econ 2105 final exam study set

Producer surplus is defined as the:

A) gap between the supply curve and the market price. B) difference between a price floor and the market price. C) gap between the demand curve and the market price. D) difference between a price ceiling and the market price. Answer is A) gap between the supply curve and the market price.

In general terms, which item is an example of an inferior good?

A) gasoline B) a city bus C) clothing D) a T-bone steak Answer is B) a city bus

Which is one of the four major reasons markets fail?

A) too much competition B) no externalities C) private ownership of resources D) a mismatch of information Answer is D) a mismatch of information

If an economy is operating at a point that is inside of its production possibilities frontier, then it can be assumed that its resources are:

A) underutilized B) fully utilized C) efficiently allocated D) over-utilized Answer is A) underutilized

Which graph shows an increase in quantity supplied?

A and B

A price ceiling usually results in a surplus and misallocation of resources.

A) False B) True Answer is A) False

Suppose that a customer's willingness to pay for a product is $79, and the seller's willingness to sell is $64. If the negotiated price is $68, how much is producer surplus?

$15 $4 $11 $21 Answer is B) $4

A lawyer can argue a case in court for one hour and make $300. She could alternatively use that hour of time to type a legal brief in her office. What is the opportunity cost of her typing the legal brief?

A) $300, since that is the amount she could have made by arguing a case in court B) There is not enough information in this problem to be able to answer the question. C) nothing, since she would always hire an administrative assistant to type for her D) nothing, since she would never type a legal brief Answer is A) $300, since that is the amount she could have made by arguing a case in court

(Figure: Understanding Price Ceilings and Floors) In the graph, which price would allow for an effective price floor?

A) $75 B) $25 C) $50 D) $40 Answer is $75

(Figure: Individual and Market Demand Curves) According to the graph, the market quantity demanded at $20 is:

A) 10. B) 6. C) 1. D) 3. Answer is A) 10.

(Table) The table shows coffee and tea units produced for the United States and Japan. If Japan decides to increase production of tea from 12 units to 24 units, the opportunity cost is:

A) 15 units of tea B) 10 units of coffee C) 8 units of coffee D) 10 units of tea Answer is C) 8 units of coffee

Paolo can walk three dogs or mow two lawns in two hours. Ashanti can walk six dogs or mow three lawns in two hours. Ashanti's opportunity cost for each additional dog walked is:

A) 2.5 lawns mowed B) 1.5 lawns mowed C) 2.0 lawns mowed D) 0.5 lawn mowed Answer is D) 0.5 lawn mowed

(Figure: Interpreting Supply Shifts 3) When the supply shifts from S0 to S1 (a leftward shift of the supply curve), the equilibrium quantity changes from:

A) 20 units to 15 units. B) $40 to $60. C) $60 to $40. D) 15 units to 20 units. Answer is A) 20 units to 15 units

In the graph, if a price floor on soybeans is set at $2 per bushel, the amount of surplus in this market would be ____ bushels.

A) 40 B) 10 C) 50 D) 0

(Table) The table shows the demand of three individuals in a market. Assuming they are the only buyers, what is total market quantity demanded if the price is $20?

A) 5 units B) 20 units C) 7 units D) 1 unit Answer is A) 5 units

Paolo can walk three dogs or mow two lawns in two hours. Ashanti can walk six dogs or mow three lawns in two hours. One can conclude that

A) Ashanti has absolute advantage in lawn-mowing, and Paolo has comparative advantage in dog-walking B) Ashanti has absolute advantage in dog-walking, and Paolo has comparative advantage in lawn-mowing C) Paolo has absolute advantage in dog-walking, and Ashanti has comparative advantage in lawn-mowing D) Paolo has absolute advantage in lawn-mowing, and Ashanti has comparative advantage in dog-walking Answer is B) Ashanti has absolute advantage in dog-walking, and Paolo has comparative advantage in lawn-mowing

Which scenario is an example of consumer surplus?

