ECON 222 MIDTERM 1
The demand and supply curves for T-shirts can be given by: Q= 12,000 -2000 P and Q = 6000 + 1000 P the equilibrium price of a T-shirt and quantity are? - $3. and 16,000 - $2. and 8,000 - $3. and 6,000 - $1. and 3,000
$2. and 8,000
The president of a poor country has announced that he will implement the following measures which he claims are designed to increase growth: 1. Reduce corruption in the legal system; 2. Reduce reliance on market forces because they allocate goods and services in an unfair manner; 3. Restrict investment in domestic industries by foreigners because they take some of the profits out of the country; 4. Encourage trade with neighboring countries; and 5. Increase the fraction of output devoted to consumption. How many of these measures will have a positive effect on growth? - 1 - 2 - 3 - 4 - 5
2
The current US Unemployment rate is closest to - 0% - 2% - 4% - 7% - 15%
4%
Which of the following is not a characteristic of a perfectly competitive market? - There are many sellers. - Different sellers sell identical products. - All of the above are characteristics of a perfectly competitive market. - Sellers must accept the price the market determines.
All of the above are characteristics of a perfectly competitive market.
If there is a positive correlation between X and Y then - X causes Y - Y causes X - There may be an omitted variable Z - All of the above may be a possibility
All of the above may be a possibility
US Government T-Bills - Have a risk of default - Are usually purchased at a discount to their principal - Have the same yield regardless of the term - Generally, are riskier than corporate bonds
Are usually purchased at a discount to their principal
Which of the following would decrease the demand for blue pens? A) an increase in the price of blue pens B) a decrease in the price of black pens C) decrease in the price of blue pens D) increase in the price of black pens - both A and B
B) a decrease in the price of black pens
If the penalty for stealing Ford cars increases, we can expect criminals to - A) steal more Hondas - B) steal less Fords - C) steal less Hondas - Both A and B - Both B and C
Both A and B
If scientists discover that steamed milk, which is used to make lattes, prevents heart attacks, what would happen to the equilibrium price and quantity of lattes? - Both the equilibrium price and quantity would increase. - The equilibrium price would decrease, and the equilibrium quantity would increase. - Both the equilibrium price and quantity would decrease. - The equilibrium price would increase, and the equilibrium quantity would decrease.
Both the equilibrium price and quantity would increase.
If the Federal Reserve decides to sell their huge quantity of T-bills, how will this affect the price of T-bills and the interest rate? - T-bill prices rise and interest rates rise. - T-bill prices fall and interest rates rise. - T-bill prices rise and interest rates fall. - T-bill prices fall and interest rates fall.
T-bill prices fall and interest rates rise.
On the horizontal axis, K/L represents capital (K) per worker (L). On the vertical axis, Y/L represents output (Y) per worker (L). The shape of the curve is consistent with which of the following statements about the economy to which the curve applies? - productivity falls as the capital to labor ratio is increased - There are increasing returns to the capital to labor ratio - There are constant returns to the capital labor ratio - There are diminishing returns to the capital to labor ratio - productivity increases from capital dilution
There are diminishing returns to the capital to labor ratio
A shift in the supply curve of bicycles resulting from lower wages for bicycle assembler workers will lead to - higher prices of bicycles - lower output of bicycles - larger output of bicycles - no change in price of bicycles - a shift in the demand curve for bicycles
a larger output of bicycles
If a surplus exists in a market, then we know that the actual price is - below the equilibrium price, and the quantity demanded is greater than quantity supplied. - above the equilibrium price, and quantity demanded is greater than quantity supplied. - below the equilibrium price, and quantity demanded is less than quantity supplied. - above the equilibrium price, and quantity supplied is greater than quantity demanded.
above the equilibrium price, and quantity supplied is greater than quantity demanded.
