Econ Midterm

Real GDP (RGDP)

the value of final goods and services evaluated at base-year prices

factors of production

land, labor, capital, entrepreneurship, these are scarce

If the cost of production rises for all the firms in a perfectly competitive industry:

Each firm will supply less output at any given price.

If price equals ATC and equals MC then:

Economic profits would be zero.

Which of the following is not a factor of production?

Land. XX Wages. Labor. Capital.

In a market economy, the _______ determines who gets the goods and services produced.

Market mechanism

For consumers, most market activity can be explained by the goal of:

Maximizing happiness.

In long-run competitive market equilibrium, price equals _______ and economic profit is _______.

Minimum average total cost; zero

An industry in which many firms produce similar products but each firm has significant brand loyalty is known as

Monopolistic competition.

The output of cell phones can be added to the output of refrigerators in order to compute GDP by:

Multiplying the output of each by the corresponding prices and adding these dollar values.

Which of the following statements is true?

Nominal GDP is a good measure of social welfare. GDP per capita is a complete measure of social welfare. Crime and pollution reduce social welfare which reduces GDP. XX GDP is not necessarily the best measure of social welfare.

Which of the following is the best measure of an increase in actual output?

Nominal GDP. XX Real GDP. Per capita GDP. GDP per dollar.

The inflation-adjusted value of final goods and services produced in the United States measures:

Nominal GDP. XX Real GDP. Per capita GDP. GDP per worker.

Given income and resource constraints, the market mechanism typically arrives at the _______ outcome.

Optimal

In economics, what represents entrepreneurship?

Skill in creating products and services.

The ability and willingness to sell specific quantities of a good at alternative prices in a given period of time, ceteris paribus, defines:

Supply.

Which of the following is the best example of a perfectly competitive market?

The breakfast cereal industry The textbook industry The plasma TV market XX The apple market

Which of the following is NOT included in U.S. GDP?

The construction of new homes to replace those destroyed by fires in California. The salary of the President of the United States. XX Shoes produced abroad and imported by a U.S. company. The purchase of U.S. soybeans by a food manufacturer in Canada.

Scarcity means:

The desire for goods exceeds our capacity to produce them.

Which of the following is included in investment, according to economists?

XX Production of plant and machinery. Purchases of corporate stock. Money put into a pension fund. Dollars spent in the stock market.

Which of the following is not included in GDP as part of government services?

XX Social Security benefits. Military equipment. Highways and bridges. Education.

What is consistent with a competitive market?

Zero economic profit in the long run

natural monopoly

an industry in which one firm can achieve economies of scale over the entire range of market supply

Market Characteristics

many firms, downward sloping demand, identical products, low entry barriers, perfect information

In a competitive industry:

marginal cost equals the price.

zero profit rule

marginal profit plunges to zero immediately after that max is reached

Ceteris Paribus

model focuses on one or two influences and holds everything else constant identifies independent influence price has on consumption

predatory pricing

monopolies may use a sharp, temporary price reduction to drive out competitors or discourage entry

microeconomic sources of market failure

public goods, externalities, market power, inequity

market mechanism

resolves basic economic questions of what, how, and for whom. uses prices & sales to allocate resources between industries

what happens to market supply curve when it lose a firm

shift left

Equilibrium price refers to the:

the price at which the quantity demanded of the good equals the quantity supplied

Law of demand

the quantity demanded increases as the prices falls in a given time period negative (inverse) relationship between price & quantity demanded movement along demand curve

Gross Domestic Product (GDP)

the total value of final goods and services produced in a country in a given year = physical output of each good x price best measure at nations economic well-being found by output times unit price

In the United States, corporations:

Dominate market transactions

Suppose during a year an economy produces $10 trillion of consumer goods, $4 trillion of investment goods, $6 trillion in government services, and has $4 trillion of exports and $5 trillion of imports. GDP would be:

$19 trillion.

In 2015, per capita GDP in the United States was approximately:

$53,000.

Which type of output leads to increased output in the future?

Investment.

Nominal GDP is affected by changes in:

output; prices

The price of a good or service:

Serves as the essential signal of the market mechanism.

U.S. GDP for 2015 was approximately:

18 trillion

If demand is constant, a leftward shift in the supply curve will result in:

A decrease in equilibrium quantity and a higher equilibrium price.

In a competitive market where firms are earning economic profits, which of the following is likely as the industry moves toward long-run equilibrium?

A lower price and more firms.

Oligopoly

A market structure in which a few large firms dominate a market

The economy of the United States is best characterized as:

A mixed economy.

