ECON312N
The real wage rate is $12.00 an hour and the CPI is 110. What is the nominal wage rate?
$13.2 an hour
In 2008, U.S. exports of goods and services were $1,847 billion and imports were $2,557 billion. What was the value of net exports?
-710 billion dollars
One of the following statements is an example of a positive statement.
-It is possible to meet all our energy needs with renewable resources -Swimmers are getting faster
If nominal GDP increases by 5 percent a year and the GDP price index rises by 2 percent a year, then real GDP increases by _______.
3 percent a year
The interest rate is 22 percent a year in The Gambia and 7.5 percent a year in South Africa. The inflation rate is 14.2 percent a year in The Gambia and 1.4 percent a year in South Africa. Calculate the real interest rate in The Gambia and South Africa.
7.8 percent in Gambia 6.1 percent in South Africa
Which of the following is an example of a price cap regulation?
A government regulation has forced cable TV operators to lower the price of cable TV from $55 a month to $30 a month.
Aqua Springs makes the following four statements about bottled spring water. Which statement best describes the firm's quantity supplied in the bottled water market?
At a price of $1 gallon, we plan to sell 2,000 gallons per day
Chained dollar real GDP is the measure of real GDP calculated by the
Bureau of Economic Analysis
M1
Currency and traveler's checks held by individuals and business + checkable deposits owned by individuals and businesses
In July 2013, M1 was $2,549 billion; M2 was $10,710 billion; checkable deposits owned by individuals and businesses were $1,414 billion; small time deposits were $556 billion; and money market funds and other deposits were $665 billion. Calculate currency held by individuals and businesses and traveler's checks in July 2013, and calculate savings deposits.
Currency held by individuals and businesses and traveler's checks were $1135 billion Savings deposits in July 2013 were $6940 billion
Who in the following statements is a discouraged worker?
Dan is available to work but has not looked for a job in the past eight weeks because of repeated applications but no single offer.
Which of the following illustrates a tradeoff?
I will study for my exam instead of going to the movie tonight
Which of the following is an example of an export subsidy?
The U.S. government pays farmers $100 per ton of sugar sold to Canada.
Identify which of the following questions is NOT a microeconomic question.
Why does the government spend more than it collects in taxes?
The fundamental force driving international trade is comparative _______.
advantage: the country with the lower opportunity cost of production exports the good
The government expenditure multiplier is the effect of a change in government expenditure on goods and services on _____.
aggregate demand
Demand-pull inflation is an inflation that starts because ___
aggregate demand increases
The balanced budget multiplier is the effect on _____ of a _____ change in government expenditure and taxes that leaves the budget balance unchanged
aggregate demand; simultaneous
An economy can achieve faster economic growth without
an increase in the population growth rate
Shari grows beautiful grows beautiful orchids. Her total fixed cost is $48 a day, and her average variable cost is $1 a plant. She is maximizing her profit by selling 12 orchids a day for $5 a plant. Few people know about Shari's Orchids. Shari thinks that if she spends $20 a day on advertising, she can sell 26 orchids a day for $5 a plant. If Shari's belief about the effect of advertising is correct, she ______.
can increase her economic profit by advertising
Which method is used to allocate strategic resources in the military? Which method is used to allocate the Academy Awards?
command; contest
All of the following are sources of inefficiency except ____
competition
A substitute is a good that is ___ another good, and a complement is a good that is ___ another good
consumed in place of; consumed together with
If Korea imposes an import quota on U.S. oranges, losers include Korean ______ of oranges and U.S. ______ of oranges.
consumers; producers
Full employment is when there is no _____ unemployment or, equivalently, when all the unemployment is _____ or _____.
cyclical; frictional; structural
All of the following are examples o scarcity except ___
deciding whether or not Pluto should be considered a planet
An increase in taxes when the economy is above full employment ______ aggregate demand and real GDP, and the price level ______.