A) Bayram was willing to sell his grandmother's china for $120, so he was thrilled that Miranda was willing to pay $150 for it. B) Constant was happy to find a used textbook for $60 because that was exactly the amount of money he budgeted for it. C) Ashlynn was overjoyed to find a wedding dress that she liked fo $1,280. She had been willing to pay $1,509. D) Brittany was willing to pay $9,000 for a used car, but Tanner would not sell his for less than $9,500. Answer is C) Ashlynn was overjoyed to find a wedding dress that she liked fo $1,280. She had been willing to pay $1,509.

How does an economy achieve production efficiency? (Answer)

A) By producing goods that provide the greatest possible benefits, regardless of cost B) By avoiding the use of scarce resources C) By encouraging firms to pay attention to the interests of community stakeholders D) By producing goods at their lowest possible opportunity cost Answer is D) By producing goods at their lowest possible opportunity cost

When the price of running shoes is higher than the market equilibrium price, which of these occurs?

A) Consumer surplus falls and deadweight loss falls. B) Consumer surplus falls and deadweight loss rises. C) Consumer surplus rises and deadweight loss falls. D) Consumer surplus rises and deadweight loss rises. Answer is B) Consumer surplus falls and deadweight loss rises.

Rising cotton prices have forced quilters to switch from fabric to linen. What happened to consumer surplus in the market for linen, assuming supply held steady and the market sells at the equilibrium price?

A) Consumer surplus will remain unchanged after the increase in demand. B) There is no way to predict whether consumer surplus will change. C) Consumer surplus will be smaller after the increase in demand. D) Consumer surplus will be larger after the increase in demand. Answer is D) Consumer surplus will be larger after the increase in demand.

How could it happen that the equilibrium price of good remains unchanged when supply shifts to the left?

A) Demand shifts to the left by a larger distance. B) Demand shifts to the left by an equal distance. C) Demand shifts to the right by an equal distance. D) Demand shifts to the right by a larger distance. Answer is B) Demand shifts to the left by an equal distance.

The demand for gasoline is rising. Which statement describes a possible cause?

A) Drivers are purchasing more fuel-efficient cars. B) Incomes are falling. C) Commuters are switching from driving to public transportation. D) Consumers expect prices to rise in the near future. Answer is D) Consumers expect prices to rise in the near future.

When demand for a product falls, ceteris paribus, what happens to equilibrium price and consumer surplus at that price?

A) Equilibrium price falls and consumer surplus falls. B) Equilibrium price rises and consumer surplus falls. C) Equilibrium price rises and consumer surplus rises. D) Equilibrium price falls and consumer surplus rises. Answer is A) Equilibrium price falls and consumer surplus falls.

Economists wish to eliminate external benefits because they prevent the market from operating efficiently.

A) False B) True Answer is A) False

Labor as a factor of production includes the mental but not physical talents of people.

A) False B) True Answer is A) False

Production efficiency is defined as producing the mix of goods and services most desired by society.

A) False B) True Answer is A) False

Suppose the equilibrium price of carrots is $1. The price floor instituted by the government is $1.50. Based on this information, which of the following would you expect to take place in the market?

A) Farmers would switch from growing carrots to growing potatoes. B) There would be a shortage of carrots. C) The price floor would have no impact on the market because it is higher than equilibrium price. D) We would expect to see a surplus of carrots. Answer is D) We would expect to see a surplus of carrots.

What event was a major influence on the development of macroeconomics?

A) Great Depression B) Employment Act of 1946 C) establishment of the Federal Reserve System in the United States D) U.S. entry into World War II Answer A) Great Depression

Which question would be considered one of three basic economic questions every society must answer?

A) How high should interest rates be? B) What is the best way to maximize soybean production? C) Where should the next Amazon headquarters be located? D) How often should roads and bridges be replaced? Answer is B) What is the best way to maximize soybean production?

