EC 202 Final Exam Review (Exams 1 & 2)

Jake is considering vaping. One of his friends just quit vaping and has offered Jake his Juul for free, but only if Jake is going to use it himself. If Jake does start vaping, he will spend $20 per week on Juul pods. Additionally, Jake's girlfriend will break up with him if he starts vaping.What is the opportunity cost of vaping for Jake? A) $20 per week B) Zero, because he got the Juul for free C) $20 per week and his girlfriend

$20 per week and his girlfriend

A country produces two goods: cheese and calculators. In year 1, the price of cheese is$2 and the price of a calculator is $10. In year 2, the price of cheese is $3 and the price of a calculator is $10. In year 2, the country produces 10 units of cheese and 1 calculator.What is real GDP in year 2, using year 1 as the base year. A) $40 B) $30 C) $50 D) Not enough information to answer this question

$30

You can buy a four-day pass to Disney World for $300, a five-day pass to Disney World for $350, or a six-day pass to Disney World for $390. What is the marginal cost of the sixth day? a. $40 b. $50 c. $90 d. $390

$40

Which of the following will cause a decrease in market equilibrium price and a decrease in equilibrium quantity? A) an increase in supply B) an increase in demand C) a decrease in supply D) a decrease in demand

A decrease in demand

Which of the following is able to change the long-run equilibrium GDP for the US? A) The fed decides to print loads of money B) A new revolutionary technology emerges C) Workers around the country unionize to demand higher wages and better working conditions D) People in the US decide they want to spend more and save less, increasing MPC.

A new revolutionary technology emerges

You have decided to buy a pizza with one topping. A cheese pizza costs $10 and the topping costs $1. You're deciding between pepperoni and mushrooms - you think both sound good and are worth paying $1 for. You decide to buy the pepperoni pizza. What was the opportunity cost? a. A pizza with mushrooms b. $10 c. $11 d. A cheese pizza

A pizza with mushrooms

Which of the following meets the economics definition of a shortage? A) Delta Airlines has to cancel its plans to add new flights because it did not get any qualified applicants to its recent job posting looking for airplane pilots. B) Minimum wage laws cause warehouses to replace workers with robots. C) A price ceiling on insulin leads to long lines outside of stores that sell insulin. D) A hurricane destroyed most of the beachfront property in North Carolina, leading to increased prices on rental houses and fewer vacationers

A price ceiling on insulin leads to long lines outside of stores that sell insulin

Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for the good. This will cause A) a rightward shift of the supply curve. B) a leftward shift of the supply curve. C) a movement up along the current supply curve. D) a movement down along the current supply curve

A rightward shift of the supply curve

Because of the significant snowfall in the plains this year, the supply of fertilizer to Washington State's apple farmers substantially decreased. As a result, the price of fertilizer has increased in Washington State. This statement indicates the A) supply for apples will necessarily increase. B) price of apples will decrease. C) demand for apples will necessarily decrease. D) amount of apples that will be available at various prices will decline.

Amount of apples that will be available at various prices will decline

The college admissions scandal in 2019 exposed the fact that celebrities were paying professional test-takers to take their children's SATs for them. As a result, both the parents who paid for these services and the people who were paid to take the SATs were severely punished. The threat of being exposed and punished is expected to deter parents from paying someone to take their child's SAT and deter people from being willing to take the someone else's SATs for money. As a result, in the market for illicit-professional-SAT-test-taking, the expected effect on price and quantity are: A) Price increases, quantity decreases B) The effect on price is ambiguous, quantity decreases C) Price decreases, the effect on quantity is ambiguous D) Price increases, quantity increases

The effect on price is ambiguous, quantity decreases

You are binge watching Stranger Things on Netflix and have one episode left in the first season. Which of the following would be describe the marginal benefit of watching that last episode? A) The enjoyment you get from watching the last episode B) The total enjoyment you received from the first season C) The hour that you could have spent studying economics (your best possible alternative use of the time, of course)

The enjoyment you get from watching that last episode

Which of the following would most likely increase the demand for gasoline? A) the expectation by consumers that gasoline prices will be higher in the future B) the expectation by consumers that gasoline prices will be lower in the future C) a decrease in the price of gasoline D) an increase in the price of gasoline

The expectation by consumers that gasoline prices will be higher in the future

Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived, he discovered that hamburgers were on sale for $1 each, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by A) the substitution effect. B) the income effect. C) the price effect. D) a rightward shift in the demand curve for hamburgers.