decreases; falls
Explain how aggregate demand changes when the government increases taxes by $100 billion. Aggregate demand ______ by ______ $100 billion.
decreases; more than
Full-employment equilibrium occurs when equilibrium real GDP ___
equals potential GDP
A recessionary gap is a gap that exists when potential GDP ___ real GDP and that brings a ___ price level. An inflationary gap is a gap that exists when real GDP ___ potential GDP and that brings a ___ price level
exceeds; falling exceeds; rising
A commodity or token is money if it is _______.
generally accepted as means of payment
Consumption expenditure flows from ______ to ______ through the ______ markets.
households; firms; goods
For consumers, ski trips and ski jackets are complements. If the price of a ski trip decreases, the demand for ski jackets will ___
increase, and the demand curve for ski jackets will shift rightward
The Fed fights inflation by _______.
raising the federal funds rate, which raises interest rates and decreases aggregate demand
Automatic stabilizers are features of fiscal policy that stabilize _____ without explicit action by the government.
real GDP
When the Fed raises the federal funds rate, the long-run real interest rate ______.
rises within a few months
When floods wiped out the banana crop in Central America, the equilibrium price of bananas ______ and the equilibrium quantity of bananas ______
rose; decreased
The Fed's policy tools include all the following except _______.
taxing banks' deposits at the Fed
When cyclical unemployment increases and other things remain the same, ______.
the natural unemployment rate does not change
Full employment is defined as a situation in which _______.
the unemployment rate equals the natural unemployment rate
The CPI basket consists of items that ______ buy and it is updated frequently to ______
urban households; reduce bias
Tax incidence is the division of the burden of a tax between the _____ and the _____.
buyer; seller
Purchases of new national defense equipment flow from ______ to ______ through the ______ markets.
governments; firms; goods
Other things remaining the same, the lower the real interest rate, the ______ is the amount of consumption expenditure and the ______ is the amount of saving. Other things remaining the same, the lower the real interest rate, the ___ is the amount of investment.
greater; smaller greater
The federal funds rate is the interest rate at which banks can borrow and lend _____ in the _____ market.
reserves; federal funds
Who in the following statements is a part-time worker for economic reasons?
Sherrie is a graduate who started working at Safeway pharmacy for 4 hours each day, three days a week, as they do not currently have a full-time opening.
With free trade between China and the United States, the winners are ______ and the losers are ______.
U.S. consumers of U.S. imports; U.S. producers of the U.S. import good
The people who support restricted international trade say that ______.
U.S. firms won't be able to compete with low-wage foreign labor if trade is free
Choose the statement that is incorrect
We include a measure of good health and life expectancy in GDP
The nominal wage rate is the average _____ wage rate measured in _____ dollars. The real wage rate is the average _____ wage rate measured in the dollars of _____ year.
hourly; current; hourly; a reference base
Suppose that the U.S. government increases its expenditure on highways and bridges by $100 billion. As a result of this expenditure, aggregate demand ______. If the economy is in a recession, real GDP _______.
increases by more than $100 billion because consumption expenditure increases in a multiplier process; increases
A discouraged worker ______.
is a marginally attached worker who has not made specific efforts to find a job within the previous four weeks because previous unsuccessful attempts were discouraging
When the output gap is positive, the unemployment rate ______ the natural unemployment rate. When the output gap is negative, the unemployment rate ______ the natural unemployment rate.
is less than; is greater than
The money multiplier
is the number by which a change in the monetary base is multiplied to find the resulting change in the quantity of money.
Government debt
is the sum of past budget deficits minus the sum of past budget surpluses.
