**Econ Quizzes Hadsell final, ECN 221 Exam 3 Quizzes Lester Hadsell Fall 2016, ECN 221 Exam 2 Quizzes Lester Hadsell UNCW Fall 2016, ECN 222 Test 3 Quiz Questions Lester Hadsell, ECN 221 Final Exam (Hadsell), ECN EXAM ONE Quizzes:, UNCW ECN 221 HADSELL...
I'MaPizzaCo. produces and sells specialty pizzas. Last year, it produced 8,000 mushroom, sausage and spinach pizzas and sold each one for $18. To produce these 8,000 specialty pizzas, the company incurred variable costs of $24,000 and a total cost of $40,000. I'MaPizzaCo's average fixed cost to produce 8,000 specialty pizzas was _____.
$2.00 TC = FC + VC. Therefore, $40,000 = $16,000 + $24,000, based on the info provided. AFC= FC / Q Therefore, AFC = $16,000/8,000 = $2.
I'MaPizzaCo. produces and sells specialty pizzas. Last year, it produced 8,000 mushroom, sausage and spinach pizzas and sold each one for $18. To produce these 8,000 specialty pizzas, the company incurred variable costs of $24,000 and a total cost of $40,000. I'MaPizzaCo's average fixed cost to produce 8,000 specialty pizzas was _____.
$2.00 TC = FC + VC. Therefore, $40,000 = $16,000 + $24,000, based on the info provided. AFC= FC / Q Therefore, AFC = $16,000/8,000 = $2.
I'MaPizzaCo. produces and sells specialty pizzas. Last year, it produced 8,000 mushroom, sausage and spinach pizzas and sold each one for $18. To produce these 8,000 specialty pizzas, the company incurred variable costs of $24,000 and a total cost of $40,000. I'MaPizzaCo's average fixed cost to produce 8,000 specialty pizzas was _____.
$2.00 (2.00 X 8,000 + 24,000 = 40,000)
Bob budgets $12 a week for entertainment. He splits his time between going to the movies and going to the gym. Each movie costs $3 and each session at the gym also costs $3. The total utility from each of these activities is shown in the table below. The marginal utility derived from consuming the fourth movie is what?
16 1-30 2-55 3-76 4-92 (92-76=16)
Suppose a firm has a demand curve P = 12 - Q, where P is price per unit and Q is number of units. What is the REVENUE maximizing Price (P)? I.e., what P should be charged if the firm wants to maximize revenue?
6: Revenue is P * Q. Revenue is maximized at the mid-point of the demand curve. Maximum price is 12 (corresponding to 0 quantity demanded, Q). Minimum price is 0. The middle is 6.
Bob budgets $12 a week for entertainment. He splits his time between going to the movies and going to the gym. Each movie costs $3 and each session at the gym also costs $3. The total utility from each of these activities is shown in the table below. The marginal utility derived from consuming the fourth movie ___________.
16 utils (the difference in the 4th and 3rd movie total utilities)
Average income in 1995 - Average income in 2015 -
1995 - $52,664 2015 - $10% less
If Burgers cost $1 each and hot dogs cost 50 cents each, what is the opportunity cost of having one more burger?
2 Hot Dogs
If Burgers cost $1 each and hot dogs cost 50 cents each, what is the opportunity cost of having one more burger?
2 hot dogs
Based on the production possibilities in the previous question, the opportunity cost of producing each sheep in the US is _________.
2 units of wheat
Check all that are true according to Dr. Warren: A. A woman in 1970 with a 16 year old child was less likely to be in the workforce than a woman in 2003 with a 6 month old child. B. A fully employed male in 1970 earned about $800 less than a fully employed male in 2003. C. More children live in homes going through divorce than in homes going through bankruptcy. D. Twice as many people in America believed (in a 2002 survey) that the landing on the moon was faked than believed one could make it into the middle class without a college degree.
A. A woman in 1970 with a 16 year old child was less likely to be in the workforce than a woman in 2003 with a 6th month old child D. Twice as many people in America believed(in a 2002 survey) that the landing on the moon was faked than believed one could make it into the middle class without a college degree
Who is Ronald Coase?
British economist and author, credited with creating the Coase theorem. 'Market Coase' - a legal and economic theory that affirms that where there are complete competitive markets with no transactions costs, an efficient set of inputs and outputs to and from production-optimal distribution are selected, regardless of how property rights are divided.
All possible choices for the individual are shown by the _______.
Budget Constraint
All possible choices for the individual are shown by the ____.
Budget constraint
All possible choices for the individual are shown by the:
Budget constraint
How does TANF avoid the poverty trap?
By requiring that welfare recipients work and by limiting the length of time they can receive benefits. From 1995 to 2002, recipients declined by more than 50%.
The largest US trading partner (in terms of total value tradedm exports plus imports) is ____________.
Canada
perfectly competitive firm
MR curve is a horizontal straight line because it is equal to the price of the good
________ describes the additional satisfaction provided by one additional unit of consumption
Marginal utility
________ describes the additional satisfaction provided by one additional unit of consumption.
Marginal utility
UNOS is an example of _______________.
a 'command' solution to an economic problem
UNOS is an example of what?
a 'command' solution to an economic problem
UNOS is an example of_______.
a 'command' solution to an economic problem
Market power
a 'price setter' (that is, it can raise its price without losing all its customers)
production technologies
alternative methods of combining inputs to produce output, planning for the long run... produces level of output at lowest cost
Active Fiscal Policy
Requires action by the government (congress and president) EX: Stimulus package in 2009 to boost economy out of recession
_______ include both the private costs incurred by firms and also costs incurred by third parties outside the production process.
