Economics 216

The distribution of GDP between different factions within an economy most closely relates to the _____________ method of aggregate accounting. The fact that the value of GDP remains equal regardless of whether GDP is measured by what people are earning or what they are producing is referred to as an ___________.

Income, Identity

Holding all else​ equal, if the price of a digital camera​ rises, then we can expect

A. a decrease in the demand for digital cameras. Your answer is not correct. B. an increase in the quantity demanded of digital cameras. C. a decrease in the quantity demanded of digital cameras. D. an increase in the demand for digital cameras.

If the level of aggregate expenditure was $16.8 trillion in 2013, the level of aggregate income in the economy during 2013 was _________. A. also​ $16.8 trillion because of the identity between aggregate expenditure and income. B. less than​ $16.8 trillion because taxes will reduce income below aggregate expenditure. C. less than​ $16.8 trillion because the United States imports more than it exports. D. more than​ $16.8 trillion because transfers​ (entitlements) allow income to exceed aggregate expenditure.

A. also $16.8 trillion because of the identity between aggregate expenditure and income.

The level of economic activity is calculated using the income method by​ ____________. A. adding together the income payments received by the various agents in the economy. B. summing labor income and capital income. C. tracking the flow of funds from firms to the owners of the factors of production. D. all of the above. E. A and C only.

C. All of the above.

The lowest price that a seller is willing to receive to sell an extra unit of a good is called___________ ​, while the highest price that a buyer is willing to pay for an extra unit of a good is called____________ For a trade to take​ place, a​ buyer's willingness to pay must be​ ____________. A. higher than the​ seller's willingness to accept. B. equal to the​ seller's willingness to accept. C. lower than the​ seller's willingness to accept. D. A and B only. E. All of the above.

Willingness to accept, willingness to pay. D. A and B only.

Marginal analysis__________ picks out _________ optimum as minimization of total cost.

always, the same

Suppose you have just landed a job near the center of a city and you now need to decide where to live. If you live close to the city​ center, your​ round-trip commute will be 15 minutes. If you live in the distant​ suburbs, your​ round-trip commute will be 60 minutes. There are lots of workers like you who work downtown. Since there are only a limited number of apartments near the city center, these apartments will be allocated based on __________ that you face. This process is known as _____________.

both the costs and benefits, optimization

To adjust for nominal variables and find the value of past income in terms of today's values, divide the ______ year's price index by the _____ year's price index and then multiply the result by the ______ year's values.

current; past; past

You have the option to play tennis or a round of golf (but not both). The tennis match requires you to take 2 hours off from work and the round of golf requires you to take 4 hours off from work. Playing tennis has value to you equal $40, while golf has value to you equal to $105. Tennis courts are publicly available at no cost, but golf costs $30 per round. Suppose your wage from working is $10 per hour. The net benefit from playing tennis is $________ and the net benefit from playing golf is $____. Therefore, you should play _______.

$20, $35, golf

Consider the following three​ statements: Statement​ 1: You can either stand during a college football game or you can sit. You believe that you will see the game very well if you stand and others sit but that you will not be able to see at all if you sit and others stand. You therefore decide to stand. Statement 2​: Your friend tells you that he expects many people to stand at football games. Statement​ 3: An economist studies photos of many college football games and estimates that 75 percent of all fans stand and 25 percent sit. Which of these statements deals with​ optimization, which deals with​ equilibrium, and which deals with​ empiricism? Explain. Statement 1 deals with​ ____________. A. ​equilibrium, because other fans may change their behavior. B. empiricism, because you believe you know what the other fans will do. C. optimization, because other fans are maximizing their​ well-being. D. optimization, because you are choosing your best feasible option. Statement 2 deals with​ ____________. A. empiricism, because your​ friend's prediction can be tested using data. B. equilibrium, because your friend presumes everyone is behaving optimally. C. optimization, because you will need this information to identify your best feasible option. D. equilibrium, because it is a prediction rather than an observation. Statement 3 deals with​ ____________. A. empiricism, because it describes behavior using​ real-world data. B. empiricism, because it illustrates people optimizing using​ cost-benefit analysis. C. optimization, because it predicts how​ people's behavior will change. D. empiricism, because it evaluates whether people maximize their​ well-being

1. D. Optimization, because you are choosing your best feasible option. 2. B. Equilibrium, because your friend presumes everyone is behaving optimally. 3. A. Empiricism, because it describes behavior using real-world data.

