marco mid term review

Suppose you want to sell your car for $10,000. A buyer offers you $12,000. Your (producer) surplus = $__ . (= Price - willingness to sell.)

$2000

Susan quit her job, which paid an annual salary of $40,000 to get her bachelor's degree. Her annual college expenses are $8,000 for tuition; $900 for books; and $2,500 for food. What's her opportunity cost of attending college per year?

$40,000 (implicit cost) + $8,000 (explicit) + $900 (explicit) = $48,900.

Price Quantity demanded Quantity supplied $10 100 400 8 150 350 6 250 250 4 275 200 2 300 200 What is the most efficient price AND quantity (i.e. the market/equilibrium price and quantity)?

$6, 250 units , MOST EFFICIENT PRICE & QUANTITY IS THE MIDDLE NUMBERS OF YHE CHART

The field of economics that is concerned about the broader issues in the economy, such as inflation, unemployment, and national output of goods and services is called

Macroeconomics

In the market for grass-fed beef, what would cause a price increase?

The prices of grass and corn increase.

Because of scarcity

we face tradeoffs in nearly every choice we make.

An increase in the population will lead to an increase in demand. Give three other examples that lead to an increase in demand

1) demographics 2) Preferences 3) related goods - substitutes and complements 4) expectation 5) income increases

What are two characteristics of public goods?

1) non-exclusive : no one can be excluded from receiving the benefits of the good 2) non-rival : consumption by one person doesn't take away from another's

Calculate GDP for an economy that has: Consumer purchases of $6,000, investment purchases of $1,000, Government purchases of $2,500, total exports of $1,000, and Total imports of $500.

6,000 + 1,000 + 2,500 + 1,000 - 500 = 10,000

2012 2013 2014 2015 Pa $100 $110 $120 $120 Qa 20 30 30 35 Pb $40 $40 $45 $50 Qb 100 70 90 70 A) What is nominal GDP for the year 2015? B) Using 2012 as the base year, what is 2015's real GDP?

A) Pa(Qa) + Pb (Qb) = ($120 • 35 )+($50 • 70) = $7,700 B) prices of 2012 • quantity of 2015 ($100 • 35) + ($40 • 70) = $6,300

classical economists

Adam Smith, David Ricardo value : factory workers

marginalists

Alfred Marshall value : anyone who could produce something sellable

Suppose the market is initially in equilibrium. Then, demand decreases while supply decreases, the equilibrium price will _________ and the equilibrium quantity ______________ .

Ambiguous/indeterminate; will fall

Roger is a recent immigrant from Canada. He currently works as a software programmer in California's Silicon Valley. Are his earnings counted in Canada's GDP or America's GDP? What about GNP?

Americas GDP because it's within America Canada GNP

Physiocrats

Francois Quesnay value : farmers

Which factor would cause an increase in the supply of cruises?

Fuel costs drop.

Name at least one factor that has allowed South Korea to grow faster economically than North Korea.

Inclusive institutions, social capital

The person who is usually credited with developing national income accounts is

Simon Kuznets

mercantilists

Sir William Petty, Gregory King value : merchants

Which of the following would always lead to an increase in price?

Supply decreases while demand increases.

The live band plays nearby a restaurant and makes it difficult for restaurant patrons to hold a conversation. This is an example of:

a negative externality

The value of _____ is counted in GDP.

a new car sold by a dealer

If the government imposes a price floor of $1 per can of soda to discourage the consumption of sugary beverages there will be: price quantity demand quantity supplied 0.50 10 7 0.75 8 8 1.00 6 9 1.25 4 10 1.50 2 11

a surplus of three cans

Suppose the Ethiopian government sets coffee prices at $3 per pound. The market price, however, is $6 per pound. The government's actions will:

cause coffee shortages

Monetary policy attempts to affect the overall level of spending through:

changes in the quantity of money and the interest rate

If people demand more of product A when the price of B falls, then A and B are:

complements

The difference between how much a consumer would be willing to pay to consume a good and the amount actually paid to purchase the good is called:

consumer surplus

Real GDP tends to understate our economic well-being because it:

excludes the value of leisure

In the paradox of thrift:

increased saving by individuals increases their chances of becoming unemployed.

When the price of watermelons rises and people buy less, that represents a shift of the demand curve.

false

A pie-baking contest offers the winner a ribbon, a $1,000 check, and the opportunity to be featured in the local newspaper. The contest organizers are using (a) __________ incentive(s).

financial & social

Among the tools available to macroeconomic policy makers is:

fiscal policy, for use in manipulating government spending and taxation.

