ECO 2305 Joshi- Final

If the price elasticity of demand for chicken is 2, then a 20% decrease in the price of chicken will lead to a:

40% increase in the quantity demanded of chicken.

All else equal, a decrease in the demand for oranges will lead to a(n) ______ in equilibrium price and a(n) ______ in equilibrium quantity.

decrease; decrease

A seller's reservation price is generally equal to:

the seller's opportunity cost of producing an additional unit

Which of the following correctly ranks the amounts from largest to smallest?

total output, average labor productivity, output per person

Suppose that total expenditures for coffee reach a maximum at a price of $5 per pound. At this price, the demand for coffee is:

unit elastic.

A firm should shut down if its total revenue is less than its _____ even when the firm produces the level of output at which price equals marginal cost.

variable cost.

The total benefit of a 3.0GHz computer is:

$1,700

What is the value added of Florida Jam Company?

$1.25

Given the data in the table above, what is the value of real GDP in 2006?

$12, 000

When the firm uses 9 employee-hours, its total labor cost each day is:

$126

In Econland total output is $8 billion, population equals 500,000 people, and, of these, 400,000 are employed workers. Output per person in Econland equals _______ and average labor productivity equals ______.

$16,000; $20,000

An economy produces only 1,000,000 computers valued at $2,000 each. Of these, 200,000 are sold to consumers, 300,000 are sold to businesses, 300,000 are sold to the government, and 100,000 are sold abroad. No computers are imported. At the end of the year, the computer manufacturers hold the unsold computers in inventory. What is the value of GDP?

$2.0 billion

Bob's Barber Shop cut 3,000 heads of hair in 2014 and 3,100 in 2015. The price of a haircut was $7 in 2014 and $8 in 2015. If 2014 is the base year, what was Bob's contribution to nominal GDP in 2015?

$24,800

An economy produces only 500,000 tables valued at $100 each. Of these, 100,000 are sold to consumers, 200,000 are sold to businesses, 100,000 are sold to the government, and 50,000 are sold abroad. No tables are imported. At the end of the year, the table manufacturers hold the unsold tables in inventory. What is the value of the investment component of GDP?

$25 million

The country of Northland produced $1,000 billion of output in one year. The population of Northland was 50 million, of whom 30 million were employed. What was average labor productivity in Northland?

$33,333

At a price of $2, the total expenditure on lattes each hour equals:

$60.

If a pizza maker pays $1 for tomatoes, $1 for cheese, $2 for sausage, and sells the pizza made with these ingredients for $7, then each pizza sold contributes how much to GDP?

$7

A second hour cleaning windows will yield additional earnings of ______

$8

The marginal cost of the 4th unit of activity is:

$8

Suppose that the total expenditures for a typical household in 2010 equaled $5,500 per month, while the cost of purchasing exactly the same items in 2015 was $6,875. If 2010 is the base year, the CPI for the year 2015 equals:

1.25

Based on the information in the table, what is the unemployment rate?

10.0%

What is the market demand for shoes when the price is $50 a pair?

11 pairs

Data for an economy show that the unemployment rate is 6 percent, the participation rate 60 percent, and 200 million people 16 years or older are not in the labor force. How many people are unemployed this economy?

18.0 million

What is the price elasticity of demand when the price of rice is $6 per pound?

2

Based on the information in the table, how many people are out of the labor force?

200,000

During a regular semester, there are 500 students on campus. Each student's weekly demand for ice cream is shown above. When the price of ice cream is $2.00 per scoop, those 500 students purchase a total of _____ scoops per week from the student union.

3,000

The CPI in year one equaled 1.45. The CPI in year two equaled 1.51. The rate of inflation between years one and two was ______ percent.

