Economics Test 2

Unknown given this data

If a market basket was defined in 2006 and it cost $10,000 to purchase the items in that basket in 2006, while it cost $12,000 to purchase those identical goods in 2007, then the inflation rate from 2005 to 2006 is

(120-100)/100*100%=20%

If a market basket was defined in 2006 and it cost $10,000 to purchase the items in that basket in 2006, while it cost $12,000 to purchase those identical goods in 2007, then the inflation rate from 2006 to 2007 is

(12000/10000)*100=120

If a market basket was defined in 2006 and it cost $10,000 to purchase the items in that basket in 2006, while it cost $12,000 to purchase those identical goods in 2007, then the price index for 2007 is

100

If a market basket was defined in 2006 and it cost $10,000 to purchase the items in that basket in 2006, while it cost $12,000 to purchase those identical goods in 2007, then the price index for the base year is

Cyclically unemployed

If a person is laid-off from a job and told that they will be brought back as soon as the economy picks up and demand for their product rises, then economists call this person.

More than 11 percentage points

If the CPI were fixed then the fact that it is wrong by 0.8 percentage points means that over a ten year period it is wrong by

Discouraged worker effect

If the unemployment rate falls because the number of people not working but searching for work (falls), economists would attribute this to the

Encouraged worker effect

If the unemployment rate rises because the number of people not working but searching for work (rises), economists would attribute this to the

Oligopolists

If you drive on a rural stretch of highway and come upon an intersection in which there are two gas stations and you know them to be the only ones for 100 miles, they are

Monopolist

If you drive on a rural stretch of highway and come upon an intersection in which there is only one gas station and you know it to be the only one for 100 miles, it is a

Structurally unemployed

In 2005, General Motors announced a 20% reduction in its staffing levels and the closure of many assembly plants. Those laid off as a result would likely be classified as

The market supply for the good rises and falls when there is entry and exit, respectively

In a diagram of perfect competition, the marginal revenue line moves up and down when there is exit and entry, respectively, because

Borrowers

In early 2005, inflation increased unexpectedly due to an increase oil prices. This helped

Counted, but goods produced by American firms in foreign countries are not counted

In measuring Gross Domestic Product, goods produced by foreign firms in the United States are

Overstating inflation because they were missing "where people shop"

In the 1970s and 1980s Wal-Mart entered several markets outside of its home base of Arkansas. As a result it brought lower prices on a variety of goods. That the Bureau of Labor Statistics did not send its shoppers into these new stores until there was a new survey led to the CPI

Overstating inflation because they were missing "where people shop"

In the 1990s and 2000s Wal-Mart entered the grocery sector in several U.S. cities and as a result it brought lower prices on food. That the Bureau of Labor Statistics did not send its shoppers into these new stores in a timely fashion led to the CPI

The percentage year-to-year increase

Inflation is measured using _________ in a price index.

A price index

Is a mechanism to compare all prices in two different years b. Is the ratio of the price of a market basket in one year to the price of the market basket in the previous year times 100

Oligopoly

Local telephone service was once an area in which consumers had no choices. Many young people no longer use "land lines" preferring instead to use their cellular phones. This means that the market has moved toward

Perfect competition.

Lumber Products can be modeled best using the model of

Needs to make to maintain the incentive to remain in the industry

Normal Profit is what a firm

-Social Security taxes are higher than they would otherwise be -Personal Income taxes are lower than they would otherwise be - The poverty line is higher than it would otherwise be -Social Security payments are higher than they would otherwise be

One of the consequences of the overstatement of the CPI is that

-Domestic production (cooking, laundry and such) are not counted -It ignores the value of leisure -It treats all spending the same (spending on military hardware is treated the same as spending on education) -Environmental quality is ignored -The underground economy (unreported and illegal income and sales) is not counted

One of the reasons that Real Gross Domestic Product is not synonymous with social welfare is

It fails to count home production

One problem with using Real Gross Domestic Product as a measure of social welfare is that

Inflation Unemployment Economic growth

One subject of study for macroeconomics is

-The personal exemption to rise too quickly -Social Security's Maximum Taxable Earnings to rise too quickly -The poverty line to rise too quickly -Standard deduction to rise too quickly -Tax brackets cutoffs to rise too quickly

