Econ test #2

People maximize...

net benefit

An emergency law prohibiting people from charging anything for gas would mean______________________________________.

no gas would be supplied and there would be no gains from trade

Rational Irrationality

people want the info if the cost exceeds benefits.

In politics, people maximize

power

speculators move

resources through lower to higher value uses

If the supply curve for loanable funds shifts to the left, then the equilibrium interest rate will ________________________________ and the equilibrium quantity will ___________________________________.

rise, fall

The amount of money paid for slaves in 1836 _______________________________________ Gross Domestic Product in 1836.

should not be counted in

tax burdens

stick to those least responsive to changes in price

is an example of a "bootlegger and Baptist" coalition.

teachers and college professors advocating higher education subsidies

On average, men with beards earn 85% of what is earned by men who are clean-shaven. If this difference is not explained by differences in productivity, how would you expect profit-maximizing firms to respond?

they would fire men who are clean shaven and hire those with beards

At equilibrium in a competitive market, _________________________________________ is maximized.

total surplus

Anti-foreign bias

trades that would be okay with another citizen are seen as harmful with foreigners

finished goods

units of product that have been completed but not yet sold to customers

The difference between politics and market is

violence

It gets really, really cold in New England in the winter, which means electricity demand is higher. A nationwide, binding price ceiling on electricity will give people __________________________________.

weaker incentives to send electricity to New England when it is most urgently wanted.

pessimistic bias

"things are ok but only get worse"

Voting with your feet

The idea that households or firms will move out of a city or state to remove themselves from adverse conditions of high taxes, poor schools, or a lack of parks and other public goods.

rational ignorance

The rationality comes from the high cost to get info and low benefit

A on labor graph

Wasteful trade (

Does writing the check matter for taxes?

Who writes the checks doesn't matter it depends on how sensitive the market is.

The graph below depicts the market for low-skill labor. As a result of the minimum wage, gains from trade going to workers are equal to ___________________________________.

B

Sugar tariffs persist because of ___________________________________ benefits and ____________________________________ costs.

Concentrated, dispersed

Y+B on labor graph

DWL

A proposal to mandate Paid Family Leave would require employers to pay workers while they take time off work to care for children or elderly parents. Holding everything else constant, the policy will ____________________ labor supply and _______________________ wages.

Decrease, Decrease

How does lobbying affect transfer?

Destroys it and turns transfer into DWL

Chick-fil-A buys cheese to sell as part of their chicken, egg, and cheese bagels. This cheese purchase is counted as part of gross domestic product. T or F?

False, the cheese in an intermediate good.

GDP

Gross Domestic Product

A state is...

an organization with a comparative advantage in violence

As countries get richer and more productive, child labor tends to _____________________________.

decrease

The best alternative use of an apartment is worth $601. It is worth $599 as an apartment to a prospective renter. Using it as an apartment would ____________________________________________.

decrease gains from trade

By investing resources in lobbying for tariffs, subsidies, quotas, and so on, a firm is _______________________________________ standards of living.

decreasing

Anti-market bias

doing something to help someone while making a profit is wrong

Assume there are no price ceilings or price floors. If the wage is below the equilibrium wage, the amount of labor demanded ____________________ the amount of labor supplied, and wages will _______________________.

exceeds, rise

A country pays for imports with its ________________________________.

exports

If cherries and strawberries are substitutes, then higher cherry prices will ___________________________________ the equilibrium price and ____________________________________ the equilibrium quantity of strawberries.

Increase, Increase

At the beginning of the Covid pandemic, Jill owned 1000 rolls of toilet paper she valued at $1 each. A strict price control kept the price of toilet paper at $0.75 per roll. Meanwhile, Jay, Jae, Jai, Jaye, and Steve would be willing to pay $2 per roll for 200 rolls each. The price control means ____________________________________.

Jill keeps the toilet paper instead of selling it to higher-value users

Bagels and cream cheese are complements. A higher price of bagels will therefore _____________________________________ the equilibrium price and ____________________________ the equilibrium quantity of cream cheese.

Lower, Lower

Hiring an additional hour of labor increases a firm's revenue. This increase in revenue is called the

Marginal product of labor

Line between W and C

Minimum willing to accept

Dunder Mifflin Paper Company just sold a massive amount of glossy paper to a magazine publisher, which will use the paper to print magazines. The paper is ___________________________.

Not counted in GDP

Increase in Tax for demanders does?

Nothing.

Increase in tax for employees does?

Nothing.

make-work bias

People see jobs as the purpose of an economy, rather than production

What is one of proximate causes of economic growth?

Physical capital

In markets, People maximize

Profit

In American elections, parties select their candidates in primaries, and then their candidates face one another in the general election. The median voter theorem predicts that a candidate will endorse a more _______________________ position in the primary and a more ________________________ position in the general election.

extreme, moderate

When people can move from one jurisdiction to another ("voting with their feet"), public policy tends to ___________________________________.

get better

intermediate goods

goods used in the production of final goods

Higher cherry imports from Turkey will most likely lead to

higher exports in industries in which Americans have a comparative advantage

When the minimum wage exceeds the equilibrium wage, there will be a(n) ______________________________________________.

higher quantity of labor supplied than demanded

"Most people aren't going to drive less just because the price of gas goes up by a little bit. Therefore, if we really want to fight climate change, we shouldn't increase gas taxes but should instead require that cars get better gas mileage." Which Big Idea(s) in Economics is someone who makes this statement ignoring?

incentives matter, think on the margin

A binding minimum wage will lead to a(n) ______________________________ in the quantity of labor supplied and a(n) ______________________________ in the quantity of labor demanded.

increase, decrease

Imposing a tariff on the market for cherries will _______________________________ the quantity produced domestically and ____________________________ the quantity consumed domestically.

increase, decrease

Imagine the city of Birmingham places a binding price floor of $20 on fast food meals in Birmingham, which means that fast food restaurants like Popeye's, Chick-fil-a, and McDonald's would not be allowed to charge less than $20 per meal. As a result, the quality of fast food meals will ________________________ and the quality of service at fast food restaurants will ___________________________.

increase, increase

The price of peanut butter rises. Holding everything else constant, what happens to the demand for jelly?

it falls

Price floors on airlines

lead to inefficiently high levels of quality.

A random allocation of goods is ________________________ a market allocation.

less efficient than

A decrease in demand for labor combined with an increase in the supply of labor will lead to ___________________________________________________.

lower wages

Price gouging causes what?

making everyone worse off through a sharp surge in demand and/or a shortage of supply

Wages in Bangladeshi factories are low and working conditions are harsh because _________________________. I. productivity in Bangladesh is very low II. workers in Bangladesh do not have many outside options III. factory owners have market power that allows them to impose harsh working conditions upon Bangladeshi workers

1 and 2

Many economists agree that the economy would be more efficient if the US government got rid of the mortgage interest tax deduction. Why might this be unlikely to happen? I. Many middle- and upper-middle-class homeowners save thousands of dollars a year due to this special tax break. II. A constitutional amendment prohibits this kind of change to the tax code III. Homebuilders and realtors get a lot more business because of the tax break.

1 and 3

Rent control effects

1. Housing shortage, Increase in demand 2. DWL 3. Wasteful trade and search costs 4. Quality deterioration 5.Misdirected energy and resources (Superfluous Discovery)