The definition of economics states that it is the study of how​ _________

A. money influences the economy in the short run and the long run. B. businesses make decisions and how those decisions impact other​ firms, the​ government, and consumers. C. the government determines​ policies, businesses set​ prices, and consumers choose how much to buy. D. Agents choose to allocate scare resources and the impact of those choices on society.

A budget constraint represents​ _________.

A. the bundles of goods or activities that a consumer can choose given her limited budget. B. the maximum amount of spending the federal government is allowed to do by law. C. the total amount of income a family earns from all sources. D. any actions taken by government officials to limit the amount of government spending.

What is meant by capital depreciation? A. The depreciation of financial assets due to unexpected inflation. B. The reduction in the value of physical capital due to obsolescence or wear and tear. C. The reduction in the value of physical and human capital due to the emergence of new technologies and globalization. D. The decrease in the productivity of physical capital due to its overuse. Why might one consider the value of depreciation in estimates of national income? A. Ignoring depreciation will result in firms paying more taxes than is justified. B. Including depreciation gives a more complete picture of economic production. C. Failing to do so overstates what society can consume (in the broadcast sense of the term). D. B and C only. E. All the above.

B. the reduction in the value of physical capital due to obsolescense or wear and tear. D. B and C only.

Negative externalities occur when an economic activity has a spillover ____ that ______ affect those directly engaged in the activity. Positive externalities occur when an economic activity has a spillover ______ that ______ affect those directly engaged in the activity.

cost, does not benefit, does not

An aggregated demand curse is created by summing the _________ on the individual demand _________.

quantity demanded at each price, curves

What is meant by comparative​ statics? Explain with an example. A. A change in an outcome, such as consumption, that results from a change in a factor, such as the price. B. The effect of the best feasible choice, such as consumption, on its marginal cost. C. Changes in net benefits when a person switches from one alternative, such as consumption, to another, such as no consumption. D. Equilibria across multiple​ markets, such as labor​ markets, financial​ markets, and service markets.

A. A change in an outcome, such as consumption, that results from a change in a factor, such as the price.

Which of the following statements about the principles of economics is​ false? A. An investor selecting and investing in a stock or a combination of stocks that always earns him​ 15% returns on his investment is an example of optimization. B. Based on the sales of last three​ years, a shopkeeper infers that the higher the discount offered on goods the higher will be its demand. This is an example of empiricism. C. Five mobile operators selling mobile phones at the same price in a city is an example of equilibrium. D. A chess player selecting his best moves to win the chess tournament is an example of optimization. Suppose a total of​ 2,500 students are allowed in the engineering programs at all of the colleges in a particular city. From the previous three​ years' record, it shows that the number of students who enroll in the entrance exam for the engineering program increases if there is an increase in the number of IT recruiters the previous year.This year there is a total of​ 3,200 students who have enrolled to take the entrance exam of which only up to​ 2,500 of those who passed would get in. Based on either the​ students' perspective or the college​ perspective, what combination of economic key concepts does the situation​ follow? A. Equillibrium and empiricism B. Optimization and empiricism C. Optimization, equillibrium, and empiricism D. Optimization and equillibrium

A. An investor selecting and investing in a stock or a combination of stocks that always earns him 15% returns on his investment is an example of optimization. C. Optimization, equillibrium, and empiricism.

Which of the following statements are true? (Check all that apply.) A. Equilibrium is attained when prices are allowed to respond to market pressure. B. A binding price ceiling will always cause the quantity demanded to exceed the quantity suppled. C. A government price control can be used to bring markets into equilibrium. D. A government price control will always cause the quantity demanded to exceed the quantity supplied.