4.1

If Laura and Chris are the only two consumers in this market then at a price of $2.50 per pound, the market demand for hamburger is:

4.5 pounds per week

Suppose the total benefit of watching 1 baseball game is 100, the total benefit of watching 2 games is 120, and the total benefit of watching 3 games is 125. In this case, the marginal benefit of watching the 3rd game is:

5

The price elasticity of demand at point A is:

5/2.

In a country with 200 million people aged 16 years and older, 120 million are in the labor force, and 114 million are employed, what is the participation rate?

60 percent

Which of the following would increase the net export component of U.S. GDP?

A bottle of California wine is purchased in London.

What might cause a demand curve to shift to the right?

An increase in the price of a substitute

A decrease in the price of pizza will lead to a(n):

increase in the quantity of pizza demanded.

Which of the following is NOT a characteristic of a perfectly competitive market?

Each firm in the market sells a somewhat different variant of the good.

Which of the following statement is normative?

Higher taxes are needed to support education.

Which of the following is NOT true of a demand curve?

It reflects sellers' reservations prices.

Moe has a big exam tomorrow. He considered studying this evening, but decided to hang out with Curly instead. If neither activity involves any explicit costs, and Moe always chooses rationally, then it must be true that:

Moe gets more benefit from spending time with Curly than from studying

Which of the following is NOT a characteristic of a market in equilibrium?

Neither buyers nor sellers want the price to change.

You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. Should you go to the concert instead of working Saturday?

No, the benefit of going to the concert is less than the cost

Which of the following best explains why you are more likely to see a poor person than a wealthy person picking up aluminum cans to sell?

The opportunity cost of picking up cans is higher for wealthy people than for poor people.

Which of the following determines whether a firm will earn higher revenues when it raises its price?

The price elasticity of demand

Suppose all the sellers in this market started out charging a price of $45 per unit. What is the most likely result?

They would lower their prices because at $45 there would be excess supply.

Suppose that the total production of an economy consists of 10 oranges and 5 candy bars, each orange sells for $0.20, and each candy bar sells for $1.00. Which expression of the output of this economy is most consistent with the concept of GDP?

This economy produces $7.00 worth of food.

If the elasticity of demand for the latest American Idol album is 1.4, this means

a 5% increase in the price leads to a 7% decrease in quantity demanded.

"As the price of personal computers continues to fall, demand increases." This headline is inaccurate because:

a falling price of personal computers increases the quantity demanded, not demand.

Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is:

an economic problem because Chris has only one hour, and engaging in one activity means giving up the other.

At a price of $9, there will be:

an excess supply of 5 units.

If the income elasticity for a particular good is negative, then:

as income increases, consumers will tend to purchase less of the good.

When a slice of pizza at the student union sold for $2, Moe did not purchase any. When the price fell to $1.75, Moe purchased a slice each day for lunch. Thus, we can infer that Moe's reservation price for a slice of pizza is:

at least $1.75 but less than $2.

Equilibrium price and quantity are determined by:

both supply and demand.

Investment spending includes spending on:

capital goods, residential housing, and changes in inventories.

If the cross-price elasticity of demand between blueberries and yogurt is negative, then the two goods are:

complements.

The four components of aggregate expenditures are:

consumption, investment, government spending, and net exports.

The supply curve illustrates that firms:

increase the quantity supplied of a good when its price rises.

If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:

elastic.

To increase total revenue, firms with ______ demand should lower price, and firms with ______ demand should increase price.

elastic; inelastic

Suppose that when the price of broccoli is $4 per pound, buyers wish to buy 500 pounds per day and sellers wish to sell 800 pounds per day. In this case:

excess supply will lead the price of broccoli to fall

If the price is $4 today and there is no change in either supply or demand, one would expect the price in the future to be:

greater than $4.

The market value of final goods and services produced within a country during a period of time is called:

gross domestic product.