The income effect

Jane subscribes to Netflix. She enjoys binge-watching The Office, but finds that, because she has seen every episode several times, she gets bored of them quickly. In fact, in a given binge-watch session, she enjoys each episode less than the one before it. Jane would subscribe toNetflix even if The Office was not available. For Jane, watching The Office on Netflix has _____ marginal benefits and _____ marginal costs. (Assume the only costs are monetary costs.) A) Decreasing; Increasing B) Decreasing: Constant C) Constant; Increasing D) Increasing; Decreasing

Decreasing; Constant

Suppose we are graphing marginal benefits and marginal costs. Usually, marginal benefit slopes ______ and marginal cost slopes _____ A) Up; Down B) Down; Down C) Straight up (vertical line); Up D) Down; Up

Down; Up

Michigan State University decides to fine everyone who leaves an electric scooter on a walkway 20 dollars. What would we expect to happen? A) There is no change in the number of scooters left on walkways B) Fewer scooters are left in walkways, but there are still some scooters left in walkways C) No scooters are left in walkways

Fewer scooters are left in walkways, but there are still some scooters left in walkways

How would a decrease in price of Blu-Ray movies affect the demand for Blu-Ray players? A) Increase in supply B) Increase in quantity demanded C) Increase in demand D) Decrease in demand

Increase in demand

Drug dealing is potentially a very profitable business, largely because the prices of illegal drugs are often very high. Successful drug dealers can become extremely wealthy. The potential for great wealth can lure teenagers into the drug trade. Additionally, if illegal drugs were not so expensive, drug dealers would not find it worthwhile to go to great lengths to smuggle drugs into the United States. Suppose we want to reduce the street price of illegal drugs. What would be the best way to do this? (Hint:Think about how each of the options would shift the supply and/or demand curves for illegal drugs) A) Increase the criminal penalties on individuals caught selling drugs B) Increase the criminal penalties on individuals caught buying drugs

Increase the criminal penalties on individuals caught buying drugs

Suppose that the economy is in long run equilibrium. The US government decides to take on a multi-billion dollar project in order to repair and replace the transportation infrastructure.This investment is so large that it is able to shift the AD demand curve. In the short run, prices will ___ and GDP will ___? A) Increase; Increase B) Increase; Decrease C) Decrease; Increase D) Decrease; Decrease

Increase; Increase

A: Steel - 0, Wheat - 100 B: S - 1, W - 90 C: S - 2, W - 75 D: S - 3, W - 55 E: S - 4, W - 30 F: S - 5, W - 0 In moving stepwise from possibility A to B to C ... to F, the opportunity cost of a unit of steel in terms of wheat: A) increases. B) decreases. C) remains constant. D) increases at first then decreases

Increases

The economy experiences an increase in the price level and a decrease in real domestic output. Which of the following is a likely explanation? A) Productivity has increased. B) Input prices have increased. C) There has been an increase in government spending. D) Government regulations have been reduced

Input prices have increased

Each week Jim buys the same market basket composed of a case of ramen noodles, two bottles of coke, and three bags of tortilla chips. Jim has found that it takes more of his wages to buy this market basket than before. We can say ________. A) Jim's nominal wage has gone down B) Jim's real wage has gone down C) Jim's after-tax wage has gone down D) Jim must be buying higher quality products

Jim's real wage has gone down

Suppose a Bank with $1000 in assets has a 10:1 leverage ratio. It then sees one of its investments (an assets) increase in value by $10. Which of the following do we expect to happen if the bank wants to maintain its 10:1 leverage ratio? A) Liabilities increase by $10 B) Liabilities increase by $90 C) Equity increases by $100 D) Liabilities decrease by $10

Liabilities increase by $90

The largest expenditure of the U.S. Federal government is for A) education. B) national defense. C) mandatory spending. D) interest on public debt

Mandatory spending

Economics is based on the principle that resources are scarce and people have unlimited desires. If the federal government were to run the money-printing presses at maximum speed and send billions of dollars in cash to every American, would that result in every American being able to obtain everything they desire? A) Yes B) No

No

Which is most likely to be observed in a community where price ceilings are imposed on residential rents? A) Poor people will be able to find adequate housing. B) Homeowners will reduce their own use of housing space, making more available to others. C) Those whose needs for housing are most urgent will be able to obtain the space they want. D) People moving into the community will have difficulty locating residential space to rent.