Which of the following is likely to affect the position and shape of society's production possibilities frontier? - the number of workers - level of workers - level of technology - amount of factories on hand - all of above are correct
all of above are correct
Both Arnold and Will work 10 hours a day. Arnold can produce six baskets of goods per hour while Will can produce four baskets of the same goods per hour. It follows that Arnold's: - productivity is greater than Will's - output is greater than Will's - standard of living is higher than Will's - all of the above are correct
all of the above are correct
The current price of blue jeans is $30 per pair, but the equilibrium price of blue jeans is $25 per pair. As a result, - the quantity supplied of blue jeans exceeds the quantity demanded of blue jeans at the $30 price - the equilibrium quantity of blue jeans exceeds the the quantity demanded at the $30 price - there is a surplus of jeans at the $30 price - all of the above are correct
all of the above are correct
What would cause the PPF to move outward next year? - an increase in the amount of physical capital this year - a decrease in the number of people unemployed next year - an decrease in investment this year - a large plague this year
an increase in the amount of physical capital this year
If the labor market was perfectly competitive then - there could be different wages for people with different skills and abilities - employers could set the wage that it offers for a job opening - at equilibrium in the market there would be full employment - the wage rate would not be flexible
at equilibrium in the market there would be full employment
An issuer of a bond is - loaning money - borrowing money - selling stock - would benefit if yields decreased
borrowing money
A change in price of a product causes a movement along the demand curve for that product from one point to another point. What factors that would cause a shift in the demand are held constant when this happens? - the number of sellers of the good - the supply of the good - the technology used to produce the good - all of the above - consumer incomes and the prices of other related goods
consumer incomes and the prices of other related goods
If a good is an inferior good, then an increase in income will result in a(n) - movement up and to the left along the demand curve for the good. - decrease in the demand for the good. - increase in the demand for the good. - movement down and to the right along the demand curve for the good.
decrease in the demand for the good.
The view of the production function is that physical capital labor is subject to - constant returns -increasing returns - diminishing returns - supply disturbances
diminishing returns
The view of the production function is that physical capital labor is subject to - supply disturbances - confiscation - constant returns - diminishing returns - increasing returns
diminishing returns
Stock prices fell throughout much of 2007 and 2008 and many investors decided to switch their funds into the bond market. What only about 30 percent of surveyed investors knew was that as bond prices rise, interest rates - fall in reaction to the increased demand for bonds. - fall in reaction to the decreased demand for bonds. - rise in reaction to the increased demand for bonds. - rise in reaction to the decreased demand for bonds.
fall in reaction to the increased demand for bonds.
An example of a perfectly competitive market would be the market for - pizza - train ticket - computers - gold - none of the above
gold
Which of the following statements about the term of a bond is correct? - term refers to the various characteristics of a bond including its interest rate and risk - yields on short term bonds are usually higher than yields on long term bonds - the term of a bond never changes - interest rates on long term bonds are usually higher than interest rates on short term bonds
interest rates on long term bonds are usually higher than interest rates on short term bonds
The US Unemployment rate - includes part time workers - is the number employed divided by the labor force - is the number unemployed divided by the labor force - includes discouraged workers
is the number unemployed divided by the labor force
Which of the following scenarios best illustrates the concept of cyclical unemployment? - grace loses her job because of new automated machinery - sean quits his job to look for work that is more fun - ellen quits looking for work because she doesn't think she can find a suitable job - marian loses her job because of a recession
marian loses her job because of a recession
The horizontal sum of all the firm's (seller's) supply curves for a product is called - market supply - aggregate supply - equilibrium - total output
market supply
Jai Li just lost her job because of a downturn in the economy a few months ago. She hasn't yet started looking for a new one. The Bureau of Labor Statistics counts Jai Li as - cyclically unemployed but in the labor force - cyclically unemployed but not in the labor force - in the labor force but not unemployed - neither in the labor force nor unemployed
neither in the labor force nor unemployed
Each of the following is a determinant of demand except - price of related goods - production technology - expectations - tastes and preferences
production technology
Accumulating physical capital - happens when there is low productivity - happens when depreciation is greater than investment (I) - allows society to consume more in the present - decreases saving rates -requires that society sacrifice consumption goods in the present - none of the above
requires that society sacrifice consumption goods in the present
the US 3 year t-note and the US 5 year t-note could be thought of as - municipal bonds - having a high risk premium - t-notes that have a high risk of default - substitutes - a measure of the risk premium
substitutes
"Moonshine" is an illegal home brew made by adding sugar to accelerate corn fermentation. Ten pounds of sugar are necessary to make a gallon of moonshine. In the mid-1970s, the price of sugar tripled and the price of moonshine skyrocketed from $6 to $15 a gallon. Which would explain this? - supply and demand increased - supply and demand decreased - supply increased and demand decreased - supply decreased
supply decreased
Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the - supply of bicycles will shift to the right - supply of bicycles will shift to the left - firm must increase output to maintain profit levels - demand for bicycle assembly workers will increase
supply of bicycles will shift to the left
Amy discovers a way to produce water heaters so they are less expensive and use less natural gas. Amy's discovery is - physical capital. If Amy's discovery leads to lower natural gas prices, it has made natural gas less scarce - physical capital. If Amy's discovery leads to lower natural gas prices, it has made natural gas scarcer. - technological knowledge. If Amy's discovery leads to lower natural gas prices, it has made natural gas less scarce. - technological knowledge. If Amy's discovery leads to lower natural gas prices, it has made natural gas scarcer.
technological knowledge. If Amy's discovery leads to lower natural gas prices, it has made natural gas less scarce.
