Survey of Econ Final Exam study guide
If advertising is successful,
the demand curve shifts to the right and becomes steeper.
Consumer surplus measures
the difference between the maximum price a consumer is willing to pay and the price actually paid.
A mathematical summary of inequality based on the Lorenz curve is known as the
Gini coefficient.
If price is greater than marginal cost, a perfectly competitive firm should increase output because
additional units of output will add to the firm's profits (or reduce losses).
An initial public offering
allows a company to raise money without increasing debt.
Most goods can yield
both positive and negative marginal utility.
A price decrease will cause total revenue to fall if the
demand is inelastic.
A corporation can elect to allocate corporate profits into either
dividends or retained earnings.
Studies have shown that unemployment causes
increased health problems.
Additional loopholes in the personal income tax law tend to
make the system less progressive.
Maximum utility is achieved when
marginal utility is zero.
The effective tax rate is
never higher than the nominal tax rate.
If income is distributed equally, the
Lorenz curve is a straight line.
A competitive firm should always continue to operate in the short run as long as
MR > AVC.
A grocery store put salt on sale but found that total revenues fell. This can be explained by which of the following?
The demand for salt is inelastic.
The long run is
a period long enough for all inputs to be variable.
Wealth is measured as
a stock only.
Unemployment was lowest during
World War II.
According to the classical view, if consumer demand slowed down,
aggregate prices would decrease and the economy would return to its long-term growth trend.
Capital gains are
an increase in the market value of an asset.
When an economy enters a recession, the
duration of unemployment rises.
Someone 18 years old who is not employed and is not actively seeking work is considered
not in the labor force.
Outsourcing is the
relocation of production from domestic companies to foreign countries.
Income elasticity measures the
responsiveness of quantity demanded to a percentage change in income.
The demand for normal goods
rises when incomes rise.
The nominal tax rate is
taxes paid divided by taxable income.
A short-run supply determinant includes
technology.
Total revenue is equal to
the income from sales.
If the population of a country is 250,000 people, its labor force consists of 145,000 people, 35,000 people are unemployed, 10,000 are unable to work, and 5,000 are unwilling to work, the unemployment rate is
24.1 percent.
A demand curve that is perfectly elastic is
horizontal.
Elasticity of supply tells us
how much sellers will increase production in response to a change in price.
A payroll tax
increases the nominal cost of labor.
A price change will have no effect on total revenue if the demand is
inelastic.
Market structure is determined by the
number and relative size of the firms in an industry.
Flat tax critics
object to the elimination of tax deductions and credits.
Interest rates are the _____ cost of money.
opportunity
How income is distributed is typically measured using
personal income.
A firm maximizes profit when
total revenue exceeds total cost by the greatest amount.
Fixed costs
are constant in the short run.
A competitive firm
is a price taker
A consumer maximizes total utility from a given amount of income when the
marginal utility per dollar obtained from the last unit of each good is the same.
A perfectly competitive firm will maximize profits by choosing an output level where the
price equals marginal cost.
Total revenue is
quantity sold times price.
According to Keynes, which of the following should the government do when the economy overheats?
raise taxes
A sudden increase in inflation, ceteris paribus,
raises the CPI and reduces real income.
A tax is progressive if it takes a
smaller fraction of income as income falls.
According to the profit effect,
some costs do not rise when average prices rise.
Financial intermediaries
spread the risk of investment failure over many individuals.
If there is a prolonged recession and, at the same time, technological advances change the skill sets of some jobs and eliminate others, what type of unemployment gets larger?
structural
To find the percentage change in price,
the change in price is divided by the average price.
If two goods are complementary goods, then
the cross-price elasticity sign will be negative.
If price is less than marginal cost, a perfectly competitive firm should decrease output because
the firm is producing units that cost more to produce than the firm receives in revenue, thus reducing its profits (or increasing its losses).
Wealth refers to
the market value of assets people own.
Supply is very inelastic when
the quantity supplied changes little when the price increases.
Cost-of-living adjustments
allow individuals to maintain their purchasing power during inflation.
