micro test 1

Table 1 shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces. Refer to Table 1. Which of the following statements is true?

(C) Haley has an absolute advantage in making bracelets and Serena in making necklaces.

________ is concerned with what is, and ________ is concerned with what ought to be. Economics is about ________, which measures the costs and benefits of different courses of action.

(C) Positive, normative, positive

Which of the following is NOT correct?

(C) Trade is based on absolute advantage

What are the four categories of income?

(C) Wages, Interest, Rent, and Profit.

Which of the following would shift the supply curve for energy drinks to the left?

(C) a decrease in the number of firms that produce energy drinks

In 2004, hurricanes damaged a large portion of Florida's orange crop. As a result of this, many orange growers were not able to supply fruit to the market. If, following the hurricane, the price remained at its pre-hurricane level, we would expect to see

(C) a shortage of oranges.

Every society faces economic trade-offs. This means

(C) producing more of one good means less of another good can be produced.

By definition, economics is the study of

(C) the choices people make to attain their goals, given their scarce resources.

According to the law of supply,

(D) A and C only

Why is GDP an imperfect measurement of total production in the economy?

(D) GDP does not include household production or production from the underground economy.

Who is harmed when individual nations move from autarky to free trade?

(D) The owners of the firms that went out of business.

Refer to Figure 1. A movement from ________ is the result of negative technological change in plastic production.

(D) Z to Y

Economic efficiency is

(D) a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

The primary difference between absolute and comparative advantage is

(D) absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

(D) consumer surplus.

The production possibilities frontier model shows that

(D) if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

In a city with rent-controlled apartments, all of the following are true except

(D) landlords have an incentive to rent more apartments than they would without rent control.

The GDP deflator is the

(D) ratio of nominal GDP to real GDP multiplied by 100.

If a firm expects that the price of its product will be higher in the future than it is today, then

(D) the firm has an incentive to decrease supply now and increase supply in the future.

In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the BEA

(D) values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up.

Which of the following is an example of a worker experiencing frictional unemployment?

A) A worker quits his job at the Post Office to find more interesting work.

The substitution bias in the consumer price index refers to the idea that consumers ________ the quantity of products they buy in response to price, and the CPI does not reflect this and ________ the cost of the market basket.

A) change; overestimates

The Bureau of Labor Statistics would categorize a person as ________ if they were temporarily away from their job because they were ill.

A) employed

If your nominal wage rises more slowly than the price level, we can say your real wage has ________ and the purchasing power of a dollar has ________.

A) fallen; fallen

If we want to use a measure of inflation that foreshadows price changes before they affect prices at the retail level, we would base our measure of inflation on

A) the producer price index.

Refer to Table 9-6. Looking at the table above, real average hourly earnings were equal to ________ in 2015.

B) $9.52

Refer to Table 9-4. Assume the market basket for the consumer price index has two products — bread and milk — with the following values in 2011 and 2016 for price and quantity: The Consumer Price Index for 2016 equals

B) 116.

If you want to earn a real interest rate of 3% on money you lend, and you expect that inflation will be 2%, what nominal rate of interest will you charge?

B) 5%

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness?

B) discouraged workers

Suppose that homemakers are included as employed in the labor force statistics, rather than being counted as out of the labor force. This would

B) increase the measured labor force participation rate.

Discouraged workers are classified by the BLS as

B) out of the labor force.

Frictional unemployment is the result of

B) the search process of matching workers with jobs.

table 9-6 looking at the table above real average hourly earnings in 2014 were

C) $10.

If the price level rose in three consecutive years from 100 to 120 to 140, then the annual inflation rate over those years would

C) decrease

The labor force equals the number of people

C) employed plus unemployed.

A full-time student who is not working is categorized as

C) not in the labor force.

Deflation occurs when

C) there is a decline in the price level.

Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest. If the inflation rate was 7%, what was the real interest rate you paid?

D) 3 percent

Refer to Table 9-5. Consider the following values of the consumer price index for 2015 and 2016. The inflation rate for 2016 was equal to

D) 3.9 percent.

You earned $30,000 in 2007, and your salary rose to $80,000 in 2016. If the CPI rose from 82 to 202 between 2007 and 2016, which of the following is true?

D) The purchasing power of your salary increased between 2007 and 2016.

The "new product bias" in the consumer price index refers to the idea that

D) new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers.

The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure inflation, but ________ quality increases. This causes the CPI to ________ the cost of the market basket.

