers) when a. the supply of the product is relatively inelastic. b. the supply of the product is relatively elastic. c. the demand for the product is relatively elastic. d. either a or c is true.

d. either a or c is true.

Relative to a no-trade situation, if the United States imported jeans, the U.S. domestic price of jeans would

decline as would domestic output.

If policy makers believe that an inflationary boom is about to begin, the Keynesian view indicates that they should

decrease government spending and/or raise taxes.

If a government price control succeeds in affecting price, it can be expected to lead to a corresponding

decrease in the quantity of sales whether the price is forced up or down.

Other things constant, an increase in resource prices will

decrease short-run aggregate supply.

Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this will

decrease the supply of soybeans.

When the interest rate decreases, the opportunity cost of holding money

decreases, so the quantity of money demanded increases.

If consumer purchases of a good are highly sensitive to the price of the good, this is illustrated by a

demand curve that is relatively flat (more horizontal).

The methodology of public choice analysis

develops a logically consistent theory based on how individual actors (such as voters, politicians, and bureaucrats) respond to incentives.

An appreciation in the U.S. dollar would

discourage foreign consumers from buying U.S. goods.

A tariff or quota that limits the entry of foreign goods to the U.S. market will... A. benefit domestic producers in the protected industries and harm domestic consumers. B. increase the nation's real income by protecting domestic jobs from foreign competition. C. reduce the demand for U.S. export goods, lowering employment in export industries. do both A and C.

do both A and C.

Compared to the no-trade situation, when a country imports a good,

domestic consumers gain, domestic producers lose, and the gains outweigh the losses.

Given the quantity theory of money, if the quantity of money doubled, prices would...

double.

Given the strict quantity theory of money, if the quantity of money doubled, prices would

double.

Because the benefits derived from an activity decline as it is expanded, it is generally

efficient to stop well before perfection is achieved.

Public choice analysis indicates that it will be politically more attractive to

enact expansionary fiscal policy during a recession than to enact restrictive fiscal policy during an economic expansion.

Use the figure below to answer the following question(s).Figure 9-2 The output of the economy depicted in Figure 9-2 is

equal to the full-employment output.

If the price of cars falls, are carmakers likely to make ___________.

fewer cars

Dr. Javier Portillo, a brilliant young Ph.D. in economics, has turned down many job offers because he hopes eventually to teach at one of the top ten universities in his field. The type of unemployment he is experiencing is...

frictional unemployment.

Government decisions tend to be biased toward actions that have

future costs that are difficult to identify and current benefits that are easily observable.

One difficulty of computing the value of GDP is that there are no market prices for

government goods and services.

When the federal government is running a budget surplus,

government revenues exceed government expenditures.

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

has mistakenly inferred causation from observed correlation

The new classical model implies that the effect of government increasing expenditures by debt financing...

has the same effect as if it was financed by raising current taxes.

If the United States were to adopt a policy of free trade with European countries and Japan, this policy would...

help all of the countries involved because every country would have a comparative advantage in the production of some good.

After a natural disaster, such as a hurricane, the increased demand for certain items (like lumber, electric generators, and chainsaws) causes their prices to rise. These higher prices

help to direct the items toward their highest valued uses.

According to the crowding-out effect, expansionary fiscal policy will lead to

higher interest rates, an appreciated dollar, and reduced net exports.

Figure 10-13 In Figure 10-13, which of the following would most likely cause the movement from point e2 to point E2?

higher wages and resource prices

If the demand for a good is relatively elastic, this means that consumer purchases of the good are

highly sensitive to the price of the good.

In which statement(s) is "supply" used correctly?(I) "An increase in the price of flour will increase the supply of flour."(II) "As the cost of producing flour rises, the supply of flour will tend to fall."

in statement II only

The most likely short-run impact of an unanticipated decrease in the money supply is a(n)...

increase in the real interest rate, which in turn reduces investment and real GDP.

Ceteris paribus, an increase in resource prices will...

increase the cost of producing goods and services, which will lead to a higher price level

An increase in the number of students attending college would tend to

increase the demand for college professors.

An increase in the demand for a product will cause output to

increase, and both the demand for and prices of the resources used to produce the product to increase

Open-market purchases by the Fed make the money supply

increase, which tends to decrease the value of money.

