Econ Final

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If two countries start with the same real GDP per person, and one country grows at 2 percent while the other grows at 4 percent,

the standard of living in the country growing at 4 percent will start to accelerate away from the slower growing country due to compound growth

which of the following statements is normative?

the unemployment rate should be lower

Producer surplus directly measures

the well-being of sellers

producer surplus directly measures

the well-being of sellers

It is claimed that a secondary advantage of mutual funds is that

they give ordinary people access to the skills of professional money managers

Economist Arthur Laffer made the argument that tax rates in the US were so high that reducing the rates would increase tax revenue

true

One of the affects of gas prices rising from about 2 to about 4 per gallon was airlines ordering new, fuel-efficiant aircraft

true

Price elasticity of demand along a linear, downward-sloping demand curve decreases as price falls

true

The demand for computer programmers is inseparably ties to the supply of computer software

true

The economic field of industrial organization examines how firms' decisions about prices and quantities depend on the market conditions they face

true

The labor-force participation rate tells us the fraction of the population that has chosen to participate in the labor market

true

trade allows a person to obtain goods that are less than that person's opportunity cost because each person specializes in the activity for which he or she has the lower opportunity cost

true

The quantity demanded of a good is the amount that buyers are

willing and able to purchase

taxes on labor income tend to encourage

workers to work fewer hours, second earners to stay home, elderly to retire early, and the unscrupulous to enter the underground economy

Example of external benefit:

An. elderly woman plants a flower garden on the vacant lot next to her house

Trade does not benefit a nation if that nation has a comparative advantage in the production of that good

False

Political leaders are always aiming for an optimal combination of efficiency and equality

false

Some economists, called supply-siders, argue that changes in the money supply exert a strong influence on aggregate supply

false

while the scientific method is applicable to studying natural sciences, it is not applicable to studying a nation's economy

false

In recent decades, Americans have increased their purchase of stocks of foreign-based companies. The Americans who have bought these stocks were engaged in

foreign portfolio investment

to improve living standard, policymakers should

formilate policies designed to increase productivity

When the consumer price index rises, the typical family

has to spend more dollars to maintain the same standard of living

the "invisible hand" refers to

how the decisions of households and firms lead to desirable market outcomes

A policy that increases saving will

improve economic growth and health outcomes

Josiah installed a metal sculpture in his front yard. A positive externality arises if the sculpture

increases the value of other properties in the neighborhood

Private decision about consumption of common resources and production of pubic goods usually lead to an

inefficient allocation of resources and external effects

If a nation has a comparative advantage in the production of a good,

it can produce that good at a lower opportunity cost than its trading partner

If a nation has an absolute advantage in the production of a good,

it can produce that good using fewer resources than its trading partner

A result of welfare economics is that the equiibrium price of a product is considered to be the best price because it

maximizes the combined welfare of buyers and sellers

a result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

maximizes the combined welfare of buyers and sellers

A decrease in the price of baseball bats will decrease the demand for baseballs

false

Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve?

As the price level increases, the interest rate rises, so spending falls

Which of the following provide benefits to society at large and not just to the person(s) who pursue it?

Both technological knowledge that is a public good and education

If scientists discover that steamed milk, which is used to make lattes, prevents heart attacks, what would happen to the equilibrium price and quantity of lattes?

Both the equilibrium price and quantity would increase

All else equal, what happens to consumer surplus if the price of a good increases

Consumer surplus decreases

in which of the following cases is the Coase theorem most likely to solve the externality

Ed is allergic to his roommate's cat

Banks and mutual funds are examples of financial markets

False

Other things the same, domestic investment will increase a country's real GDP by more than foreign investment

False

Which of the following is not an example of a market

In the US, a sick person cannot legally purchase a kidney

Which of the following statements is true about a market economy?

Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being

If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?

One year after the price increase

Which if the following is correct concerning stock market irrationality

Speculative bubbles could arise, in part, because the price that people pay for stock depends on what they think someone else will pay for it in the future

What will happen in the market for shotgun-shell ammunition now if buyers expect higher shotgun-shell prices in the near future

The demand for shotgun-shell ammunition will increase

Bob's Butcher Shop is the only place within 100 miles that sells bison burgers. Assuming that Bob is a monopolist and maximizing his profit, which of the following statements is true?

The price of Bob's bison burgers will exceed Bob's marginal cost.

