Econ final exam

Suppose rational decision-maker Harry has decided to attend a concert but he faces a choice: he can buy a ticket to see either Beth Patterson or Zoe Boekbinder. The price of a ticket to see Beth is $10 and the price of a ticket to see Zoe is $15. In making his decision, what is Harry's sunk cost? 1.-$5. 2.$0. 3.$5. 4.$10. 5.$15. 6.$25.

$10

Suppose Justin is employed, his regular wage is $10 per hour, and he must receive overtime pay for hours worked over 40 in a workweek at a rate of time and one-half his regular rate of pay (i.e., $15 per hour). Last week he worked 42 hours. What was the marginal benefit of the 42nd hour Justin worked? 1.$0. 2.$5. 3.$10. 4.$15. 5.$30. 6.$430.

$15

Suppose Danielle is considering opening her own beauty salon. She anticipates the following costs per year: Furniture: $20,000 Equipment: $30,000 Rent: $36,000 Coloring products: $40,000 Styling products: $43,000 Danielle is withdrawing $50,000 from her savings account that pays 2 percent interest per year to purchase furniture and equipment and is quitting her current job that pays $40,000. She expects that the total revenues from the new business in the first year will be $200,000. What is Danielle's... a) explicit cost? b) implicit cost? c) accounting profit? d) economic profit?

$20,000 + $30,000 + $36,000 + $40,000 + $43,000 = $169,000/ $40,000 + $50,000 (.02) = $41,000/ $200,000-$169,000 = $31,000/ $200,000 - $41,000 - $31,000 = -$10,000

Which of the following conditions must hold if a firm is to engage in price discrimination? 1.A firm must be a price taker in its market. 2.Different groups of consumers must have similar preferences for the product. 3.Different groups of consumers must be distinguishable. 4.The transaction costs of one consumer selling the product to another consumer must be low.

.Different groups of consumers must be distinguishable.

Romania is said to have the _____ advantage over Serbia in producing a good if Romania produces _____ of the good per worker hour than Serbia does. 1.absolute; more 2.absolute; less 3.comparative; more 4.comparative; less

1.absolute; more

If the exchange rate between the Japanese yen and the U.S. dollar changes from 109 to 112 yen per dollar, then the dollar has _____ relative to the yen. 1.appreciated 2.Depreciated

1.appreciated

In the United States unemployment rates tend to move _____. This means that when the economy is experiencing _____, unemployment rates increase, everything else held constant. 1.Procyclically; an expansion 2.Procyclically; a recession 3.countercyclically; an expansion 4.countercyclically; a recession

1.countercyclically; a recession

If the price a firm charges for a good is greater than its average total cost of producing it, then the firm is earning an economic profit _____ zero. 1.greater than (p > ATC) 2.less than 3.equal to

1.greater than (p > ATC)/ Profit = (P (price) - ATC) * Q

The term "business cycle" refers to the _____ fluctuations in _____. 1.short-term; the aggregate price level 2.short-term; economic growth rates 3.short-term; the unemployment rate 4.long-term; the aggregate price level 5.long-term; economic growth rates 6.long-term; the unemployment rate

1.short-term; economic growth rates

Suppose, at a given point in time, Chez Rachael is a non-price discriminating monopolist selling ratatouille and is producing its profit-maximizing level of output. Suppose further that at this level of production, Rachael's average fixed cost of producing ratatouille is $2, her average total cost is $10, and her marginal cost is $12. At her current level of production, what is... a) Rachael's average variable cost of producing ratatouille? b) Rachael's marginal revenue from selling ratatouille? c) the price of ratatouille? d) Rachael's profit from selling ratatouille? Will Rachael continue to produce ratatouille in the long run? Why or why not? Explain verbally.

10-2=8/ 12/ >12/ >0, positive/ Yes, because economic profit is > 0. MC= 12 AFC = 2 ATC = 10 AVC = 10-2 =2

Suppose Greg's Guava Grove is operating in a perfectly competitive market and is producing its profit-maximizing level of output. Suppose further that at this level of production, Greg's average total cost of producing a kilo of guavas is $2.20, his average variable cost is $0.95, and his marginal cost is $1.95. At his current level of production, what is... a) the average fixed cost of producing a kilo of guavas? b) the marginal revenue from selling a kilo of guavas? c) the price of a kilo of guavas? d) Greg's profit from selling guavas?