People moving into the community will have difficulty locating residential space to rent

American Airlines based their fleet of Boeing 737 Max airplanes at Miami International Airport. In March of 2019, the United States government banned the use of these airplanes due to safety concerns. How would we expect this to affect the price and quantity of airline travel out of MiamiInternational Airport? A) Price increases and quantity increases B) Price increases and the effect on quantity is ambiguous C) Price increases and quantity decreases D) Price decreases and the effect on quantity is ambiguous

Price decreases and quantity decreases

What might happen to the equilibrium price and quantity of Disney World tickets if Universal Studios offers discounts to families? A) Price of Disney World tickets decreases, and quantity bought increases B) Price of Disney World tickets increases, and quantity bought increases C) Price of Disney World tickets increases, and quantity bought decreases D) Price of Disney World tickets decreases, and quantity bought decreases

Price of Disney World tickets decreases, and quantity bought decreases

Due to a recent hurricane there is a major loss of sugarcane crops. At the same time in the U.S. consumers are eating healthier and cutting back on eating items that have sugar in them. How will this affect the price and quantity in the sugar market? A) Quantity decreases and price is indeterminate B) Quantity increases and price is indeterminate C) Price increases and quantity is indeterminate D) Price decreases and quantity is indeterminate

Quantity decreases and price is indeterminate

Suppose the price of roses increases. Assume that roses and chocolates are substitutes. Which of the following responses is likely? (Note: that we are looking for what happens after the price changes, not for what caused the price change) A) Quantity of chocolates decreases B) Quantity of roses sold increases C) Price of chocolates decreases D) Quantity of chocolates increases

Quantity of chocolates increases

With a tax of $2,000 on $30,000 of income, and $2,000 on $70,000 of income, we can describe the structure of this tax as A) progressive. B) proportional. C) regressive. D) marginal.

Regressive

The main reason why you cannot have everything you want is that: A) Taxes are too high B) Resources are scarce C) Opportunity costs are equal to zero

Resources are scarce

Which of the following is not an example of a final good or service A) New lawn mowers sold to consumers by Cut-Rite Lawn Equipment & Supplies in their retail store B) Flowers and pots purchased by homeowner Joe Smith for his garden C) A new string trimmer purchased by Green Grass Lawn Care Services, which employees will use to maintain customer's yards D) Seedlings and saplings purchased for resale by Wendy's Garden Center

Seedlings and saplings purchased for resale by Wendy's Garden Center

An improvement in production technology will A) increase equilibrium price. B) shift the supply curve to the left. C) shift the supply curve to the right. D) shift the demand curve to the left.

Shift the supply curve to the right

Maria is deciding how big of a house to build. She gets decreasing marginal benefits from house size (so, the marginal benefit of the first square foot is greater than the marginal benefit of the second square foot and so on). The builder charges $100 per square foot. Maria decides to build a 1,700 square foot house. What if, instead, the builder offered a discount, where the first 1,000 square feet were half price ($50 per square foot)? How big of a house would Maria choose to build: A) Less than 1,700 square feet B) Still 1,700 square feet C) More than 1,700 square feet

Still 1,700 square feet

When economists say that the supply for a product has decreased, they mean that the A) supply curve has shifted to the right. B) product has become particularly abundant for some reason. C) product has become more expensive and thus consumers are buying less of it. D) supply curve has shifted to the left.

Supply curve has shifted to the left

You are the fifteenth caller for a contest at your favorite radio station and win your choice of three concert tickets: Post Malone, Taylor Swift, and the Jonas Brothers. You choose Post Malone, because that is your favorite performer. Your second choice would have been theJonas Brothers. What is the opportunity cost of the concert tickets? A) Zero, because they were free B) The Jonas Brothers tickets C) The Jonas Brothers tickets and the Taylor Swift tickets

The Jonas Brothers tickets

The income and substitution effects are part of the reason why A) the supply curve is upward-sloping. B) the demand curve is downward-sloping. C) the supply curve is downward-sloping. D) the demand curve is upward-sloping.