The difference between actual real GDP and potential GDP

increases as the unemployment rate rises.

If the Fed unexpectedly increases the money supply, real GDP

increases because the resulting decrease in the interest rate leads to an increase in investment.

When a banker accepts a deposit of $1,000 in cash and puts $200 aside as required reserves and then makes a loan of $800 to a new borrower, this set of transactions

increases the money supply by $800.

Terrance loses his job and immediately begins looking for another. Other things the same, the unemployment rate

increases, and the labor-force participation rate is unaffected.

What is NOT a reason the demand curve slopes downward?

increasing marginal benefits

The major advantage of automatic stabilizers is that they

institute countercyclical fiscal policy without the delays associated with legislative action.

If a $500 tax is placed legally (statutorily) on the sellers of new violins and as a result the price of violins to consumers rises by $400, then the actual burden of the tax

is $400 on violin buyers and $100 on sellers.

The M1 money supply

is composed of assets that reflect the medium of exchange function of money.

The natural rate of unemployment

is the rate of unemployment present when the economy is operating at full employment.

The size of a country's "economic pie" is thought of as the total dollar value of all goods and services produced during some period of time. The economic pie

is variable, not fixed, across time periods.

While in Covid-19 quarantine, many people started to bake, which increased the demand for flour. How did this change in preferences effect demand for flour?

it caused the demand curve to shift right

If an economy operates at a point within (underneath) its production possibilities curve,

it is not efficiently using all of its resources.

Though many assets can be used as a store of value, money is a particularly attractive method to store value because

it is the most liquid of all assets.

Use the figure below to answer the following question(s).Figure 9-2 The economy depicted in Figure 9-2 is experiencing

its natural rate of unemployment.

When the economy enters a recession, automatic stabilizers create...

larger budget deficits

When the economy enters a recession, automatic stabilizers create...

larger budget deficits.

Which of the following would be a protective function of government?

legal enforcement of contracts and rules against fraud

Of the following, who would most likely be hurt by an unanticipated increase in the rate of inflation?

lenders who have made long-term loans at fixed interest rates

The deadweight loss (or excess burden) resulting from levying a tax on an economic activity is the

loss of potential gains from trade from activities forgone because of the tax.

Countries that impose high tariffs, exchange rate controls, and other barriers that restrict international trade have, on average,

low rates of economic growth.

Low rates of inflation are generally associated with

low rates of growth of the quantity of money.

If an unanticipated reduction in aggregate demand throws a market economy into a recession,

lower real resource prices and interest rates will act as a stabilizing force and direct the economy back to its full employment potential.

Supply-side economics stresses that

marginal tax rates exert important incentive effects that influence real output.

Figure 4-23 Refer to Figure 4-23. In which market will the majority of the tax burden fall on the buyer?

market (b)

One advantage of a money system compared to a barter system is that

money is more efficient.

If ten years ago the price of a movie ticket was $5 and the average hourly wage was $10, and today the price of a movie ticket is $8 and the average hourly wage is $20, then

movies are now relatively cheaper in terms of work hours.

Use the figure below to answer the following question(s).Figure 12-3 Refer to Figure 12-3. If an economy is currently operating at Y1, which of the following would a new classical economist be most likely to favor?

no government action and reliance on the self-corrective mechanism

In economics, the term "scarcity" refers to the fact that

no society can produce enough to satisfy fully the desires of people for goods and services.

Because illegal drug markets operate outside the legal system, the quality of these drugs has increased. the sellers of illegal drugs earn less money. there is less violence in these markets than if they were legal. none of the above.

none of the above.

The main problem with using the infant industries argument to justify protecting an industry from foreign competition is that

once in place, it is difficult to remove protection even as the industry matures.

Suppose the official unemployment rate is 10 percent. We can conclude without question that

one of every ten people in the labor force is currently unemployed

When the actual rate of unemployment is less than the natural rate of unemployment, the economy

operates at an output greater than its long-run potential.

The highest-valued alternative that must be given up in order to choose an action is called its...

opportunity cost.

Once decision makers fully adjust to an increase in the general price level,

output will return to the full-employment level.

