EC 202 Final
Suppose you buy a house in 2016 and finance it with a 30-year mortgage that has a 6% annual rate of interest. Inflation during 2017 is 4%. What is the real rate of interest you pay your mortgage in 2017?
6%-4%
In July 1988 the price of postage stamps was 32 cents and the CPI was 118.5. In July 2015 the price of postage stamps was 44 cents and the CPI was 237.7. What was the real value in 2015 prices of postage stamps in 1988?
64.2 cents
In July 1988 the price of postage stamps was 32 cents and the CPI was 118.5. In July 2015 the price of postage was 44 cents and the CPI was 237.7. What was the real value in 2015 prices of postage stamps in 1988?
64.2 cents
The consumer price index was 200 in 2008 and 190 in 2009. The nominal interest rate during this period was 4.5%. What was the real interest rate during this period
9.5%
Refer to table 7-6. If the market price of an apple is %1.40, then consumer surplus amounts to
$0.60
Which of the following is not an example of the free rider problem?
A park ranger takes a nap in his car because his boss is working hundreds of miles away and will never know about the nap
Refer to Figure 10-19. The social optimum can be reached if
A subsidy of $36 is applied to each unit of the good
Refer to Figure. The social optimum can be reached if
A subsidy of $36 is applied to each unit of the good
Refer to the figure. Which of the following would improve economic efficiency in the market?
A tax equal to P1-P3, the sixe of the marginal external cost
Refer to the figure. Which of the following would improve economic efficiency in the market?
A tax equal to P1-P3, the size of the marginal external cost
Refer to the figure. If there is no tax placed on the good in the market, total surplus is the area
A+B+C+D+E+F
Refer to figure 23-1. Which of the following correctly identifies the flow of dollars?
A, L, N, B
Refer to the figure. If the per-unit tax is placed on the good in the market, the consumer surplus is the area ____ and the producer surplus is the area ____
A;D
Refer to the same figure. If the per-unit tax is placed on the good in the market, the consumer surplus is the area _____ and the producer surplus is the area ____
A;D
Refer to the graph. If the price falls from P2 to P1 area B represents the
Additional consumer surplus to initial consumers
Refer to the graph. If the price falls from P2 to P1, area B represents the
Additional consumer surplus to initial consumers
Suppose buyers of vodka are required to spend $5.00 to the government for every bottle of vodka they buy. Further, suppose this tax causes the effective price received by sellers of vodka to fall by $3.00 per bottle. Which of the following statements is correct?
All of the above are correct
The CPI overstates the increase in the cost of living because:
All of the above are correct
The CPI overstates the increase in the costs of living because
All of the above are correct
The equilibrium price in the market for gluten-free muffins is $5, and at this price, 300 gluten-free muffins are bought and sold. At a quantity of 200 gluten-free muffins, the market is not efficient because:
All of the above are correct
What can government policy do to raise productivity and living standards?
All of the above are policies that increase productivity and increase living standards
Which of the following is not a characteristic of pollution permits?
Allowing firms to trade their permits reduces the total quantity of pollution beyond the initial allocation
Refer to table 7-11. If the sellers bid against each other for the right to sell; the good to a consumer, then the good will sell for
$100 or slightly less
Which of the following would not be a result of a binding price ceiling on child care?
An increase in the quantity of child care supplied
For an economy with $3 billion government purchases $1 billion exports, $11 billion consumption spending $1 billion imports, and $2 billion investment, the GDP is:
$16 billion
If real GDP is $2200 billion, the GDP deflator is 110, nominal net exports are $100 billion, nominal investment is $200 billion, and nominal government expenditures are $400 billion, what is nominal consumption
$1720
Your grandmother tells you that she earned $3.15 an hour at her summer job as a freight handler in 1964. Since then prices have risen 490%. In order to keep her purchasing power constant, what would her wage rate be today?
$18.59
For a closed economy, GDP is $12 trillion, consumption is $7 trillion, taxes net of transfers is $3 trillion and the government runs a deficit of $1 trillion. What are private saving and national saving?
