Econ ch1-8

In 1946 the price of a bottle of soda was $0.05. Using 1983 as base year, we know the consumer price index (CPI) in 1946 was 20. Based on this information, the inflation adjusted price a consumer would pay for this product in 1983 is:

$0.25

You won on a radio show a free ticket to see Eric Clapton's concert (which has no resale value). Bob Dylan is performing on the same night and is your next-best alternative activity. Tickets to see Dylan cost $400. On any given day, you would be willing to pay up to $500 to see Dylan. Based on this information, what is the opportunity cost of seeing Eric Clapton?

$100

Assume that the market for beer is described by the following two equations: Q = -150 + 150*P and Q = 1200 - 120*P, where Q represents quantity and P represents price. The government institutes a $3 price floor in this market. With the new rule fully in effect, the value of producer surplus is:

$1200

Miner Joe has just completed his Economics test and feels hungry. He heads to the school cafeteria and narrows down his choice to one of the following two lunch options: Menu A - Pizza and Wings Combo, which Joe values at $25, but he can buy for $15. Menu B - Peanut butter and Jelly Sandwich, which Joe values at $18, but he can buy for $10 Assuming that Joe has up to $25 to spend, what will be the economic cost of his choice?

$23

Assume that a $0.10/pound tax on apples raises $100 million in revenue but causes a $125 million overall loss of consumer and producer surplus. From this information, we know that the deadweight loss from the tax is:

$25 million.

Acme Steel Works produces 2000 tons of pig iron worth $20 per ton. It puts 500 tons of pig iron into storage for next year and uses the rest (1500 tons of pig iron) to produce 1000 tons of steel worth $60 per ton. The entire production of steel is then sold. Overall, in production, Acme pays wages of $25,000, it buys $20,000 worth of coal and $10,000 worth of vanadium, and pays $3,000 in business taxes. Acme's contribution to GDP is:

$40,000

Sam has two options this weekend. He could work at his job and earn $9/hour for three hours, or he could go to a show at the theater for that three hours. A ticket to the theater costs $30. What is Sam's economic cost of going to the theater?

$57

Product: Quantity: Price: Shoes 40 $60.00 DVDS 100 $18.00 Tomatoes 2000 $1.00 Ketchup 300 $4.00 Refer to the table above. Suppose that a simple economy produces only four goods and services: shoes, dvds, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households. Using the information in the above table, nominal GDP for this simple economy equals:

$6400

Assume that the market for bread is described by the following two equations: Q = -100 +100*P and Q = 800 - 200*P, where Q represents quantity and P is price. If the government imposes a price ceiling at $2, then consumer surplus will change (relative to the perfectly competitive outcome) by:

$75

In chapter 3 of the textbook, in the section that discusses the equilibrium in a competitive market, a hypothetical market for student assistant hours is described by the following two equations: QD = 40 - 4.8P and QS = -11.5 + 5.5P. Based on this information, the amount of total revenue generated by the sellers per week is:

$80

Refer to table 16-3, from your textbook (page 383). Based on the hypothetical production possibilities schedules between United States and Honduras, which would be acceptable terms of trade between the two countries?

1,000 tractors for 3 tons of bananas

Nominal GDP: Real GDP: Year: 2007: 14,078 13,254 2008: 14,441 13,312 Refer to the table above. Consider the following data on nominal GDP and real GDP (values are in billions of dollars). The GDP deflator for 2008 equals

108.5

Assume that the market for beef in a small and isolated community is described by the following two equations: Q = -150 +150*P and Q = 600, where Q represents quantity and P is price. If a $1 per unit sales tax is imposed on businesses then the after-tax producer surplus will be

1200

If the total working-age civilian population is 230 million, out of which 40 million people are not in the labor force, and the number of unemployed people is 10 million, then the unemployment rate is:

5.26%

If the number employed is 190 million, the number unemployed is 10 million, and the working age population is 250 million, then the labor force participation rate is

80%

If the number of unemployed workers is 19 million, the working age civilian population is 500 million, and the unemployment rate is 4% what is the labor participation rate?