A. Equilibrium is attained when prices are allowed to spond to market pressure. B. A binding price ceiling will always cause the quantity demanded to exceed the quantity supplied.

Which of the following is the best example of causation​ (versus correlation)? A. Oil prices go up and gasoline prices go up. B. Women's skirts get shorter and the stock market goes up. C. The groundhog sees its shadow and winder lasts longer. D Ice cream sales and the number of drownings.

A. Oil prices go up and gasoline prices go up.

Some people go to a new gym because it just happened to open up right next to where they live. People who live farther away do not go to this new gym as much. You compare fitness between these two groups. Using the concept of natural experiment, which of the following statements is true about the scenario? A. This is a good natural experiment. B. This is a decent natural experiment. C. This is not a natural experiment.

A. This is a good natural experiment.

Does the principle of optimization imply that people always make the best choices? A. Yes, it is a good approximation for the decisions people make. B. No, because people do not have full information. C. Yes, because people make perfect calculations. D. No, because people are irrational. E. It cannot be tested without more data.

A. Yes, it is a good approximation for the decisions people make.

In a perfectly competitive​ market, sellers​ _________ and buyers​ _________. A. cannot charge more than the market price; cannot pay less than the market price. B. cannot charge more than the market price; are able to pay less than the market price. C. are able to charge more than the market price; are able to pay less than the market price. D. are able to charge more than the market price; cannot pay less than the market price. In a perfectly competitive market, if one seller chooses to charge a price for its good that is slightly higher than the market price, then it will _________. A. lose all or almost all of its customers. B. see no change in its number of customers. C. see a small decrease in its numbers of customers. D. All of the above are equally likely.

A. cannot charge more than the market price; cannot pay less than the market price. B. lose all or almost all of its customers.

Which of the following statements regarding marginal analysis are​ true? (Check all that apply.​) A. It excludes information that is relevant to the​ individual's decision. B. It is often faster to implement than optimization using total value. C. It focuses on the difference between one feasible alternative and the next feasible alternative. D.It always picks out a different optimum than the minimization of the total cost. Which one of the following is common between optimization using total value and optimization using marginal​ analysis? A. It calculates the extra cost generated by moving from one feasible alternative to the next feasible alternative. B. It excludes the information that is not relevant to the decision. C. It is a​ cost-benefit analysis technique for optimization. D. It calculates the change in total value and chooses the option with the highest total value as a best feasible option.

B,C C. It is a cost-benefit analysis technique for optimization.

Which of the following news stories​ (all published in early​ 2014) would typically be studied in​ macroeconomics? ​(Select all that apply​.) A."5 Reasons Why Apple is Looking Like the Next​ Sony" B. "Expectations High for March​ Employment." C. "What If Economic Growth Is No Longer​ Possible?" D. "We Believe Inflation Should Rule Monetary​ Policy." E. "Which College-Which Major-Will Make You Richest."

B. "Expectations High For March Employment." C. "What If Economic Growth Is No Longer Possible?" D. "We Believe Inflation Should Rule Monetary Policy."

In which of the following examples is prescriptive economic analysis necessary? A. The government is right to introduce a ban on smoking in public places. B. Jay chooses to go to Europe rather than China because of the huge discounts. C. If the government raises the tax on​ beer, this will lead to a fall in profits of the brewers. D. Higher interest rates will reduce home prices. Which of the following statements explain positive economics? (Check all that apply.) A. It is not factual B. The predictions are testable. C. It can be rejected or amended depending on the evidence available. D. It depends upon value judgements. Which of the following does not support the concept of an economic agent? (Check all that apply.) A. Groups are considered as a single decision maker. B. All economic agents are individuals. C. Their decisions do not have an effect on the economy of a country. D. They make decisions by solving choice problems.