$2 trillion and $1 trillion
Refer to table 7-11. If Evan, Selena, and Angie sell the good, and the resulting producer surplus is $300, then the price must have been
$200
A farmer sells five pounds of pecans to a Smith's fresh pecans for $10. Smith's Fresh Pecans resells three pounds $4.50 per pound. The remaining pecans are shelled and canned and sold for a total of $8.00 Taking these transactions into account, how much is added to GDP
$21.50
Tyler and Camille both live in Oklahoma. A new-car dealer in Oklahoma bought a new car from the manufacturer for $18,000 and sold it to Tyler for $22,000. Later that year, Tyler sold the car to Camille for $17,000. By how much did these transactions contribute to US GDP for the year
$22,000
Refer to the graph. If the government imposes a price ceiling of $55 in this market, then total surplus will be
$250.00
At Nick's Bakery, the cost to make a cheese Danish is $1.50 per Danish. As a result of selling ten Danishes, Nick expeexperiences a producer surplus in the amount of $20. Nick must be selling his Danishes for
$3.50
Quality Motors is a Japanese-owned company that produces automobiles; all of its automobiles are produced in American plants. In 2010 Quality Motors produced $30 million worth of automobiles, with $17 million in sales to Americans, $9 million in sales to Canadians, and $4 million worth of automobiles added to Quality Motors' inventory. The transactions just described contribute how much to US GDP for 2010?
$30 million
Refer to Figure 10-19. Note that the lines labeled "Demand" and "Social Value" are parallel. Also, the slopes of the lines on the graph reflect the following facts 1) Private value and social value decreases by $1.00 with each additional unit of the good that is consumer and 2) private cost increases by $1.40 with each additional unit of the good that is produced. Thus, when the 59th unit of the good is produced and consumed, social well-being increases by
$33.60
Refer to figure. Note that the lines labeled "Demand" and "Social Value" are parallel. Also, the slopes of the lines on the graph reflect the following facts: 1) private value and social value decrease by $1.00 with each additional unit of the good that is consumed 2) private cost increases by $1.40 with each additional unit of the good that is produced. Thus, when the 59th unit of the good is produced and consumed, social well-being increases by
$33.60
Ethel purchased a bag of groceries in 1970 for $8. She purchased the same bag of groceries in 2006 for $25. If the price index was 38.8 in 1970 and the price index was 180 in 2006, then what is the price of the 1970 bag of groceries in 2006 dollars?
$37.11
Consider tow cars manufactured by Chevrolet in 2014. During 2014, Chevrolet sells one of the two cars to Emily for $20,000. Later in the same year, Emily sells the car to Jim for $18,000. The second automobile, with a market value of $19,000, is unsold at the end of 2014 and it remains in Chevrolet's inventory. The transactions just described contribute how much to GDP for 2104?
$39,000
Refer to table 7-11. If the sellers bid against each other for the right to sell the good to a consumer, then the producer surplus will be
$50 or slightly less
Suppose you inherit an antique doll from your Great Aunt Sadie. The doll has a sentimental value of $100 to you. Jane is a collector who is willing to pay $800 for your doll. If you sell the doll to Jane for $600, your producer surplus is ___ and Jane's consumer surplus is _____, respectively:
$500, $200
Suppose you inherit an antique doll from your great Aunt Sadie. The doll has a sentimental value of $100 to you. Jane is a collector who is willing to pay $800 for your doll. If you sell the doll to Jane for $600, your producer surplus is ____ and Jane's consumer surplus is ____
$500, $200
Suppose there are only two firms in an economy: Cowhide, Inc. produces leather and sells it to couches Inc. which produces and sells leather furniture. With each $1,000 worth of leather that it buys from Cowhide Inc. Couches Inc, produces a couch and sells it for $2,600. Neither firm had any inventory at the beginning of 2015. During that year, Cowhide produced enough leather for 25 couches. Couches In bought 80% of that leather for $20,000 and promised to buy the remaining 20% for $5,00 in 2016. Couches INC produced 20 couches during 2015 and sold each one during that year for $2,600. What was the economy's GDP for 2015?
$57,000
1. The market for gluten-free breakfast cereal is shown in the graph. The after-tax price paid by buyers and price received by sellers are, respectively
$6.00, $4.00
The market for gluten-free breakfast cereal is shown in the graph. The after-tax price paid by buyers and price received by sellers are, respectively
$6.00, $4.00
Ronnie operates a lawn-care service. On each day, the cost of mowing the first lawn is $15, the cost of mowing the second lawn is $25, and the cost of mowing the third lawn is $40. His producer surplus on the first three lawns of the day is $100. If Ronnie charges all customers the same price for lawn mowing, that price is
$60
Refer to the same graph. If the government imposes a price floor of $55 in this market, then total surplus will be
$62.50 lower than It would be without the price floor
The table contains information about an economy that produces only rice and beans. The base year is 2014. Using the table, what is the value of nominal GDP for 2015?
