ECON 1301 - 003 Reviews

Which of the following characteristics relate to model?

A simplified representation of an object or situation that includes enough of the key features to be useful.

Given the data provided in the table below, the total revenue (TR) for production at quantity (Q) level 4 equals

$20.00

Given the data provided in the table below, what will the marginal revenue equal for production at quantity (Q) level 4?

$5.00

At the beginning of 2013, a government had a total debt of $540 billion dollars. It ended 2013 with a $6 billion dollar budget surplus and in 2014, its budget surplus reached $8 billion dollars. What is the total debt of the government equal to at the end of 2014?

$526 billion

Assuming a country's economy maintains an 8% rate of growth, young adults starting at age 20 would see the average standard of living in their country more than double by the time they had reached age _____.

30

If nominal GDP is 1800 and the money supply is 450, what is velocity?

4

What will the new price equal?

600

Which of the following characteristics relate to price ceiling?

A law that prevents a price from rising above a certain level.

What is meant by insider-outsider model?

A model that divides workers into those already working for the firm who know the procedures and those who are recent or prospective hires.

What term is used to describe total revenues minus the firm's costs, without taking opportunity cost into account?

Accounting profit

What term is used to describe the process of an economy as a whole turning economic inputs like labor, machinery, and raw materials into outputs like goods and services used by consumers?

Aggregate production function

_____________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry.

An oligopoly

_____________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation.

Automatic stabilizers

Which of the following refers to trading one good or service for another directly, without using money?

Barter

Refer to Figure 2-1. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from:

C to F

Which of the following refers to a measure of inflation calculated by U.S. government statisticians based on the price level from a basket of goods and services that represents the purchases of the average consumer?

Consumer Price Index (CPI)

What term is used to describe moving in the opposite direction of the business cycle of economic downturns and upswings?

Countercyclical

What term is used to describe coins and paper bills?

Currency

What term is used to describe when the marginal gain in output diminishes as each additional unit of input is added?

Diminishing marginal returns

____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.

Diminishing marginal returns

What name is given to long-lasting goods like cars and refrigerators?

Durable goods

Which of the following refers to the price where quantity demanded is equal to quantity supplied?

Equilibrium price

Which of the following refers to goods and services that are produced domestically and sold in another country?

Exports

Which of the following refers to when a market exchange affects a third party who is outside to the exchange?

Externality

Which of the following refers to economic policies that involve government spending and taxes?

Fiscal policy

In India one person can produce 330 pounds of rice or 110 shirts in one year. In China one person can produce 400 pounds of rice or 200 shirts in one year. Which of the following statements is true?

India has a comparative advantage in the production of rice.

____________, is a term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800s.

Industrial Revolution

What name is given to rise in the overall level of prices?

Inflation

Which of the following characteristics relate to quality/new goods bias?

Inflation calculated using a fixed basket of goods over time tends to overstate the true rise in cost of living because it doesn't take into account improvements in the quality of existing goods or the invention of new goods.

What term is used to describe international trade of goods within the same industry?

Intra-industry trade

What term is used to describe a tax that collects a greater share of income from those with high incomes than from those with lower incomes?

Progressive tax

What term is used to describe the total number of units of a good or service purchased at a certain price?

Quantity demanded

Which of the following refers to the rate of interest with inflation subtracted?

Real interest rate

Which of the following refers to a payment to make up for the risk of not being repaid in full?

Risk premium

What is meant by "medium of exchange"?

Whatever is widely accepted as a method of payment.

What is meant by predatory pricing?

When an existing firm uses sharp but temporary price cuts to discourage new competition.

What is meant by surplus?

When at the existing price, quantity supplied exceeds the quantity demanded.

Which of the following characteristics relate to trade surplus?

When exports exceed imports.

_________________ results when an economy experiences high unemployment and high inflation at the same time.

Stagflation

What term is used to describe goods that can replace each other to some extent, so that a rise in the price of one good leads to a lower quantity consumed of another good, and vice versa?

Substitutes

Which of the following institutions oversees the safety and stability of the U.S. banking system?

The Federal Reserve

What is meant by producer surplus?

The benefit producers receive from selling a good or service, measured by the price the producer actually received minus the price the producer would have been willing to accept.

Which of the following characteristics relate to intellectual property?

The body of law including patents, trademarks, copyrights, and trade secret law that protects the right of inventors to produce and sell their inventions.

What is meant by open market operations?

The central bank buying or selling bonds to influence the quantity of money and the level of interest rates.

What is meant by diminishing marginal utility?

The common pattern that each marginal unit of a good consumed provides less of an addition to utility than the previous unit.

What is meant by law of supply?

The common relationship that a higher price is associated with a greater quantity supplied.

What is meant by productive efficiency?

When it is impossible to produce more of one good without decreasing the quantity produced of another good.