A movement along the supply curve might be caused by a change in - production technology - input prices - expectations about future prices - the demand for the good if demand increases
the demand for the good if the demand increases.
When used in an economic sense rather than a scientific sense, the law of supply and demand refers to - the fact that there are no exceptions - the process of prices adjusting so that quantity demanded and quantity supplied are equal. - the supply of a good increases as the price rises and vice versa, ceteris paribus - the fact that at some point in equilibrium demand will equal supply
the process of prices adjusting so that quantity demanded and quantity supplied are equal.
In January, 2,500 quarts of ice cream are sold in Boston at $2 a quart. In February, 3,000 quarts are sold at $2.50 a quart. This change in quantity sold and price may have been caused by - a decrease in the temperature in Boston from a winter storm in February - the release of a medical study showing that ice cream consumption improves mental health. - the introduction of labor-saving automated ice cream-packing machinery. - a reduction in wages in the Boston area.
the release of a medical study showing that ice cream consumption improves mental health.
In an attempt to reduce poaching of elephant tusks for ivory, officials in Kenya burned illegally gathered ivory. Economists tend to point out that - the supply of ivory has fallen, leading to an increase in price and reward for poaching - burning ivory raises demand, and controlled prices will lead to even greater poaching. - burning ivory decreases demand, leading to lower prices and reward for poaching. - burning ivory decreases demand, leading to lower prices and reward for poaching.
the supply of ivory has fallen, leading to an increase in price and reward for poaching
A university's football stadium is never more than half-full during football games. This indicates: - nothing about the equilibrium price. - the ticket price is at the equilibrium price. - the ticket price is below the equilibrium price. - the ticket price is above the equilibrium price.
the ticket price is above the equilibrium price.
Keynes thought that the classical theory of unemployment might be wrong because - all those in the labor market were identical - of the high amount of frictional unemployment - the law of supply and demand would drive the market to equilibrium - the wage might not be flexible
the wage might not be flexible
The 10 year US Treasury Note with a face value of $10,000 that you bought last week yielding 2.8% just dropped in price yesterday. You paid $9,500 for it but now they are selling for $9,200. This means that - the principal has changed - the yield on the 10 year notes have changed - the yield on the note has not changed - you can sell it at the market price of $9,500
the yield on the 10 year notes have changed
If the supply of a product increases, then we would expect equilibrium price - to increase and equilibrium quantity to decrease. - and equilibrium quantity to both decrease. - and equilibrium quantity to both increase. - to decrease and equilibrium quantity to increase - the effect on price is ambiguous - to increase, the effect on quantity is ambiguous - to decrease, effect on quantity is ambiguous
to decrease and equilibrium quantity to increase
Which of the following is human capital? - a student loan - understanding how to use a company's accounting software - a machine that is controlled by a worker - an addition of 500 new employees to a company
understanding how to use a company's accounting software
If the demand for labor decreased and wages did not fall what would occur - a shortage in the labor market - the quantity of labor to remain the same - the PPF would move inward - nothing. the economy would stay on the edge of the PPF -unemployment
unemployment
If the wage rate was "sticky", what would you expect to happen if the demand for labor decreased? - The market would move to equilibrium quickly because of the law of supply and demand - unemployment - The price and quantity of labor would fall -A shortage of labor
unemployment
All of the following would be considered inputs in the production function except - labor (L) - physical capital (K) - wages (W) - technology (A) - human capital (HC)
wages (W)
You are thinking of buying a bond from Bluestone Corporation. You know that this bond is long term and you know that Bluestone's business ventures are risky and uncertain. You then consider another bond with a shorter term to maturity issued by a company with good prospects and an established reputation. Which of the following is correct? - The longer term would tend to make the interest rate (yield) on the bond issued by Bluestone lower, while the higher risk would tend to make the interest rate (yield) higher. - Both the longer term and the higher risk would tend to make the interest rate (yield) higher on the bond issued by Bluestone. - Both the longer term and the higher risk would tend to make the interest rate lower (yield) on the bond issued by Bluestone. - The longer term would tend to make the yield on the bond issued by Bluestone higher, while the higher risk would tend to make the yield lower.
Both the longer term and the higher risk would tend to make the interest rate (yield) higher on the bond issued by Bluestone.
A basic principle of economics is that a country's standard of living depends on its - quantity of physical capital. - The amount of labor - It's productivity - ability to thrive economically without having to interact with other countries.
It's productivity