$660
In 2014, a farmer grows and sells $3 million worth of corn to Big Flakes Cereal Company. Big Flakes Cereal Company produces $8 million worth of cereal in 2014, with sales to households during he year of $7 million. The unsold $1 million worth of cereal remains in Big Flake Cereal Company's inventory at the end of 2014. The transactions just described contribute how much to GDP for 2014?
$8 Million
In 2014, a farmer grows and sells $3 million worth of corn to Big Flakes Cereal Company. Big Flakes Cereal Company produces $8 million worth of cereal in 2014, with sales to households during the year of $7 million. The unsold $1 million worth of cereal remains in Big Flake Cereal Company's inventory at the end of the 2014. The transactions just described contribute how much to GDP for 2014?
$8 million
The market for gluten-free bread is represented in the graph. When the market is in equilibrium, consumer surplus is
$80
Michigan Cranberry Company sold $10 million worth of cranberries it produced. In producing cranberries, it purchased $1 million dollars' worth of supplies from foreign countries and paid workers who reside in Canada but commute to the US $1 million. How much did these transactions add to US GDP?
$9 million
AA Appliances sells refrigerators. In 2015 it added $100,000 to its inventory. $10,000 of this addition was from used refrigerators, and the remaining $90,000 was from their purchases of newly manufactured refrigerators. How much of AA's inventory is include in 2015 GDP?
$90,000
AA Appliances sells refrigerators. In 2015 it added to $100,00 to its inventory. $10,00 of this addition was fro used refrigerators, and the remaining $90,000 was from their purchases of newly manufactured refrigerators. How much of AA's inventory is included in 2015 GDP?
$90,000
What causes the tragedy of the commons? 1) social and private incentive differ 2) common resources are not rival in consumption and are not excludable 3) common recourses are not excludable but are rival in consumption
1 and 3 only
Which of the following is a disadvantage of government provision of a public goos such as national defense? 1) The government does not know the exact willingness of consumers to pay for the public good 2) the free-rider problem is more likely to occur when the government provides a public good than when the private sector provides a public good 3) Taxpayers do not agree on the optimal quantity of the public good that the government should provide
1, and 3 only
Suppose that in a closed economy GDP is equal to 15,000, taxes equal to 4,000 consumption equals 10,000 and government expenditures equal 3,000. What are private saving and public saving?
1,000 and 1,000
Suppose a local city council hires a team of economists from a nearby university to conduct a cost-benefit analysis of building a new public school. The economists should consider which of the following 1) the benefits to the children who will use the school 2) the costs to the tax payers who will pay for the school 3) the increased productivities of the teachers 4) the benefits to the community of having better-educated children
1,3,and 4
In the class, we talked about continuous compounding that is suppose the nominal interest rate is I, if you deposit $100 into a bank account, you will receive $100(e) after one year $100(e^21) after two years. And this is the reason that fisher equation is an exact equality. Inflation rate is (pie), after two years, suppose inflation rate is also continuous. What is the real balance on your account?
100xe^(2i-2pie)
In 2013, XYZ Corporation had total earnings of $500 million and XYZ retained 20% of its earnings for future investments. If the price of a share of XYZ stock is $70 and if 100 million shares of its stock is outstanding, then what is the price-earnings ratio?
14.0
Use the information in the table above to calculate the consumer price index for 2016 using 2015 as the base year
162.5
The fixed basket of good contains 200 cans of soda and 100 pizzas. The base year is 2014, and the prices for soda and pizza are given below. Refer to the table above. What is the inflation rate for 2016?
17.6%
In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000 and in 1990, he earned $36,000. If the CPI was 40 in 1970, 70 in 1980, and 130 in 1990, then in real terms, Professor Plum's salary was highest in
1980 and lowest in 1990
Refer to table 1. If the market price of an apple is $1.40, then the market quantity of apples demanded per day is
3
Refer to table 7-6. If the market price of an apple is $1.40, the the market quantity of apples demanded per day is
3
In the case of public goods, free markets
Fail to allocate resources efficiently because property rights are not well established
As the sixe of a tax increases, the sixe of the deadweight loss first increases, then decreases
False
$500 ten years from now, discounted at 4% would be worth ___ today
$338
The following table contains information about an economy that produces only rice and beans. The base year is 2014. Using the table above, what is the value of real GDP for 2016?