What is meant by government debt?

The total accumulated amount that the government has borrowed and not yet paid back over time.

What is meant by globalization?

The trend in which buying and selling in markets have increasingly crossed national borders.

Which of the following refers to a definition of the money supply that includes currency, traveler's checks, and checking accounts in banks?

M1

What name is given to a definition of the money supply that includes currency, traveler's checks, checking accounts in banks, savings deposits, money market funds, and certificates of deposit?

M2

Which of the following characteristics relate to monopolistic competition?

Many firms competing to sell similar but differentiated products.

What term is used to describe the economic statistic actually announced at that time, not adjusted for inflation; contrast with real value?

Nominal value

What name is given to goods where the quantity demanded rises as income rises?

Normal goods

Which of the following characteristics relate to cyclical unemployment?

Unemployment closely tied to the business cycle, like higher unemployment during a recession.

What term is used to describe the percentage of adults who are in the labor force and thus seeking jobs, but who do not have jobs?

Unemployment rate

Which of the following characteristics relate to frictional unemployment?

Unemployment that occurs as workers move between jobs.

What term is used to describe the common way in which market values are measured in an economy?

Unit of account

Which of the following refers to those who do not have a job and are not looking for a job?

Out of the labor force

What is meant by cartel?

a group of firms that collude to produce the monopoly output and sell at the monopoly price

A firm that holds a monopoly position in the market place is

a price maker

The graph above refers to a significant increase in oil prices. Which of the following is likely to result?

a rise in inflation from 2.0% to 3.0%

The imposition of a price ceiling on a market often results in:

a shortage

What is meant by recession?

a significant decline in national output

What is meant by negative externality?

a situation where a third party, outside the transaction, suffers from a market transaction by others

What is meant by proportional tax?

a tax that is a flat percentage of income earned, regardless of level of income

Which of the following characteristics relate to budget deficit?

When the federal government spends more than it collects in taxes in a given year.

Specialization:

can lead to an increase in overall production

Marginal thinking is best demonstrated by:

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

The demand (expenditure approach) measure of GDP accounting adds together:

consumption, investment, government purchases, and trade balance.

The components of demand are:

consumption, investment, government spending, exports, and imports.

Which of the following would be classified as a positive externality?

converting a derelict empty lot to a public vegetable garden

The central bank uses a ____________________ monetary policy to offset business related economic contractions and expansions?

countercyclical

Market-oriented environmental tools _______________ for firms to take the social costs of pollution into account and ____________________ in reacting to these incentives.

create incentives; allow firms some flexibility

When the economy of a country is operating close to its full capacity,

cyclical unemployment is close to zero

Refer to the diagram above. What is the significance of the point marked L1 at the bottom upward-sloping portion of the individual labor supply (2) curve?

as wages increase over this range, the quantity of hours worked also increases.

The _____________________ curve will always lie below the curve for average cost because average cost includes ___________ in the numerator of the calculation.

average variable cost; fixed costs

A positive externality arises in a situation where a third party, outside the transaction,

benefits from a market transaction by others

One alternative reaction occurs when buyers and seller decide to break the government rules on prices or sales, which is referred to as _______________.

black market

If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a

budget surplus.

A central bank that wants to increase the quantity of money in the economy will

buy bonds in open market operations.

The nature of demand indicates that as the price of a good increases:

buyers desire to purchase less of it.

If monopolists are able to produce fewer goods and sell them at a higher price than they could under perfect competition, the result will be

abnormally high sustained profits.

When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________________ in producing that product.

absolute advantage

The labor force consists of:

all adults who are working or actively seeking work.

Refer to the above diagram. In this instance,

all of the above and the consumer can choose any point on or below the budget constraint line BC.

The marginal revenue curve for a monopolist ____________________ the market demand curve.

always lies beneath

The federal government levies _____________________________ on people who pass assets ____________________________, either after death or during life.

an estate and gift tax; to the next generation

Refer to Figure 4-3. A change from Point A to Point E represents a(n):

decrease in supply.

Another term used to describe negative inflation is;

deflation

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.

division of labor

The slope of the demand curve for a monopoly firm is

downward sloping

The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls.

economies of scale

When the price of labor is not at the ___________, economic incentives tend to move salaries toward the equilibrium.

equilibrium

The definition of market equilibrium states that at the _______________, the quantity of labor demanded by employers will equal the quantity supplied.

equilibrium wage

The term "constant returns to scale" describes a situation where

expanding all inputs does not change the average cost of production.

A business cycle reflects changes in economic activity, particularly real GDP. The stages of a business cycle are:

expansion, peak, recession, trough

If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used?

expansionary

In order to avoid double counting, statisticians just count the __________________.

final goods and services

A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production.

fixed costs; do not change

The circular flow diagram of economic activity is a model of the:

flow of goods, services, and payments between households and firms.