Social Costs
________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process.
Social Costs
includes both the private costs incurred by firms and also costs incurred by third parties outside the production process.
Social Costs
________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process.
Social costs
Commodity Money
Something of value that backs up the currency
Budget constraint
Shows all possible choices for an individual
The demand curve:
Shows the maximum price that consumers are willing and able to pay for each quantity
Along the continuum between 'Command Economy' and 'Market (Capitalist) Economy', measuring economic freedom (government intervention), the United States is ______.
among the most free (in the top 10 or so countries)
Law of Demand
as price rises, quantity demanded decreases and vice versa
increases
as quantity __________ the difference between the price and marginal rev becomes bigger
Profit is maximized _________________.
at a lower quantity than the quantity where revenue is maximized
diseconomies of scale
decreasing returns to scale, as the quantity of output rises, the avg cost of production rises
poverty trap
describes how government programs for the poor can (under certain conditions) provide little work incentive
Marginal Utility
describes the additional satisfaction a consumer gains from consuming one or more unit of a good or service
Marginal utility
describes the additional satisfaction provided by one additional unit of consumption.
Compensating Differentials
differences in wages that result from differences in working conditions (risky jobs usually pay higher wages)
monopolistic competition
differentiated/hetero product free entry and exit equal access to technology and inputs entry ensures that firms don't earn profit in the long run
Richard Wilkinson TED talk
discusses the social problems associated with inequality
Richard Wilkinson TED talk ____________.
discusses the social problems associated with inequality
marginal cost
change in total cost divided by the change in quantity, extra cost of producing once extra unit
Genetically mutated marine life caused by "endocrine disruptors" is being found in the Potomac. "Endocrine disruptors" are _______________.
chemicals from consumer products and pharmaceuticals
Genetically mutated marine life caused by "endocrine disruptors" is being found in the Potomac. "Endocrine disruptors" are what?
chemicals from consumer products and pharmaceuticals
Gini Coefficient refers to a _______.
commonly used measure of the degree of inequality of income derived from the Lorenz Curve
imperfect competition
competition that does not fit the definition of perfect competition either because it involves a smaller number or firms or only one firm, or products that aren't identical
Financial Capital Market
complex set of instructions in which suppliers of capital and the demand for capital interact
The __________ is responsible for fiscal policy.
congress and president
The demand curve for an individual firm's product in a perfectly competitive industry is what?
horizontal
Framing
how given information affects consumer choice
The 'poverty trap' describes ____________.
how government programs for the poor can (under certain conditions) provide little work incentive
The 'poverty trap' describes ____________.
how government programs for the poor can, under certain conditions, provide little work incentive
marginal rev curve
in a monopoly and monopolistic competitive, _____________ is below the demand curve. they intercept at the same place
Factors that might shift demand include:
income, consumer tastes, and population
Factors that might shift demand
income, consumer tastes, population
mc=mr
firm choses output at ......
Collusion
firms agreeing to restrict competition by restricting output and keeping prices high
end result of entry and exit
firms end up with a price that lies on the downward sloping portion of the avg cost curve, not at the bottom of the AC curve. not be productively efficient
less then
for a monopolist, marginal rev is _____ then the price
key to the continuum of market structure
left to right: low to high market power
barriers to entry
legal restrictions, controlled physical resources, technological superiority (patent, trademark, copy right)
barriers to entry
legal, technological, or market forces that may discourage or prevent potential competitors from entering a market - will block entry even if firm is earning profit -
As Barry Schwartz describes in the reading on Blackboard, more choice leads to what?
less happiness for some individuals
monopolistic competition
less market power than oligopoly more than 5 firms but less than 100s products are similar but different some market power (pizza) (colleges) many firms competing to sell similar but differentiated products
Optimal Level of Provision of Goods
level at which society's total willingness to pay per unit is equal to the marginal cost of producing the good
utility
level of satisfaction
Deposits represent a _________ to the bank.
liability
monopolists must
lower price to sell extra units
generally upward sloping because diminishing marginal returns implies that additional units are more costly to produce
marginal cost curve shape
Diminishing marginal returns
marginal gain in output diminishes as easy additional unit of input is added
We study perfect competition mostly because ________.
it serves as a good base for comparison (ie a reference point when examining other types)
Why do we study perfect competition?
it serves as a good base for comparison (ie a reference point when examining other types)
We study perfect competition mostly because ________.
it serves as a good base for comparison(i.e., a reference point when examining other types)
Liability Rules
laws that require A to compensate B for damages imposed
The Utilitarian approach to income inequality involves redistribution, with the goal of ______.
maximizing social well being
'Economic mobility' refers to ____________.
movements up or down the income distribution
differentiated products
products that are distinctive in a particular way
Equilibrium
quantity that firms provide is the same as the quantity that consumers demand
Rawls' argument relies on what?
recognition that we each bring our own 'position' (prejudice) to questions about the fairness of income inequality, making agreement difficult.