Because resources are scarce, a society cannot give all individuals the standard of living to which each aspires

True

Opportunity cost measures the trade-off between two goods that each producer faces

True

People who are risk averse dislike bad outcomes more than they like comparable good outcomes

True

People who report being not in the labor force but who want to work but have given up trying to find a job after an unsuccessful search cause the reported unemployment rate to be lower than it would otherwise be

True

Permanent tax cuts have a larger impact on consumption spending than temporary ones

True

The present value of any future sum of money is the amount that would be needed today, at current interest rates, to produce that future sum

True

Which of the following events would cause both the equilibrium price and equilibrium quantity of number two grade potatoes to increase if number two grade potatoes are an inferior good?

a decrease in consumer income

Which of the following statements about a tariff is true?

a tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and reduces total surplus

If US workers can produce everything in less time than Mexican workers, it is not possible for the US to gain from trade with Mexico

false

When the governemtn prevents prices from adjusting naturally to supply and demand, it

adversely affects the allocation of resources

Foreigns trade

allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home

Japan is

an advanced economy, and over the past century its rate of economic growth has been higher that that of the United States

A bank loans Kellie's Print Shop $350,000 to remodel a building near campus to use as a new store. On their respective balance sheets, the loan is

an asset for the bank and a liability for Kellie's Print shop. The loan increases the money supply

Which of the following would shift the demand curve for gasoline to the right?

an increase in consumer income, assuming gasoline is a normal good

which of the following would shift the demand curve for gasoline to the right

an increase in consumer income, assuming gasoline is a normal good

which of the following correctly explains the crowding-out effect?

an increase in government expenditures increases the interest rate and so reduces investment spending

If muffins and bagels are substitutes, a higher price for bagels would result in

an increase in the demand for muffins

In order for antitrust laws to raise social welfare, the government must

be able to determine which mergers are desirable and which are not

producer surplus is the area

below the demand curve and above the supply curve

The producer price index measures the cost of a basket of goods and services

bought by firms (NOT producer!)

For the purpose of calculation GDP, investment is spending on

capital equipment, inventories, and structures, including household purchases of new housing

if the cross-price elasticity between two goods is negative, the two goods are likely to be

complements

all else equal, what happens to consumer surplus if the price of a good increases?

consumer surplus decreases

The Carters' oldest son attends Big State University. He and his parents pay all his fees and tuition. These payments count in GDP as

consumption of services

According to the principle of comparative advantage

countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners

Which of the following increase when the Fed makes open mark3et purchases?

currency and reserves

Laws that restrict the smoking of cigarettes in public places are examples of government intervention that is intended to reduce

externalities

An inferior good is one for which an increase in income causes a

decrease in demand

Studies show that a 10 percent increase in the minimum wage

decreases teenage employment by about 1 to 3 percent

The price of a stock will rise if the

demand for the stock rises

If consumers think that there are very few substitutes for a good, then

demand would tend to be price inelastic

suppose two economists are arguing about policies that deal with unemployment. One economist says, "The government could be lower unemployment by one percentage point if it would just increase government spending by 50 billion dollars." The other economist responds, "That's ridiculous. If the government spent an additional 50 billion dollars, it would reduce unemployment by only one-tenth of 1 percent, and that effect would only be temporary!" These economists

disagree because they have different scientific judgements

when a country allows trade exports a good,

domestic producers are better off, domestic consumers are worse off, and the nation is better off because the gains of the winners exceed the losses of the losers

points of the production possibilities frontier are

efficient

If total spending rises from one year to the next, then

either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both

If demand is linear (a straight line), then price elasticity of demand is

elastic in the upper portion and inelastic in the lower portion

it is likely that a constitutional amendment that required the government always to run a balanced budget would

eliminate the economy's automatic stabilizers

Both public goods and common resources are

nonexcludable

If the demand for a good falls when income falls, the good is called a

normal good

Minimum wage laws dictate

only a minimum wage that firms may pay workers

What must be given up to obtain an item is called

opportunity cost

what must be given up to obtain an item is called

opportunity cost

While pollution regulations yield the benefit of a cleaner enviroment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that

people face tradeoffs

The amount of money today needed to produce a particular sum in the future, given prevailing interest rates, is known as

present value

In general, a flatter demand curve is more likely to be

price elastic

if a small percentage increase in the price of a good greatly reduces the quntity demanded for that good, the demand for that good is

price elastic

a new government takes steps toward improving the court system and reducing governemtn corruption. The citizens of Eurnesia find these efforts credible and outsiders believe these changes will be effective and long lasting. The changes will probably raise

real GDP per person and productivity in Eurnesia

A free rider is a person who

recieves the benefit of a good but avoids paying for it

In a market economy, economic activity is guided by

self-interest and prices

If the federal reserve decided to raise internet rates, it could

sell bonds to lower the money supply

A price floor

sets a legal minimum on the price at which a good can be sold

positive statements are

statements of description that can be tested

within the supply-and-demand model, a tax collected from the sellers of a good shifts the

supply curve upward by the size of the tax per unit

In a closed economy, public saving is the amount of

tax revenue that the governemtn has left after paying for its spending

A baker recently has come to expect higher prices for bread in the near future. We would expect

the baker to supply less bread now than she was supplying previously

Which of the following is not a commonly-advanced argument for trade restrictions

the efficiency argument

Which of the following statements is not correct

the government may break up a natural monopoly to lower the price of charged customers

Which of the following is not part of the opportunity cost of going on vacation?

the money you spent on food

The price elasticity of demand is defined as

the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good

Aggregate demand includes

the quantity of goods and services the government, households, firms, and customers abroad want to buy


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