An individual who wants others to pay for public goods, but plans to use those goods for their own purposes, is often referred to as a ______________.

free rider

Final goods or services used to compute GDP are:

goods and services purchased by the ultimate users.

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made.

government

Refer to Figure 4-1. Using the graph above and beginning on D1, a shift to D2 would indicate a(n):

increase in demand.

Improvements in the productivity of labor will tend to:

increase wages.

The key assumption that accompanies the use of numbers for measuring utility is that

individuals choose based on their preferences.

When the central bank decides to increase the discount rate, the

interest rates increase.

When Marietta chooses to only purchase a combination of goods that lie within her budget line, she

is maximizing utility.

Karen chooses to go to university full-time rather than to work. Karen:

is not part of the labor force.

Refer to Figure 2-2. At Point A in the production possibilities graph shown above, the economy:

is not using its resources efficiently.

If a nation has a comparative disadvantage in the production of some commodity:

it can still gain from international trade in that commodity, by getting it at a lower opportunity cost than if it produced it domestically.

Why would a typical U.S. business fail to take the social costs of pollution into consideration during the development of their operating strategies?

it isn't required to pay any of the cost of cleaning up its pollution

If the CEO of I'MaBigBank is playing prisoner's dilemma then, from his perspective, the gains to be had from cooperation are

larger than the rewards from pursuing self-interest.

Which of the following is most likely to be a monopoly?

local electricity distributor

Which of the following have historically been more willing to sacrifice their environmental quality for some additional economic output?

low incomes and command economies

When a natural monopoly exists in a given industry, the per-unit costs of production will be

lowest when a single firm generates the entire output of the industry.

The unemployment rate may underestimate the true extent of unemployment if:

many people become discouraged and cease looking for work.

The idea behind comparative advantage reflects the possibility that one party:

may be able to produce something at a lower opportunity cost than another party.

The basic difference between macroeconomics and microeconomics is:

microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

A price floor that makes it illegal for an employer to pay employees less than a certain hourly rate is known as:

minimum wage

The largest cattle rancher in a given region will be unable to have a __________ when sufficient numbers of smaller cattle ranchers provide sources of competition.

monopoly

What happens in a perfectly competitive industry when economic profit is greater than zero?

new firms may enter the industry and all of the above

The reasons that nations trade includes the fact that:

no one country produces all of what citizens within the country want.

A public good is a good that is ____________________, and thus is difficult for market producers to sell to individual consumers.

nonexcludable and nonrivalrous

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________, which describe how the world should be.

normative statements

Property rights are the legal rights of ownership on which others are

not allowed to infringe without paying compensation.

If new manufacturers enter the computer industry, then (ceteris paribus):

the supply curve shifts to the right.

Refer to the diagram above. Based on the information illustrated in the graph, which of the following is correct?

the transition point between where MC is pulling down and pulling up AC always occurs at the minimum point of the AC curve

GDP is:

the value of all final goods and services produced domestically within a given period of time.

If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms,

they will be unable to earn higher-than-normal profits in the long run.

A monopolistically competitive firm may earn abnormally high profits in the

short term, but the process of entry will drive those profits to zero in the long run.

The time lag for monetary policy is typically ________________ the time lag for fiscal policy.

shorter than

The market supply curve for labor:

shows the relationship between the wage rate and the quantity of labor that workers are willing to supply.

If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________.

shutdown point

A highly innovative firm operating in a competitive market will usually have

some time before competitors catch up to its innovations.

Which of the following would most likely be identified as being the ultimate goal of public policies that pertain to technology?

to encourage a stream of invention that benefits the whole of society.

The money multiplier is equal to the _______________ in the economy divided by the original _________________.

total money; quantity of money

Aggregate supply (AS) denotes the relationship between the __________________ that firms choose to produce and sell and the _________________, holding the price of inputs fixed.

total quantity; price level for output

Lance paid $175,000 for his house in 2009 and sold it for $325,000 in 2013. What function did the house serve during the time Lance owned it?

store of value

Gomer loses his job as a road construction worker and cannot find another position with equivalent pay and benefits. As a result, he is still checking the want ads and reporting to the unemployment office on a weekly basis. He is considered to be:

underemployed.

Scarcity exists because of:

unlimited wants and limited resources

Laws that impose an upper limit on the interest rate that lenders can charge are known as:

usury laws

In deciding how many hours to work, Beulah will make a choice that maximizes her _______; that is, she will choose according to her preferences for leisure time and income.

utility

If a monopoly or a monopolistic competitor raises their prices, the quantity demanded ____________.

will decline

The quantitative easing policies adopted by the Federal Reserve are usually thought of as

temporary emergency measures.

Reginald looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment, he is considered:

out of the labor force.