2.2 - 0.95 = 1.25/ 1.95/ 1.95 (MR)/ Price - ATC = 1.95 - 2.2 = -0.25 ATC = AFC + AVC 2.2 = AFC +.95

An open market sale of government bonds by the Federal Reserve will cause _____ in government bond prices and _____ in market interest rates, everything else held constant. 1.a decrease; a decrease 2.a decrease; an increase 3.a decrease; no change 4.an increase; a decrease 5.an increase; an increase 6. an increase; no change

2.a decrease; an increase

The Federal Open Market Committee (FOMC) consists of _____ voting members, ____ of whom are members of the Board of Governors. 1.7; 5 2.12; 5 3.12; 7 4.19; 5 5.19; 7 6.19; 12

3.12; 7

Which of the following is a characteristic of a perfectly competitive market? 1.Firms are price makers in the market. 2.Firms face significant barriers to entering the market. 3.There are few firms selling the good in the market. 4.The goods sold in the market are homogeneous.

4.The goods sold in the market are homogeneous.

Suppose an increase in political uncertainty in European Union countries makes U.S. government bonds appear more desirable to financial investors. Everything else held constant, this increased uncertainty will cause _____ in U.S. government bond prices and _____ in market interest rates in the United States. 1.a decrease; a decrease 2.a decrease; an increase 3.a decrease; no change 4.an increase; a decrease 5.an increase; an increase 6. an increase;no change

4.an increase; a decrease

Romania is said to have the _____ advantage over Serbia in producing a good if Romania has a _____ opportunity cost of producing the good than Serbia does. 1.absolute; higher 2.absolute; lower 3.comparative; higher 4.comparative; lower

4.comparative; lower

Who has the absolute advantage in the production of bagels? Cookies? Why? Who has the comparative advantage in the production of bagels? Cookies? Why? Is mutually beneficial trade possible between Aurora and Eos? If so, how and why? If not, why not?

Aurora because 25 > 20, Eos because 200 > 175/ Aurora because 7 < 10,Eos because 1/10 < 1/7/ Yes, because if Aurora does bagels they're cheaper, and if Eos does cookies cheaper.

increase in this will result in increase of money multiplier

Bank reserves:

What is received

Benefit:

The presidents of which Federal Reserve Banks are voting members of the FOMC every other year? Which of the two is a voting member this year?

Cleveland and Chicago/ Chicago

Suppose Cody and Sally can spend their time harvesting radishes or pears. Their productivity @ each activity is the following: Cody: 250 radishes per hour, 50 pears per hour; Sally 240 radishes per hour, 40 pears per hour. What should be the pattern of specialization and trade in the case of Cody and Sally?

Cody will specialize in harvesting pears, sally will specialize in harvesting radishes, and mutually beneficial trade can occur

Suppose Cody and Sally can spend their time harvesting radishes or pears. Their productivity @ each activity is the following: Cody: 250 radishes per hour, 50 pears per hour; Sally 240 radishes per hour, 40 pears per hour. In the situation above, ___ has the absolute advantage in harvesting radishes and _____ has the comparative advantage in harvesting pears.

Cody, Cody

Suppose Al owns a donut shop. He pays his employees $80,000 per year and his inventory costs him $40,000 per year. Prior to running the donut shop, Al worked on a television show and earned $50,000 per year. (Assume these are the only costs he faces.) The total revenue of the store per year is $180,000. What is Al's... a) explicit cost? b) implicit cost? c) accounting profit? d) economic profit?

Cost you pay in order to run the business, $80,000 + $40,000= $120,000/ What you give up in order to run a business, $50,000/ Total revenue- explicit cost= $180,000 - $120,000 = $60,000/ Total revenue - explicit - implicit = $180,000 - $120,000 - $50,000 = $10,000

-a and b more opposite directions

Countercyclically

Monetary Base (MB) =

Currency in circulation + Bank reserves

Money Supply (MS) =

Currency in circulation + Checking account deposits

An unemployed individual seeking a job where theres an opening and have the skills and geographic match can be considered __________________

Frictional

Model: MS =

MB x Money Multiplier

Suppose Mimi's Magic Marker Company operates in a perfectly competitive market and is producing its profit-maximizing level of output. Suppose further that at this level of production its average fixed cost of producing magic markers is $0.10, average variable cost is $0.15, and marginal revenue is $0.20. At her current level of production, what is... a) the average total cost of producing magic markers? b) the marginal cost of producing magic markers? c) the price of a magic marker? d) Mimi's profit from selling magic markers? Over time, what will happen to... a) the number of firms selling magic markers? b) the price of magic markers? c) the quantity of magic markers transacted in the market? d) the quantity of magic markers produced by Mimi? e) profits of firms operating in the magic marker market?