A real business cycle is a cycle that results from fluctuations in the pace of growth of ___ and ___
labor productivity; potential GDP
Which of the following is an example of an import quota? The United States _____ .
limits the quantity of auto parts that U.S. car makers may buy from China
The Fed's "dual mandate" is to achieve ________.
low inflation and maximum employment
The methods that governments use to support farms vary, but they almost always include all of the following except _______.
lower taxes for farmers
The three vital functions that money performs are ______.
medium of exchange, unit of account, and store of value
Concerned about the political fallout from rising college tuition, the U.S. government decides to impose a price ceiling on tuition of $30,000 a student. If more colleges open and drive the equilibrium price of tuition to $25 comma 00025,000 a student, _____. The market for college education is ______.
neither a surplus nor a shortage of college education emerges; efficient
According to classical macroeconomics ____
no remedy by the government can improve on the performance of the market
Suppose migration into the United States increases the working-age population. As a result there is ___ in the U.S. production function. There is ___ in the U.S. demand for labor and ___ in the U.S. supply of labor.
no shift; no change; an increase
Every day, we make many choices. We can't avoid having to make choices because___
our wants exceed the resources available to satisfy them.
Betsy graduates from college and her income increases by $25000. Nothing else changes. Betsy decreases the quantity of pasta and pretzels that she buys and increases the quantity of coffee that she buys. For Betsy, ___
pasta and pretzels are inferior goods
The working-age population is the total number of _____ aged _____ years and over who are not in jail, hospital, or some other form of institutional care or in the U.S. Armed Forces.
people; 16
An automatic stabilizer is at work if as real GDP increases, ______.
tax revenues increase and transfer payments decrease
If the BLS included all marginally attached workers as being unemployed, the _______ would be _______.
unemployment rate; higher
CPI measure the average price paid by ___ for ___
urban consumers; fixed basket of consumption goods and services
The opportunity cost of a pair of running shoes is best defined at the ___
value of the highest-valued alternative given up to get a pair of running shoes
The opportunity cost of a vacation is best defined as the ____
value of the highest-valued alternative given up to get a vacation
The BLS counts Jody as being unemployed if she _______.
wants a job and is willing to take a job but after searching last week cannot find a job
The nominal interest rate is 5 percent a year and the real interest rate is 7 percent a year. What is the inflation rate?
-2 percent a year
Suppose that in September 2009 in the United States, the monetary base in the United States was $625 billion, commercial banks' deposits at the Fed were $15 billion, and Federal Reserve notes were $600 billion. Calculate the quantity of coins
$10 billion
Suppose that at the end of December 2009, the quantity of coins was $15 billion, the monetary base in the United States was $635 billion, and banks' reserves at the Fed were $20 billion. Calculate the Federal Reserve notes
$600 billion
The BLS reported that in July 2017, the labor force was 160.5 million, employment was 153.5 million, and the working-age population was 255.2 million. The BLS also reported thatnbsp 17.3 17.3 percent of all employment in July 2017July 2017 was part time and thatnbsp 5.3 5.3 million people worked part time for economic reasons. How many people worked part time for noneconomic reasons?
21.2 million
The BLS reported that in November 2017, the labor force was 160.5 million, employment was 153.5 million, and the working-age population was 255.2 million. Calculate the unemployment rate and the labor force participation rate. The unemployment rate is ___ percent. The labor force participation rate is ___ percent.
4.4 62.9
The Bureau of Labor Statistics reported that in June 2005, the labor force was 151.1 million, employment was 143.3 million, and the working-age population was 226.2 million. In June 2005, what was the unemployment rate and the labor force participation rate?
5.2 percent unemployment 66.8 percent labor force participation
The Bureau of Labor Statistics reported that in June, 2017, the labor force was 160,494,000, employment was 153,513,000, and the working-age population was 255,151,000. Calculate for that month the labor force participation rate and the unemployment rate. The labor force participation rate was ___ percent. The unemployment rate was ___ percent.
62.9 4.3
Suppose that in an economy, investment is $160 billion, saving is $140 billion, government expenditure on goods and services is $150 billion, exports are $200 billion, and imports are $250 billion. ______ in government expenditure or ______ in taxes will increase investment and speed economic growth.