A return to which of the following 1930s regulations would limit or restrict unwise borrowing and lending practices by banks?

the Glass-Steagall Act

Government ______________ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for ______________.

patent; a limited time

What is meant by marginal cost?

the additional cost of producing one more unit

Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it?

physical space for the gallery

After maximizing profits, what do the firm's profit's equal?

the area of rectangle BDEG

A beekeeper decides to locate her business on a plot of land that is between an apple orchard and an elementary school. A positive externality that can result is

the bees helping to pollinate the orchard, leading to more fruit.

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:

the benefit to his grades from studying for an hour

The term _________________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.

price taker

For a positive externality, _________________________ than the social benefits.

private benefits of an action are less

Why would labor be treated as a variable cost?

producing larger quantities of a good or service generally requires more workers

A monopolist is able to maximize its profits by

producing output where MR = MC and charging a price along the demand curve.

Refer to the diagram above. In this instance, at the range of output represented at point c,

profits will be maximized.

To achieve a high standard of living, a nation should:

promote economic growth.

Which of the following represents one of the methods that the government uses to promote technology?

protection of intellectual property

The objective of imposing a higher pollution tax is to

provide adequate incentive for firms to reduce their emissions by more.

Idaho farmers can sell as large a quantity of their potato crop as they wish,

provided each is willing to accept the prevailing market price.

Economists typically measure economic growth by tracking:

real GDP per capita.

The nominal value of any economic statistic refers to the number that is actually announced at that time, while the ________________ refers to the statistic after it has been adjusted for inflation.

real value

Refer to the diagram above. In this instance, the marginal revenue curve

reflects each of the above

The term ___________________ describes the proportion of deposits that the bank must hold in the form of reserves that are not loaned out or invested in bonds.

reserve ratio

If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then,

the firm should keep expanding production.

What is meant by federal funds rate?

the interest rate at which one bank lends funds to another bank overnight

Which of the following is considered to be a tell-tale signal that the point with the highest total utility has been found?

the marginal utility per dollar is the same for both goods

A beekeeper decides to locate her business on a plot of land that is between an apple orchard and an elementary school. A negative externality that can result is

the possibility of the bees stinging the students at the school.

The most significant real economic cost of high unemployment is:

the potential goods and services that might have been produced but weren't.

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good.

the production possibilities frontier

Which of the following is not counted as a part of GDP?

the purchase of 100 shares of AT&T stock by your grandfather.

According to the basic quantity equation of money, if price and output fall while velocity increases,

the quantity of money will fall.

In order to determine the average variable cost, the firm's variable costs are divided by _______________________.

the quantity of output

A pollution charge is a form of tax imposed on

the quantity of pollution that a firm emits.

Which of the following characteristics relate to complements?

Goods that are often used together, so that a rise in the price of one good tends to decrease the quantity consumed of the other good, and vice versa.

Which of the following refers to the skills and education of workers?

Human capital

Which of the following refers to policy that involves altering the quantity of money and thus affecting the level of interest rates and the extent of borrowing?

Monetary policy

What term is used to describe the unemployment rate that would exist in a growing and healthy economy from the combination of economic, social, and political factors that exist at a time?

Natural rate of unemployment

What term is used to describe a diagram that shows the combinations of output that are possible for an economy to produce?

Production possibilities frontier

Which of the following refers to accounts that the depositor has committed to leaving in the bank for a certain period of time, in exchange for a higher rate of interest?

Time deposits

_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price.

Total revenue

What is meant by economic profit?

Total revenues minus all of the firm's costs, including opportunity costs.

Which one of the following will cause the production possibilities curve to shift outward?

improved public education

The unemployment rate in a town in which 65,400 persons are employed and 11,000 are unemployed equals:

14.4%

When a price index moves from 107 to 110, the rate of inflation is:

2%

What term is used to describe a game in which if both players pursue their own self-interest, they both end up worse off than if they cooperate?

Prisoner's dilemma

______________________ refers to the additional revenue gained from selling one more unit.

Marginal revenue

What term is used to describe the additional utility provided by one additional unit of consumption?

Marginal utility

Which of the following refers to an economy in which most economic decisions are made by buyers and sellers, who may be individuals or firms?

Market-oriented economy

What name is given to the plant and equipment used by firms in production?

Physical capital

What name is given to the maximum quantity that an economy can produce given its existing levels of labor, physical capital, technology, and institutions?

Potential GDP

What term is used to describe a law that prevents a price from falling below a certain level?

Price floor

In the early 1990`s extremely high inflation rates of 2500% were common in Russia. During that time, we can say that as a result of those inflation rates, Russia was experiencing ____________________.

hyperinflation

As the aggregate price level in an economy decreases,

imports decrease.

A change in the quantity of the product that the labor produces can:

shift the demand curve for labor

One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living, is;

substitution bias

If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages ______.

will increase