A CPI miscalculation that overstates its increase by 0.8 percentage points will cause

A depression is much worse

A depression is different from a recession in that

Inadequately deals with updates in product lines for existing goods

A reason given why the CPI overstates the cost of living is it

Makes no attempt to control for quality improvements except in consumer goods

A reason given why the CPI overstates the cost of living is it

Makes no attempt to control for substitution to cheaper goods

A reason given why the CPI overstates the cost of living is it

Makes no attempt to control for the fact that sales often occur on holidays

A reason given why the CPI overstates the cost of living is it

Updates the market basket infrequently thereby missing the steep price decline in the early adoption period

A reason given why the CPI overstates the cost of living is it

BLS audits prices in the same types of stores, rather than shift to cheaper outlets

A reason given why the CPI overstates the cost of living is that the

Never intended to measure increases in the cost of living but many use it that way

According to the Bureau of Labor Statistics, the Consumer Price Index was

Real Gross Domestic Product is Gross Domestic Product

Adjusted for inflation

Perfect competition

Agricultural Products can be modeled best using the model of

The percentage of sales in the industry by the largest firms

An indicator of the degree of competition in an industry is the concentration ratio. It measures

Oligopoly

An industry in which there are just a few large firms is likely to be characterized by

Monopolistic competition

An industry in which there are many competitors with specific marketing niches is likely to be characterized by

Cause these wages to rise more quickly that they otherwise would

Because the CPI overstates the rate of inflation, Cost of Living Adjustments for wages that are based on it will

Leads to the CPI overstating the rate of inflation

DVD writers allow people to record TV shows in a high quality format. They entered the market in 2002 at a price of $1000. By 2003 they were under $500. By the time they had become part of the CPI market basket they are likely to be less than $250. Economists will argue that this type of issue

The average price level (CPI) falls

Deflation occurs only when

A firm makes more than the minimum required to maintain the incentive to remain in the industry

Economic Profit exists whenever

Inversely related to the number of firms competing in the industry

Economic theory would suggest that the profitability of an industry would be

Dangerous, as it can lead to a depression

Economists consider deflation

Overstates it by a difference of about .8% (meaning that an official inflation rate of 1.8% is really only about 1%)

Economists generally believe that relative to the true cost of living, the CPI

1.0 percentage points

Estimates of the overstatement of cost of living by the CPI suggest the magnitude of the overstatement is roughly

A single seller

For a market to be characterized by monopoly, there must be

Barriers to entry and exit

For a market to be characterized by monopoly, there must be

-large number of firms with no one able to influence price - Freedom of entry and exit -Indistinguishable products being sold (All of the above)

For a market to be characterized by perfect competition, there must be

Earn, spend

Gross Domestic Product is counted using two methods: one which counts all the ways people _____ money and another which counts all the ways people _____ money.

Profit will increase

If MR>MC then when an additional unit is sold the firm's

2006

If a market basket was defined in 2006 and it cost $10,000 to purchase the items in that basket in 2006, while it cost $11,000 to purchase those identical goods in 2007, then the base year is

(110-100)/100*100%=10%

If a market basket was defined in 2006 and it cost $10,000 to purchase the items in that basket in 2006, while it cost $11,000 to purchase those identical goods in 2007, then the inflation rate from 2006 to 2007 is

(11000/10000)*100=110

If a market basket was defined in 2006 and it cost $10,000 to purchase the items in that basket in 2006, while it cost $11,000 to purchase those identical goods in 2007, then the price index for 2007 is

100

If a market basket was defined in 2006 and it cost $10,000 to purchase the items in that basket in 2006, while it cost $11,000 to purchase those identical goods in 2007, then the price index for the base year is

There are too frequent updates of the market basket

Which of the following is not a reason that the CPI overstates the cost of living?