A decrease; an increase
Bank's total deposits
Checkable deposits + savings deposits + small time deposits
Choose the statement that is incorrect.
Deposits are not money because you cannot settle a debt with a deposit.
Suppose that in an economy, investment is $400 billion, saving is $400 billion, tax revenues are $500 billion, exports are $300 billion, and imports are $200 billion. What is government expenditure and the government budget balance?
Government expenditure is $400 billion. The government budget balance is $100 billion.
M2
M1 + savings deposits + small time deposits + money market funds and other deposits
In December 2003, currency and traveler's checks held by individuals and businesses was $670 billion; checkable deposits owned by individuals and businesses were $634 billion; savings deposits were $3,169 billion; small time deposits were $810 billion; and money market funds and other deposits were $796 billion. Calculate M1 and M2 in December 2003.
M1 = 1304 billion M2 = 6079 billion
Sara withdraws $1,000 from her checking account at Bank of America, keeps $200 in cash, and deposits the balance in her time deposit account at Citibank. What is the immediate change in M1 and M2?
M1 decreases by $800 and there is no change in M2.
The federal government's major outlay in its budget is ______ and its major source of revenue is ______.
Social Security and other benefits; personal income taxes
How do the Fed's monetary policy actions influence the exchange rate?
The Fed influences the exchange rate by changing the U.S. interest rate differential.
Choose the correct statement about the Fed and the FOMC.
The Fed provides banking services to banks and governments and the FOMC meets approximately every six weeks to review the state of the economy
Choose the statement that is incorrect.
The aim of a bank is to maximize the net worth of its depositors
The institutions that make up the banking system are ______.
The federal reserve, commercial banks, thrift institutions, and money market funds
Choose the statement that is incorrect.
The magnitude of the tax multiplier is larger than the government expenditure multiplier
A bank has the following deposits and assets: Checkable deposits, $300 Savings deposits, $1,400 Small time deposits, $650 Loans to businesses, $1,824 Outstanding credit card balances, $300 Government securities, $225 Currency, $1 Reserve account at the Fed, $6 Calculate the bank's total deposits and the amount of deposits that are part of M1 and M2.
The bank's total deposits are $2350. Deposits that are part of M1 are $300. Deposits that are part of M2 are $2350.
Which of the following is an example of absolute advantage?
Tom does his math homework in 2 hours while Harry takes only 30 minutes to do the same task
The economy is in a boom and the inflationary gap is large. Discretionary fiscal policy that might occur is ______.
a decrease in government expenditure and an increase in taxes
The supply-side effects of a tax cut arise because taxes act as ____ to work, save, and provide entrepreneurial services. The supply-side effects from an increase in government expenditure arise because government expenditure increases the quantities of ___ , which increases potential GDP and aggregate supply. So, a tax cut increases people's ___ to work, to save, and to provide entrepreneurial services, all of which lead to an increase in aggregate supply and potential GDP.
a disincentive; public goods and services; incentive
Suppose Dell introduces a new supercomputer that everyone can afford. As a result there is ___ in the U.S. production function and ___ in the U.S. demand for labor
an upward shift; an increase
The natural unemployment rate is the unemployment rate when the economy is _____.
at full employment
The structural surplus or deficit is the budget balance that would occur if the economy were _____.
at full employment
Classify each of the following items as discretionary fiscal policy or automatic fiscal policy or neither.
automatic - A decrease in tax revenues in a recession discretionary - Additional government expenditure to upgrade highways discretionary - An increase in the public education budget discretionary - A cut in infrastructure expenditure during a boom
A fall in income that results in a decrease in tax revenues is an example of ______.
automatic fiscal policy
Cost-push inflation is an inflation that begins with an increase in
cost
When the economy goes into recession, the biggest increase in unemployment is _______.
cyclical because jobs are lost in many industries as they cut production
To fight unemployment and close a recessionary gap, the Fed ________.
