Econ 110 Final
Jamaica has a comparative advantage in the production of ______ and Norway has a comparative advantage in the production of _______.
Radios, coolers
Jamaica has an absolute advantage in the production of ______ and Norway has an absolute advantage in the production of _______.
Radios, coolers
Jamaica should specialize in the production of _____ and Norway should specialize in the production of _____.
Radios, coolers
Jennifer lives in a home that was newly constructed in 2011 for which she paid $240,000. In 2014 she sold the house for $260,000. Which of the following statements is correct regarding the sale of the house?
The 2014 sale affected neither 2014 GDP nor 2011 GDP.
Comparative advantage
The ability to produce a good at a lower opportunity cost than another producer
Absolute advantage
The ability to produce a good using fewer inputs than another producer
What will happen in the gasoline market now if buyers expect higher gasoline prices in the near future?
The demand for gasoline will increase.
Opportunity cost
Whatever must be given up to obtain some item
The Components of GDP
Y = C + I + G + NX
When the price of a good rises, the quantity supplied of the good ______
rises
Other things the same, as the price level falls, the real value of a dollar
rises, and interest rates fall.
Matthew bakes apple pies that he sells at the local farmer's market. If the price of apples increases, the
supply curve for Matthew's pies will decrease
According to classical macroeconomic theory, changes in the money supply affect
the price level, but not real GDP.
The farmer has a comparative advantage in the production of
tomatoes
The farmer has an absolute advantage in the production of
tomatoes
The farmer should specialize in the production of _____ and the rancher should specialize in the production of _______.
tomatoes, pork
Assume that the farmer and the rancher each has 24 labor hours available. If each person spends all his time producing the good in which he has a comparative advantage and trade takes place at a price of 1 pound of pork for 2 pounds of tomatoes, then the rancher _____ gain from this trade and the farmer _____.
will, will not
When the price of a good rises, the quantity demanded of the good ______
falls
An automobile factory in Michigan uses $100,000 worth of parts purchased from foreign countries along with U.S. inputs to produce 30 cars worth $20,000 each. Twenty of these cars are sold and 10 are left in inventory. How much did these actions add to GDP?
$500,000
Variables that can shift the demand curve
-Income -Prices of related goods -Tastes -Expectations -Number of buyers
Variables that can shift the supply curve
-Input prices -Technology -Expectations about future -Number of sellers
Jamaica's opportunity cost of one cooler is ________ and Norway's opportunity cost of one cooler is ________.
.05 and .125
The opportunity cost of 1 pound of tomatoes for the rancher is
1 pound of pork
The opportunity cost of 1 pound of pork for the rancher is
1 pound of tomatoes
At which of the following prices would both Jamaica and Norway gain from trade with each other? 1 radio for 1 cooler 1 radio for 4 coolers 1 radio for 10 coolers
1 radio for 4 coolers
The opportunity cost of 1 pound of tomatoes for the farmer is
1/2 pound of pork
Jamaica and Norway would not be able to gain from trade if Norway's opportunity cost of one radio changed to
2 coolers
The opportunity cost of 1 pound of pork for the farmer is
2 pounds of tomatoes
A good is produced by a firm in 2009, added to the firm's inventory in 2010, and sold to a household in 2010. As a result, on net,
2009 GDP increased and 2010 GDP did not change.
Assume that Jamaica and Norway each has 4 days available for production. Originally, each country divided its time equally between the production of coolers and radios. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of coolers increased by
24
Suppose Jamaica decides to increase its production of radios by 12. What is the opportunity cost of this decision?
24 coolers
Assume that Jamaica and Norway each has 4 days available for production. Originally, each country divided its time equally between the production of coolers and radios. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of radios increased by
6
Assume that the farmer and the rancher each has 24 labor hours available. If each person spends all his time producing the good in which he has a comparative advantage, then total production is
6 pounds of pork and 8 pounds of tomatoes
Quantity supplied
Amount of a good sellers are willing and able to sell
Quantity demanded
Amount of a good that buyers are willing and able to purchase
GDP vs CPI
GDP reflects prices of all goods and services produced in economy CPI reflects prices of goods and services bought by consumers and includes imports
Gross Domestic Product (GDP)
Measures the total income of everyone in the economy and the total expenditure on the economy's output of goods and services FINAL production
Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in
Mexican GDP, but it is not included in U.S. GDP.
The producer price index measures the cost of a basket of goods and services
bought by firms
The consumer price index is used to monitor
changes in the cost of living over time
A U.S. citizen buys a tea kettle manufactured in China by a company that is owned and operated by U.S citizens. In which of the following components of U.S. GDP is this transaction accounted for?
consumption and imports
If the number of buyers in a market decreases, then
demand will decrease
Most economists believe that money neutrality
does not hold in the short run
Most economists believe that classical theory describes the world
in the long run
For an economy as a whole,
income must equal expenditure
If Kindle e-readers and Nook e-readers are substitutes, a higher price for Nooks would result in a(n)
increase in the demand for Kindles
When the overall level of prices in the economy is increasing, economists say that the economy is experiencing
inflation
Other things the same, an increase in the price level makes consumers feel
less wealthy, so the quantity of goods and services demanded falls
When the dollar depreciates, U.S.
net exports rise, which increases the aggregate quantity of goods and services demanded.
If the demand for a good falls when income falls, then the good is called a(n)
normal good
The rancher has a comparative advantage in the production of
pork
The rancher has an absolute advantage in the production of
pork
The law of supply states that, other things equal, an increase in
price causes quantity supplied to increase
CPI=
price of goods in current year/price of goods in base year x 100