ECON 2301 Midterm Review (Ch. 1-7, 17)
A three-word synonym for the term ceteris paribus is
"nothing else changes."
Depreciation refers to a decrease in the value of a good caused by
"wear and tear" of capital goods over time.
Suppose that consumption spending is $4,200 billion, spending on durable goods is $1,200 billion, and spending on services is $2,000 billion. What does spending on nondurable goods equal?
$1,000 billion
Refer to Exhibit 4-1. Suppose the good shown is being sold at the $6 price ceiling. At a quantity of 75 units, what is the maximum per-unit price buyers would be willing to pay for a good "tied" to the good shown in the exhibit?
4
Refer to Exhibit 7-1. What is the value of personal income?
4252
Refer to Exhibit 6-2. How many people are not in the labor force in year 1?
50 million
Refer to Exhibit 6-2. The employment rate in year 2 is
50 percent
Refer to Exhibit 6-2. The labor force participation rate in year 1 is
80 percent
In an economy with a population of 100 million persons, 40 million hold civilian jobs and 9 million are not working but are looking for jobs. The number counted as unemployed is
9 million
Refer to Exhibit 2-2. If PPF2 is the relevant production possibilities frontier, then point __________ is unattainable
J
Through war, many of the factories in country 1 are destroyed and many of its people are killed. As a result, the country's
PPF after the war has probably shifted to the left compared to its PPF prior to the war.
The economist credited with pioneering the "new growth theory" is
Paul Romer
Which of the following is an unintended effect of placing safety caps on medicines?
People leave their medicine containers open more often, which ends up making it easier for children to get into the medicine.
"Absolute real economic growth" is defined as an increase in __________ from one period to the next.
Real GDP
Refer to Exhibit 3-9. The production of X is more profitable than it used to be. A number of producers enter the business of producing X. You expect a movement in the market for X from
S1 to S2
A common measure of inflation is the percentage change in the CPI of adjacent years.
TRUE
High demand for a product does not necessarily mean a high quantity demanded for that product if the price is high enough.
TRUE
If the demand curve for tickets to a television show taping intersects the supply curve for tickets to that show at a negative price, then in order to put that market in equilibrium the producers would need to pay people to view the show being taped.
TRUE
Mutually beneficial trade between buyers and sellers drives a market to equilibrium.
TRUE
Some economists argue that the recent relatively high rate of unemployment has resulted in part from the fact that some people have not made the adjustment to modern technologies.
TRUE
The law of increasing opportunity cost helps to explain why PPFs are typically bowed-outward.
TRUE
The minimum wage is a good example of a price floor.
TRUE
The price of a given good is likely to be less variable with speculators than it would be without speculators.
TRUE
The term economic growth can be used in reference to absolute real economic growth or to per- capita real economic growth.
TRUE
When universities charge students less than the equilibrium tuition for admission, they have to impose some nonprice-rationing device.
TRUE
Exhibit 4-2 represents the orange juice market. The horizontal line represents a price ceiling imposed by the government. Which of the following is true?
The quantity supplied at the price ceiling will equal the quantity sold.
Is it possible for the economy to be at full employment and still have some people who are unemployed?
Yes, since full employment exists if the economy is operating at the natural unemployment rate and there is always some natural unemployment.
Which of the following statements is true? To an economist, demand is different from quantity demanded. A demand schedule is the numerical tabulation of the law of demand. A demand curve is the graphical representation of the direct relationship between price and quantity demanded. a and b a, b, and c
a and b
Refer to Exhibit 5-5. If the airline charges a price that is between P1 and P2 for both aisle seats and middle seats, the result will be
a surplus of middle seats and a shortage of aisle seats.
Which of the following statements is true? National income accountants consider the portion of corporate profits that is used to pay corporate profits taxes to be income earned by households but not received. Net domestic product (NDP) is a smaller dollar amount than GDP. Personal income includes transfer payments. b and c a, b, and c
a, b, and c
Net domestic product is the total value of
all final goods and services produced within a country's borders in a year minus capital consumption allowance.
Suppose the government sets a price floor that is above the equilibrium price for a given good. It can be said that at the price floor,
although consumers are purchasing all of the product that they desire at this price, the sellers are not selling all that they desire.
What does annual economic growth refer to?
annual increases in Real GDP
Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium, the consumers surplus will equal
area 1 + 2 + 4
If there is freeway congestion at 8 a.m., we can reduce (or eliminate) the congestion by
building more freeways; raising the price to drive on the freeway at 8 a.m; encouraging workers to carpool. (a, b and c)
If variable X goes down as variable Y goes down, then X and Y are
directly related
An increase in nominal GDP
does not necessarily mean either absolute or per capita real economic growth.
New growth theory holds that technology is __________ and that the more resources that go to develop technology, the __________ technology that is produced.
endogenous; more and better
Government purchases consist of the total dollar amount(s) spent on goods and services by the
federal, state, and local governments.
Investment equals inventory investment added to
fixed investment; business purchases of new capital goods and purchases of new residential housing. (either c or d)
According to new growth theory, technological advances can be promoted
from within the economy
Something that provides utility is called a
good
Refer to Exhibit 1-2. According to the data provided in this table, what is the slope of the line between points A and B, if these data were graphed with X on the horizontal axis and Y on the vertical axis?