95%

Which of the following will cause a decrease in the quantity supplied of cocoa?

A new, highly credible study, positively links chocolate consumption to an increased incidence of dental cavities in children.

As the owner of a hotel, you have decided to lower the price for all rooms in the month of October. What should you expect to happen?

As the price is lowered, the quantity demanded of rooms will increase

Refer to the figure above. (quiz 5, question 4) Which surface(s) describe(s) the consumers dead-weight loss, as a result of this price ceiling?

C

Which of the following statements is TRUE?

Current GDP does not include the market value of final goods and services produced domestically in a different time period.

Wheat flour is a factor of production of cupcakes. Due to unusually hot weather, there has been a significant loss in the wheat crop this year. Furthermore, a successful advertising campaign has made cupcakes a lot more popular among consumers of all ages. What do expect to happen in the market for cupcakes?

Equilibrium price will increase, while the effect on the equilibrium quantity is ambiguous

Suppose that two things happen simultaneously in the market for fish. First, a new technology allows fishing boats to catch more fish while using the same number of crew-members. At the same time a new study shows that eating fish at least three times a week helps prevent heart attacks. How will the market for fish respond?

Equilibrium quantity will increase but the effect on the equilibrium price is unknown without more information

As mentioned in the lecture, the economic concept of opportunity cost was first introduced by:

Friedrich von Wieser

While generous disability insurance can help those who have been permanently injured, it can also increase the likelihood that individuals will falsely claim to disabled. This likelihood is an example of a(n):

Indirect incentive

In the event of a binding price ceiling, what is one function that an illegal market serves?

It provides the good to those who value it the most

Suppose that Sheldon and Leonard can either run errands or wash dishes. The time it takes each of them to accomplish one of these jobs is given in the following table. Given the same quantity of resources (one hour of time) and assuming no breaks for either one, how will they specialize and what terms of trade can they both agree on? Run an errand Wash a Dish Sheldon: 60 minutes 1 minute Leonard: 20 minutes 2 minutes

Leonard specializes in running errands and Sheldon in washing dishes; they trade at 1 errand run per 55 dishes washed.

Kelly is an architect, and she is trying to decide whether to hire Mike, a draftsman, to work with her on projects. Kelly could hire Mike at $25 per hour, but it would take him three times the time to complete the task as well as Kelly, a standard of quality which the clients have come to expect. Kelly is able to earn $90 for every hour she puts in one of her projects and has more architectural jobs than she is able to handle. Which of the following is then true?

Mike should be hired at $25 per hour wage rate

For every 5 turkeys that Missouri produces, it gives up the opportunity to make 50 lbs. of ham. Virginia can raise 10 turkeys for every 250 pounds of ham it produces. Which of the following is true about the comparative advantage between two states.

Missouri has the comparative advantage in turkeys

Which of the following is true about labor markets?

None of the other answers

Michael is a U.S. citizen who currently lives in St. Louis. He hires John, an authorized vintage car broker (also a U.S. citizen, living in the same city) to help sell Mike's first-generation 1965 Ford Mustang (pony car class) produced in Valencia, Venezuela. Which of the following is TRUE?

Only John's commission will be counted in the U.S. GDP

Refer to the graph above. (quiz 6, question 5) What is the amount of the tax, as measured along the y axis?

Pc-Ps

Mina Jo, an economics student, was just named Miss Missouri S&T, based in part on her answer to the question of why price gouging laws should be relaxed in the state. Mina won because she gave which of the following answers?

Price gouging laws discriminate against deserving and interested customers

Refer to the figure above. (quiz 5, question 3) This figure shows the market for apartments in St. Louis. Recently the government imposed a rent ceiling at Ro and a shortage of apartments ensued. Suppose that landlords ignore the law and decide to rent the apartments that are still profitable with the law in place for the highest rent they could get. What is the rental price they will charge?