(Table) Based on the table

A) Mexico has a comparative advantage in producing steel. B) Canada has a comparative advantage in producing airplanes. C) Canada has a comparative advantage in producing steel. D) Mexico has an absolute advantage over Canada in producing both steel and airplanes. Answer is C) Canada has a comparative advantage in producing steel.

(Figure: PPF of Econia (a small nation)) Looking at the production possibilities frontier (PPF) of Econia, imagine that research develops a new hybrid variety of cotton that increases Econia's ability to produce cotton. Which statement would be true?

A) Point A remains unattainable because the ability to produce wheat is unaffected. B) Points C, D, and F move from being unattainable to attainable. C) Point G remains on Econia's PPF D) Point A is now attainable because there would be an outward parallel shift of the PPF Answer is A) Point A remains unattainable because the ability to produce wheat is unaffected

___occurs when goods and services are produced with as few resources as possible, while ____ occurs when the mix of goods and services produced is the most desired by society.

A) Production efficiency; social efficiency B) Production efficiency; allocative efficiency C) Allocative efficiency; social efficiency D) Allocative efficiency; production efficiency Answer is B) Production efficiency; allocative efficiency

Which of the following circumstances suggests that the selling price of the good is above its equilibrium price?

A) There is never a parking space available on campus, even though students complain that the price of parking is too high. B) An apartment building has a long list of tenants waiting for units to become available. C) In your neighborhood, you notice that a significant number of homes have had a "For Sale" sign in the yard for at least six months. D) People wait in line overnight to buy concert tickets for an upcoming performance of a fusion band. Answer is C) In your neighborhood, you notice that a significant number of homes have had a "For Sale" sign in the yard for at least six months.

(Table) According to the data in the table, who has an absolute advantage in the production of shirts?

A) Tom, because he can produce more shirts in a week than Joe can B) Tom, because he cannot produce as many shirts as Joe can C) Joe, because he can produce more shirts in a week than Tom can D) Joe, because he cannot produce as many shirts as Tom can Answer is A) Tom, because he can produce more shirts in a week than Joe can

The limits on international trade include all of these EXCEPT:

A) Trade may hurt some industries and individuals within each country. B) transportation and communication costs. C) increasing opportunity costs and diminishing returns. D) decreasing opportunity costs and increasing returns. Answer is D) decreasing opportunity costs and increasing returns

A change in the quantity demanded of hamburgers occurs when the price of hot dogs changes.

A) True B) False Answer is B) False

As it relates to the production possibilities frontier, an increase in technology for one good while holding all else constant will cause a complete outward shift of the production possibilities frontier.

A) True B) False Answer is B) False

Which organization determines the beginning and end dates of a recession?

A) U.S. Treasury Department B) National Bureau of Economic Research C) Council of Economic Advisers D) Federal Reserve Board of Governors Answer B) National Bureau of Economic Research

Which is NOT considered a basic economic question?

A) Who will receive the goods and services? B) How will these goods and services be produced? C) What goods and services will be produced? D) How will the system accommodate change? Answer is D) How will the system accommodate change?

Which of these circumstances would NOT affect the supply of new automobiles?

A) a labor strike in the steel industry B) higher interest rates for new car financing C) an improvement in automobile manufacturing technology D) a subsidy for struggling automobile manufacturers Answer is B) higher interest rates for new car financing

(Figure: Predicting Demand Shifts 2) What would cause a shift from D1 to D2?

A) a new virus that reduces the bee population B) a decrease in population C) a new study that shows that honey cures cancer D) a decrease in the price of honey Answer is C) a new study that shows that honey cures cancer

A market exists when:

A) a physical location is created to facilitate the exchange of personal information about consumer choices. B) an absolute advantage is achieved by one country. C) people exchange money for goods and services. D) the cost of production is equated to the price by a government agency. Answer is C) people exchange money for goods and services

An outward shift of the production possibilities frontier shows that the economy is:

A) acquiring more resources or making better use of the resources it has B) producing more of the good measured on the horizontal axis C) producing more of the good measured on the vertical axis D) running out of scarce resources Answer is A) acquiring more resources or making better use of the resources it has

(Figure: Supply and Demand for Shoes) If the price of shoes is $60, then we:

A) are at equilibrium. B) have a shortage of shoes. C) have a surplus of shoes. D) There is not enough information to answer this question. Answer is C) have a surplus of shoes.