A key feature of oligopoly is ______________.
recognized interdependance
A key feature of oligopoly is ______________.
recognized interdependence
How does libertarianism differ from utilitarianism in terms of income inequality and distribution?
redistribution, with the goal of maximizing social well being
Dumping
refers to selling a product at a price below (marginal) cost
Objectification
refers to the fear that putting a price on certain things and buying or selling them might move them into a class of impersonal objects
Objectification _______________.
refers to the fear that putting a price on certain things and buying or selling them might move them into a class of impersonal objects
objectification:
refers to the fear that putting a price on certain things and buying or selling them might move them into a class of impersonal objects
A public good is a good that is ____________________ , and thus is difficult for market producers to sell to individual consumers.
nonexcludable and nonrivalous
A public good is a good that is ____________________ , and thus is difficult for market producers to sell to individual consumers.
nonexcludable and nonrivalrous
monopoly
one firm, no competition
monopoly
one firm, no entry sets own price one demand curve tells how much to sell
perfectly competitive
one major choice: what quantity to produce
Comparative advantage is based on what?
opportunity cost
Transfer Payments
payments by the government to people who do not supply goods or services in exchange (ex: Social Security)
Framing refers to
people react to a particular choice in different ways depending on how it is presented
The substitution bias _________________.
tends to overestimate the true rate of inflation (Substitution bias: when the switch to lower price alternatives is not captured in the market basket (and hence the CPI)
The changes in consumers' preferences based on the addition of a clearly inferior substitute (as shown in the "Rome with no coffee" example in class) illustrates ______.
that 'framing' is important
The changes in consumers' preferences based on the addition of a clearly inferior substitute (as shown in the "Rome with no coffee" example in class) illustrates what?
that 'framing' is important
The changes in consumers' preferences based on the addition of clearly inferior substitutes (as in the "Rome with no coffee" example in class) illustrates ______.
that 'framing' is important
intellectual property
the body of law including patents, trademarks, copyrights, and trade secret law that protects the right of inventors to produce and sell their invention
'Dumping' refers to _____.
selling a product at a price below (marginal) cost
BONUS (will count toward your point total but not your points attempted): 'Dumping' refers to _________.
selling a product at a price below (marginal) cost
Dumping' refers to _________.
selling a product at a price below (marginal) cost
dumping refers to:
selling a product at a price below marginal cost
Sunk costs
should typically be ignored because spending has already been made and cannot be changed
sunk costs
should typically be ignored because spending has already been made and cannot be changed
The Demand Curve
shows the maximum price that consumers are willing and able to pay for each quantity
The demand curve ____________.
shows the maximum price that consumers are willing and able to pay for each quantity
demand curve
shows the maximum price that consumers are willing and able to pay for each quantity
Edgeworth
summed up giffen goods situation, famous economist
marginal revenue product (MRP)
reveals how much revenue a firm could receive from firing an additional worker and selling the output of that worker
Drop-in-the-Bucket Problem
the good or service is usually so costly that its provision generally does not depend on whether any single person pays
Utilitarian Justice
the idea that "a dollar in the hand of a poor person is worth more than a dollar in the hand of a rich person." If the marginal utility of income declines with income, transferring income from the rich to the poor will increase total utility.
Supporting Rawls' principle of justice is ___________. (See Sandel lecture, part 1, in particular)
the idea that attempting to correct for unequal talents will cause more harm than good
entry
the long-run process of firms beginning and expanding production when they see opportunity for profits
exit
the long-run process of firms reducing production and shutting down because they expect losses
Supporting Rawls' principle of justice is ___________.
the observation that the fate of birth (ie, one's family) plays an unfair role in determining one's place in the income distribution as an adult
Supporting Rawls' principle of justice is ___________. (See Sandel lecture, part 1, in particular)
the observation that the fate of birth (ie, one's family) plays an unfair role in determining one's place in the income distribution as an adult
Supporting Rawls' principle of justice is what?
the observation that the fate of birth (ie, one's family) plays an unfair role in determining one's place in the income distribution as an adult.
Rawlsian Justice
the social contract emerging from the "original position" would call for an income distribution that would maximize the well being of the worst-off member of society
When there is an negative externality the market price is _______ and the market quantity is ____ relative to the socially optimal levels
too low, too high
When there is an negative externality the market price is _______ and the market quantity is ____ relative to the socially optimal levels (select from the pairs from below to fill in the respective blanks).
too low, too high
average cost
total cost divided by quantity of output 40 haircuts = 320$ 320/40=8$
demand
total revenue is maximized at the center of the ________ curve
profit
total revenue-total cost (price)(quantity produced) - (average cost) (quantity produced)
economic profit
total revenues minus all the firm's costs, including opportunity costs
accounting profit
total revenues minus the firm's costs, without taking opportunity cost into account
economic profit
total revenues minus the firms costs, taking opportunity cost into account
accounting profit
total revenues minus the firms costs, without taking opportunity cost into account
marginal utility
utility you get from the next increment
Labor Theory of Value
value of a commodity depends on the amount of labor required to produce it
Opportunity Cost
value of what you have to give up to get something else
average variable cost
variable cost divided by quantity of output 80 haircuts = $400 400/80=5$
Clip Joint barber example
variable costs: hiring barbers (80$ per day) fixed costs: space and equipment (160$ per day) total costs: fixed + variable
fixed cost
vertical intercept
monopoly
waste is possible profit always positive price always greater then mc and ac
perfect competition
we study _______ because it serves as a good base for comparison (ie a reference point when examining other types)
Oligopoly
when a few firms have all or nearly all of the sales in an industry
predatory pricing
when an existing firm uses sharp but temporary price cuts to discourage new competition
economies of scale or increasing returns to scale
when average cost of producing each individual unit declines as total output increases... a large factory can produce at a lower avg cost then a small one
constant returns to scale
when expanding all inputs does not change the avg cost of production
diminishing marginal returns
when marginal gain in output diminishes as each additional unit of input is added
'Convergence' is_____________
when poor countries grow (in terms of GDP) faster than rich countries
natural monopoly
when the quantity demanded in the market is less than the quantity at the bottom of the long run avg cost curve
natural monopoly
when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve
shut down point
when the revenue a firm receives does not cover its average variable costs the firm should shut down immediately...... point where the MC curve crosses the AC curve
shutdown point
when the revenue a firm receives does not cover its average variable costs, the firm should shut down immediately; the point where the marginal cost curve crosses the average variable cost curve
Prisoners Dilemma
when two players pursue their own self-interest, they both end up worse off than if they were to cooperate
highest profit
will occur at the quantity where total rev is the farthest above total cost
perfectly competitive firm
MC curve is identical to the firms supply curve
The progressive income tax system is an example of ______.
