Exam 1-3

Using the Marginal Approach, the firm should produce __ units of output (Q) in order to maximize profit.

**will be the same as TOTAL approach ...where MR=MC are as CLOSE TO

if UE rate is 8% this means

8% of the LF is UE

The unemployment rate in a town in which 54,200 persons are employed and 4,900 are unemployed equals:

8.3% 54,200+4,900=59,100 4,900/59,100 x 100= 8.3%

The basket of goods in the Consumer Price Index (CPI) consists of about _________ products; that is, several hundred specific products in over __________ broad-item categories.

80,000;200--from the book

aka negative inflation

DEFlation

the DEMAND curve for a monopoly firm si

DOWN slope

Gross Domestic Product equals $1.2 trillion. If consumption equals $660 billion, investment equals $220 billion, and government spending equals $250 billion, then:

EXP. exceed imports. by 70 million 1.2= (660+220+250+?) ?=70...so X-M must be 70+

____ is a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines

Economies of scale

Uganda has a GDP of $35 billion (measured in U.S. dollars) and a population of 47 million. Costa Rica has a GDP of $62 billion (measured in U.S. dollars) and a population of 5 million. Calculate per capita GDP for each country.

U= 744.68 and CR: 12,400 divide 35/47 and 62/5 ...all x 1,000 to convert millions and billions together

Efficiency wage theory

_______ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate.

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the ____, a diagram which shows all possible consumption combinations of goods that someone can afford to buy.

a budget constraint

A decrease in quantity SUPPLIED is demonstrated by

a movement from point B to point A --upward on S line

A firm that holds a monopoly position in the market place is

a price maker

A market is defined as

an interaction b/ buyers and sellers

________ occurs when a few large firms have all/most of the sales in an industry.

an oligopoly

when the RR is lowered, what happens

banks have more money to lend out ad the money supply increases

The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the _____.

business cycle

A positive statement

can be tested against the facts

What role can advertising play with respect to differentiated products?

can influence customers by pointing out a product's physical aspects

A ______________ refers to a group of firms colluding with one another to produce at the monopoly output and sell at the monopoly price.

cartel? test said prisoner's dilemma?

CONSUMPTION

is the largest component of GDP

a lender of last resort is an institution that

provides short-term emergency loans in conditions of financial cris

market equilibrium occurs when

quantity demanded equals quantity supplied

the difference b/ nomainl and real is that

real has been adjusted for inflation

Kitchen Maid produces and sells kitchen wares. Last year, it produced 7,000 can openers and sold each one for $6. To produce the 7,000 can openers, the company incurred variable costs of $28,000 and a total cost of $45,000. Kitchen Maid's average fixed cost to produce the 7,000 can openers was:

$2.43 --45-28=17 / 7,000= 2.43

The table gives data on the production and prices in a very small local economy. Use 2018 as the base period. What does real GDP equal in 2019?

14.25. --look at notes for math

Suppose you are stuck on an island and you divide your time between catching fish and gathering fruit. Part of your production possibilities frontier is given in the above table. Suppose you are on your PPF and you increase the amount of fish you gather from 11 to 24 pounds. The opportunity cost is:

9 pounds of fruit subtract 98-89= 11. becuase moving from 11 to 24 pounds of fish

which does bank regulation help prevent or resolve

ALL bak runs loss of depositors money risky behavior by banks

Production efficiency is represented by ________ a production possibilities frontier.

all points ON

which example best describes division of labor

dividing the work based on each worker's skills

the discount rate is an IR

charged by the central bank on the loans that it gives to other commercial banks

the demand measure of GDP accoutning adds

consumption, investment gvt. spend trade balance

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:

goods X and Y are complement goods

the demand curve for a a PERFECTLY COMP. firm is

horizontal

According to the textbook, when constructing the circular flow diagram, there are 2 types of markets to know:

households and firms

the largest category, by perctage that makes up the CPI is

housing

Once the government passes a bill to respond to a recession, it takes some time to disperse the funds to the appropriate agencies to start the programs. Economists call this time to start the projects the _________________.

implementation lag

In order to avoid double counting, statisticians just count the __________________.

final goods and services

when calculating the core inflation index, which economics variables are excluded

food and energy

In the __________, the perfectly competitive firm will react to losses by _______________.

log run; reducing production or shutting down

Refer to the table. If the firm produces 5 units that it sells at a price of $30.00 each, what will its profits or losses equal?

losses equal $5

GDP does NOT directly incldue the value of

intermediate goods sold during a period

Economists refer to this pattern, the _______, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines.

law of diminishing marginal utility

the most common form of market structure in the US is/are

monopolistic competition among firms with differentiated products

Marcella operates a small, but very successful art gallery. All of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business, EXCEPT:

monthly rent for the gallery

the PPF is a graph showing

productively effficient combos of g/s that can be produced

In a(n) ______________ market structure, firms sell their product in a market with other firms who produce identical products.