To be effective, a price floor must be set:

higher than the equilibrium price

The _____ the opportunity cost of an activity, the _____ a person will do that activity.

higher, less

Which factor would lead to a increase in the demand for artwork?

income rises

Suppose the United States removes the sugar quotas and the market price of sugar drops. Since sugar is an input in chocolate, we would expect consumer surplus in the chocolate market to:

increase

A laptop computer that is purchased by an accounting firm is considered to be:

investment spending

Construction of new houses is counted under

investment spending (GDPI)

Brazilian cotton farmers were losing a lot of revenue due to the subsidies the U.S. government paid (and continues to pay) to American cotton farmers. In 2004, through the WTO, Brazil sued the U.S. and won. The reason they sued was that subsidized cotton from the United States:

lead to cotton surpluses in the United States and lower prices for Brazilian farmers on world markets.

A price ceiling is a(n):

legally established maximum price that can be charged for a good

A common method that the government utilizes to limit the quantity of a good transacted is by:

licensing the suppliers.

example of quota

limits on the number of bushels of clams that can be caught in New Jersey

The market for Jersey corn is considered to be competitive. This means there are _____ buyers and _____ sellers.

many, many

If two of a producer's goods are substitutes in production, this usually means that the producer (with a fixed set of resources) will need to reduce production of one good when she produces:

more of the other good

George buys a used truck from a rental agency to make deliveries from his new furniture store. Would this purchase be included in GDP? If so, would it be consumption or investment spending?

no because it's used. had it been new , it would've been counted under investment spending

A delivery truck is an example of

physical capital

What can be used to encourage a positive externality?

pigouvian subsidy

A community college creates _____ for a community.

positive externalities

The _____ shoes will decrease when the price of shoes rises.

quantity demand of

The best available common measure of a nation's standard of living is:

real GDP per capita

An example of an intermediate good is:

steel purchased by the aircraft manufacturers

Draw a market demand curve and market supply curve for automobiles. -On the graph, show what would happen if the auto workers union required all manufacturers of automobiles to now provide health insurance for all workers and their dependents. (Assume that prior to this change, manufacturers of automobiles did not provide health insurance coverage to 100 percent of their employees and/or their dependents.) -Predict how the price of automobiles will change as a result of this change in union policy?

supply will decrease, prices will increase

The quota rent is:

the difference between the demand price and the supply price at the quota limit

When specialization is used:

there are greater gains in material goods

Opportunity costs exist because:

using resources for one activity means that their use elsewhere must be given up.

What are the four categories of resources? Give an example of a resource from each category

• Land (iron, water, oil, lumber) • Labor (time and effort spent on unloading a delivery vehicle) • Physical capital (computer, power tools, delivery truck) • Human capital (degree in project management, instructor/teacher workshop/training)

What are the five main causes of market inefficiencies?

1)Control over a key input of production 2) imperfect and asymmetric information, 3) externalities- positive & negative , 4) Price floors, ceilings, quotas , government control of prices 5) public goods

b) If the price was $4, then the quantity supplied would be ____ and quantity demanded would be ___, leading to a ( shortage ) of ____ units.

200, 275, 200

_________ was found to follow financialization of the real economy.

Greater income inequality , A fall in investment spending in the real economy , Social and political unrest

What other country (mentioned in the lecture) had internal differences in growth due to (one of) the factors mentioned in your answer above?

Italy

Identify each of the following statements as positive or normative, and explain your answer. a. The government should take measures to provide everyone with universal healthcare coverage.

Normative; value-based question

People who engage in dangerous personal behavior impose higher costs on society through higher medical costs.

Positive; medical costs can be calculated.

Give at least one example (each) of a price floor and a price ceiling.

Price floor: minimum wage, state minimums on cigarettes prices Price ceiling: rent control, essentials (such as water, paper towels, gas, lumber) during natural disasters

Change in Demand vs. Change in Quantity Demanded

Qd: happens when there's a change in the price of the good (movement along the curve). D: shift of entire curve to left ( decreases ) or right ( increases )

What is the difference between real GDP and nominal GDP?

Real GDP is adjusted for inflation, nominal GDP is using the given years prices

Fluctuations in graduate school enrollment correlate positively with fluctuations in unemployment.

The opportunity cost of going to graduate school is low when jobs are hard to find

What is the purpose of a Pigouvian subsidy

To fund/encourage a positive externality.

What is the purpose of a Pigouvian tax?

To tax/discourage a negative externality.

a) Tariffs on aluminum will cause the supply of new cars to ___. b) The price of cars rises and car manufacturers increase production. c) The supply of ethanol will ________ if the government provides subsidies for corn farmers. (Corn is used to produce ethanol.) d) As a result of lockdowns, short-term rentals (Airbnb; VRBO) reservations fell by 80%

a) left, decrease b) up c) right, increase d) left

An inferior good is one for which a(n) _____ in buyers' incomes causes a(n) _____.

increase; decrease in demand

In Europe the minimum wage has led to:

widespread evasion of the minimum wage law in the black market for labor.