stimulates aggregate demand by lowering the federal funds rate, which increases the quantity of money
Macroeconomic equilibrium occurs when the quantity of real GDP ___ equals the quantity of ___
demanded; real GDP supplied
The natural unemployment rate is not zero because natural unemployment includes _______. The unemployment rate fluctuates around the natural unemployment rate because _______ during a recession and ___________ during an expansion.
frictional and structural unemployment; cyclical unemployment increases; decreases
A business cycle is a ___ but ___ up-and-down movement of total ___ and other measures of economic activity
periodic; irregular; production
Economic freedom is a condition in which people are able to make ___ choices, there private property is ___ and they ___ markets.
personal; protected by the rule of law; are free to buy and sell in
If in the short run, firms in monopolistic competition make _____ economic profit, then in the long run, new firms will enter the market. The ______ each individual firm's product will ______. In the new long-run equilibrium, firms will make _____ economic profit.
positive; demand for; decrease; zero
The output gap is real GDP minus _____ expressed as a percentage of _____.
potential GDP; potential GDP
The inflation rate is the percentage change in the _____ from one year to the next. Deflation is a situation in which the _____ is _____ and the inflation rate is _____.
price level; price level; falling; negative
Which of the following are included in the income approach to measuring GDP?
profit; indirect taxes less subsidies; wages
A commercial bank creates money when it does all the following except _______.
puts cash in its ATMs
An automatic fiscal policy is a fiscal policy action that is triggered by _____. A discretionary fiscal policy is a fiscal policy action that is initiated by _____.
the state of the economy; an act of Congress
Potential GDP is the value of real GDP when _______.
the unemployment rate equals the natural unemployment rate
Markets are a necessary precondition for economic growth because ___
they create incentives to save and invest
Keynes' theory was that ___
too little private spending is the cause of depression and recession
Market failure arises if ____
total surplus is not maximized
A country has been in existence for only two years. In the first year, tax revenues were $1.0 million and outlays were $1.5 million. In the second year, tax revenues were $1.5 million and outlays were $2.0 million. At the end of the second year, the government had issued debt worth ______.
$1 million
Once a month, the Bureau of ______ Statistics calculates the Consumer Price Index, which is a measure of the ______ consumers for a fixed basket of consumer goods and services.
Labor; average of the prices paid by urban
The monetary base is the sum of _______.
coins, Federal Reserve notes, and banks' reserves at the Fed
Explain how aggregate demand changes when the government increases both expenditure on goods and services and taxes by $100 billion. Aggregate demand ______ because the increase in government expenditure has ______ effect on aggregate demand than the effect of the tax increase.
increases; a larger
Explain the change in aggregate demand when government expenditure on national defense increases by $100 billion. Aggregate demand ______ by ______ $100 billion.
increases; more than
U.S. national debt ______ when the federal government's ______.
increases; outlays exceed tax revenue
Fiscal stimulus when the economy is below full employment ______ aggregate demand and real GDP, and the price level ______
increases; rises
A decrease in tuition fees will decrease your college's total revenue if the price elasticity of demand for college education is _____
greater than zero and less than 1
When a firm decides to produce a good by using a capital intensive method, it is answering the ___ question. When a firm decides to produce computers rather than DVD players, it is answering the ___ question. Who gets the goods and services that are produces answers the ___ question.
how; what; for whom
Major league baseball is exempt from laws designed to limit market power and it operates as a monopoly. If the baseball market became competitive, the number of teams would ______ and the economic profit of each team would ______.
increase; decrease
You can stay in school or you can quit school and get a full-time job. Your rational choice will be to stay in school if ___
the net benefit from staying in school is greater than the net benefit from getting a full-time job
A black market that emerges as the result of a price ceiling is an illegal market in which _______
the price exceeds the legally imposed price ceiling
Normal profit is the return to _____. Normal profit is part of a firm's _____ cost because it is the cost of not running another firm.
entrepreneurship; opportunity
Which of the following correctly lists the categories of factors of production?
land, labor, capital, and entrepreneurship
A cartel is a group of firms acting together to _____ output, _____ price, and increase _____.
limit; raise; economic profit
Choose the statement that is incorrect.