$590
Abe owns a dog; the dog's barking annoys Abe's neighbors, Jenny. Suppose that the benefit of owning the dog is worth $200 to Abe and that Jenny bears a cost of $400 from the barking. Assuming Abe has the legal right to keep the dos, a possible private solution to this problem is that
Jenny pays Abe $300 to give the dog to his parents who live on an isolate farm
If real GDP is $14 trillion and nominal GDP is $16 trillion what is the GDP deflator?
100x(16 trillion/$14 trillion)
The fixed basket of good contains 200 cans of soda and 100 pizzas. The base year is 2014, and the prices for soda and pizza are given below. Refer to the able above. What is the inflation rate for 2016?
17.6%
Rhinoceroses are among the most endangered species. Which of the following policies would result in an efficient quantity of rhinoceroses? The governments of countries
Assign property rights to individuals with rhinos on their land, allowing them to use rhinos for whatever purposes they choose
The purchase of rice produced this period is included in GDP if the rice is
B and C are correct
Country A had a population of 1,000 of whom 600 worked an average of 8 hours a day and had a productivity of 2.5. Country B had a population of 800, of whom 650 worked 8 hours a day and had productivity of 3.0 Country
B had the higher level of real GDP and real GDP per person
Refer to the figure. If the per-unit tax is placed on the good in the market, the tax revenue is the area
B+C
Two bonds have the same term to maturity. The first issued a state government and the probability of default is believed to be low. The other was issued by a corporation and the probability of default is believed to be high. Which of the following is correct?
Because of the differences in tax treatment and credit risk, the corporate bond should have the higher interest rate
Refer to figure 10-19. Each additional unit of the good that is produced yields an external
Benefit of $36
Other things the same, if the capital stock increases faster than employment, then we would expect
Both output and labor productivity to rise
Suppose that cold temperatures cause a decrease in the supply of tea. What should happen in the market for coffee, assuming tea and coffee are substitutes?
Both the equilibrium price and quantity will increase
Rocket Energy Drink Company buys sugar to produce energy drinks. At the end of a quarter both its inventory of sugar and its inventory of energy drinks has increased investment for the quarter will include
Both the increased inventory of sugar and the increased inventory of energy drinks
Braden says that $400 saved for one year at 4% interest has a smaller future value than $400 saved for two years at 2% interest. Lefty says that the present value of $400 to be received one year from today if the interest rate is 4% exceeds the present value of $400 to be received two years from today if the interest rate is 2%
Braden and Lefty are both correct
Which of the following is an example of the dree-rider problem?
Bruce owns Buster, a large dog who barks whenever anyone walks near his house. Betty lives next to Bruce, and Buster's barking can be heard whenever anyone walk near her house, too. Thus, Betty receives free protection from burglars because of Buster's barking
Which of the following phrases is sound advice based on the efficient markets hypothesis?
Buy broadly and hold
The market for gluten-free breakfast cereal is shown in the graph above. Suppose the government enacts a $2 tax per unit, imposed on the sellers. The policy will cause:
Buyers and sellers to each bear $1 burden of the tax
The market for gluten-free breakfast cereal is shown in the graph above. Suppose the government enacts a $2 tax per unit, imposed on the sellers. The policy will cause:
Byers and sellers to each bear a 41 burden of the tax
Suppose you know the value of the consumer price index (CPI) in year 1 as well as the inflation rate in year 2. Which of the following equations is valid for the CPI in year 2?
CPI in year2= (CPI in year 1 x Inflation rate in year 2)+ (100 x CPI in year 1)/ 100
A stairwell in a certain office building is always congested at 12:00 and 1:00. The congestion is so bad that people have been complaining to the buildings owner. Which of the following methods would be the most efficient way of reducing congestion?
Charge everyone who uses the stairwell when it is congested the same fee. People who value the use of the stairs the most will be the ones who use the stairwell at peak times
A stairwell in a certain office building is always congested at 12:00 pm and 1:00 pm The congestion is so bad that people have been complaining to the buildings owner. Which of the following methods would be the most efficient way of reducing congestion?
Charge everyone who uses the stairwell when it is congested the same fee. People who value the use of the stairs the most will be the ones who use the stairwell at peak times
Which of the following illustrates the Tragedy of the Commons problem?
Commercial fishing companies over-fish Chilean sea bass
Which of the following statements is not correct?
Corrective taxes set the maximum quantity of pollution, whereas tradable pollution permits fix the price of pollution
During the last 12 months' country A had a population of 20,000, 15,000 workers who each worker 8 hours, and production of 2,400,000 goods. Country B had a population of 16,000, 12,000 workers who each worked 8 hours a day produced 2,112,000 goods. Which of the following is correct?