Each of the following pushes a country inside its production possibilities curve except
an increase in labor force participation.
Explicit costs
are the sum of actual monetary payments made for the use of resources.
The law of diminishing marginal utility states that
as a consumer enjoys successive units of a good, eventually marginal utility will fall.
An increase in the value of an asset, such as a stock, is called
a capital gain.
A bond is
a certificate acknowledging a debt and the amount of interest to be paid each year until repayment.
If a product has a high marginal utility, then
a consumer is willing to pay a high price for it.
If a good is inferior, its
income elasticity of demand is negative.
If a good is normal, its
income elasticity of demand is positive.
Assume the CPI increases from 106 to 125, and an individual's nominal income increases from $100,000 to $125,000 over the same period. This person's real income has
increased by approximately 6.0 percent.
Price discrimination
is a way for sellers to elicit the maximum willingness to pay from buyers.
The marginal cost curve
is the short-run supply curve for a competitive firm at prices above the AVC curve.
Economic profit is
less than accounting profit by the amount of implicit cost.
If peanut butter and jelly are complementary goods, an increase in the price of peanut butter will, ceteris paribus,
reduce the demand for jelly.
If workers do not have the skills that are required in the job market, which of the following will occur?
structural unemployment
A teenager without a high school diploma is unable to find work because all the available jobs require a certain minimum reading skill level that the teenager is not proficient in. Which of the following best characterizes the teenager's circumstances?
structurally unemployed
A U.S. worker who loses his or her job in an import industry because the good is no longer produced would be classified as, ceteris paribus,
structurally unemployed.
Unemployment was low during all of the following periods except
the Great Depression.
Liquidity is
the ability of an asset to be converted to cash.
Dividends are
the amount of corporate profit paid out for each share of stock.
A motivation for holding stock is
the anticipation of capital gains.
If two goods are substitute goods,
the percentage change in quantity demanded for good X will fall if there is a reduction in price of good Y.
According to the law of demand, ceteris paribus,
the quantity demanded increases at lower prices.
Supply is very elastic when
the quantity supplied has a large increase in response to an increase in price.
The market demand for a product is
the sum of all of the individual demands for that product.
Treasury bonds typically have lower coupon rates than corporate bonds because
there is a lower risk that the U.S. Treasury will default.
The _________ of the demand curve corresponds to the idea that the marginal utility for the first few goods is _____________________.
top; higher
Economic profit is the difference between
total revenues and total economic costs.
Internal market forces include all of the following except
trade disruptions.
Part-time workers who desire full-time employment are
underemployed but do not contribute to the unemployment statistic.
A demand curve that is perfectly inelastic is
vertical
The law of diminishing marginal utility gives us a deeper understanding of the downward-sloping demand curve because
when marginal utility is high, we are willing to pay a higher price.
Entrepreneurship
can result in economic losses.
Inflation affects production decisions because it
causes businesses to be more cautious since the future appears more uncertain.
Airline companies engage in price discrimination by
charging higher prices to customers who must travel on short notice.
Each of the following is a detrimental macro consequence of inflation except
COLAs.
A monopoly occurs when
there is only one producer of a good or service.
According to Keynes, which of the following can be used to slow down an overheated economy?
decrease government purchases
Government attempts to create a more equitable income distribution by increasing marginal tax rates will most likely do all of the following except
decrease unemployment.
Price elasticity looks at
how much the quantity demanded or quantity supplied changes after as a result of a change in price.
Elasticity of supply looks at
how responsive sellers are to a change in price.
Each of the following tends to coincide with an increase in unemployment except
decreased stress levels.
The risk premium is the
difference in rates of return on safe and risky investments.
If the Gini coefficient is greater for the United Kingdom than for Japan, we can conclude that the
distribution of income in the United Kingdom is less equal than in Japan.
Horizontal equity can be determined by comparing the
effective tax rates for two taxpayers with the same nominal incomes.
If the cross-price elasticity of demand for SUVs with respect to the price of gasoline is -0.10 and gasoline prices rise by 18 percent, then SUV sales should, ceteris paribus,
fall by 1.8 percent.