1.5
Refer to Exhibit 4-9. Suppose that the government imposes a price ceiling at a price of $13. _________ units would be exchanged in a free market, and ____________ units would be exchanged with the price ceiling in effect.
150; 150
If Real GDP was $8,742 billion in year 2 and it had been $8,509 billion in year 1, what was the approximate economic growth rate during this time period?
2.74 percent
Refer to Exhibit 2-4. The opportunity cost of moving from point A to point B is
20,000 copiers
Refer to Exhibit 2-1. The opportunity cost of moving from point B to A is
20,000 units of butter
Refer to Exhibit 6-2. How many people are not in the labor force in year 4?
200 million
Suppose there are 200 million persons in the population, 120 million persons in the civilian labor force, and 90 million persons are employed. The number of people unemployed is _______ million and the unemployment rate is ___________ percent.
30; 25
Which of the following statements is false? An upward-sloping supply curve graphically represents the law of supply. A vertical supply curve graphically represents the law of supply. If income rises and good X is a normal good, then the demand for good X will rise. If income falls and good Y is an inferior good, then the demand for good Y will rise.
A vertical supply curve graphically represents the law of supply.
Refer to Exhibit 5-4. If television studio executives choose to charge a price of PB to view the taping of all shows, they will find that there is a shortage of tickets to view the taping of show ___________ and a surplus of tickets to view the taping of show ______________.
A; C
If the Bureau of Labor Statistics considers Jessica to be a discouraged worker, then she is counted as unemployed for purposes of computing the official unemployment rate.
FALSE
In a given community, if the government builds more freeways, then the supply curve for freeway space shifts rightward and the demand curve for freeway space shifts leftward.
FALSE
People who buy houses in good-weather locations receive this benefit absolutely for free.
FALSE
Production functions used in economic growth theory are always limited to two inputs: labor and capital.
FALSE
Production possibilities curves can shift outward but they do not shift inward.
FALSE
When a market is in disequilibrium, such as when the quantity supplied of a good is greater than the quantity demanded of that good, the price of the good will rise, ceteris paribus.
FALSE
When the price of Toyota Corollas rises, ceteris paribus, the demand for Corollas falls
FALSE
Refer to Exhibit 3-17. At a price of $16, the quantity demanded of good X is ____________ than the quantity supplied of good X, and economists would use this information to predict that the price of good X would soon ______________. This would push the price __________ the equilibrium price.
greater; rise; toward
Deciding at the margin is __________ an all-or-nothing decision.
inconsistent with
Refer to Situation 4-1. An economist would predict that the oil embargo imposed in 1974 would result in a
leftward shift in the supply (curve) of gasoline.
Which of the following goods is an intermediate good?
lettuce that a restaurant buys to put on sandwiches; tires that a car company buys to put on the cars it produces (a and b)
A price floor is a government-mandated
minimum price below which legal trades cannot be made.
When a production function is graphed with Real GDP on the vertical axis and labor on the horizontal axis, a rise in labor ________________________which shifts the LRAS curve ____________ resulting in ______________________.
moves us up along a given production function; rightward; economic growth
According to the text, farming today in the U.S. is __________ productive compared to a century ago, resulting in there being __________ farmers today than at the turn of the previous century.
much more; fewer
Refer to Exhibit 2-6. Which graph depicts the result of a decrease in the unemployment rate?
none of the above
Refer to Exhibit 17-4 Assume that the starting point in graphs (a) and (b) in Exhibit 17-4 is point 1. After a decrease in income taxes, there would be a ______________________ which would cause a movement along the production function from point 1 to point ______________. The result would be a shift of the LRAS curve from LRAS1 to _______________ resulting in _______________..
rightward shift of the labor supply curve from SL1 to SL2; movement along the production function to point 2; LRAS2; economic growth
To an economist, utility means:
satisfaction
When the price of a good rises, the price is transmitting information indicating that the good is relatively
scarcer
The author of the text defines economics as the
science of scarcity
In the production possibilities framework, economic growth is depicted by the PPF
shifting rightward (away from the origin).
At a price for which the quantity supplied exceeds the quantity demanded, a __________ is experienced, which pushes the price __________ toward its equilibrium value.
surplus; downward
An "increase in demand" means that
the demand curve has shifted to the right.
There is no toll charge to drive on freeway A. If there is freeway congestion at 9 a.m., there will be greater freeway congestion at 11 a.m. if
the demand to drive on the freeway at 11 a.m. is greater than the demand to drive on the freeway at 9 a.m.
Which of the following issues is most unlikely to be addressed by an economist practicing positive economics?
the desirability of a minimum wage increase
If a production possibilities frontier (PPF) is concave outward, it follows that
the opportunity cost (of producing the good on the horizontal axis) rises as more of the good is produced.
Refer to Exhibit 4-3. If price P3 is a price ceiling, then
the price ceiling does not have an effect on the market for good X; the price at which exchange takes place is P2. (both a and c)
Suppose that the production function for an economy is graphed with Real GDP on the vertical axis and labor on the horizontal axis. When the level of capital in this economy rises, it causes ____________________which shifts the LRAS curve ____________ resulting in ______________________.
the production function to shift upward; rightward; economic growth
Refer to Exhibit 3-7. If S1 is the relevant supply curve, a decrease in the price of a resource that is necessary for the production of good X causes
the supply of good X to shift from S1 to S2
A good provides __________ and a bad provides __________.
utility; disutility