6.0% (8/(125+8)*100%

With 125 million people working, 8 million out of work and looking for work, and 147 million neither working nor looking for work the unemployment rate would be

-Part of the 125 million holding part time jobs when they were qualified for full-time jobs -Part of the 125 million holding low-skill jobs when they were qualified for high-skill jobs

With 125 million people working, 8 million out of work and looking for work, and 147 million neither working nor looking for work, "underemployment" would be illustrated by

8 million giving up in their search for work

With 125 million people working, 8 million out of work and looking for work, and 147 million neither working nor looking for work, the "discouraged worker effect" would be illustrated by people in the

147 million seeking but not attaining employment

With 125 million people working, 8 million out of work and looking for work, and 147 million neither working nor looking for work, the "encouraged worker effect" would be illustrated by people in the

Delay their purchases of goods in hopes prices will fall further

With deflation people will

Increase exponentially

Over the years the consequences of the biased-measurement of the CPI

Overstate inflation because of the issue of substitution

Suppose people on diets buy the bulk of the ground chicken and ground turkey sold in the U.S. and they use either interchangeably as a substitute in recipes for ground beef. If the price of ground turkey rises and the price of ground chicken does not the then CPI will

Monopolistic competition.

Suppose ten companies begin introducing new genetically engineered apples. Each has their own distinctive taste and brand name. This market would be described by

Oligopoly

Suppose you can fly from Charlotte to London but only two airlines provide the service. This market would be described by

Monopolistic competition

Suppose you can fly from LA to New York and 15 separate airlines provide the service. This market would be described by

Monopoly.

Suppose you can fly from your home city to New York but only one airline provides the service. This market would be described by

Oligopoly.

Suppose you can get broadband only from your cable company or your phone company. This market would be described by

Oligopoly..

Suppose you can get the typical cable channels (ESPN, MTV, Bravo, etc.) from a cable company, from DIRECTV, or from DISH Network. This market would be described by

It consistently overstates the increase in the cost-of-living

The Consumer Price Index (CPI) is a heavily criticized measure of inflation because

An increase in the number of people who are looking for work & An decrease in the number of people with jobs

Which of the following can make the unemployment rate rise?

Substitution into nearly-equivalent goods is assumed to be more common than it is

Which of the following is not a reason that the CPI overstates the cost of living?

The good one firm produces is exactly the same as the good another firm produces

The assumption under perfect competition of a "homogeneous product" means that

That no buyer will pay more for one firm's good than another's

The assumption under perfect competition of a firm that has no market power means that

Monopolistic competition.

The breakfast cereals industry can be best modeled using the model of

The Bureau of Labor Statistics

The consumer price index is computed by

Monopolistic competition

The fast food industry can be modeled best using the model of

That there are two in oligopoly rather than one competitor in a monopoly

The key difference(s) between monopoly and oligopoly is

The products sold are slightly different in monopolistic competition

The key difference(s) between perfect competition and monopolistic competition is

Monopoly.

The local residential electrical power industry can be best modeled using the model of

One percentage point

The magnitude of the annual overstatement of the CPI is approximately

Overstates the increase in the cost of living

The majority of economists believe that the Consumer Price Index

The inflation rate is

The percentage increase in the price index from one year to the next

Monopoly

The personal computer operating systems industry can be best modeled using the model of

-It would mean that personal income taxes would rise -It would mean that benefits to the poor would fall -It would mean that Social Security benefits would fall

The political problems associated with fixing the CPI are that

To avoid double counting goods that are sold so as to be resold

The reason that only final sales are counted in GDP is

Oligopoly

The soft drink (colas in particular) industry can be best modeled using the model of

Even though, strictly speaking, few industries in the U.S. are governed by perfect competition

The usefulness and relative simplicity of the supply and demand model is often used

Monopoly..

There are hundreds of local water companies but economists insist that in each community they are __________ because consumers have no other choices in the local market in which they live.

P>ATC

There will be long-run pressure on the price to fall whenever

P<ATC & P<AVC

There will be long-run pressure on the price to rise whenever

P>ATC

There will be short-run pressure on the price to fall whenever

P<AVC

There will be short-run pressure on the price to rise whenever

The goods average people buy and the quantities in which they buy them

To an economist a "market basket" is made up of

The marginal cost curve, but only that portion that is above the minimum of average variable cost

Under perfect competition, the supply curve is

Beer industry

Very high concentration ratios characterize the

Furniture industry

Very low concentration ratios characterize the

Economic profit

Whether a firm stays in business or shuts down depends heavily on the concept of

A decrease in the number of people who are looking for work & An increase in the number of people with jobs

Which of the following can make the unemployment rate fall?