Passive fiscal policy
Tariffs
Taxes on imports
A progressive tax ____________.
is one in which those with higher incomes pay higher rates
Disposable income _______________.
is total income minus taxes.
intellectual property
protects the right of inventors to produce and sell their inventions
Based on the above production possibilities, which of the following is true?
The US has an absolute advantage in production of both goods.
trademark
a word, name, symbol or device that indicartes the source of goods and can only be used by the firm that registered the trademark
marginal costs
additional cost of producing one more unit calculated by taking the change in total cost divided by change in quantity ex) as quantity increases from 40 to 60, total costs rise by 80 so, 80/20=4
I'MaPizzaCo. produces and sells specialty pizzas. Last year, it produced 8,000 mushroom, sausage and spinach pizzas and sold each one for $18. To produce these 8,000 specialty pizzas, the company incurred variable costs of $24,000 and a total cost of $40,000. I'MaPizzaCo's average fixed cost to produce 8,000 specialty pizzas was what?
$2.00
Median household income in the US
$50,000
Median household income in the US is about ________.
$50,000
Median household income in the US is about ________.
$50,000-55,000
Suppose the CPI=100 in year 1 and CPI=150 in year 10. What is the equivalent price in year 10 of something that cost $500 in year 1?
$750 (500*(150/100)=750
One reason for unemployment is ___________.
'sticky wages'
Who is Robert Shiller?
(born March 29, 1946) is an American Nobel Laureate, economist, academic, and best-selling author. He currently serves as a Sterling Professor of Economics at Yale University and is a fellow at the Yale School of Management's International Center for Finance. -The Dislocations of Inflation
variable costs
*costs of hiring barbers* for The Clip Joint example pg 152
Check all that are true according to Dr. Warren
-A woman in 1970 with a 16 year old child was less likely to be in the workforce than a woman in 2003 with a 6 month old child. - Twice as many people in America believed (in a 2002 survey) that the landing on the moon was faked than believed one could make it into the middle class without a college degree.
Check all that are true according to Dr. Warren:
-A woman in 1970 with a 16 year old child was less likely to be in the workforce than a woman in 2003 with a 6 month old child. -Twice as many people in America believed (in a 2002 survey) that the landing on the moon was faked than believed one could make it into the middle class without a college degree.
Federal Reserve
-In charge on monetary policy -U.S. central bank-1913, 3rd attempt central bank (first in 1800's)
Monetary Policy
-Keeping out of recession -Run the business cycle -Using Money rates and interest supply -Done by the federal reserve rather than the government -Independent from the government
Tools of federal policy
-OMO-Open Market Operations, loanable funds market -Discount Rate-interest rate-interest rate that the federal reserve charges the banks when the banks need to borrow -Moral Suasion-(Persuasion) for banks to buy and sell more -QE-Quantitative easing, the feds buying mortgages to influence interest rates
3 requirements for currency
-Unit of count -Medium of exchange -Store Value
Key Features of Monopolistic Competition
-free entry and exit -many firms -product differentiation
Factors that may shift demand
-income -consumer tastes -population
Fiscal Policy __________________.
-is meant to counteract the business cycle (move the economy back to full employment) -Gov. intervention
Sources of Household Income
-wages and salaries -Income from property -Income from the government
(from the last question) Given the table of preferences in the previous problem. Bob's utility maximizing point is ____.
1 movie, 3 workout sessions (biggest difference in utilities out of all the answer choices)
Given the table of preferences in the previous problem. Bob's utility maximizing point is what?
1 movie; 3 gym workout sessions
Given the table of preferences in the previous problem. Bob's utility maximizing point is ____.
1 movie; 3 gym workout sessions (find marginal ultility)
1. Fixed Cost 2. Variable Cost 3. Total Cost 4. Marginal Cost
1. cost of setting up operations 2. costs that vary with output 3. variable + fixed cost 4. cost of producing one extra unit
5 Ways to Solve Externalities
1. Private Bargaining and Negotiation 2. Legal rules and procedures 3. Taxes and Subsidies 4. Selling or Auctioning pollution rights 5. Direct Regulation
If the required reserve ratio is 0.1 then the money multiplier is ________.
10
If the CPI rises from 200 in year 1 to 220 in year 2, the rate of inflation is ____________.
10% (220-200)/200 = 10%
oligopoly
2-6 firms that sell the most of the product in the industry. More market power because limited competition. (verizon, sprint, att&t) (coke, pepsi, dr. pepper) (beer)
The last federal budget surplus in the US was _____________.
2001
An economy growing at about 3 percent per year will double in size in approximately ______.
24 years (use rule of 72, this this rule is an approximation)
Suppose the demand curve is estimated to be: P = 10 - Q. What Price (P) will the firm charge if it wants to maximize REVENUE?
5
suppose the demand curve is estimated to be: P = 10 - Q. What Price (P) will the firm charge if it wants to maximize REVENUE?
5
Suppose the demand curve is estimated to be: P = 10 - Q. What Price (P) will the firm charge if it wants to maximize REVENUE?
5 Revenue is always maximized at the 'middle of the demand curve' - the half-way point.
Suppose the demand curve is estimated to be: P = 10 - Q. What Price (P) will the firm charge if it wants to maximize REVENUE?