The demand curve is downward-sloping

To keep the local professional football team from leaving, the city of San Diego proposed a tax on hotel rooms that would be used to fund a new football stadium. Many people are opposed to using tax revenues to fund sports stadiums. The mayor argued that, because the tax would be paid by out-of-town visitors, the new stadium would be "free" for residents. Which of the following statements is most accurate? A) The mayor is correct B) The mayor is forgetting about the opportunity cost of having a football team instead of having another sports team C) The mayor is forgetting about the opportunity cost of spending the tax revenue on a new stadium instead of on something else D) The mayor is forgetting about the marginal benefits residents receive from the football stadium

The mayor is forgetting about the opportunity cost of spending the tax revenue on a new stadium instead of on something else

Suppose the price of roses increases. Assume that roses and oranges tend to have similar growingclimates, and that farmland that currently grows one of them can easily grow the other crop instead. Which of the following responses is likely? (Note: that we are looking for what happens after the price changes, not for what caused the price change) A) The price of oranges increases B) Quantity of roses demanded increases C) The quantity of oranges sold increases

The price of oranges increases

If a price ceiling is set below the equilibrium price in a market A) Quantity supplied will equal quantity demanded B) surpluses of the commodity will develop. C) the quantity demanded will exceed the quantity supplied. D) the quantity supplied will exceed the quantity demanded.

The quantity demanded will exceed the quantity supplied

When the price of Nike soccer balls decreased, Ronaldo purchased more Nike soccer balls and fewer Adidas soccer balls. Which of the following best explains Ronaldo's decision to buy moreNike soccer balls? A) The substitution effect B) The income effect C) An increase in the demand for Nike soccer balls D) The price effect

The substitution effect

If aggregate expenditure in an economy equals 2,000 + 0.8Y and full employment realGDP equals 11,000, then this economy has A) no autonomous expenditure. B) an expansionary gap. C) a recessionary gap. D) no output gap.

a recessionary gap

What function is money serving when you deposit it in a savings account? A) a store of value B) a unit of account C) a checkable deposit D) a medium of exchange

a store of value

If product prices were stated in terms of tobacco leaves, then tobacco leaves would be functioning primarily as A) fiat money. B) legal tender. C) a store of value. D) a unit of account

a unit of account

Adding up the market value of all final and intermediate goods and services in an economy in a given year would result in ________. A) the calculation of GDP for that year B) an amount less than GDP for that year C) an amount greater than GDP for that year

an amount greater than GDP for that year

Suppose that investment is increasing and that MPC is 0.75. Most of the increase in realGDP that results is due to ________. A) additional increases in investment B) an increase in net exports C) an increase in consumption D) an increase in government purchases

an increase in consumption

A bank is in the position to make loans when required reserves A) equal actual reserves. B) equal excess reserves. C) are less than actual reserves. D) are greater than actual reserves

are less than actual reserves

A bank's net worth is equal to its A) assets plus its liabilities. B) assets minus its liabilities. C) liabilities minus its assets. D) profits plus its assets.

assets minus its liabilities

If an economy maintains a small rate of growth for a long period of time, then the size of the economy A) can only increase by a small amount. B) can never double. C) can increase by a large amount. D) will stay nearly constant

can increase by a large amount

If Matt's disposable income increases from $4,000 to $4,500 and his level of saving increases from $200 to $325, it may be concluded that his marginal propensity to: A) consume is 0.80. B) consume is 0.75. C) save is 0.60. D) save is 0.30

consume is 0.75

The cost of a higher living standard in the future is giving up A) current investment. B) future investment. C) current consumption. D) future consumption.

