ECO 2013 Final
Suppose demand decreases and supply decreases at the same time. Which of the following will happen?
Equilibrium price will be indeterminate, while equilibrium quantity will decrease.
The market for fast food is in equilibrium. The price of hamburgers rises, and as a result, the demand for tacos rises. You can conlude (ceteris paribus) that...
hamburgers and tacos are substitutes
Open-market purchases by the Fed make the money
increase, which tends to decrease the value of money.
The value of the best thing given up to get something is...
opportunity cost
The market for letter envelopes is in equilibrium, but then two things happen at the same time. First, the invention of email and other electronic communication causes people to write fewer paper letters. Second, new regulation on paper production makes production of envelopes more costly. What happens to the price and quantity of paper envelopes?
price is indeterminate, quantity falls
Refer to the image below. Suppose a price floor of $7.00 is imposed. As a result,
quantity supplied will exceed quantity demanded
When a market is in equilibrium...
quantity, supplied equals quantity demanded, the price is at the intersection of supply and demand, and total surplus is maximized.
Pierre runs a French restaurant. He goes to the grocery store and buys a $5 container of smoked Mediterranean sea salt to be used in the kitchen at the restaurant, and a pound of Velveeta "cheese product" for $3 for home use. He then goes to a consignment store and pays $20 for a gently used apron and toque (that tall white hat you think traditional chef's unicorn). How much of this is counted in this year's GDP?
$8, $3
Suppose you are offered $1,000 dollars two years from now. If the interest rate is 5%, what is the present value of $1,000?
$907.03
Price Elasticity of Supply
% Change in QS / % Change in Price
Elasticity
%Change in quantity/%Change in price
U.S. Nominal GDP in 2014 was $17,419,000. U.S. Real GDP in 2014 was $16,150,000. GDP Deflator in 2014 was therefore
107.8
Suppose a nation's money supply is growing at 6%, is velocity stable (i.e., not changing), and its economy is growing at 3%. What is the inflation rate?
3%
Automobiles are now safer and get better gasoline mileage. If there is an increase in the price of automobiles, which of the following is true?
A portion of the price increase reflects the improvement in the quality of the product rather than inflation.
Other things equal, as the price of a good or service falls, which of the following will be experienced by consumers?
An increase in Consumer Surplus
Which of the following statements is correct?
An increase in price causes an increase in producer surplus, ceteris paribus.
Which of the following is an example of a person responding to incentives?
As a result of an increase in her pay Maria chooses to take her lighter course load in college and work more hours at her job. As a result of an increase in gas prices Donna begins carpooling to work with her friends.
Which of the following usually occurs during a recession?
Cyclical unemployment rises
%change in quantity < %change in price, <1
Inelastic
Which of the following is most likely to harm economic growth?
Little protection for private property rights
Noah values his car at $10,000, and Emily values it at $14,000. If Emily buys it from Noah for $11,000, which of the following is true?
Noah gains $1,000 of value, and Emily gains $3,000 of value.
Present value
PV = FV/(1 + i)^n PV = present value, FV = future value, i = decimalized interest rate, and n = number of periods
Which of the following does not contribute to GDP?
You lose $50 playing cards with friends.
A student asks many helpful questions during class. This costly to the student, who must think of good questions and speak up in front of hundreds of students. Most of the benefits of this go to the other students, who learn more as a result. This is an example of a...
Positive Externality
The market for letter envelopes is in equilibrium, but then two things happen at the same time. First, the invention of email and other electronic communication causes people to write fewer paper letters. Second, new regulations on paper production makes production of envelopes more costly. What happens to the price and quantity of paper envelopes.
Price is indeterminate, quantity falls.
If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?
Price would decrease, and quantity would decrease.
Which of the following is not correct?
Real GDP overestimates our material well-being because it does not account for inflation.
Which of the following is the best choice for measuring improvements the average person's standard of living?
Real GDP per capita
Gold, silver, stone, copper, and bronze coins, and even cowrie shells (small seashells) have been used as money. Iron, however, was only rarely used as money, because of how it interacts with moisture. Which of the characteristics of money does it fail to satisfy?
Store of value`
Inflation rate
Subtract the past date CPI from the current date CPI and divide your answer by the past date CPI. Multiply the results by 100.
Suppose Google enters the market for televisions, producing its own models. Which of the following occurs in the market for televisions?
Supply shifts to the right, price falls, quantity rises.
Which of the following is a deficiency of the regular (or traditional) consumer price index (CPI) as a measure of the cost of living?
The CPI does not adjust regularly for the fact that consumers will shift their spending away from goods that become more expensive.
The reporter on one broadcast network says 2011 GDP increased to an all-time high. Commenting on the same figure, a second reporter says GDP in 2011 was less than in 2010. Which of the following explanations is consistent with the statements of both reporters?
The first reporter was referring to nominal GDP, and the second was referring to real GDP.
A country has 250 noninstitutionalized civilian adults, 25 of which are unemployed, and 175 of which are employed. Which of the following is correct?
The labor force participation rate is 80% and the unemployment rate is 12.5%.
The price of toilet paper goes up by 10% and the quantity supplied rises by 30%. Which of the following is correct?
The price elasticity of supply is 3 and supply is elastic.
A global pandemic occurs, and many sawmills (which produce lumber) shut down. Which of the following will occur, ceteris paribus?
The supply of lumber shifts to the left.
The problem with unanticipated inflation is...
Unanticipated inflation makes it hard to plan for the future, which makes people reluctant to undertake risky long-term investments.
%change in quantity = %change in price, =1
Unitary
Other things equal, if the price of a product falls, producers will experience...
a decrease in producer surplus
The market for yachts is in equilibrium. Due to increased income inequality, the government is pressured to put a high tax on yachts and similar luxury goods. If such a tax is imposed, the result will be...
a decrease in the equilibrium quantity of yachts.
Which of the following would most likely cause the production possibilities curve for breadfruit and fish to shift outward from AA to BB in the image below?
a major technological advance
An increase in demand is...
a shift of the demand curve to the right.
if the equilibrium price of gasoline is $4.50 per gallon, and the government sets a price ceiling of $3.00 per gallon, the result will be...
a shortage of gasoline.
Economic growth is likely to be faster when
domestic markets are opened to foreign sellers and foreign investors.
%change in quantity > %change in price, >1
elastic
The market for exchanging dollars for Swiss francs for U.S. dollars is in equilibrium. The supply of francs rises, and the demand for francs falls. As a result, the exchange rate of dollars for francs will...
fall, none of the above.
Which of the following goods is likely to have inelastic supply?
solar power generated from an array in south Florida
When individuals are unemployed because they lack the qualifications to fill available jobs, this is called
structural unemployment
Suppose prices for new homes have risen and sales of new homes have also risen. We can conclude that
the demand for new homes has risen.
Price Elasticity of Demand
the percentage change in the quantity demanded of a good or service divided by the percentage change in the price
The U.S. sugar industry is protected from foreign competition by quotas, which limit the quantity of sugar that they may be imported. As a result, Americans pay more for all goods containing sugar. This has also encouraged the growth of the high fructose corn syrup industry. Which of the following most likely explains why this quota exists?
the special interest effect
If there is a deadweight loss, this means that...
total surplus could be increased