perfect competition

The term _______________ refers to a firm operating in a perfectly competitive market that must accept the prevailing market price for its product.

price taker

Which of the following is the name used to describe the price index that consists of intermediate goods and finished goods?

producer price index

Human wants for goods, services, and resources exceeeding what is available refers to the topic of

scarcity

according to the "invisible hand" idea

self-interested behavior by individuals can lead to positive social outcomes

If one company could gain ownership control all of the aluminum production plants in the US, then:

that firm could set up barriers to entry to discourage competition

which of the following regarding the circular flow diagram model is TRUE

the counter-clockwise flow is called the resource flow

A decrease in SUPPLY is shown by

shift from S to S1 leftward shift

On a production possibilities frontier (PPF) curve, economic growth is shown as a: Hint: This is covered in the module's video & resources.

shift outward of the PPF curve

fixed costs are important bc, at least in the ____, the firm

short run; cannot alter them

In the _______________, the perfectly competitive firm will seek out _______________.

short run; the quant. of output where profits are highest

If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________ .

shutdown point

Using the data in the table above, if the price of a stapler is $8, then there is a ________ of staplers, and the quantity of staplers demanded is ________ the quantity of staplers supplied.

suprlus; is less than

th outward-bending shape of the PPF can be explained by

the law of diminishing returns

Which determinant causes a MOVEMENT along the demand curve w/o shifting the demand curve

the price of the good itself

which of the follwoin gis NOT included in the year's GDP

the sale of your 5yo BM to your neighbor

opportunity cost is best defined as

the value of the next best alternative that is forgone in making a choice

according to the law of supply

there is a direct relationship between price and quantity supplied

The above figure shows the market for game day t-shirts. If the price of them is $8, then

there is a shortage and the price of t-shirts will RISE _because the $8 t-shirt is to the left of the Demand curve

Suppose the market price of a pound of steak is $8/ pound and the equilibrium price is $6/pound. what takes place?

there is a surplus, so the price falls

if IMP. are more than EXP. this is

trade DEF.

the books says the typical ag economy is best shown by

traditional economy

example of crowding out?

when an increase in GVT. borrowing causes the interest rate to increase which reduces business and consumer spending

At what level output (Q) does the firm begin earning a profit? When Q = ____.

when does total profit (TR-TC) begin to be a positive number? Q=3

crowding out used to explain which?

when gvt. borrowing and spending results in higher interest rates

Using the data in the table above, if the price of a stapler is $5, then there is:

a shortage of 40 staplers price is $5. Qd=100. Qs=60

labor force is

all adults who are working or actively seeking work

OPEN MARKET ops target which of the following interest rates

federal funds rate

What are the Total Fixed Costs (TFC) for this firm?

$10---what are its TC when Q=0

What are the Total Variable Costs (TVC) for this firm when Q = 3 units per day?

$10.75 TC=20.75- $10. (what does Q= at 0?)

Milano's produces and sells pizzas. Last year, it produced 8,000 mushroom, sausage and spinach pizzas and sold each one for $8. To produce these 8,000 pizzas, the company incurred variable costs of $24,000 and a total cost of $40,000. Milano's average fixed cost to produce 8,000 pizzas totaled:

$2 40-24= 16 /8 = 2

Given the data provided in the table, what will the marginal cost equal for production at quantity (Q) level 4?

$4. look at Q 4 and Q 3 math is : $19-$15= $4

Given the data provided in the table, what will the marginal revenue equal for production at quantity (Q) level 4?

$5

Using the Total Approach, the firm should produce __ units of output (Q) in order to maximize profit

**find the highest value in total profit (TR-TC)

The graph below shows an economy in macroeconomic equilibrium. Suppose the government decreases spending in an attempt to reduce inflationary pressures. All else equal, illustrate the effect of this contractionary fiscal policy on macroeconomic equilibrium.

**says CONT= shift AD to the left

The graph below shows an economy in macroeconomic equilibrium. Suppose the government doubles the tax rebates tax filers receive in order to encourage consumption expenditures. All else equal, illustrate the effect of this expansionary fiscal policy on macroeconomic equilibrium.

**says expansionary= shift AD to the right

Based on the table, the unemployment rate is _____ percent.

10% UE= unemployeed/LF 15/150= 10

based on table, waht does GDP equal?

11,023 billion 8180+1520+1403+ (1290-1370) = 11,023

ACME produces and sells widgets. Last year, it produced 9,000 widgets and sold each one for $8. To produce the 9,000 widgets, the company incurred variable costs of $27,000 and a total cost of $36,000. ACME's average fixed cost to produce 9,000 widgets equaled:

36-27=9/9=1

Diminishing marginal returns sets in with the

3rd worker --this is where the avg. product starts to decrease

if CPI is 231.4 in one year and 241.2 the next. inflation rate id

4.24 241.2-231.4..all divided by 231.4

Based on the table, the labor force participation rate is _____ percent

71.4....LFPR: LF/WAP LFPR= 150/ 210

The table provides cost information for the production of golf balls. Some values are missing. Which of the following statements is correct?