Oligopolies have a natural barrier preventing the entry of new firms.
The United States maintains an import quota on sugar. What is the argument for this import quota? The argument is ______ because ______
The import quota protects U.S. jobs. incorrect; sugar growers would be more efficiently employed producing things in which the United States has a comparative advantage
The dry cleaning industry is in monopolistic competition. In the short run, the profit-maximizing price is $10 per item and the average total cost is $6 per item. In long-run equilibrium, the profit-maximizing price is $8 per item. In long-run equilibrium, what is the economic profit of a firm in the dry cleaning industry? In long-run equilibrium, the dry cleaning firm makes ______ economic profit.
$0
Poinsettia growing is a perfectly competitive industry and all poinsettia growers have the same cost curves. The market price of poinsettias is $9 a pot and each grower maximizes profit by producing 800 pots a week. The average total cost of producing poinsettias is $20 a pot. Minimum average variable cost is $8 a pot, and the minimum average total cost is $12 a pot. In the long run, the market price of poinsettias is _____ a pot. In the long run, a poinsettia grower's economic profit is ___.
$12;$0
Rose growing is a perfectly competitive industry and all rose growers have the same costs. The market price of roses is $26 a bunch and each grower maximizes profit by producing 1,300 bunches a week. Average total cost of producing roses is $13 a bunch and average variable cost is $9 a bunch. Minimum average variable cost is $5 a bunch. What is the price at the grower's shutdown point?
$5 a bunch
The quantity demanded of good A decreases by 2 percent when the price of good B rises by 5 percent and other things remaining the same. The cross elasticity of demand of good A with respect to good B is negative ___. The cross elasticity of demand tells us that good A and good B are ______ and as the price of good B rises, the demand for good A ______.
-0.4; complements; decreases
When incomes in Detroit rise by 5 percent and other things remain the same, 1. the quantity demanded of frozen mixed vegetables decreases by 33 percent and 2. the quantity demanded of fresh asparagus increases by 12 percent. The income elasticity of demand for frozen mixed vegetables is ___
-0.6
When the price of a cup of coffee increases 10 percent, the quantity of donuts demanded decreases by 7 percent. Calculate the cross elasticity of demand for donuts with respect to the price of a cup of coffee. The cross elasticity of demand for donuts with respect to the price of a cup of coffee is ___. Coffee and donuts are ___
-0.7; complements
One of the following statements is an example of a normative statement.
-Workers must not be lazy -Poverty should be abolished
If the quantity demanded of noodles decreases by 24 percent when the price of noodles rises by 20 percent, what is the price elasticity of demand for noodles?
1.2
When you pick apples for 3 hours, you pick 8 baskets of apples. And if you pick apples for an extra hour, you pick a total of 10 baskets. To study for the extra hour, you give up playing cards for that hour with your friends. The marginal benefit from picking apples one more hour is ___. The marginal benefit from picking apples is measured by ___.
2 baskets; the card game you are willing to give up
Elizabeth owns an ice cream parlor. In an hour she can produce 10 milkshakes or 30 sundaes. Ben also owns a parlor. In an hour he can produce 8 milkshakes or 8 sundaes. Elizabeth's opportunity cost of 1 milkshake is ____. Ben's opportunity cost of 1 milkshake is ____. ______ has comparative advantage in milkshakes.
3 sundaes; 1 sundae; Ben
The Social Network had world-wide box office receipts of $225 million. The movie had a production budget of $70 million and marketing costs of $50 million. ___ is a marginal cost that a producer of a movie faces. ___ is a marginal benefit that a producer of a movie receives.
All of the above; All of the above
Jeb makes the following four statements about peanuts. Which statement best describes his quantity demanded in the peanut market?