Country B had the highest productivity and the highest GDP per person
Consider three different closed economies with the following national income statistics. Country A has taxes of $40 billion, transfers of $20 billion, and government expenditures on goods and services of $30 billion. Country B has private savings of $60 billion, and investment expenditures of $40 billion. Country C has GDP of $300 billion, investment of $90, consumption of $180 billion, taxes of $60 billion and transfers of $20 billion. From this information, we know that
Country B has the largest government budget deficit
The diagram below pertains to the demand for turkey in the United States. All else equal, buyers expecting turkey to be more expensive in the future would cause a current more from
DB to DA
Karen's cat causes Danny to sneeze. Karen values her cat's companionship at $300 per year. The cost to Danny of tissues and her allergy medication is $350 per year. Based on the Coase theorem
Danny should pay Karen $325 to give away her cat
The market for gluten-free bread is characterized by an inelastic demand and an elastic supply. What would happen to the deadweight loss of a tan, if the supply would also be inelastic?
Decrease
Refer to table 1. If the market price of an apple increases from $1.40 to $1.60, then consumer surplus
Decreases by $0.45
Refer to table 7-6. If the market price of an apple increases from $1.40 to $1.60, then consumer surplus
Decreases by $0.45
Refer to Figure 10-19. Note that the lines labeled "Demand" and "Social Value" are parallel. Also, the slopes of the lines on the graph reflect the following facts 1) Private value and social value decreases by $1.00 with each additional unit of the good that is consumer and 2) private cost increases by $1.40 with each additional unit of the good that is produced. Thus, when the 74th unit of the good is produced and consumed, social well-being
Decreases by $2.40
Suppose that all economies have the same ratio of investment to GDP. The conventional view of production process is that capital is characterized by
Diminishing returns, so that real GDP in rich countries would grow slower than in poor countries
Suppose that the city of Bloomington imposes a $1 per-tire recycling fee on buyers whenever they purchase a new tire. We can illustrate the tax on a graph by shifting the demand curve
Down by $1; the price paid by buyers would rise by less than $1
Refer to the figure. If the per-unit tax is placed on the good in the market, the deadweight loss is the area
E+F
Which of the following statements is not correct?
Economists typically prefer regulations to corrective taxes because regulations provide more incentives for firms to seek continued reductions in pollution
One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake bread that is sold for $3.00 to consumers. A second bag of flour is sold for $1 to a grocery store who sells it to a consumer for $2.00. Taking these four transactions into account, what is the effect on GDP
GDP increases by $5.00
A market is a
Group of buyers and sellers of a particular good or service
Harry buys a bond issued by Dell, INC. which uses the funds to buy new machinery for one of its factories. In the language of macroeconomics,
Harry is saving, Dell is investing
Greg's portfolio includes only stick in Boston Organic T. If he diversified
He could reduce firm-specific but not market risk
In 1991 a median home cost $122,000 and CPI=137. In 2016 the median home cost $219,400 and CPI=237.7. In real terms
Houses were more expensive in 2016
For an imaginary economy, the consumer price index was 80 in 2014, 100 in 2015, and 140 in 2016. Which of the following statements is correct?
If the basket of goods that is used to calculate the CPI cost $25 in 2015, then that basket of goods cost $35 in 2016
In some African countries, elephants are killed for the ivory in their tusks. In Kenya it is illegal to kill elephants and sell their ivory. In Namibia, a landowner is allowed to kill elephants, but only those on his land. In which country is the population of elephants on the rise and why?
In Namibia, where elephants are private property and the landowners have an incentive to protect the elephants
Revive Beverage Company is considering buying new bottling equipment for its factories. It will take one year to order and install the equipment. The second year they will gain $2 million in revenues. The third year they will gain $3 million in revenues. At the start of the fourth year they will scrap the equipment and a salvage company will haul it away or free but with no payment to RBC. At which of the following prices and interest rates would RBC find the equipment profitable?
4.35 million and 8%
Andrew got his first job at the age of 23, earning $30,00 a year. Andrew lives in an economy where all incomes grow at 3% per year. How old will Andrew be when his income will double?