R1

Two friends, Rachel and Joey, enjoy baking bread and making apple pies. Rachel takes two hours to bake 1 loaf of bread and one hour to make 1 pie. Joey takes four hours to bake 1 loaf of bread and four hours to make 1 pie. Which of the following is TRUE?

Rachel's opportunity cost to bake 1 pie is 1/2 of a bread.

Which of the following is most likely TRUE, if a society decides it wants more of one particular good, but all its economic resources are currently fully utilized?

Society has to give up some of the other goods and thus incur an opportunity cost.

Consider an economy for which the latest national labor market report shows a decline in both the unemployment rate, as well, as the labor force participation rate. Which of the following scenarios, holding everything else constant, would likely result in this type of outcome?

Some of the unemployed people are going back to school as full time students.

Smoke detectors have been shown to effectively reduce the death rate due to fires. In order to ensure that as many individuals as possible install a smoke detector, the government recently decided to subsidize all purchases of smoke detectors. Which of the following will be the consequences of this subsidy?

The demand curve for smoke detectors shifts to the right

Which of the following could cause nominal GDP to decrease, but real GDP to increase?

The price level falls and the quantity of final goods and services produced rises.

When the labor market is at full employment

There is no cyclical unemployment in the economy

The equilibrium wage in a local labor market is $6 per hour. If a minimum wage of $8.00 per hour is imposed, which of the following will occur?

There will be an increase in unemployment

What will be the economic effect of a non-binding price floor?

There will be no effect

Imagine a market where the supply is price elastic, while the demand is very price inelastic. Which of the following is true?

a decrease in supply will likely benefit firms' revenues

The Great Depression of the 1930s with a large number of workers and factories unemployed would be represented in a production possibilities frontier graph by:

a point inside the frontier.

Refer to the example discussing the personal computers market in your textbook at page 50. Over the last two decades the combined increase in sales of computers and drop in prices could be best explained by

an increase in both supply and demand for personal computers with supply shifting relatively more to the right than demand

The purchase by a NATO member country of an advanced anti-missile defense system produced in the United States is included in the US

balance of trade (i.e. the difference between imports and exports).

A tax on milk would likely cause a decrease in the price of:

breakfast cereal

In table 2-1, on page 23 of your book, if Newburgia wants to increase production of all other goods (AOG) from 400 to 600 units, by how much will it have to reduce its production of wheat?

by 60,000 bushels of wheat.

If a tax is imposed on a good with a perfectly elastic supply, the burden of the tax will be borne:

by consumers alone

If the cross-price elasticity of demand for goods x and y is -1.25, then the two goods would be

complements

Suppose both buyers of a commodity and sellers of it expect the market price of the commodity to decrease in future. This will cause the equilibrium price of the commodity to _____ and the equilibrium quantity transacted of it to _____ TODAY, everything else held constant

decrease; be ambiguous

During a recession, Real GDP __________ and unemployment ________________

decreases; increases

Compared to producers, consumers will lose, as a percentage, a greater amount of economic surplus due to a tax, if:

demand is less elastic than supply

If you do not like changing the oil in your car and pay your father to do it for you, you have provided him with a(n):

direct incentive

Assume that a market is described by the following two equations: QS = P and QD = 4, where QS represents quantity supplied, QD is quantity demanded, and P is price. The total producer surplus generated by this market is:

eight dollars

GreenTree Corporation sells live Christmas trees. It observes that when it increases the price of Christmas trees by 20%, its total revenue drops by 15%. Based on this information we can conclude that in the relevant region, the demand for Christmas trees is:

elastic

Suppose pasta salad is a normal good. If the price of pasta (a major ingredient in pasta salad) decreases and income increases, the

equilibrium quantity of pasta salad will increase and the equilibrium price of pasta salad may either increase or decrease