Producer surplus is shown graphically as the area ___ the market price.

A) below the demand curve and below B) above the supply curve and below C) below the demand curve and above D) above the supply curve and above

(Figure: Determining Production Possibilities 3) According to the graph, the output combination represented by the point can be achieved only

A) by reducing imports. B) if the unemployment rate were zero. C) reducing immigration. D) if more resources were acquired. Answer is D) if more resources were acquired.

(Figure: Wheat and Autos in the United States and South Korea) According to the graph, for every extra:

A) car the United States wants to produce, it must give up 100 bushels of wheat. B) car South Korea wants to produce, it must give up half a bushel of wheat. C) car South Korea wants to produce, it must give up 40,000 bushels of wheat. D) bushel of wheat the United States wants to produce, it must give up 100 cars. Answer is B) car South Korea wants to produce, it must give up half a bushel of wheat.

(Figure: Interpreting Demand Curves) In the demand curve shown, an increase in price from $1 to $2 will:

A) cause quantity demanded to fall from 30 units to 20 units. B) make buyers angry. C) have no impact on sales. D) cause quantity demanded to rise from 20 units to 30 units. Answer is A) cause quantity demanded to fall from 30 units to 20 units.

A production possibilities frontier that is a straight line is the result of:

A) constant opportunity costs B) scarcity C) increasing opportunity costs D) underemployment of resources Answer is A) constant opportunity costs

The largest component of GDP is

A) consumption expenditure. B) government spending. C) gross private domestic investment. D) net exports. Answer A) consumer expenditure.

Suppose an economy has historically grown at a rate of 1.25%. Economic activity decreased every quarter over the past year, but the decline stopped this quarter. The economy is expected to grow at a rate of 1.4% in the near future, but monetary authorities are concerned that inflation may increase. This economy is probably in the _____ stage of the business cycle.

A) contraction B) recovery C) trough D) expansion Answer C) trough

In the market for cable television, fewer people are subscribing to cable while the cost of providing cable television has increased. As a result, since the drop in cable subscribers has had a bigger impact on the market, we can expect a(n)

A) decrease in the equilibrium price and quantity of cable television. B) unknown change in the equilibrium price but a decrease in the equilibrium quantity of cable television. C) unknown change in the equilibrium quantity but a decrease in the equilibrium price of cable television. D) increase in the equilibrium price and quantity of cable television. Answer is A) decrease in the equilibrium price and quantity of cable television

(Figure: Determining Surplus and Loss) Consider the graph. If the price is raised from $8 to $12, consumer surplus:

A) decreases by $120 and deadweight loss increases by $70. B) increases by $120 and deadweight loss increases by $60. C) increases by $20 and deadweight loss increases by $70. D) decreases by $20 and deadweight loss increases by $70. Answer is A) decreases by $120 and deadweight loss increases by $70.

(Figure: Determining Surplus and Loss) Consider the graph. If the price is lowered from $8 to $5, consumer surplus

A) decreases by $20 and deadweight loss increased by $30. B) increases by $120 and deadweight loss increases by $70. C) increases by $20 and deadweight loss increases by $70. D) increases by $20 and deadweight loss increases by $30. Answer is C) increases by $20 and deadweight loss increases by $70.

Other factors held constant, as the price of an iPad rises, the:

A) demand for iPads falls. B) quantity demanded for iPads falls. C) quantity demanded for iPads rises. D) demand for iPads rises. Answer is B) quantity demanded for iPads falls

Simon Kuznets

A) devised the gross national product as a way of measuring a nation's economic output. B) set up the National Bureau of Economic Research. C) was the Secretary of Treasury during World War II. D) invented the hair net. Answer A) devised the gross national product as a way of measuring a nation's economic output.