46 years old
In the 1960s, the lobstering community of Port Lincoln on Australia's southern coast set a limit on the number of traps that could be set and then sold licenses for those traps. Since then, any newcomer could enter the business only by buying a license from another lobsterman. This government intervention in the lobster market caused an
Increase in economic efficiency because of the existence of a common-resource problem
In the 1960s, the lobstering community of Port Lincoln on Australia's southern coast set a limit on the number of traps that could be set and then sold licenses fort hose traps. Since then, any newcomer could enter the business only by buying a license from another lobsterman. This government intervention in the lobster market caused an
Increase in economic efficiency because of the existence of a common-resource problem
A person who is risk averse has utility which
Increases with wealth but the addition to utility from an additional dollar decreases as wealth increases
Suppose that the public consumes $200 billion less relative to the previous year and the government spends $100 billion less. Other things constant, what happens to the supply of loanable funds?
It shifts right by $300 billion
Which of the following is an example of physical capital?
Machinery in a bottling factory
Refer to Figure 23-1. Which of the following pairs correctly identify X and Z?
Markets for factors of production and markets for goods and services
Which answer is not a way to promote economic growth?
Minimum wage
Kristi and Rebecca sell lemonade on the corner for $0.50 per cup. It costs them $0.10 to make each cup. On a certain day, their producer surplus is $20. How many cups did Kristi and Rebecca sell?
50
For an imaginary closed economy, T=$5,000; S$11,000; C=$48,000 and the government is running a budget surplus of $1,000. Then
Private saving = $10,000 and GDP= $63,000
In a closed economy, if Y and T remained the same, but G rose and C fell but by less than the rise in G, what would happen to public and national saving?
Public and national saving would fall
Other things constant, if the government increases its expenditures but not taxes
Public saving will fall and the interest rate will rise
Timber companies are most likely to engage in over-logging of forests on
Publicly owned land because it is a common resource
Currently a country has real GDP per person of 500. Raising capital pre worker by one would increase output per worker by 4. Other things the same, which of the following long-run combinations are consistent with the effects of this country increasing its saving rate?
Real GDP per person is 520 and raising capital per worker by one would increase output per worker by 3
If the economists want to gauge economic well being it is appropriate to look at
Real GDP, if they want to look at economic growth it is also appropriate to look at real GDP
Wally owns a dog whose barking annoys Wally's neighbor, Corrine. Suppose that the benefit of owning the dog is worth $700 to Wally and that Corrine bears a cost of $500 from the barking. Assuming Wally has the legal right to keep the dog, a possible private solution to this problem is that
The current situation is efficient
A dentist shares an office building with a radio station. The electrical current from the dentist's drill causes static in the radio broadcast, causing the radio station to lose $10,000 in profits. The radio station could put up a shield at a cost of $30,000; the dentist could buy a new drill that causes less interference for $6,000. Either would restore the radio station's lost profits. What is the economically efficient outcome?
The dentist gets a new drill; it does not matter who pays for it
Suppose that an MBA degree creates no externality because the benefits of an MBA are internalized by the student in the form of higher wages. If there are no government subsidies for MBAs, then which of the following statements is correct?
The equilibrium quantity of MBAs will equal the socially optimal quantity of MBAs
In mathematics, we have log (1+x) =x when x is close to 0. If GDP2 and GDP1 represent this year's GDP and last year's GDP. What is the economic interpretation of log(GDP2)-log(GDP1)?
The growth rate of GDP
The students living in "The part house" are prone to host loud parties on Saturday night. They value these celebrations at $100. Their studious neighbors value peace and quiet at $90. The noise ordinance in this college town requires the police to stop loud parties if the neighbors complcomplain. Assume zero transaction costs. An efficient solution for this problem would be for
The party house to pay the neighbors $91 to not call the police
The citizens of Knoxville are complaining that the two pickle-makers in town, "crunchy pounds' pickles" and "sweet rose pickles" are polluting the environment. Currently, each pickle-maker emits 20 tons of pollution each year. Crunchy ponds pickles could clean the pollution at a cost of $500 per ton. Sweet rose pickles could also clean the pollution but a cost of $1,100 per ton. In an effort to reduce pollution, the government of Knoxville decrees that from now on, each pickle factory has to reduce pollution to 10 tons per year each, or else. What is the cost of reducing pollution to the desired levels? How is this possible?