The dead weight loss from a tax is likely to be less for a good that has:

few substitutes

If a $100 drop in the price of a $10,000 car resulted in an increase in the quantity of cars purchased from 100 to 110 and a $100 drop in the price of a $5000 vacation rental resulted in an increase in the quantity of weekly vacation homes rented from 100 to 110, the price elasticity of demand is, on a relative basis:

greater for the car

Refer to the cost of higher education case study from your textbook (page 48-49). According to the analysis in the text, the increase in tuition prices and college enrollment at national level over the past 25 years can be best explained by:

higher wage growth rate for college graduates

Gasoline and ethanol are substitute fuels with downward sloping demand curves and upward sloping supply curves. If the government increases taxes on gasoline, this will cause a(n):

increase in deadweight loss in the market for gasoline and an increase in the price of ethanol

The purpose of advertising a good or service is to cause the demand for the product being advertised to _____ and, at the same time, make that demand line relatively more price _____.

increase; inelastic

If a 2 percent increase in price results in a 5 percent _____ in the quantity supplied, then it can be concluded that supply is _____, everything else held constant.

increase; price elastic

Which of the following is NOT counted when calculating the U.S. GDP using the income approach

interest paid to domestic lenders by the state of Kentucky for a loan made to cover a temporary shortfall in the unemployment benefit payments system due to a large number of workers that had been laid off by Toyota Motor Manufacturing, Kentucky

It has been estimated that the price elasticity of demand for flu shots is 0.164. In order to increase the number of flu shots purchased by 5%, the government should subsidize them enough to:

lower their price by 30.5%

Assume that tuition at University of Virginia cost $2,962 (per semester) in 2004 and $11,584 in 2012. If the consumer price index was 184 in 2004 and 226 in 2012, then we could say that over this period:

nominal tuition has increased much more rapidly than inflation

Suppose that the nominal GDP was $800 billion in 1988 and $900 billion in 1989. We may

not compare the actual production of the economy in 1988 and 1989 without also knowing the change in prices

In the long run we can expect any surpluses created by a binding price ceiling to:

remain absent

When the Polio vaccine first became available in the United States, the government controlled the price with a binding price ceiling. If this price control had been unexpectedly removed, the ______ would have been eliminated by price________, quantity demanded_______ and quantity supplied___________.

shortage; increasing; decreasing; increasing

Two economists are walking down the street. One sees a $10 bill lying on the sidewalk and asks, "Isn't that a $10 bill?" "Obviously not," says the other. "If it were, someone would have already picked it up." This joke tells us how economists think. Specifically, economists believe

that if the opportunity for gain exists, it won't last for long.

When testing a model rocket on your campus quad, which of the following would be an endogenous factor?

the amount of thrust generated by the propulsion system at liftoff.

It is said that taxes drive a wedge between prices. This statement is true because in a standard market, with an upward sloping supply and downward sloping demand, taxes cause:

the consumer price to increase and the producer price to decrease.

Suppose that tea and coffee are substitutes in consumption. If the price of tea increases, then

the demand for coffee will shift to the right

Refer to Figure 2-1 in your textbook (page 24). in Newburgia, based on that PPF, if we are considering increasingly larger quantities of wheat production,

the marginal opportunity cost for producing a unit of AOG decreases.

Marko's Polos Marginal Cost 1st shirt 5 2nd shirt 10 3rd shirt 15 4th shirt 20 The table above lists the marginal cost of polo shirts by Marko's, a firm that specializes in producing men's clothing. If the market price of polo shirts is $15,

the producer surplus for Marko's will equal $15.

As a discipline, economics is best described by which of the following?

the study of how to use scarce resources to satisfy unlimited wants and needs

Assume that a market is described by the following two equations: QD= 8 - P and QS = 4, where QS represents quantity supplied, QD is quantity demanded, and P is price. The total economic surplus (welfare) generated by this market is:

twenty four dollars

Rational decision-making under conditions of scarcity requires individuals, above all, to:

understand that trade-offs are necessary

Suppose that a dealership added domestically-produced cars to its inventory in June 2014 because it expected an increase in demand for them. The dealership miscalculated the preferences of its customers, however, and was not able to sell the cars until January 2015. The cars added to the dealership's inventory in June 2014

will be counted in 2014 GDP as part of investment (I )

Deflation:

would benefit the economic agents who hold physical currency (dollars)