MC = MR AFC = 0.1 AVC = 0.15 MR = .2 ATC = AFC +AVC ATC= 0.1 + 0.15 = .25 .25/ .2/ .2/ .2-.25/ decrease/ increase/ decrease/ Increase (If some firms shut down then customers will go to Mimi now)/ Increase until = 0

The extra cost (i.e., change in total cost) of doing one more unit of something.

Marginal Cost:

only the behavior change to central bank can influence ________

Monetary Base

behavior change of commercial banks or public can influence ________________

Money multiplier

The president of which Federal Reserve Bank is a voting member of the FOMC every year?

New York

Suppose 15-year-old Joe and his 17-year-old brother Frank are full-time high school students. Suppose further that Joe works 20 hours per week, for pay, at a local fast food restaurant. Frank, on the other hand, does not currently have a job. After constantly hearing about his brother's exciting work adventures, Frank obtained a job application at the same restaurant two weeks ago. While he is able to begin immediately, Frank has not yet submitted his application. 1)Is Joe included in the civilian noninstitutional population? If so, why (and continue to Q#2)? If not, why not (the end)? 2)Is Joe classified as employed? If so, why (the end)? If not, why not (and continue to Q#3)? 3)Is Joe classified as unemployed? If so, why (the end)? If not, why not (and continue to Q#4)? 4)Is Joe classified as not in the labor force? Why (the end)?

No, because he is only 15 years old/ no/ no/ no

What is given up = Benefit from the best alternative not chosen

Opportunity Cost:

___________ involves comparative advantage

Opportunity cost

-a and b move together

Procyclically

________ involves absolute advantage

Productivity

Opportunity cost of what get = ?

Productivity give up / Productivity get

Do something if the benefit is at least as great as the opportunity cost at the time the decision is taken; Benefit ≥ (Opportunity) Cost

Rationality:

The following table depicts the seasonally adjusted unemployment rates for the United States in 2008. Which of the following describes the economic performance of the United States in 2008? 1.Expansion. 2.Recession.

Recession

An unemployed individual seeking a job where theres an opening and do not have the skills and geographic match can be considered __________________

Structural

Suppose Leslie lost her job when the typewriter factory closed down nine years ago and has been unemployed ever since. Leslie would be considered _____ unemployed. 1.frictionally 2.Structurally 3.cyclically 4.seasonally

Structurally

A monetary expenditure incurred regardless of the option chosen; irrelevant to the decision

Sunk Cost:

Suppose rational reader Debi has decided to purchase one book to read this weekend and she has narrowed her choices down to either The Meat and Spirit Plan by Selah Saterstrom, priced at $15, or After I Was Dead by Laura Mullen, priced at $19. What is Debi's benefit from purchasing Laura's book? What is Debi's opportunity cost of purchasing Laura's book? What is Debi's benefit from purchasing Selah's book? What is Debi's opportunity cost of purchasing Selah's book? Which book will Debi choose to purchase? Why? Explain. What is Debi's sunk cost in making her decision?

The reading pleasure from Laura's book./ The reading pleasure from Selah's book + $4 that she can save based on the difference in price. / The reading pleasure from Selah's book + $4 that she can save based on the difference in price. / The reading pleasure from Laura's book./ We don't know because we don't know the reading pleasure from each book. If she buys Laura's book we can assume it has a higher reading pleasure./ $15

Bank reserves =

Vault cash + Deposits at Federal Reserve

The Federal Reserve will engage in an expansionary open market policy action in order to combat _____ in the United States. 1.inflationary pressures 2.a recession

a recession

If firm is earning positive economic certainly earning positive _______

accounting profits

Suppose a profit-maximizing firm is earning positive accounting profits at its current level of output. Everything else held constant, the firm's economic profits are 1.positive. 2.negative. 3.normal. ambiguous

ambiguous(because earning positive accounting profits)

Given the production possibilities frontier shown, point p is _____ for Amanda. point q? 1.attainable 2.unattainable

attainable/ unattainable

What are the requirements to be included in the civilian non-institutionalized population?

be 16+

If the cost of moving is _________ than the benefit then you shouldn't move

bigger

An unemployed individual seeking a job where there is not an opening because of the economy can be considered _________

cyclical

Suppose Mark lost his job as a sales executive due to a recession. He sends his résumé to thirty companies per week on average and is available to begin a job immediately, if offered one. In this situation, Mark would be considered _____ unemployed. 1.frictionally 2.structurally 3.cyclically seasonally

cyclically

On Friday morning, 03 November 2017, Nick was very busy and only took a brief look at the October 2017 Employment Situation Report for the United States. While driving home that afternoon, he recalled the report and thought, "Hmmm...that's strange." All he could remember about the report was three pieces of information. First, the unemployment rate in October fell to 4.1 percent. Second, the number of people classified as employed decreased from its September level. Third, the civilian noninstitutional population increased from its September level. 1)Nick concluded with certainty that the number of people classified as unemployed in October 2017 __________ its September 2017 level. 2)Nick concluded with certainty that the number of people in the civilian labor force in October 2017 _______ its September 2017 level. 3)Nick concluded with certainty that the number of people classified as not in the labor force in October 2017 ________ its September 2017 level.