Total cost of cleaning 20 tons of pollution id $10,000 per year. Crunchy Ponds Pickles cleans 20 tons of pollution after selling 10 pollution permits to Sweet Rose Pickles
The citizens of Knoxville are complaining that the two pickle-makers in town, "crunchy pounds' pickles" and "sweet rose pickles" are polluting the environment. Currently, each pickle-maker emits 20 tons of pollution each year. Crunchy ponds pickles could clean the pollution at a cost of $500 per ton. Sweet rose pickles could also clean the pollution but a cost of $1,100 per ton. In an effort to reduce pollution, the government of Knoxville decrees that from now on, each pickle factory has to reduce pollution to 10 tons per year each, or else. What is the cost of reducing pollution to the desired level
Total cost of cleaning 20 tons of pollution is $16,00 per year, it costs Crunchy Ponds pickles $5000 to clean 10 tons of pollution; it costs Sweet Rose Pickles $11,000 to clean 10 tons of pollution
The group of goods and services used to compute the GDP deflator changes automatically over time
True
If a positive externality exists in the market for flu shots, the private market equilibrium occurs at a price that is
Two low and a quality that is too low in comparison to the socially optimal equilibrium
GA wind farm in Iowa buys a large turbine generator from a Swedish-owned factory located in Connecticut that uses workers who live in Connecticut. As a result,
US Investment and GDP increase by the same amount, but US GNP increases by a smaller amount
When an American household purchases a bottle of Italian wine for $100
US consumption increases by $100, US net exports decrease by $100 and IS GDP does not change
GA wind farm in Iowa buys a large turbine generator from a Swedish-owned factory located in Connecticut that uses workers who live in Connecticut. As a result,
US investment and GDP increase by the same amount, but US GNP increases by a smaller amount
A German citizen buys an automobile produced in the United States by a Japanese company. As a result
US net exports and GDP increase, Japanese GNP increases, German net exports decrease, and German GNP and GDP are unaffected
A German citizen buys an automobile produced in the United States by a Japanese company. As a result,
US net exports and GDP increase, Japanese GNP increases, German net exports decrease, and German GNP and GDP are unaffected
Refer to the labor market graph. The imposition of an $8 minimum wage would cause
Unemployment of 35 labor hours
Which of the following is an example of the law of demand?
When tuition at State rises, fewer students enroll in courses at State
In an inexpensive alternative to oil were found, the price of oil adjusted for inflation
Would decline as the alternative would reduce the demand for oil
Suppose the government were to replace the income tax with a consumption tax so that interest on savings was not taxed. The result would be that the interest rate
Would decrease and investment would increase
Imagine that someone offers you $X today or $1,500 in 5 years. If the interest rate is 4%, then you would prefer to take the $X today if and only if
X>1,232.89
In which of the following instances is the present value of the future payment the largest?
You will receive $1,000 in 5 years and the annual interest rate is 5%
By driving onto a congested road for which no toll is charged, a driver
all of the above
Which of the following would shift the supply curve of iPhones to the right?
A decrease in wages paid to workers making iPhones
A $2 tax levied on the producers of a good has the same effect on buyers and sellers as a $2 tax levied on the consumers of the good
true
Taxes create market inefficacies that can be measured as deadweight loss
true
Consider the market price for portable air conditioners in equilibrium. When a heat wave strikes the equilibrium price
And quantity both increase
Refer to the graph. Which of the following is correct?
At P3, producer surplus is smaller than at P1
If there is a shortage of loanable funds, then
Neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium
All else equal, if there are diminishing returns, then what happens to productivity if both capital and labor increase?
None of the above are necessarily correct
Suppose a tax of $2 per unit is imposed on this market. Which of the following is correct?
One-half of the burden of the tax will fall on buyers, and one-half of the burden of the tax will fall on sellers
Suppose that interest rates rise unexpectedly. Suppose also that IBM announces that revenues from last quarter were down, but that the decline was exactly what the public and analysts had expected. According to the efficient markets hypothesis, which of these events would cause the price of IBM stock to change
Only the interest rate rising
Assume that your roommate is very messy. According to campus policy, you have a right to live in an uncluttered apartment. Suppose she gets an $80 benefit from being messy but imposes a $60 cost on you. The Coase theorem would suggest that an efficient solution would be your roommate to
Pay you at least $60 but less than $80 to live with the clutter
In the production function graph, with output per worker on the vertical axis and capital
Positive and gets flatter as capital per worker increases
This graph illustrates the market for gluten dree chocolate cake. If the current price is $30 per cake, we expect the
Price to increase due to the shortage of cake
Pens are normal goods. What will happen to the equilibrium price of pens if the price of pencils rises, consumers experience an increase in income, writing In ink becomes fashionable, people expect the price of pens to rise in the near future, the population increases, fewer firms manufacturer pens, and the wages of pen-makers increase?