If Laura and Chris are the only two consumers in this market, then when the price of hamburger decreases from $2.50 to $2.00 per pound, the quantity demanded in the market will ______ by ______ pound(s) per week.

increase; 1.5

Pepsi One is a close substitute for Diet Coke. When Pepsi introduced Pepsi One, the price elasticity of demand for Diet Coke ______ and Coke's ability to raise revenues through price increases ______.

increased; was reduced

If an increase in income leads to a decrease in the demand for ground beef, then ground beef is a(n):

inferior good

The value of unpaid childcare services provided by a stay-at-home dad ______ included in GDP; the value of daycare services purchased from a licensed childcare provider ______ included in GDP.

is not; is

The Cost-Benefit Principle indicates that an action should be taken if, and only if:

its benefits exceed its costs.

At P = 8 and Q = 4, D1 is ______ elastic than D2, which is shown graphically as D1 being _____ D2.

less; steeper than

The cross-price elasticity of demand between two goods that are substitutes can never be:

negative.

If the demand for salad dressing increases when the price of lettuce decreases, the crossprice elasticity of demand between salad dressing and lettuce will be ______ because these two goods are ______.

negative; complements

If the demand curve for a good is a vertical line at Q = 1, then a decrease in the price of that good will:

not change the quantity demanded.

The standard of living in an economy is best measured by:

output per person.

When the price of insulin is $10, consumers demand 100 units; when the price is $15, consumers demand 100 units; and when the price is $20, consumers demand 100 units. Based on this information, the demand for insulin is:

perfectly inelastic

"U.S. exports will increase as a result of joined CAFTA," is an example of a ______ statement, while "The U.S. should join CAFTA," is an example of a _____ statement.

positive; normative

Macroeconomic policies are government policies designed to affect:

the performance of the economy as a whole.

An increase in the quantity of tea demanded occurs if:

the price of the tea falls

In surveying their alumni, State U's economics department discovered that ramen noodle consumption declined once students graduated and found jobs. One conclusion the survey team might draw from this result is that:

ramen noodles are an inferior good.

If total output increases from $1 trillion to $2 trillion as population increases from 100 million to 200 million, then output per person:

remains constant.

Suppose one knows two facts: first, the market for prescription drugs experiences chronic shortages and second, the government sets the price for prescription drugs. One can conclude that the government has:

set the price below the equilibrium price

Government purchases include all of the following except:

social security benefits paid by the federal government.

If the demand for olives falls when the price of cheese falls, then we know that cheese and olives are:

substitutes

In general, when the price of a variable factor of production increases:

the profit-maximizing level of output falls.

In the United States decisions to increase interest rates are made by the _____ and decisions to increase taxes are made by ____.

the Federal Reserve; Congress

The field of macroeconomics developed when economists looked for causes of:

the Great Depression

A CPI that equals 1.34 in 2008 (when 2000 is the base year) means that:

the average level of prices is 34 percent higher in 2008 than in the base year.

According to the Cost-Benefit Principle, you should go see the latest Star Wars movie with your friends this week-end if:

the benefits of seeing the movie are greater than the costs of seeing the movie

Suppose that if the price of plane tickets increased, more people would choose to travel by train. If this happened, you would know that:

the cross-price elasticity between plane tickets and train tickets is positive.

When Joe's Gas raises its price for regular unleaded gasoline, total revenue from regular unleaded gas falls to zero. It must be the case that

the demand for Joe's regular unleaded gasoline is perfectly elastic.

The economic surplus of an action is:

the difference between the benefit and the cost of taking an action.

You can spend $10 for lunch and you would like to purchase two cheeseburgers. When you get to the restaurant, you find out the price for cheeseburger has increased from $5 to $6, so you decide to purchase just one cheeseburger. This is best described as:

the income effect of a price change.

The opportunity cost of an activity includes the value of:

the next-best alternative that must be foregone.

Alex received a four-year scholarship to State U. that covered tuition and fees, room and board, and books and supplies. If Alex becomes a full-time student, then:

the opportunity cost of attending State U. includes the money Alex could have earned working for four years.