5 (half of 10, the given number)
Suppose mpc = 0.8 and Government spending decreases by 100. By how much will GDP change after all rounds of spending are completed?
500
Suppose a firm has a demand curve P = 12 - Q, where P is price per unit and Q is number of units. What is the REVENUE maximizing Price (P)? I.e., what P should be charged if the firm wants to maximize revenue?
6
BONUS: Suppose a firm has a demand curve P = 12 - Q, where P is price per unit and Q is number of units. What is the REVENUE maximizing Price (P)? I.e., what P should be charged if the firm wants to maximize revenue?
6 (half of 12, the given number)
The table below sets out cost information for the production of volley balls. Some values are missing. Which of the following statements is correct?
A = 42, E = 12
Profit-maximizing firm
A __________ will always attempt to produce its desired level of output at the lowest possible cost
Income Effect
A change in price affects the buying power of income. ex- higher price means less buying power of income
Higher price, income and substitution effect.
A change of price in one good can also have a range of effects, positive and negative, on the quantity consumed of other goods
Positive Externality
A situation where a third party, outside of the transaction, benefits from a market transaction by others..
Negative Externality
A situation where a third party, outside of the transaction, suffers from a market transaction by others..
What is true to Dr. Warren?
A woman in 1970 with a 16 year old child was less likely to be in the workforce than a woman in 2003 with a 6 month old child and Twice as many people in America believed (in a 2002 survey) that the landing on the moon was faked than believed one could make it into the middle class without a college degree.
According to J. Charles Fox, former EPA administrator, hat is "by far the largest source of pollution to all water ways in the country"?
Agriculture
What is "by far the largest source of pollution to all water ways in the country", according to one speaker (J. Charles Fox, former EPA administrator) in the video?
Agriculture
The Wireless industry, consisting mainly of three large companies, Verizon, AT&T, and Sprint, is an example of what?
An oligopoly
Which of the following is true?
Any two countries can benefit from trade even if one country can produce all goods more cheaply
which of the following are true:
Any two countries can benefit from trade even if one country can produce all goods more cheaply
U-Shaped curve
Average cost curve
Factors that might shift demand include __________.
Choices b, c, and d (income, consumer tastes, and population) are all possible shift factors
The largest single component of GDP is _____________
Consumption
Injunction
Court order forbidding negative externality causing behavior
Republican View
Decreases in taxes
Perfect competition
Each firm faces many compeititors that sell identical products
The Federal Reserve is the only entity that can create money.
False
Because their wages are typically lower, young people in the U.S. (ages 20-24) usually have had a lower unemployment rate compared to older workers (25-54, for example).
False (The young typically have higher unemployment rates than older people. The text has details. A large part of this is related to lack of experience and the fact that younger workers tend to be more recently hired (and so are the first ones to be laid off during a recession, for example))
The U.S. central bank is the oldest among CBs in developed countries.
False, Sveriges Riksbank, or simply Riksbanken is the oldest, 1688
Currency is the largest form of money in the U.S. economy.
False. 1 Trillion in currency, 14 Trillion in money.
Monopoly
Firm with no competitiors
Fax machines, office space, and computers, because they are required regardless of the exact level of production (output) would best categorized as ______.
Fixed inputs
Fax machines, office space, and computers, because they are required regardless of the exact level of production (output) would best categorized as what?
Fixed inputs
Which of the following is not among the three largest expenditure categories in the US federal budget?
Foreign aid. Medicare, social security, and military are the most expensive
An individual who is unwilling to pay for public goods, but plans to use those goods for his/her own purposes, is often referred to as a ______________ .
Free Rider
An individual who wants others to pay for public goods, but plans to use those goods for their own purposes, is often referred to as what?
Free Rider
An individual who wants others to pay for public goods, but plans to use those goods for their own purposes, is often referred to as a ______________ .
Free rider
Why should zero pollution not be a goal?
From an economic persepctive the socially optimal level of pollution occurs when the marginal benefit of the last unit of pollution exactly equals the marginal cost of pollution. At this level the net benefits to society are maximized. If all of the externalities of pollution are accounted for, the resulting level of pollution will be optimal.
We sometimes consider alternatives to GDP such as the HDI because _____________.
GDP does not measure some important aspects of well-being (such as health)
Extremely high rates of inflation are called _____________.
Hyper inflation
Democratic View
Increase in government spending
The demand curve for an individual firm's product in a perfectly competitive industry __.
Is horizontal
What do each of the variables in the following equation represent? MV = PQ How might this equation be useful? What does it tell us?
M=money supply V=Velocity P=Price Q=Quanity
The source of water for the Washington DC area is what?
Local Potomac River
The graph describing the income distribution is called ___________.
Lorenz Curve
The graph describing the income distribution is called what?
Lorenz Curve
The graph describing the income distribution is called ___________.
Lorenz curve
M2...
M1+savings accounts and other savings
________ describes the additional satisfaction provided by one additional unit of consumption.
Marginal Utility
Why use median rather than average?
Median is more accurate than average as one outlier could give a misinterpretation of the average of the data
Coffee shops, clothing stores, and landscapers would be good examples of which type of market structure?
Monopolistic competition
The market structure with many firms selling a differentiated product is ________.
Monopolistic competition
_________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others.
Negative Externality
describes a situation where a third party, outside the transaction, suffers from a market transaction by others.
Negative Externality
_________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others.
Negative externality
The Environmental Protection Agency (EPA) was signed into law by which president?