decrease (unemployed decrease = unemployed people/ employed +unemployed)/ decrease (employed decreaseà civilian labor force decrease =employed decrease + unemployed decrease)/ increase (civilian noninstitutional increase = employed decrease+ unemployed decrease + not in labor force increase)

Suppose that every January the currency-to-checkable deposit ratio decreases in the United States. In other words, for every dollar held in checking account deposits, the public holds less in currency in January than at other times of the year. Everything else held constant, how will each of the following change (i.e., increase, decrease, or remain unchanged) in January? a) Currency in circulation b) Bank reserves c) The monetary base d) The money multiplier e) The money supply

decrease, increase, no change, increase (because bank reserves increased), increase

If bond price increase then ________ in interest rate. More demand cause ____________ in price.

decrease/ increase

When marginal cost is less than the average total cost at a particular level of output, average total cost must be 1.increasing. 2.remaining constant. 3.decreasing (Because MC < ATC)

decreasing (Because MC < ATC)

Suppose, at a given point in time, Wanda's Wig Warehouse, a non-price discriminating monopolist, is producing at a level of output where marginal revenue is less than marginal cost. Everything else held constant, Wanda could increase her firm's profits by _____ the quantity of wigs she produces and _____ the price she charges for them. 1.increasing; increasing 2.increasing; decreasing 3.decreasing; increasing 4.decreasing; decreasing 5.not changing; not changing

decreasing; increasing MR < MC Profit decreasing à should increase price and decrease quantity (because inelastic)

Given the production possibilities frontier shown, point j is _____ for Amanda. 1.efficient 2.inefficient

efficient

working 16+ people are considered

employed

What is the civilian labor force made of?

employed and unemployed

GDP is stock/flow variable.

flow

If variable dependent of time =_______________

flow

If someone has been unemployed for 7 weeks it can be considered _______________, 7 months _____________, and 7 years __________________.

frictional, can't determine, structural

Suppose 37-year-old Chris is a mother who has become bored with staying at home and raising her two-year-old daughter. As a result, she has placed her child in day care, is available to begin a job immediately, and has been actively seeking employment for the last seven weeks. In this situation Chris would be considered _____ unemployed. 1.frictionally 2.structurally 3.cyclically 4.Seasonally

frictionally

commercial banks are making some loans means multiplier is _______________

greater than 1

Suppose Kristen goes to her bank and withdraws $250 of currency from her demand deposit account. Everything else held constant, how will each of the following change (i.e., increase, decrease, or remain unchanged) as the result of Kristen's withdrawal? a) Currency in circulation b) Bank reserves c) The monetary base d) The money multiplier e) The money supply

increase, decrease, no change (no change in central bank), decrease, decrease

Suppose the Federal Reserve undertakes an open market purchase of government bonds. Everything else held constant, how will each of the following change (i.e., increase, decrease, or remain unchanged) as the result of the Fed's policy action? a) The monetary base b) The money multiplier c) The money supply d) Market (i.e., nominal) interest rates

increase, no change, increase, decrease

Suppose Petra's Plantain Plantation sells plantains in a perfectly competitive market. Suppose further that at her current level of production, Petra's marginal cost is $2.00 per kilo. If the market price of plantains is $2.75 per kilo, it can be concluded with certainty that Petra's economic profits are 1.positive. 2.negative. 3.increasing. 4.decreasing.

increasing MR = 2.75 MR > MC

Suppose the average total cost of producing 9 sweaters is $65 and the marginal cost of producing the 10th sweater is $63. Everything else held constant, the average total cost of producing 10 sweaters will be _____ the average total cost of producing 9 sweaters. 1.greater than 2.the same as 3.less than

less than (because MC < ATC)

When a commercial bank increases the dollar amount of loans it makes, everything else held constant, the 1.money multiplier increases. 2.money multiplier decreases. 3.monetary base increases. monetary base decreases.

money multiplier increases.