B. Jay chooses to go to Europe rather than China because of the huge discounts. B,C B,C

Read the story to the​ right, and then answer the following​ questions: Based on what happened at the Richmond​ event, it is apparent that at a price of​ $50, the quantity​ _________ of laptops exceeded the quantity​ _________. This resulted in an excess​ _________ for laptops. A. demanded; supplied; supply B. demanded; supplied; demand C. supplied; demanded; demand D. supplied; demanded; supply Which of the following ways of distributing the laptops would be more efficient? (Check all that apply.) A. Using a first-come, first-served rule. B. Auctioning off the laptops to the highest bidders. C. Using a random lottery to decide who gets the laptops. D. Using flexible prices, so those who value the laptop more would pay more for it.

B. demanded; supplied; demand b, c, d.

The concept of diminishing marginal benefits means that​ __________. A. the more of a good that you​ consume, the lower is your overall benefit from that good. B. each additional unit consumed is worth less to you than the previous one. C. each additional unit consumed is worth more to you than the previous​ one, but the additional benefit grows at a diminishing rate. D. as you consume more of a​ good, your willingness to pay for that good increases faster than the benefit you receive. The concept of diminishing marginal benefits ________ for goods that you like a lot. Suppose you have a flashlight that takes three batteries to power it. If you buy the batteries one at a​ time, for which purchase will diminishing benefits set​ in? A. When you buy the first battery. B. When you buy the second battery. C. When you buy the third battery. D. When you buy the fourth battery.

B. each additional unit consumed is worth less to you than the previous one. D. When you buy the fourth battery.

Which of the following cases can create a​ free-rider problem? ​(Check all that apply.) A. Opening a savings account in a bank. B. Use of a personal television by the owner. C. Use of public parks by locals. D. The street light on the road. Mason and Jack are neighbors. Mason wants to buy a new outdoor grill so he can barbecue. Mason has two​ options, a charcoal grill or a gas grill. By using _____ , he chooses to buy a gas grill. Mason knows that Jack would borrow his grill without asking; therefore, decides to use ______ in order to prevent his neighbor Jack from becoming a free-rider.

C, D Prescriptive economic analysis, equilibrium analysis

Comparing a set of feasible alternatives and picking the best one is an optimization process called _________. A. statistical inference B. likelihood estimation C. cost-benefit analysis. D. normative analysis. When deciding whether to install visible countdown timers for pedestrians at crosswalks, which of the following would be considered in the cost-benefit analysis? (Check all that apply.) A. The higher maintenance bill associated with fixing these more complex signals when they break down. B. The value of the pedestrians' lives saved by having the timers to assist in crossing the street. C. The cost in terms of dollars of installing these new timers all over the city. D. The value of the lives lost by drivers who watch the countdown timers and try to make it through a light.

C. Cost-benefit analysis a,b,c,d

Suppose you have been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. Your client would like your team to perform a study on​ customers' gasoline purchasing habits when they notice price increases. You suggest that the team​ _____________. A. collect competitor data. Your answer is not correct. B. develop a model that allows for scenario analysis. C. design and execute an experiment. D. utilize artificial intelligence to model human behavior. Debbie, a member of your​ team, advocates finding random people and then breaking them up into two groups. Group A would be shown an increase in the price of gas before taking the survey. Group B would be told there was no increase in the price of gas before taking the survey.​ Troy, another member of your​ team, recommends finding two groups of people already sorted by whether or not they have recently noticed an increase in the price of gas. Debbie's method is a ________ and Troy's method is a _______ Group A is the ________ and Group B is the _________.

C. Design and excecute an experiment. controlled experiment, natural experiment. treatment group, control group.

Which of the following is not true about economic​ models? A. A model is only an approximation. B. They can be highly complex and based on lengthy mathematical analysis. C. They are not​ useful, since they do not include all variables.. D. Models are not perfect replicas of reality. Which of the following it NOT an important property of an economic model? A. It is based on a theoretical construct. B. It predicts what would happen on average. C. It predicts actual results over half the time. D. It makes predictions that can be tested with data.

C. They are not useful, since they do not include all variables. C. It predicts actual results over half the time.

If opportunity cost were to suddenly​ increase, total cost would A. Increase and net benefit would increase. B. decrease and net benefit would decrease. C. decrease and net benefit would increase. D. increase and net benefit would decrease.