At a price of $1 per pack, I plan to buy 2 packs of peanuts per week
Former Venezuelan president Hugo Chavez opposed the creation of a Free Trade Area of the Americas (FTAA). Why? Who did he think would gain and lose? President Chavez thought that ______. A. poor workers in Venezuela would lose and rich American firms would win B. Venezuela would lose tariff revenue C. Venezuelans would lose because they would have to clean up their polluting industries D. Venezuelans would lose because the price of oil would fall E. Both A and B are correct Do you think he is correct?
Both A and B are correct; No, because greater free trade would bring gains for all, including low-income workers in Venezuela.
A tariff _______. A. enables the government to satisfy the self-interest of people who earn their incomes in import-competing industries B. is a tax imposed on a good when it is imported C. provides revenue to the government D. all of the above
D. All of the above
Which of the following activities is an example of dumping?
Dell exports PCs to India at a price 20 percent lower than the cost of producing them.
Which of the following firms produce at the efficient scale?
Dell produces 100 computers a week at which its average total cost is minimized.
The benefit of something is the ___
Gain or pleasure it brings
Which is an example of economics as a policy tool?
More students are taking out student loans
Indicate all the items in the following list that are not factors of production and explain why. Item a: Trucks used by FedEx to make deliveries Item b: Your dog Item c: Undiscovered coal reserves Item d: A garbage truck Item e: A pack of bubble gum Item f: The President of the United States
Items b, c, and e because they are not productive resources used to produce goods and services—land, labor, capital, or entrepreneurship.
Which of the following countries is facing a recession
Japan's real GDP of 3.8 percent in the first quarter decreased by 0.3 and 0.4 percent respectively in the second and third quarters of 2012
Lizzie hires students at $60 a day to paint houses. She leases equipment that costs $90 a day. Suppose that Lizzie doubles the number of students she hires and doubles the amount of equipment that she leases. If Lizzie experiences diseconomies of scale, her long-run average cost curve ______.
Slopes upward
Choose the correct statement
Social interest and self interest can come into conflict
Consider a perfectly competitive market in which all firms have the same costs. Choose the statement that is incorrect.
The market demand is perfectly elastic at the market price.
Consider the U.S. market for Caribbean cruises. Suppose cruising in the Caribbean becomes less popular. Explain the effect of this event on the quantity of Caribbean cruises demanded and on the demand for Caribbean cruises.
The demand for Caribbean cruises decreases
Consider the market for coffee. Suppose a study is published that says drinking coffee causes stomach ulcers. Explain the effect of this event on the quantity of coffee demanded and on the demand for coffee.
The demand for coffee decreases
In the market for steel, the price of a ton of steel falls. Explain the effect of this event on the quantity of steel supplied and on the supply of steel
The quantity of steel supplied decreases and the supply of steel is unchanged
If the government sets a price on dog food that is below the equilibrium price, ______.
a shortage of dog food occurs
Real GDP
does not accurately measure household production, underground economic activity, or life expectancy
Payments for labor services flow from ______ to ______ through the ______ markets.
firms; households; factor
Suppose that a new technology enables anyone with a small workshop to produce outstanding kayaks. You would expect ______ in production differentiation and ______ competition on product quality, price, and marketing.
an increase; more
In the United States today, three wants that are especially pressing and are not satisfied are ___
better public schools, a cure for cancer, and better public transportation systems
The tendency for the values of two variables to move in a predictable and related way is called ___
correlation
An economy that uses new technology___
experiences an outward shift of its PPF
Suppose that the world price of bananas is 18 U.S. cents a pound and that when Australia does not trade bananas internationally, the market price of bananas in Australia is 12 U.S. cents a pound. If Australia opens up to trade, Australia ______ bananas. The price of bananas in Australia ______. The quantity of bananas consumed in Australia ______ and the quantity of bananas grown in Australia ______.
exports; rises decreases; increases
The functional distribution of income shows the distribution of income among ______ and the personal distribution of income shows the distribution of income among ______.