(Figure: Bread and Honey) In the graph, point b represents:

A) economic growth B) a better economic situation than point a C) a point of inefficiency D) a point where all of society's resources are fully employed Answer is D) a point where all of society's resources are fully employed

(Figure: Understanding Price Ceilings and Floors) In the graph, if the government sets a price of $75, this is an example of an:

A) efficient price floor. B) efficient price ceiling. C) effective price floor. D) effective price ceiling. Answer is C) effective price floor.

A good example of a government imposed-price ceiling is:

A) equilibrium. B) minimum wage. C) rent controls. D) supply and demand. Answer is C) rent controls.

(Figure: Tanks and Health Care) Which point in the figure is obtainable but NOT efficient?

A) f B) g C) b D) a Answer is A) f

The U.S. gross domestic product is equal to the total market value of all

A) final goods and services produced by U.S. citizens in the United States. B) intermediate goods and services produced by resources in the United States. C) intermediate goods and services produced by citizens in the United States. D) final goods and services produced by resources in the United States. Answer D) final goods and services produced by resources in the United States.

Consumer surplus is defined as the:

A) gap between the supply curve and the market price. B) difference between a price ceiling and the market price. C) gap between the demand curve and the market price. D) difference between a price floor and the market price. Answer is C) gap between the demand curve and the market price.

Which of these is NOT correct? Price floors and price ceilings:

A) help a market balance the interests of sellers and buyers. B) can interfere with the process leading to market equilibrium. C) can result in surpluses or shortages. D) are typically instituted by government. Answer is A) help a market balance the interests of sellers and buyers.

(Figure: Interpreting Supply Shifts 2) A shift to the right of the supply curve could be caused by a(n):

A) improvement in production technology. B) increase in the costs of resources. C) decrease in the number of sellers. D) increase in the price of a complement. Answer is A) improvement in production technology.

(Figure: Interpreting PPF Shifts) According to the graph, which of the following changes may cause the production possibilities frontier to shift inward from PPF1 to PPF0

A) increase in the labor force B) improve the skills of the workers C) increase government regulation on businesses overall D) increase in the population Answer is C) increase government regulation on businesses overall

Investment in human capital refers to:

A) increasing the machinery and equipment that firms use B) education, on-the-job training, and professional training activities C) increasing the number of people working at companies D) increasing the financial capital in the economy Answer is B) education, on-the-job training, and professional training activities

GDP can be found by adding up either all of the _____ or all of the _____ in the economy.

A) investment; income B) net interest payments; taxes C) spending; taxes D) spending; income Answer D) spending; income

When quantity demanded in a market equals quantity supplied, then the:

A) market is in temporary disequilibrium. B) market will not clear without further price adjustments. C) equilibrium price is less than expected by buyers. D) market is in equilibrium. Answer is D) market is in equilibrium.

In a ____ economy, individuals and firms own most resources, and in a ___ economy, the government controls most resources.

A) market; planned B) planned; socialist C) planned; market D) socialist; planned Answer is A) market; planned

The four types of spending in GDP are personal consumer spending, _____ private domestic investment, government spending, and _____.

A) net; net imports B) gross; net exports C) gross; net imports D) net; net exports Answer B) gross; net exports

A ___ occurs when price is above market equilibrium.

A) price rise B) sell-off C) shortage D) surplus Answer is D) surplus

The idea that all income ultimately goes to households, which then use it to buy goods and services from firms, is a central idea of the

A) production possibilities frontier. B) circular flow diagram. C) supply and demand model. D) classical model. Answer B) circular flow diagram

The state of Florida is experiencing a drought that has caused the price of water that farmers use to grow oranges to rise. This will cause a decrease in the

A) quantity supplied of oranges. B) supply of oranges. C) quantity demanded of oranges. D) demand for oranges Answer is B) supply of oranges.