Nixon
Passive Fiscal Policy
No action required by the government to increase or decrease spending EX: Unemployment checks will rise automatically during a recession due to laws that are already in place
Fiat Money
Nothing backing up the money besides the people's faith that it has value
inelastic demand:
Occurs when buyer demand is not very sensitive to price changes
The beer industry in the US is best characterized as ________________.
Oligopoly, because while there are many brands there are only a few suppliers
The beer industry in the US is best characterized as what?
Oligopoly, because while there are many brands there are only a few suppliers
Economic mobility
Refers to movements up or down the income distribution
Which of the following should typically be ignored because spending has already been made and cannot be changed?
Sunk costs
average cost
TELLs a firm whether it can earn profits, given the price in the market
Suppose that England can produce a maximum of 30 units of Wheat OR 30 units of Sheep, if it uses all its resources efficiently and specializes in either Wheat or Sheep. Suppose also that the US can produce a maximum of 100 units of Wheat OR 50 units of Sheep, if it uses all its resources efficiently and specializes in either Wheat or Sheep. Based on the above production possibilities, which of the following is true?
The US has an absolute advantage in production of both goods.
Suppose that England can produce a maximum of 30 units of Wheat OR 30 units of Sheep, if it uses all its resources efficiently and specializes in either Wheat or Sheep. Suppose also that the US can produce a maximum of 100 units of Wheat OR 50 units of Sheep, if it uses all its resources efficiently and specializes in either Wheat or Sheep. That is,
The US has an absolute advantage in production of both goods.
Suppose that England can produce a maximum of 30 units of Wheat OR 30 units of Sheep, if it uses all its resources efficiently and specializes in either Wheat or Sheep. Suppose also that the US can produce a maximum of 100 units of Wheat OR 50 units of Sheep, if it uses all its resources efficiently and specializes in either Wheat or Sheep. That is, Maximum production with specialization England US Wheat per acre 30 100 Sheep per acre 30 50 Based on the above production possibilities, which of the following is true?
The US has an absolute advantage in production of both goods.
Marginal Utility
The additional utility provided by one additional unit of consumption
Which of the following is true? -Any two countries can benefit from trade even if one country can produce all goods more cheaply -The benefits (to consumers, producers) of free trade are equally distributed -Free trade will lead to fewer jobs in the long-run. -Free trade leads to lower wealth for at least one of the parties involved
The benefits (to consumers, producers) of free trade are equally distributed
11. What are two primary reasons for rising income inequality offered in the text?
The changing composition of American households/A shift in the distribution of wages
Diminishing Marginal Utility
The common pattern that each marginal unit of a good consumed provides less of an addition to utility then the previous unit
horizontal
The demand curve for an individual firm's product in a perfectly competitive industry is _______
Utility
The level of satisfaction or pleasure that people receive from their choices
Monopolistic competition
The market structure with many firms selling a differentiated product
monopolistic competition
The market structure with many firms selling a differentiated product is
oligopoly
The market type characterized by high barriers to entry is
Required Reserve Ratio
The minimum amount of deposits that banks have to keep
Which one of the following is counted in GDP?
The value of the wood purchased at Home Depot by someone making a homemade table. (Must be market produced (transaction with a buyer and seller) of a newly produced good or service. Use autos are not newly produced. Homecooked meals are not market transactions. Neither is child care.)
Average cost
Total cost divided by quantity of output
Government creates currency: T/F?
True, banks create additional money by taking deposits and giving loans
Giffen good
Unrealistic theory that a higher price for a good could lead to a higher quantity demanded
'Productive efficiency' refers to __________.
Using resources to their fullest
Productive efficiency
Using resources to their fullest
productive efficiency refers to:
Using resources to their fullest
Externality
When a market exchange effects a third party who is outside of "external" to the exchange, sometimes called a spillover.
Normal Goods
When a rise in income leads to a rise in the quantity consumed.... when a fall in income leads to a fall in quantity consumed
predatory pricing
When an existing firm uses sharp but temporary price cuts to discourage new competition
Inferior Goods
When people trim back on a good as income rises because they can now afford the more expensive choice
middle of demand curve
Where is the TR is always maximized
Substitution Effect
______ is when a price changes, consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price
profit
________ is maximized at a lower Q than where TR is maximized. (And hence, always at a higher Price.)
entry and exit
__________ and ______________ are the driving forces behind a process that in the long run pushes the price in a perfect competitive market to be at the hero profit point where the MC curve crosses the AC curve
profit
__________ is maximized at a lower quantity than the quantity where revenue is maximized
demand curve for labor
____________ slopes downward... as labor becomes more expensive, profit seeking firms will seek to substitute the use of other inputs. Depending on wages, you could want more machines or more workers.
shape of the long-run average cost curve
______________ shows how man firms will compete in an industry and whether the firms in an industry have many different sizes or tend to be the same size
UNOS is an example of:
a command solution to an economic problem
Externality
a cost or benefit imposed on an individual or a group that is outside, or external to, the transaction
The Income Effect
a decline in the price of any product will make the household better off, income will be leftover leading to improved well-being
price takers
a firm in a perfectly competitive market that must take the prevailing market price as given
prisoner's dilemma
a game in which if both players pursue their own self-interest, they both end up worse off than if they cooperate
Cartel
a group of firms that get together and make joint price and output decisions to maximize joint profits (result of collusion)
recognized interdependence
a key feature of oligopoly
Where is Profit maximized?
a lower quantity than the quantity where revenue is maximized
Quotas
a numeric (quantity) restriction on imports
kinked demand curve
a perceived demand curve that arises when competing oligopoly firms commit to match price cuts, but not price increases
Rawls' argument relies on ___________.