The Secretary of Labor states that wage rates in the country have risen by 2 percent this past year. The head of a local labor union states that wage gains should have been higher. The Secretary's statement is a(n) ____ economic statement, and the labor head's statement is a(n) ____ economic statement.

positive; normative

Economists who stress the "store of value" function of money generally

prefer the M2 measure of the money supply to the M1 measure

Keynesian economists argue that during a recession

private sector spending will decline, and therefore government spending should increase in order to help maintain a high level of aggregate demand.

Real GDP per person

provides more meaningful comparisons across time and countries than real GDP.

If the U.S. put an import quota on clothes dryers, it would

raise U.S. net exports of clothes dryers and lower net exports of other U.S. goods.

Opening trade between a nation that has "cheap labor" and one that has "expensive labor" will Group of answer choices

raise the standard of living in both countries.

In the loanable funds market, the true burden of borrowers and the true yield to lenders is the...

real (inflation adjusted) interest rate

When the Fed unexpectedly increases the money supply, it will cause an increase in aggregate demand because...

real interest rates will fall, stimulating business investment and consumer purchases.

The change in the quantity of goods and services demanded in the U.S. is based on the logic that as the price level rises,

real wealth falls, interest rates rise, and net exports fall.

A recession abroad would

reduce U.S. net exports and reduce aggregate demand.

When an economy expands into an economic boom, automatic stabilizers will tend to

reduce the budget deficit (or increase the surplus).

High transaction costs will tend to

reduce the number of mutually beneficial exchanges that occur.

Automatic stabilizers are government programs that tend to...

reduce the ups and downs in aggregate demand without legislative action.

Internet sites such as eBay make it easier for sellers and buyers to find one another and, by doing so,

reduce transactions costs.

An import quota on a product protects domestic industries by...

reducing the foreign supply to the domestic market and thereby raising the domestic price.

The major overall purpose of the Federal Reserve System is to

regulate the money supply and, thereby, provide a monetary climate that is in the best interest of the economy.

The fraction that banks must, by law, hold as reserves against the checking deposits of their customers is called the

required reserve ratio.

A nation with cheap, efficient communications is likely to be

richer, ceteris paribus, because transaction costs will be lower and trade greater.

Suppose the demand curve for a good is highly elastic and the supply curve is highly inelastic. If the government taxes this good,

sellers will bear a larger share of the tax burden.

According to the shortsightedness effect, politicians tend to favor projects with

short-run benefits and long-run costs.

The money multiplier will be

smaller if either banks hold on to excess reserves or private citizens hold on to cash.

A system of economic organization in which the ownership and control of productive capital assets rests with the state and in which resources are allocated through central planning and political decision making is called

socialism.

Consider the market for soda in Philadelphia. The equilibrium price is $1.10 and the equilibrium quantity is 1.4 million bottles. The city government implements a sales tax of $0.30 (in other words, buyers pay the tax). Suppose that sellers have a large number of alternative uses for their resources, and suppose buyers do not have good alternatives for soda. Where will the actual tax incidence be?

split between buyers and sellers, but more heavily on buyers

When individuals are unemployed because they lack the qualifications to fill available jobs, this is called

structural unemployment.

If the cost of rubber increases, what happens in the market for bicycles? Hint: think of bicycle tires and what they're made of.

supply decreases

Suppose that a tax is placed on a particular good. If the sellers end up bearing most of the tax burden, this indicates that the

supply is more inelastic than demand.

A decrease in the price of leather used to make shoes would cause the

supply of shoes to increase.

The value (purchasing power) of each unit of money

tends to decline as the money supply expands in relation to the availability of goods and services.

If the dollar depreciates relative to the Peso, it can be said that

the Peso appreciates relative to the dollar.

Assume, for the U.S., that the domestic price of beef without international trade is lower than the world price of beef. This suggests that with trade,

the U.S. has a comparative advantage in the production of beef over other countries and the U.S. will export beef.

When an economy is in long run equilibrium,

the actual and natural rates of unemployment will be equal.

As more and more resources are dedicated to an activity

the benefits will become smaller and smaller while the costs will rise.

The actual benefit of a government subsidy is determined primarily by

the elasticities of demand and supply.

The actual burden of a tax is determined primarily by

the elasticities of demand and supply.