"The wine tasting was a perfect way to celebrate the end of an eventful first week in Rome" is an example of a _____ statement. 1.Positive 2. normative

normative

tells you opinion, related to feeling and opinion

normative statement

neither unemployed or employed

not in labor force

"Students in the United States who transfer from one four-year institution to another are less likely to graduate than those who do not" is an example of a _____ statement. 1.Positive 2. normative

positive

(tells you some fact)

positive statement

Producing goods through worker per hour = ?

productivity

Suppose Cody and Sally can spend their time harvesting radishes or pears. Their productivity @ each activity is the following: Cody: 250 radishes per hour, 50 pears per hour; Sally 240 radishes per hour, 40 pears per hour. In the situation above, 6 _____ is ___ opportunity cost of harvesting one ______

radishes, sally's, pears

An unemployed individual seeking a job where there is not an opening because of the culture or atmosphere can be considered _________________

seasonal

Suppose an online store sells pairs of shoes for $40 each and is running a "buy three pairs, get one pair free" sale. This pricing scheme is an example of _____-degree price discrimination. 1.first 2.second 3.third

second

Fluctuations refer to ________________

short term

Bank reserves is a stock/flow variable.

stock

Currency in circulation is a stock/flow variable.

stock

If variable is independent of time = __________-

stock

The M1 money supply is a stock/flow variable.

stock

The monetary base is a stock/flow variable.

stock

In the United States, "federal tax laws allow you to deduct your moving expenses if your relocation relates to starting a new job or a transfer to a new location for your present employer. To qualify for the deduction, your new work location must be a sufficient distance from your old home and you must begin working shortly after you arrive." This tax policy is most effective at combating _____ unemployment. 1.frictional 2.structural 3.cyclical 4.Seasonal

structural

Suppose an all-you-can-eat buffet charges $12 per person, but allows children under 10 years of age to dine for free. This pricing scheme is an example of _____-degree price discrimination. 1.first 2.second 3.third

third

________ can benefit all countries, you can only go outside of the production possibilities frontier through ________.

trade

Answer true or false to the following statement. Engaging in trade with other countries allows the United States to consume outside of its production possibilities frontier. 1.True. 2.False.

true

Answer true or false to the following statement. Frictional unemployment occurs because it takes time to match potential workers with job openings.

true

16+ and have been available to work for 4 weeks and can't find job

unemployed

federal reserve buys more bonds, price goes _______, interest rates go down, cause _______ in GDP

up/ increase

Suppose Kurt, a 73-year old lawyer living and working in Baton Rouge, has spent the last four weeks on vacation in the Caribbean. During this period, he has been relaxing on his sailboat and has not done any work. 1)Is Kurt included in the civilian noninstitutional population? If so, why (and continue to Q#2)? If not, why not (the end)? 2)Is Kurt classified as employed? If so, why (the end)? If not, why not (and continue to Q#3)? 1)Is Kurt classified as unemployed? If so, why (the end)? If not, why not (and continue to Q#4)? 2)Is Kurt classified as not in the labor force? Why (the end)?

yes, yes, no, no

Suppose Albert, an 81-year old former private investigator, was retired and living in Surprise, Arizona when his pension fund collapsed. Three weeks ago, in order to augment his meager income, Albert applied for a job as a receipt checker at the local Wal-Mart, a position he is eager to fill immediately if offered. At present, however, he is still waiting on a response and has not applied for any other jobs. 1)Is Albert included in the civilian noninstitutional population? If so, why (and continue to Q#2)? If not, why not (the end)? 2)Is Albert classified as employed? If so, why (the end)? If not, why not (and continue to Q#3)? 3)Is Albert classified as unemployed? If so, why (the end)? If not, why not (and continue to Q#4)? 4)Is Albert classified as not in the labor force? Why (the end)?

yes/ No, because he was retired and now trying to find a job/ Yes, because the time period is less than 4 weeks and he is available to work/ no

Suppose 15-year-old Joe and his 17-year-old brother Frank are full-time high school students. Suppose further that Joe works 20 hours per week, for pay, at a local fast food restaurant. Frank, on the other hand, does not currently have a job. After constantly hearing about his brother's exciting work adventures, Frank obtained a job application at the same restaurant two weeks ago. While he is able to begin immediately, Frank has not yet submitted his application. 1)Is Frank included in the civilian noninstitutional population? If so, why (and continue to Q#2)? If not, why not (the end)? 2)Is Frank classified as employed? If so, why (the end)? If not, why not (and continue to Q#3)? 3)Is Frank classified as unemployed? If so, why (the end)? If not, why not (and continue to Q#4)? 4)Is Frank classified as not in the labor force? Why (the end)?

yes/ no/No (if he submitted application then he would be considered unemployed)/Yes, because he is over 16 years old and is not employed and not unemployed