Which is NOT a source of economic growth?

A) reducing barriers to financial aid for higher education B) increasing research and development C) reducing the level of international trade D) increasing business investment Answer is C) reducing the level of international trade

We are MOST likely to see a recession if interest rates on long-term bonds are

A) rising. B) higher than interest rates on short-term bonds. C) the same as interest rates on short-term bonds. D) lower than interest rates on short-term bonds. Answer D) lower than interest rates on short-term bonds.

In the market for coffee, consumers expect the price of coffee beans to rise next week. This would make the demand for coffee this week

A) shift right B) stay the same, since demand is not affected by price changes. C) shift left. D) stay the same, since the effects of this week and next week will cancel each other out. Answer is A) shift right

The theory of comparative advantage says that countries:

A) should import those goods they can produce at a lower opportunity cost than another country B) should export those goods they can produce at a lower opportunity cost than another country C) can never benefit from specialization in trade D) should restrict trade by cutting off all imports Answer is B) should export those goods they can produce at a lower opportunity cost than another country

U.S. business cycles since 1950 have shown

A) stable unemployment rates. B) expansions to be shorter than recessions. C) expansions to be just as lengthy as recessions. D) expansions to be longer than recessions. Answer D) expansions to be longer than recessions.

If there is a surplus in a given market, then

A) supply will increase. B) the price will decrease. C) the price will not change. D) the price will increase. Answer is B) the price will decrease.

(Figure: Determining Surplus and Loss) In the graph, if the government sets a price of $5, there is a:

A) surplus of 20 units. B) surplus of 40 units. C) shortage of 20 units. D) shortage of 40 units. Answer is D) shortage of 40 units

Suppose that at the current price, the quantity supplied of a product is 5 units and the quantity demanded is 8 units. In this market, there is a ___ of this product and the price should ___.

A) surplus; rise B) shortage; fall C) surplus; fall D) shortage; rise Answer is D) shortage; rise

A business cycle is

A) the engine of economic growth. B) identical to the consumption life cycle. C) the periodic fluctuation of economic activity. D) a period lasting about 50 years. Answer: C) the periodic fluctuation of economic activity.

(Figure: Interpreting a Market Graph) The graph represents:

A) the law of demand. B) the law of supply. C) willingness-to-pay. D) the price system. Answer is B) the law of supply.

Supply is defined as:

A) the minimum amount of a product that sellers are willing and able to provide for sale over a particular time period at various prices, holding all other relevant factors constant. B) the maximum amount of a product that buyers are willing and able to purchase over a particular time period at various prices, holding all other relevant factors constant. C) the minimum amount of a product that buyers are willing and able to purchase over a particular time period at various prices, holding all other relevant factors constant. D) the maximum amount of a product that sellers are willing and able to provide for sale over a particular time period at various prices, holding all other relevant factors constant. Answer is D) the maximum amount of a product that sellers are willing and able to provide for sale over a particular time period at various prices, holding all other relevant factors constant.

At any price below the equilibrium price:

A) the quantity demanded is less than the quantity supplied in the market. B) the quantity demanded equals the quantity supplied in the market. C) demand exceeds supply in the market. D) the quantity demanded exceeds the quantity supplied in the market. Answer is D) the quantity demanded exceeds the quantity supplied in the market.

Which is an example of capital in the production process of an amusement park?

A) the ticket-taker B) the electricity used at the park C) the mechanics who maintain the equipment D) the roller coaster Answer is D) the roller coaster

Flu vaccination shots provide external benefits. Thus:

A) too few flu vaccination shots are given. B) too many flu vaccination shots are given. C) the private market provides the socially desirable output of shots. D) the private market collapses. Answer is A) too few flu vaccination shots are given.

There is a(n) ___ relationship between price and quantity demanded.

A) very weak B) negative C) indeterminate D) positive Answer is B) negative

Which graph shows an increase in quantity supplied?