Assume IBM decides, despite an ongoing recession, to build a new branch for computer analysis in Bozeman, Montana. The plant expects to spend $12 million to hire the necessary employees, all of whom move in from out of state to take the jobs. If Bozeman citizens decided to spend more than 3/4 of the additional income,

the expansion in income would be larger.

Your professor loves his work, teaching economics. He has been offered other positions in the corporate world that would increase his income by 25 percent, but he has decided to continue working as a professor. His decision would not change unless...

the marginal cost of teaching increased.

The opportunity cost of production differs from an accounting definition of a firm's costs because it includes

the opportunity cost of assets and financial resources owned by the firm.

Suppose the economy is in long-run equilibrium. In a short span of time, there is a pessimistic revision of expectations about future business conditions and an unexpected rise in the value of the dollar. In the short run, we would expect

the price level and real GDP both to fall.

Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling,

the quantity demanded of physicals increases and the quantity supplied of physicals decreases.

Other things constant, as the price of a resource increases,

the quantity of the resource demanded falls.

Economists use the phrase "business cycle" when referring to fluctuations in

the rate of real output and employment.

If the expected rate of inflation is zero, and expectations are correct,

the real interest rate must equal the money interest rate.

Use of real GDP to measure changes in national output from one period to another can be misleading if

the share of production carried out in the nonmarket sector is different for the two periods.

Legislation that offers immediate and easily recognized benefits, at the expense of costs that are observable only in the distant future, is often enacted even when economic inefficiency results. This can be expected because of

the shortsightedness effect.

Suppose that the government had decided to place the tax on soda sellers rather than soda buyers. Which of the following would be true regarding the tax incidence compared to the situation above?

the statutory incidence would change, but the actual incidence would not change

A subsidy on a product will generate more actual benefit for producers (and less for consumers) when

the supply of the product is relatively inelastic.

When the inflation rate of a country is high over a lengthy time period,

the year-to-year variability in the rate of inflation is generally large.

The price of a good will tend to rise when

there is excess demand for the good.

People who spend more time and effort investigating the advantages and disadvantages of different automobile models when they go to purchase one than they do investigating the strengths and weaknesses of presidential candidates are saying, in effect, that

they expect to use the information on the merits of alternative cars to greater personal advantage than they could information on the merits of alternative presidential candidates.

Which of the following is a transaction cost for attending a concert?

time spent standing in line to buy the concert ticket

In economics, transaction costs refer to the

time, effort, and other resources needed to search out and negotiate an exchange.

Within the aggregate demand / aggregate supply framework, the quantity on the horizontal axis in the aggregate goods and services market represents the...

total real output (real GDP) of the economy

Use the figure below to answer the following question(s).Figure 6-1 Figure 6-1 illustrates the four possibilities of the distribution of costs and benefits among voters for a government project. A tariff on imported steel to protect jobs in the domestic steel industry that raises the cost of many products for consumers would be considered which type of project?

type B

During periods when the inflation rate fluctuates widely,

uncertainty about changes in relative prices causes a decrease in economic efficiency

Isabella is on a temporary layoff from her factory job. If Isabella participates in the BLS survey, she will be classified as

unemployed and in the labor force.

In the equation of exchange, V stands for...

velocity, or the annual rate at which money changes hands in the purchase of final products.

In a properly operating, dynamic economy...

we would expect to have some unemployment due to normal structural and frictional factors.

Which of the following are examples of people responding to incentives according to their rational self-interest? (There may be more than one correct answer, so select all that apply.)

- Daenerys, tired of being made fun of because her parents gave her a fashionable name that very quickly became dated, has her name legally changed. She pays $40 in legal fees. - Anna has been playing a lot of League of Legends in her spare time, and has become so good at it that she has been offered $70,000 a year to play for a professional team. She takes the job, dropping out of college.

Which of the following statements are positive statements? You must select all correct answers in order to receive full credit. A rise in average temperatures will increase the demand for sun screen products. Pollution is the most serious economic problem. The rising price of crude oil on world markets will lead to an increase in cycling to work. Only suckers pay the full sticker price for a new car. The Detroit Lions have won more football playoff games since 1957 than any other NFL team.