a preference for working within the current system rather than replacing it with something totally different (i.e. a preference for continuity)
If banks hold 10% of their deposits as reserves and lend out 90% __.
a) the money multiplier is 10
The Utilitarian approach to income inequality involves redistribution, with the goal of ______.
achieving a fair and just distribution (obtained by agreement behind a 'veil of ignorance')
"Economies of Scale" refers to ____________.
achieving lower cost per unit of production as production becomes greater
Economies of Scale
achieving lower cost per unit of production as production becomes greater
economies of scale
achieving lower cost per unit of production as production becomes greater
Perfect Competition
an industry structure in which there are many small firms, producing identical products, and in which no firm is large enough to control prices
If the required reserve ratio is 0.1 then _____________.
an initial $100 of deposits will become $1,000
The Wireless industry, consisting mainly of three large companies, Verizon, AT&T, and Sprint, is an example of ____.
an oligopoly
duopoly
an oligopoly with only two firms
barrier to entry
anything that keeps out competition (patents, copyrights, pharmesudical industry)
Quotas _____________.
are a numeric (quantity) restriction on imports
Quotas:
are a numeric (quantity) restriction on imports
Which of the following should typically be ignored because spending has already been made and cannot be changed? a. Variable costs b. Sunk costs c. Marginal costs d. Average marginal costs
b. Sunk Costs
long run average cost curve
based on a group of short run avg cost curves, each of which represent a specific level of fixed costs.
Oligopoly, because while there are many brands there are only a few suppliers
beer industry is characterized as
The most often used method used by the Fed to increase the money supply is ______.
buying bonds from banks. an example of open market operations
lose more
by lowering prices you _____ more money. you also lose rev on units that could have been sold previously
The demand curve for an individual firm's product in a perfectly competitive industry __.
is horizontal
An increase in the supply of loanable funds _____.
can lead to an increase in investment borrowing which will lead to lower interest rates, more people borrowing money, shifting AD to the right (AD increasing), prices go up
shut down point
can the firm at least cover its variable costs by remaining open? if no then this is the
fixed costs aka SUNK costs
convey info about the firms ability to cut costs in the present and the extent to which costs will increase if production rises
marginal cost
costs of production that increase with the quantity produced (labor)
Which of the following is true? a. Free trade will lead to fewer jobs in the long-run. b. The benefits (to consumers, producers) of free trade are equally distributed. c. Free trade leads to lower wealth for at least one of the parties involved. d. Any two countries can benefit from trade even if one country can produce all goods more cheaply
d. Any two countries can benefit from trade even if one country can produce all goods more cheaply
close substitutes
don't have extreme power
monopolistic comp curve
downward sloping, can raise its price without losing all of its customers
perfect competition
each firms sells the exact same product/ no market power/ base for comparison model
lower total costs
earns higher profits
If the expected rate of inflation is 4% and the nominal interest rate is 6% then ____________.
expected real interest rate is 2% (Nominal = expected real + expected inflation).
fixed cost
expenditures that must be made before production starts and don't change regardless of the level of production
Fax machines, office space, and computers, because they are required regardless of the exact level of production (output) would best categorized as ______.
fixed inputs
copyright
form of legal protection to prevent copying for commercial purposes original works of authorship, including books and music
An individual who wants others to pay for public goods, but plans to use those goods for their own purposes, is often referred to as a ______________ .
free rider
patent
government rule that gives inventor the exclusive legal right to make, use, or sell the invention for a limited time
market power
idea that firms can raise or lower prices to maximize profit and won't lose competitors bc they have limited competition
Substitution Effect
if price of a product increases it becomes more expensive relative to substitutes, thus a household will likely buy less of it and more of other goods
marginal cost of production
if the ___________ is below the average cost for producing previous units then producing one more unit will reduce avg costs overall
produce the extra unit
if the marginal rev exceeds the marginal cost then the firm should
decrease
if you change the level of fixed costs by increasing it, you will _______ the profile level, but the profit maximizing price in quantity will stay the same
profit level (it will dec if the variable cost increases) and the profit maximizing price in quantity.
if you change the variable cost then you will change the ________ and _________.
low
if you change the variable cost then you will reach your max profit at a ________ input it will also tilt the curve and shift the table
Utilitarian approach to income inequality
involves redistribution, with the goal of maximizing social well being.
Bob budgets $12 a week for entertainment. He splits his time between going to the movies and going to the gym. Each movie costs $3 and each session at the gym also costs $3. The total utility from each of these activities is shown in the table below. The marginal utility derived from consuming the fourth movie ___________.
is 16 utils
Wealth _______.
is a 'flow' variable (measured over a period of time)
The Earned Income (Tax) Credit (EIC or EITC) _______________________.
is a refund on one's income tax return on income up to a certain amount
The payroll tax _______________.
is a tax on income from employers used to fund social security and medicare
Someone working 10 hours per week__________
is counted as employed
Inequality _______ as the GINI coefficient (ratio) increases
is higher
Inequality _______ as the GINI coefficient (ratio) increases.
is higher
Inequality _______ as the GINI ratio increases.
is higher
If a firm has 'Market Power' it means ________
it is a 'price setter' (that is, it can raise its price without losing all its customers)
If a firm has 'Market Power' it means ________.
it is a 'price setter' (that is, it can raise its price without losing all its customers)
We study perfect competition mostly because ________
it serves as a good base for comparison (ie a reference point when examining other types)
recognized interdependence
key feature of oligopoly
Monopolistic Competition
many firms competing to sell similar but differentiated products
monopolistic competition
many firms competing to sell similar but differentiated products
Oligopoly
market with few sellers who control most of the market and sell majority of the product(ex: cell phones, beer companies)
A "meet the competition" promise ____________.
may lead to higher prices industry wide
A "meet the competition" promise ____________.
may lead to higher prices industry-wide
meet the competition
may lead to higher prices industry-wide
meet the competition promise
may lead to higher prices industry-wide
Velocity" of money __________.
measures how quickly a dollar circulates in the economy
'M1' _______________.
measures money supply and includes currency and demand (checking) deposits as the main categories. JSG Boggs.