D. Increase and net benefit would decrease.

Suppose you have just been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. In your first presentation to​ management, how would you describe your planned methodology to perform the​ analysis? A.Management consulting method. B.Price discrimination method. C.Economic method. D. Scientific method. What tool would you employ to analyze the relationship between gasoline prices and consumer​ behavior? A.Refining models. B.Fashion models. C.Economic models. D.Accounting models. You should collect _______ amount of data to create _______ to test the _______ indicated by the economic model.

D. Scientific Method. C. Economic Models a large; empirical evidence; hypothesis

What does it mean to say that we are running out of​ "cheap oil"? A. That there are declining reserves of​ low-quality oil, but there is still plenty of​ high-quality oil remaining. B. That we will soon deplete all the​ world's oil​ reserves, which will cause the price of oil to increase significantly. C. That world demand for oil is​ declining, which will raise the price of oil in the future. D. That oil reserves are becoming more expensive to find and extract over time. What does this imply for the price of oil in the​ future? A. The demand for oil will​ increase, which will lead to lower prices in the future. B. The supply of oil will​ decrease, which will lead to higher prices in the future. C. The supply of oil will​ increase, which will lead to lower prices in the future. D. The demand for oil will​ decrease, which will lead to higher prices in the future

D. That oil reserves are becoming more expensive to find and extract over time. B. The supply of oil will decrease, which will lead to higher prices in the future.

Which of the following statements would not be considered a positive​ statement? A. In 2013-2014, tuition at 4-year colleges grew at its slowest rate in 30 years. B. U.S. automobile sales increased by 13 percent in 2012, compared to 2011. C. The highest annual unemployment rate in the last 10 years was 9.6 percent. D. The vending machine outside the classroom needs a better selection of food. The statement that the U.S. government should increase carbon taxes to reduce carbon emissions that cause global warming is​ ___________. A. a positive​ statement, since most studies have found that global warming does exist and most economists do believe that carbon taxes are an effective way to control emissions. B. neither a positive nor a normative​ statement, since it discusses the broad topic of global warming instead of a specific issue within the country. C. a normative​ statement, since it is an incorrect statement. Most economists believe that carbon taxes should be lowered to control emissions. D. a normative​ statement, since it describes what ought to be done and is therefore not possible to confirm with data.

D. The vending machine outside the classroom needs a better selection of food. D. A normative statement, since it describes what ought to be done and is therefore not possible to confirm with data.

All of the following are properties of the most exciting economic​ questions, except good questions A. address topics that are important to society. B. can be answered. C. address topics that are important to individual economic agents. D. cannot be answered.

D. cannot be answered.

A competitive market will A. create excess demand because wants exceed needs. B. move towards equilibrium because producers set the prices. C. create excess supply because producer want profits. D. move towards equilibrium quantity because both producers and consumers act in their own best interest.

D. move towards equilibrium quantity because both producers and consumers act in their own best interest.

Every five​ years, the Bureau of Economic Analysis​ (BEA) revises past GDP figures and the methodology involved in computing national income. In June​ 2013, the BEA decided to increase the weighting given to the creation of intellectual property in the national income accounts. This means that the intellectual property involved in the creation of​ books, movies,​ photographs, and even greeting cards will be included in GDP.​ Moreover, the initial cost of producing intellectual property will be treated as a capital investment and future flows of revenue from the book or TV show will be added later on. What are the possible difficulties that the BEA could face with this new​ approach? A. Identifying the qualifying expenditures that lead to the creation of the intellectual property. B. Deciding how broadly or narrowly to define the concept of intellectual property. C. Separating the effect of intellectual property on growth and productivity from the effect of real tangible assets. D. All of the above. E. A and B only. The BEA plans to retrospectively revise U.S. GDP data using this new methodology. Given that the​ debt-to-GDP ratio is a measure of a​ country's debt in relation to its​ GDP, how will this ratio be affected by the​ BEA's revisions? If GDP is revised downward as a result of the revision, the debt-to-GDP ratio will _________; on the other hand, if GDP is revised upward or there is no change, then the ratio will _________.

E. A and B only. increase, decrease or not change