A rise in average temperatures will increase the demand for sun screen products. The rising price of crude oil on world markets will lead to an increase in cycling to work. The Detroit Lions have won more football playoff games since 1957 than any other NFL team.

Which of the following could be considered to be a secondary effect caused by making drugs such as marijuana illegal? - The higher prices that result from making them illegal results in more property theft by users to afford the drugs. - The usage of police and law enforcement resources to enforce drug laws leads to lower enforcement (and thus a higher amount) of other crimes. - Without the ability to use the legal system to enforce contracts, violence often results when one party to a drug deal does not live up to their end of the bargain, thus the amount of violence increases by making drugs illegal. - All of the above would be considered secondary effects of making drugs illegal.

All of the above would be considered secondary effects of making drugs illegal.

Consider statements 1, 2, 3, 4. One of these statements is an example of causation, while the rest are correlation. 1. Rain causes clouds 2. Birthdays cause people to age 3. Snow causes Christmas 4. Skipping lunch causes hunger Now consider statements 5, 6, 7, 8. One of these statements is not an example of causation. 5. Kryptonite causes Superman to lose all his powers. 6. Temperatures of less than 32˚F cause water to freeze. 7. Umbrellas cause rainstorms. 8. Stepping on the gas pedal causes a car to move faster. Which of the following is correct? Statement # 4 is causation, and statement # 7 is not causation.

Answer 1: 4 Answer 2: 7

Each resource described in the table is an element of human resources, capital, or natural resources. Choose the correct type of resource illustrated by each example. Oil that needs to be extracted for the production of gasoline. natural resource Your saxophone skills enhanced by taking music theory lessons and practicing. human resource A truck used by a delivery service company. physical resource

Answer 1: natural resource Answer 2: human resource Answer 3: physical resource

Andrew, a college student, loves drinking coffee late at night to study for exams. Having no income, he is used to buying cheap bad tasting coffee, such as Beanlightened, that he needs to grind and brew himself. The coffee tastes putrid but, with enough cream and sugar, Andrew is able to tolerate it. Occasionally, he does go out to Starbucks when he has spare money. After graduation, Andrew gets a job working at a database firm as a programmer. His income is now a healthy $75,000 a year and he decides he's had enough bad tasting coffee. He ends up buying coffee daily from Starbucks even though it costs significantly more than Beanlightened. In economic terms, Starbucks coffee is a(n) normal good . In economic terms, Beanlightened coffee is a(n) inferior good .

Answer 1: normal good Answer 2: inferior good

Select which of the following stories describes a shift of the demand curve (and NOT a movement along the demand curve). You must select ALL of the correct answers to receive full credit.

Buzzier, an energy drink company, notices students are desperate to stay awake in order to study during final exam week, and change their buying behavior. Out-N-In, a burger joint with a cult-like national following in the U.S., sells more burgers as the price of chicken increases. In the country of Jeansland, pants that are designed to sag low are no longer in vogue after a series of tragic walking accidents, and sales fall as a result. After it earns 1st prize in the "whose tastebuds have been most numbed by years of eating spicy food" category of a cookoff, fans of spicy noodles buy a lot more Double Burn brand ramen noodles.

In which of the following ways does a middleman reduce transaction costs?

By providing buyers and sellers with information at a lower cost and arranging trades between them

Which of the following is true? - Changes in personal costs and benefits will exert a predictable impact on the choices of human decision makers. - Only direct monetary costs matter in making decisions. - If a good is provided free to an individual, its production will not consume valuable scarce resources. - Secondary effects are seldom of importance in economics.

Changes in personal costs and benefits will exert a predictable impact on the choices of human decision makers.

Private school graduates earn 14% more than public school graduates on average. If you wanted to determine whether it is private school that causes higher earnings, what sorts of control variables are likely to get you closer to a ceteris paribus comparison? A. Differences in ambition between the two groups. B. Differences in test scores between the two groups. C. Differences in family background. D. All of the above. E. A and B only.

D. All of the above.

Assume that supply increases greatly and demand increases slightly. Which of the following will happen?

Equilibrium price will fall and equilibrium quantity will rise.