C and D Answer is C)

Jonathan purchased coffee for $5 at Jennifer's coffee shop; however, he was willing to pay $9. Jennifer was willing to accept $3 for the coffee. The results of this transaction are a consumer surplus of:

A) $10 and a producer surplus of $12. B) $12 and a producer surplus of $10. C) $2 and a producer surplus of $4. D) $4 and a producer surplus of $2. Answer is D) $4 and a producer surplus of $2.

(Figure: Determining Surplus 6) Using the graph, we can calculate the maximum possible consumer surplus aws

A) $10,000 B) $40,000 C) $20,000 D) $80,000 Answer is C) $20,000

(Figure: Determining Surplus and Loss) In the graph, how much is deadweight loss at a price of $12?

A) $70 B) $0 C) $80 D) $60 Answer is A) $70

The measure of society's benefits due to a market transaction is called:

A) deadweight loss. B) total surplus. C) consumer surplus. D) producer surplus. Answer is B) total surplus.

If the government of Spain decides to spend less on the military and more on health care, the forgone spending on military items represents the:

A) opportunity cost of the extra health care B) cost factor of the extra health care C) allocative cost of the extra healthcare D) production efficiency of the extra health care Answer is A) opportunity cost of the extra health care

Which type of payment would NOT be a market transaction?

A) payment for a used book purchased on eBay B) payment made to a disaster victim C) payment for a soft drink at a vending machine D) payment for purchase of shares at a stock exchange Answer is B) payment made to a disaster victim

(Figure: Bread and Honey) In the graph, a movement from point f to point g could occur if:

A) people decide they prefer bread to honey B) technological improvements occur C) people decide they prefer honey to bread D) unemployed workers find jobs Answer is B) technological improvements occur

Laws that prohibit price gouging are often politically:

A) popular, but result in surpluses. B) popular, but result in shortages. C) unpopular and result in surpluses. D) unpopular and result in shortages. Answer is B) popular, but result in shortages.

(Figure: Understanding Surplus and Efficiency) In the graph above, efficiency in this market is achieved at a price of:

A) $14. B) $4. C) $10. D) $0. Answer is C) $10

(Table) According to the table, the equilibrium price is _____, and the equilibrium output is _____ units.

A) $15; 40 B) $10; 60 C) $12; 70 D) $12; 60 Answer is B) $10; 60

(Table) According to the table, the GDP for 2010 was

A) $16,843.8 billion. B) $13,562.1 billion. C) $15,603.1 billion. D) $14,592.3 billion. Answer D) $14,592.3 billion.

Suppose that a customer's willingness to pay for a product is $79, and the seller's willingness to sell is $64. If the negotiated price is $68, how much is consumer surplus?

A) $21 B) $15 C) $11 D) $4 Answer is C) $11

When Mr. Wilson worked full time, he paid a service to have his house cleaned twice a month. Now that he is retired, Mr. Wilson does his own cleaning. What is the effect on GDP?

A) GDP falls as a result of this change. B) GDP at first rises but then falls. C) GDP rises as a result of this change. D) GDP is unaffected by this change. Answer A) GDP falls as a result of this change.

Which statement describes the informal economy?

A) It does not include transactions dealing with illegal goods and services. B) It accounts for 20% of U.S. GDP. C) It does not include income earned by undocumented residents. D) It is largely unmeasured. Answer D) It is largely unmeasured.

The value of cars that the Ford Motor Company produces in a German plant is

A) a part of U.S. GDP. B) not a part of German GDP. C) a part of German GNP. D) a part of U.S. GNP. Answer D) a part of U.S. GNP.

Which item would be included in the GDP accounts?

A) caring for your aged grandmother at home B) paying a $50 consultation fee over the phone with a psychic adviser C) personal time spent learning how to use accounting software D) personally rotating the tires on your neighbor's car Answer is B) paying a $50 consultation fee over the phone with a psychic adviser