Price will rise
Refer to the figure. The socially optimal level of output is
Q2
The deadweight loss from a tax
Reflects inefficiency in resource allocation because the tax distorts incentives
The deadweight loss from a tax
Reflects the inefficiency in recourse allocation because the tax distorts incentives
In some countries it is time consuming and costly to establish ownership of property. Reforms to reduce these costs would likely
Rise real GDP and productivity
If a person exchanged some portion of stocks in their portfolio for government bonds, then
Risk and return would fall
In the language of macroeconomics, a higher interest rate induces people to
Save more, so the supply of loanable funds slopes upward
Cutter is spending less than he's earning, and he uses his unspent income to buy some stock from Phi Optics Corporation. A macroeconomist will call Cutter's act:
Saving
Assuming the graph is drawn to scale, which of the following is true regarding the burden of the tax in the market above?
Sellers pay a larger share of the tax because supply is more inelastic than demand
Rent Controls cause
Shortages of apartments which are larger in the long run than in the short run
Rent controls cause
Shortages of apartments which are larger in the long run than in the short run
According to the Coase theorem, private parties can
Solve externally problems through private bargaining
Which of the following statement is correct?
Some goods, such as lighthouses, may be either private or public goods
Which of the following statements is correct?
Some goods, such as lighthouses, may be either private or public goods
An advance in technology would shift the
Supply Chain to the right
An advance in technology would shift the
Supply curve to the right
The deadweight loss from a tax is likely to be smallest when
Supply is inelastic and demand is inelastic
In the last few years the US government budget deficit has increased. Other things the same this means the
Supply of loanable funds shifted left, interest rate increased, and quantity of loanable fund declined
Other prices the same, an increase in the price of French wine would increase
The CPI but not the GDP deflator
Sally purchased a log-splitter five years ago. This year, she purchased some new parts, gasoline, oil, and spends 2 hours repairing the log-splitter. Which of the following is included in this years GDP?
The amount she paid to buy new parts, gasoline, and oil
What will happen to the equilibrium price of new textbooks if more students attend college, paper becomes cheaper, textbook authors accept lower royalties, and fewer used textbooks are sold?
The price will be ambiguous
Refer to figure 10-19. Which of the following decreases as the quantity of the good is increased?
The private values of the good
On the market for loanable funds, if the interest rate were lower than the equilibrium level:
The quality of loanable funds supplied would be less than the quantity of loanable funds demanded
Suppose that company A's railroad cars pass through Farmer B's corn fields. The railroad causes an externality to the farmer because the railroad cars emit sparks that cause $1,500 in damage to the farmer's crops. There is a special soy-based grease that the railroad could purchase that would eliminate the damaging sparks. The grease costs $1,200. Suppose that the farmer has the right to compensation for any damage that his crops suffer. Assumer that there are no transaction costs. Which of the following characterizes the efficient outcome?
The railroad will purchase the grease for $1,200 and pay the farmer nothing because no crop damage will occur
The market of chocolate cupcakes is in equilibrium at a price of $4 and a quantity of 300 chocolate cupcakes. The government levies a $1 per unit tax, which decreases the quantity bought and sold to 250. Which of the following statements is correct?
The tax revenue collected as a result of the new tax is $300
A stove is produced by a firm in 2014, added to the firm's inventory in 2014, and sold to a household in 2015. It follows that
The value of the good is added to the investment category of 2014 GDP, added to the consumption category of 2105 GDP, and subtracted from the investment category of 2015 GDP
An American Company operates a fast food restaurant in Paris, France. Which of the following statements is accurate?
The value of the goods and services produced by the restaurant is included in French GDP, but not in US GDP
The most efficient pollution control system would ensure that
Those polluters with lowest cost of pollution abatement reduce their pollution most
In 2015, the minimum wage according to federal law was $7.25 per hour. Increasing minimum wage to $8 per hour (approximately a 10% increase) will probably lead to:
all of the above
A newspaper article informs you that most business reduced production in the last quarter but also sold from their inventories during the last quarter. Based on this information GDP likely
decreased
When the government imposes a binding price ceiling, it causes a surplus of the good
false
Refer to Figure 23-1. Which of the following pairs correctly identify W and Y?
firms and households
A policymaker that wants to raise tax revenue while minimizing the deadweight loss should tax goods with inelastic supply and demand rather than goods with elastic supply and demand
True
Other things constant, if Dunkin Doughnuts increases the price of coffee, then both the CPI and GDP deflator increase
True
The CPI gives greater weights to goods that consumers purchase more of
True