Government price guarantees for certain crops are an example of:

A price floor.

Which of the following is NOT a factor of production?

A toll-bridge across a lake. XX The money hidden in an old basement. A wrecking ball used to tear down old buildings. The CEO of a large corporation.

firm demand curve

ALWAYS horizontal

Which of the following is NOT a reason why the United States is able to produce such high levels of GDP?

Abundant factors of production. XX Labor-intensive production process. High levels of investment in human capital. High quality of capital.

Economic growth always takes the form of

An expansion of production possibilities.

What events would cause a rightward shift in the supply curve for automobiles?

An improvement in the technology used to produce automobiles.

What is an example of government failure?

An increase in bureaucracy and red tape that fails to improve economic outcomes.

An example of a negative externality

An increase in the incidence of cancer due to pollution.

Imports

Are a larger dollar value than exports for the United States.

Sole proprietorships:

Are owned by one individual.

In order to demand a good, the buyer must:

Be both willing and able to pay for it.

The productivity of American workers reflects all of the following EXCEPT:

Capital intensity of the production process. Investment in human capital. High quality of capital. XX Scarcity of plant and equipment.

A movement along the supply curve is the same as a:

Change in the quantity supplied.

In a competitive market, economic losses indicate that:

Consumers want resources to be reallocated.

A price floor:

Creates a market surplus.

U.S. net exports are:

Equal to the value of exports minus the value of imports

Income transfers include all of the following EXCEPT:

Food stamps. Medicaid. XX Wages. Welfare benefits.

Exports represent:

Goods and services sold to foreigners.

In economics, capital refers to:

Goods that can be used to produce other goods.

per capita GDP

Gross Domestic Product per person can be found by dividing total GDP by total population

Income transfers include:

Housing provided at a reduced cost by the government.

A market exists for the sale and purchase of:

Illegal drugs, computer services, and nuclear warheads.

The growth of international trade for the United States has been enhanced by:

Improved communication and transportation technologies.

The production possibilities curve shifts outward in response to:

Improved technology or more resources or both.

Market power:

Is the ability to alter the market price of a good or service.

Which of these statements about income distribution in the United States is correct?

People often move up and down the income ladder. The poorest fifth of households account for 3 percent of total income. The richest fifth of households account for 51 percent of total income. XX All of these statements are correct.

In which of the following industries is the firm referred to as a price taker?

Perfect competition

Which of the following market structures has the lowest barriers to entry?

Perfect competition

What group correctly ranks market structures from most competitive to least competitive?

Perfect competition, monopolistic competition, oligopoly, monopoly

An individual competitive firm:

Produces a small portion of output relative to the market.

Consumers:

Provide dollars to the product market.

Ceteris paribus, according to the law of supply, if the price of product Z increases from $6 to $8, then the:

Quantity supplied of Z will increase.

Economic interactions with others are necessary because:

Resources are limited.

In a market, the equilibrium price is determined by:

The interaction of both demand and supply.

Market failure means:

The market mechanism does not produce the best mix of output.

A market shortage occurs when:

The market price is below equilibrium

Competition in markets results in:

The optimal mix of goods and services being produced

What will not cause a shift in the demand curve for a good?

The price of the good itself.

When economists talk about a trade-off between "guns and butter," they mean:

The production of more military goods may require fewer consumer goods.

example of investment, as a component of GDP?

The purchase of a truck by a delivery company.

What is a characteristic of a perfectly competitive market?

There are low barriers to entry

If resources are limited:

There will be tradeoffs whenever choices are made.

Which of the following is NOT true about investment goods?

They add to the nation's stock of capital. They can be used to replace worn-out equipment. They can expand the nation's production possibilities. XX They increase the retirement benefits for individuals.

If a perfectly competitive firm produces and sells more output, its _______ will definitely increase.

Total revenue

A monopoly is:

a firm that produces the entire market supply of a particular good or service

Near Monopolies

a single firm has the bulk of sales in a specific market

where does marginal curve fall in monlopoly demand curve

below demand curve

free riding

benefiting from a good without paying for it

market demand curve

downward sloping

GDp net exports

exports - imports

If firms in a competitive industry were earning short-run economic profits:

one would expect the supply curve to shift to the right.

monopoly barriers to entry

patents, legal harassment, exclusive license, bundling products, government franchise

determinants of market supply curve

price of factor outputs, technology, expectations, number of firms

firm characteristics

price taker, set output where marginal cost = price, zero economic profit in long run

Karl Marx viewed ______________as the major flaw with capitalism.

private property ownership