Rob Crusoe is stranded on an island and has no hopes of rescue. Since he is unlikely to be rescued he must find fish or coconuts to consume in order to survive. Since Rob may choose to fish all day, collect coconuts all day, or do some combination of the two, the graph below represents the different combinations of fish and coconuts that he is able to gather on a given day. Which of the following statements are correct? You may assume that Rob would like to consume as much as possible every day and therefore produces as much as he can everyday.

Rob is able to gather 6 coconuts and catch 1 fish.

If everyone thinks that the price of tomatoes will go up next week, what is likely to happen to demand for tomatoes today?

The demand for tomatoes increases

If there is a decrease in both the supply and demand for a good, which of the following will definitely occur?

The equilibrium quantity will decrease.

Assume the demand curve for shampoo is downward sloping. If the price of shampoo falls from $1.50 to $1.25 per bottle,

a larger quantity of shampoo will be demanded.

When economists say that market equilibrium is consistent with economic efficiency, they mean

all units creating more benefit than cost have been produced.

According to the invisible hand principle, competitive markets generally

bring the self-interest of individuals into harmony with the efficient allocation of resources, even though centralized planning of economic activities is absent.

Along a supply curve, if the price of oil falls, what will happen to the quantity of oil supplied?

it will decrease

When economists say an individual has made a rational choice, they mean the individual has...

made the choice by weighing their own subjective costs and benefits.

The Invisible Hand Principle suggests that

market forces tend to channel the actions of self-interested individuals into activities that promote the general betterment of society.

The height of the supply curve at a quantity of 100 represents the

minimum price required to induce a producer to supply the hundredth unit.

If the resources of an economy are being used inefficiently, it would be

possible to increase production of all goods simultaneously.

A shortage occurs whenever

price is less than equilibrium price.

When economists say the quantity supplied of a product has decreased, they mean the

price of the product has fallen, and consequently, suppliers are producing less of it.

Suppose a country attempts to be self-sufficient and doesn't trade with any other countries. From an economic perspective, citizens of this nation can be expected to

produce less total value than they could if they specialized and engaged in trade with other nations.

According to the law of supply,

producers are willing to supply larger amounts of a good as its price increases.

The student government associations at several universities have experimented with purchasing bicycles to leave around campus for everyone's use. Anyone who needs the bike can use it, and they are not allowed to lock the bike up or take it home, but rather must leave it on campus for someone else to use. Economic theory would predict that

students will not take as good of care of these commonly owned bicycles as they do their own bicycles.

Use the figure below to answer the following question(s).Figure 3-14 Refer to Figure 3-14. The gasoline market was initially in equilibrium at point e. Other things constant, an increase in the popularity and use of Sport Utility Vehicles (SUVs) that consume more gasoline per mile driven than most other types of cars would likely move the equilibrium in this market toward point

t.

Between 1994 and 2004, the monthly charge for cellular phone service decreased from $120 per month to $30 per month. At the same time, the number of subscribers increased from less than 10 million to more than 75 million. Which of the following provides the best explanation for these changes?

technological improvements that reduced the cost of supplying cellular phone service

The opportunity cost of an action is

the highest valued alternative forgone as the result of choosing an option.

The forces of supply and demand assure that

the price of a good will eventually rise in response to an excess demand for that good.

Profits and losses play an important role in helping

to allocate scarce resources in a manner that maximizes the value created to society.

Use the table below to choose the correct answer. The table is a schedule of the supply and demand for coffee (both given in thousands of pounds per month). Price per Pound Quantity Demanded Quantity Supplied $6.00 25 9 $8.00 20 12 $10.00 15 15 $12.00 10 18 The equilibrium market price of coffee would be

$10 per pound.

Air travel from New York to Miami costs $300 and takes 6 hours. A bus ticket between the cities costs $150 and takes 56 hours. Other things constant, a rational individual would choose to fly rather than drive if they valued their time by more than...

$3 per hour.

BUYER WILLINGNESS TO PAY MIKE $50.00 SANDY $30.00 JONATHAN $20.00 HALEY $10.00 Refer to Table 3-1. If the table represents the willingness to pay of four buyers and the price of the product is $18, then their total consumer surplus is

$46.

Figure 3-20 Refer to Figure 3-20. At the equilibrium price, consumer surplus is

$480.