A= 42, E=12

federal funds rate is a long term IR, that refelcts credit conditions in finanical markets

FALSE

retired person included in labor foce?

FALSE

The supply curve is a DOWN-sloping curve

FALSE.. supply= UP demand=DOWN

teacher quits job and moves from city to new city for a better job:

FRICTIONally emp.

Scooters and bikes are substitutes. suppose that the price of a bike falls. which figure best shows how this fall in price affects the DEMAND curve for scooters

Figure B...supply arrow pushing to the left

An economics professor is discussing a measure of inflation over time based on a basket of goods comprised of all the components of GDP. Which measure is it?

GDP deflator

what is true?

GDP inclues spending on recreation and travel, but doesnt cover leisure time

a basic difference b/ macro and micro is

MACRO= causes of inflation and unemployment

Eric goes to uni rather than fulltime work so he is

NOT part of the labor force

Assume the market is initially in equilibrium. Due to a technological advancement, there is an increase in the supply of bottled water. There is no change in demand. What will be the result? Hint: This is covered in the module's video & resourc

Qant. INCREASES and price DECREASES

the ___is the nominal interst rate minus the rate of inflation

REAL interest rate

The purpose of bank regulation is to prevent bank runs, financial crisis, and the loss of depositors' money, among other goals.

TRUE

Hot dogs and hot dog buns are complements. If the price of a hot dog falls, then

a demand for hotdog buns will INCREASE

Monica has stopped looking for work bc hasnt had any success. she is

a discourage worker and EXCLUDED from the LF

which of the following is most likely to be a monopoly

a local electricity distributor

best describes contractionary FP

action that decreases the level of AD, either t/ cuts in gvt. spending or increases in taxes

The form of legal protection intended to prevent reproduction of original works is referred to as _________ law.

copyright

how is the national debt different from budget deficit

debt= borrowed over time budge def= borrowed in ONE year

If a firm is experiencing _______________, then as the quantity of output rises, the average cost of production rises.

decreasing returns to scale

which expenditure is NOT one of the 4 main compoenents of US fed. gvt. spending

education the 4 are: interest payments, national defense , health programs, and social security

when we want to measrue wage inflation in the labo market, we use the

employment cost index

a BC reflections changes in economic activity, partic. real GDP. stages are

expansion peak recession trough

effects of inflation are seen in

g/s/ wages and income levels

The branch of mathematics that analyzes situations in which players must make decisions and then receive payoffs most often used by economists is called:

game theory

Inflation erodes the purchasing power of money for all of these groups EXCEPT:

ind. who borrow from banks at a FIXED rate and then inflation increases during the loan repayment period

A payment is said to be ________________ if it is automatically adjusted for inflation.

indexed

For a pure monopoly to exist,

is a single sller, so it is the industry

when the fed sells bonds on the open market

it decreases the money supply and increases the federal funds rate

when the fed buys securities on the open market

it increases the money supply and lowers the federal funds rate

The latin term "ceteris paribus" means

keeping other things the same

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

marginal alaysis

Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _____, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

marginal alaysis

for a PC firm, its price is equal to its

marginal revenue

Refer to the table. In this instance, confirmation that this firm is operating in a perfectly competitive market can readily be ascertained by the fact that its

marginal revenue is constant

Investment inclues the amount spent on

new factories and machinery

The above figure shows the production possibility frontier for an economy. Which point (or points) is/are productively inefficient (resulting in underproduction of both goods)?

point D because it is UNDER the curve

A country has a comparative advantage in a production of a good if it can

produce the good at a LOWER opp. cost

A monopolist is able to maximize its profits by

producing output where MR = MC and charging a price along the demand curve.

A budget surplus is a financial situation in which the government ___________ more money in taxes than it ______________ in a year.

receives; spends

utomatic stabilizer are programs that automatically____________ aggregate demand in a recession and ___________ aggregate demand in a potentially inflationary boom.

stimulate; hold down

UE bc of "skills gap"...lacks skills valued by job market

structurally unemployed

one of the reasons tha t a rise in the price of a fixed basekt of goods over time tends to overstate the rise in consumer's true cost of living is

substitution bias

in the US we call the central bank___, aka

the Federal Reserve; the Fed

Consumers expect the price of bottled water will rise by 50% next week. which of the following likely happens

the demand for bottled water decreases next week

In order to determine the average variable cost, the firm's variable costs are divided by ___________.

the quantity of output

According to the textbook, Division of Labor INCREASES production

true

If a monopolistic competitor raises its price, it will lose fewer customers than a perfectly competitive firm would, but it will lose more customers than a monopoly would.

true

a cartel arises when firms act together to reduce output to keep prices high

true

according to the book, there are substantial black markets in a command economy

true

UE rate measures

unemployeed workers as a percentage of the LF

if a monopolistic competitor raises their prices, the quantity demanded

will decrease