current consumption

Other things being equal, a decrease in an economy's exports will A) increase domestic aggregate expenditures and the equilibrium level of GDP. B) decrease domestic aggregate expenditures and the equilibrium level of GDP. C) have no effect on domestic GDP because imports will offset the change in exports. D) increase the amount of imports consumed by the private sector

decrease domestic aggregate expenditures and the equilibrium level of GDP

A decrease in consumer spending can be expected to shift the aggregate expenditures curve ________. A) downward and the aggregate demand curve leftward B) upward and the aggregate demand curve leftward C) downward and the aggregate demand curve rightward D) upward and the aggregate demand curve rightward

downward and the aggregate demand-curve leftward

The Social Security tax is regressive because A) the Social Security tax rate applied does not rise with the salary level. B) no Social Security tax is collected for incomes in excess of a "cap" income level. C) each individual must pay a set percentage of his or her income in Social Security taxes. D) as income increases, the Social Security tax rate increases at a decreasing rate.

each individual must pay a set percentage of his or her income in Social Security taxes.

The aggregate demand curve shows the ________. A) inverse relationship between the price level and the quantity of real GDP purchased B) direct relationship between the price level and the quantity of real GDP produced C) inverse relationship between interest rates and the quantity of real GDP produced D) direct relationship between real-balances and the quantity of real GDP purchased

inverse relationship between the price level and the quantity of real GDP purchased

The best example of a "frictionally unemployed" worker is one who A) reduces productivity by causing friction in a business. B) is laid off during a recessionary period in the economy. C) is in the process of voluntarily switching jobs. D) is discouraged and not actively seeking work

is in the process of voluntarily switching jobs.

The upward slope of the supply curve reflects the A) principle of specialization in production. B) law of supply. C) fact that price and quantity supplied are inversely related. D) law of diminishing marginal utility

law of supply

The transactions demand for money will shift to the A) left when nominal GDP increases. B) left when nominal GDP decreases. C) right when the interest rate decreases. D) right when the interest rate increases.

left when nominal GDP decreases

Assume that an increase in a household's disposable income from $40,000 to $48,000leads to an increase in consumption from $35,000 to $41,000. This means that the household's A) marginal propensity to consume is 0.75. B) average propensity to consume is 0.75. C) marginal propensity to save is 0.20. D) marginal propensity to consume is 0.6.

marginal propensity to consume is 0.75

Which of the following functions of money enables society to gain the benefits of geographic and labor specialization? A) unit of account B) store of value C) medium of exchange D) medium of deferred payment

medium of exchange

When loans are repaid at commercial banks' A) money is created. B) money is destroyed. C) the assets of commercial banks increase. D) the net worth of commercial banks increases.

money is destroyed

If the price level decreases, then the aggregate expenditures schedule will shift and this translates into a ________. A) movement down along the aggregate demand curve B) shift in aggregate demand to the right C) shift in aggregate demand to the left D) movement up along the aggregate demand curve

movement down along the aggregate demand curve

A bank's required reserves can be calculated by A) dividing its excess reserves by its required reserves. B) dividing its required reserves by its excess reserves. C) multiplying its checkable-deposit liabilities by the reserve ratio. D) multiplying its checkable-deposit liabilities by its excess reserves.

multiplying its checkable-deposit liabilities by the reserve ratio

Full-time homemakers and retirees are classified in the BLS data as A) employed. B) unemployed. C) part of the labor force. D) not in the labor force.

not in the labor force

An example of an intermediate good would be ________. A) bricks bought by a homeowner who plans to build a patio in his backyard B) groceries bought by a dentist for his family C) cars bought by a car-rental company D) paper and ink bought by a publishing company

paper and ink bought by a publishing company

The aggregate supply curve (short run) is upward-sloping because ________. A) wages and other resource prices match changes in the price level B) the price level is flexible upward but inflexible downward C) per-unit production costs rise more slowly D) wages and other resource prices are flexible upward but inflexible downward

per-unit production costs rise more slowly

The required-reserve ratio is equal to a commercial bank's A) checkable-deposit liabilities divided by its required reserves. B) required reserves divided by its checkable-deposit liabilities. C) checkable-deposit liabilities multiplied by its excess reserves. D) excess reserves divided by its required reserves

required reserves divided by its checkable-deposit liabilities.