factors of production; households
A 8 percent increase in the price of a good increased the quantity supplied of the good by 4 percent after one month. Supply of this good is ___. This good is most likely produced using factors of production that are ___. The price elasticity of this good is ___.
inelastic; unique or rare; 0.5
Indonesians bemoan Hollywood blockbuster blackout: The Indonesian import tariff on Hollywood movies was meant "to protect local film makers," but major Hollywood studios withdrew their films. Indonesia is using the ______ argument against free trade with the United States. Indonesia's argument is misguided because protected industries ______.
infant-industry; generally perform poorly and the country does not develop comparative advantage
When the price of a good increased by 8 percent, the quantity demanded of it decreased 4 percent. Most likely, this good ______ and ______.
is a necessity; has poor substitutes
A firm is a natural monopoly if ______.
it can satisfy the market demand at a lower average total cost than other firms can
The price elasticity of demand for Fiona's popcorn is 1.5. Fiona wants to increase her total revenue. Fiona should ___ the price of her popcorn because the demand for popcorn is ___.
lower; elastic
A country that trades internationally imports a good at a price ______ than what domestic producers could produce the good for before the country began to trade internationally and exports a good at a price ______ than what domestic producers could sell the good for before the country began to trade internationally.
lower; higher
What you get from a one-unit increase in an activity that you enjoy is called ___.
marginal benefit
Your school has decide to increase the intake of new students next year. What economic concepts would your school consider in reaching its decision? Would the school use the "economic way of thinking" and make its decision at the margin?
marginal benefit and marginal cost Yes: it would consider the marginal benefit and marginal cost of a student
National comparative advantage arises from the differences in _______ across countries. If country A has a comparative advantage in the production of automobiles and country B has a comparative advantage in the production of boats, ______.
opportunity cost both countries will gain if country A exports automobiles to country B and country B exports boats to country A
When new and better ways of producing all goods and services are discovered or when the quantity of capital increases, ___
our economy grows, but we still face scarcity and opportunity cost
A demand schedule is a list of the ___ at each different price when all other influences on buying plans remain the same. A demand curve is a graph of ___
quantities demanded; a demand schedule
A supply schedule is a list of the ___ at each different price when all other influences on selling plans remain the same. A supply curve is a graph of ___
quantities supplied; a supply schedule
An increase in the demand for hot dogs brings a ___ of hot dogs at the original price, and the price of a hot dog will ___
shortage; rise
In Music Ville, the price elasticity of demand for CD players is 1.3, the income elasticity of demand for CD players is 0.4, and the cross elasticity of demand for CD players with respect to MP3s is 0.1. CD players and MP3s are ______. If the price of an MP 3 increases by 2020 percent with no change in the price of a CD player, the number of CD players____ by ___ percent.
substitutes; increases; 2
Many Americans are selling their used cars and buying new fuel-efficient hybrids. Other things remaining the same, in the market for used cars, ______ and in the market for hybrids ______
supply increases and the price falls; demand increases and the price rises
Economic growth is defined as ___
sustained expansion of production possibilities
A positive relationship or direct relationship is a relationship between two variables that move in ___, and a negative or inverse relationship is a relationship between two variables that move in ___
the same direction; opposite directions
Taxes lead to _______ , and subsidies lead to _______. A regulation that puts a price cap on apartment rents leads to _______. A monopoly leads to _______
underproduction; overproduction underproduction; underproduction
Baird and Paxton are the only major producers of a special pet vaccine. Each company has developed a vaccine and aggressively advertises it. The two firms are locked in a duopolists' dilemma. The duopolists' dilemma facing Baird and Paxton is ______.
whether they could trust each other to raise the price of a vaccine and decrease advertising to raise economic profit
______ are the ______ that we buy from people in other countries. ______ are the ______ that we sell to people in other countries.
Imports; goods and services Exports; goods and services