Investment ___________________.
measures purchases of things like trucks, factories, and machines to be used in the production process
Consumer Surplus
measures the difference between the equilibrium price and the price consumers are willing and able to pay
Consumer Surplus ____________.
measures the difference between the equilibrium price and the price consumers are willing and able to pay
consumer surplus:
measures the difference between the equilibrium price and the price consumers are willing and able to pay
"Utility" ____________.
measures the level of satisfaction or pleasure that people receive from their choices
Utility
measures the level of satisfaction or pleasure that people receive from their choices
Utility ____________.
measures the level of satisfaction or pleasure that people receive from their choices
trade secrets
methods of production kept secret by the producing firm
trade secrets
methods of production kept secret by the producing firm (formula for coca cola) not patented or anything but kept secret by the company
Johnny has been without a job for 2 years since his employer shut down. But seeing no prospects he last looked for a job 2 months month (and has not even applied for one in three months). Johnny is _____________.
not counted as unemployed (One must be actively looking for a job to be counted as in the labor force and unemployed. One must be in the labor force to be either unemployed or employed. Johnny is not in the labor force and therefore is not unemployed.)
Quotas
numeric (quantity) restriction on imports
Inelastic Demand
occurs when buyer demand is not very sensitive to price change
Inelastic demand
occurs when buyer demand is not very sensitive to price changes
Inelastic demand ___________.
occurs when buyer demand is not very sensitive to price changes
Comparative Advantage
occurs when one producer (country) can produce something at a lower opportunity cost than another producer (country)
Comparative advantage
occurs when one producer (country) can produce something at a lower opportunity cost than another producer (country)
Comparative advantage _______________
occurs when one producer (country) can produce something at a lower opportunity cost than another producer (country)
Comparative advantage:
occurs when one producer (country) can produce something at a lower opportunity cost than another producer (country)
Poverty Line
officially established income level that distinguishes the poor from the non poor
The market type characterized by high barriers to entry
oligopoly
The market type characterized by high barriers to entry and a recognized interdependence (and thus strategic interaction) is _______________.
oligopoly
The market type characterized by high barriers to entry is ___________.
oligopoly
A monopolist is able to maximize its profits by ___________.
producing output where MR = MC and charging a price along the demand curve
A monopolist is able to maximize its profits by what?
producing output where MR = MC and charging a price along the demand curve
monopolists maximize when
producing output where MR = MC and charging a price along the demand curve
A monopolist is able to maximize its profits by ___________.
producing output where MR = MC and charging a price along the demand curve: Maximum profit is where the difference between TR and TC is maximum. This occurs where the additional revenue from more sales (MR) equals the additional cost of producing those units (MC).
Productivity is defined as ______________.
production of hour per work
Other 'solutions' to income inequality (in particular, those aimed at the poverty end), discussed in the text, include the Earned Income Tax Credit (EITC). This program _________.
provides a tax refund of 40 cents for every dollar earned, over a range of incomes
Other 'solutions' to income inequality (in particular, those aimed at the poverty end), discussed in the text, include the Earned Income Tax Credit (EITC). This program does what?
provides a tax refund of 40 cents for every dollar earned, over a range of incomes.
Rawls' argument relies on ___________.
recognition that we each bring our own 'position' (prejudice) to questions about the fairness of income inequality, making agreement difficult
The production possibilities frontier (PPF) ________________.
reflects output assuming the full use of society's resources
The production possibilities frontier(PPF)____.
reflects output assuming the full use of society's resources
production possibilities frontier (PPF)
reflects output assuming the full use of society's resources
The production possibilities frontier (PPF) ________________.
reflects output assuming the full use of societys resources
A normative statement ___________________________.
relies on personal values (A normative statement is opinion-based (a value-based statement) as opposed to a 'positive' statement, which is fact based.)
deregulation
removing government controls over setting prices and quantities in certain industries
deregulation
removing government controls over setting prices and quantities in certain industries (airlines, trucking, banking, telecommunication, electricity)
Human Capital
stock of knowledge, skills, and talents that people possess; it can be inborn or acquired through education and training
Economics
study of production, distribution, and consumption of goods and services
marginal cost curve
the _______ has to go through the min of the avg cost curve
average variable cost curve, average cost
the _______________ will always lie below the curve for _________ because average cost includes fixed costs in the numerator
marginal revenue
the additional revenue gained from selling one more unit
Economic Income
the amount of money a household can spend during a given time without increasing or decreasing its net assets
Law of Diminishing Marginal Utility
the more of any one good consumed in a given period, less satisfaction(utility) is generated by consuming each additional unit of the same good
marginal physical product
the quantity of goods produced by an additional input like an additional worker
Diamond/Water Paradox
things that people need have little or no value where as things that people want have high value
The MPC varies by income group.
true
Coase Theorem
under certain conditions, when externalities are present, private parties can arrive at a solution without government involvement
Productive Efficiency refers to ___.
using resources to their fullest
As Barry Schwartz describes in the reading on Blackboard, more choice _________.
will lead to less happiness for some individuals
Are 'Ithaca Hours' money? Why or why not?
yes, they meet the 3 requirements