Cash held by a bank in its vault is a part of the bank's A) reserves. B) liabilities. C) money supply. D) net worth

reserves

Graphically, the full-employment, low-inflation, rapid-growth economy of the last half of the 1990s is depicted by a ________. A) rightward shift of the aggregate demand curve along a fixed aggregate supply curve B) rightward shift of the aggregate supply curve along a fixed aggregate demand curve C) rightward shift of the aggregate demand curve and a rightward shift of the aggregate supply curve D) leftward shift of the aggregate demand curve and a leftward shift of the aggregate supply curve

rightward shift of the aggregate demand curve and a rightward shift of the aggregate supply curve

The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily responsible for A) maintaining cash reserves that can be used to settle international transactions. B) supervising banks to make sure that markets are open to all and remain competitive. C) issuing currency and acting as the fiscal agent for the federal government. D) setting the Fed's monetary policy and directing the purchase and sale of government securities.

setting the Fed's monetary policy and directing the purchase and sale of government securities.

An increase in the supply of music downloads indicates that more music downloads will be A) supplied, even if prices of music downloads stayed the same. B) supplied, because music download prices have decreased. C) demanded, because sellers are selling more music downloads. D) demanded, because sellers are putting music downloads on sale

supplied, even if prices of music downloads stayed the same

When the price level decreases, ________. A) the demand for money falls and the interest rate falls B) holders of financial assets with fixed money values decrease their spending C) holders of financial assets with fixed money values have less purchasing power D) there is a decrease in consumer spending that is sensitive to changes in interest rates

the demand for money falls and the interest rate falls

The value of the multiplier is likely to fall if there is a decrease in A) consumption. B) income. C) total spending. D) the marginal propensity to consume.

the marginal propensity to consume

The most basic premise of the aggregate expenditures model is that the A) total output produced in the economy depends directly on the level of total spending. B) level of employment in the economy depends inversely on the real wage rate. C) total output produced depends mostly on the total capacity of firms to produce. D) unemployment level in the economy is inversely related to the inflation rate

total output produced in the economy depends directly on the level of spending

When a banker records how many dollars each of his borrowers owes the bank, money is serving as a A) store of value. B) unit of account. C) medium of exchange. D) legal tender

unit of account

When a consumer wants to compare the price of one product with another, money is primarily functioning as a A) store of value. B) unit of account. C) checkable deposit. D) medium of exchange

unit of account

The functions of money are to serve as a A) resource allocator, a method for accounting, and a means of income distribution. B) unit of account, a store of value, and a medium of exchange. C) determinant of consumption, investment, and government spending. D) factor of production, exchange, and aggregate supply

unit of account, a store of value, and a medium of exchange.

In the aggregate demand-aggregate supply model, the economy's price level is assumed to be ________. A) constant, just like in the aggregate expenditures model B) variable, just like in the aggregate expenditures model C) constant, unlike in the aggregate expenditures model D) variable, unlike in the aggregate expenditures model

variable, unlike in the aggregate expenditures model

In Macroland autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, investment is fixed at 50, government expenditures are fixed at 150, and net exports are fixed at 20. Aggregate expenditure equals A) 320 + 0.75Y. B) 290 + 0.75Y. C) 320 + 0.25Y. D) 290 + 0.25Y

290 + 0.75Y

Consider a Bank whose assets consist of $200 in reserves and $800 in loans and whose liabilities consist of $600 in deposits. What is the leverage ratio of this bank: A) 2:1 B) 5:2 C) 3:1 D) 4:1

5:2 (1000/(1000-600))

When the fed increases the money supply, which of the following is true: A) Bond prices go up, which means that interest rates on bonds go down B) Bond prices go up, which means that interest rates on bonds go up C) Bond prices go down, which means that interest rates on bonds go down D) Bond prices go down, which means that interest rates on bonds go up

Bond prices go up, which means that interest rates on bonds go down

The economy's long-run AS curve assumes that wages and other resource prices________. A) eventually rise and fall to match upward or downward changes in the price level B) are flexible upward but inflexible downward C) rise and fall more rapidly than the price level D) are relatively inflexible both upward and downward

eventually rise and fall to match upward or downward changes in the price level

Economists refer to the talents, training, and education of workers as A) human capital. B) physical capital. C) average labor productivity. D) labor supply

human capital

Getting a college degree is an example of investing in A) physical capital. B) technology. C) human capital. D) research and development

human capital