D) not; overstate

The Bureau of Labor Statistics would categorize a retiree who is not working as

D) out of the labor force.

The unemployment rate is

D) the percentage of the labor force that is unemployed.

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to overstate the true extent of joblessness?

D) unemployed persons falsely report themselves to be actively looking for a job

If the number of unemployed workers is 200 million, the number of employed workers is 300 million, and the working-age population is 800 million, what is the labor force participation rate?

D)62.5%

. Refer to Figure 4-5. What is the value of producer surplus after the imposition of the ceiling?

(A) $40,000

. Refer to Figure 4-5. What is the value of the deadweight loss after the imposition of the ceiling?

(A) $50,000

Refer to Table 1. What is Serena's opportunity cost of making a bracelet?

(A) 2 necklaces

Refer to Table 1. What is Haley's opportunity cost of making a necklace?

(A) 3/4 of a bracelet

Orange juice drinkers want to consume more orange juice at a lower price. Which of the following events would have this effect?

(A) a decrease in the price of orange juice processing

Refer to Figure 1. Consider the following events: a. a decrease in the unemployment rate b. general technological advancement c. an increase in consumer wealth Which of the events listed above could cause a movement from V to W?

(A) a only

In general, the term "ceteris paribus" means

(A) all else equal.

If a demand curve shifts to the right, then

(A) demand has increased.

Asymmetric information is a situation in which one party to an economic transaction has less information than the other party. Two types of problems associated with asymmetric information are adverse selection and moral hazard. Which of the following is an example of adverse selection? An example of adverse selection is

(A) sick people being more likely to purchase health insurance than healthy people.

Tax incidence is

(A) the actual division of the burden of a tax between buyers and sellers in a market.

If the price of automobiles was to increase, then

(A) the demand for gasoline would decrease.

The law of demand implies, holding everything else constant, that as the price of bagels increases,

(A) the quantity of bagels demanded will decrease.

Refer to Figure 4-5. Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments. What is the value of the portion of consumer surplus transferred to producers as a result of the price floor?

(B) $100,000

Refer to Figure 4-5. What is the value of the portion of producer surplus transferred to consumers as a result of the rent ceiling?

(B) $100,000

Refer to Figure 4-5. What is the value of consumer surplus after the imposition of the ceiling?

(B) $230,000

Refer to Figure 4-5. Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments. What is the value of producer surplus after the imposition of the price floor?

(B) $240,000

Refer to Figure 4-5. Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments. What is the value of consumer surplus after the imposition of the price floor?

(B) $30,000

. Refer to Table 1. What is Serena's opportunity cost of making a necklace?

(B) 1/2 of a bracelet

Refer to Figure 4-5. Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments. What is the quantity of apartments demanded at the new price?

(B) 200

Which of the following is the correct way to describe equilibrium in a market?

(B) At equilibrium, quantity demanded equals quantity supplied.

Which of the following covers the study of topics such as inflation or unemployment?

(B) Macroeconomics

Which of the following is evidence of a surplus of bananas?

(B) The price of bananas is lowered in order to increase sales

If, in response to an increase in the price of chocolate the quantity of chocolate demanded decreases, economists would describe this as

(B) a decrease in quantity demanded

The area ________ the market supply curve and ________ the market price is equal to the total amount of producer surplus in a market.

(B) above; below

Refer to Figure 1. A movement from X to Y

(B) could occur because of an influx of immigrant labor.

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls

(B) scarcity

Opportunity cost is

(B) the highest valued alternative that must be give up to engage in an activity.

In 2004, hurricanes destroyed a large portion of Florida's orange and grapefruit crops. In the market for citrus fruit in 2004

(B) the supply curve shifted to the left resulting in an increase in the equilibrium price.

Refer to Figure 4-5. With rent control, the quantity supplied is 200 apartments. Suppose apartment owners ignore the law and rent this quantity for the highest rent they can get. What is the highest rent they can get per month?

(C) $2,000

Refer to Table 1. What is Haley's opportunity cost of making a bracelet?

(C) 1 1/3 necklaces

What are the four major categories of expenditure?

(C) Consumption, investment, government purchases, and net exports.

Refer to Table 1. Which of the following statements is true?

(C) Haley has a comparative advantage in making bracelets and Serena in making necklaces.

If the nominal interest rate is 6% and the inflation rate is 9%, then the real interest rate is

A) -3%.

Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2016, then the value of your grandfather's salary in 2016 dollars is approximately

A) $84,775.

The labor force participation rate is defined as

E) the percentage of the working-age population in the labor force