Econ Mid term
____ 1. Demand curve ____ 2. Quantity demanded ____ 3. Consumer surplus ____ 4. Total consumer surplus A The quantity that buyers are willing and able to buy at a particular price B Measured by the area beneath the demand curve and above the price C The consumer's gain from exchange, or the difference between the maximum price a consumer is willing to pay for a certain quantity and the market price D A function that shows the quantity demanded at different prices
1. D 2. A 3. C 4. B
Trade (exchange) may occur in the absence of production in either of these scenarios:
1.Two individuals have different endowments and the same preferences (tastes). 2.Two individuals have different preferences (tastes) and the same endowments.
____ 13. Surplus ____ 14. Shortage ____ 15. Equilibrium price ____ 16. Equilibrium quantity M A situation in which the quantity demanded is greater than the quantity supplied N The quantity at which the quantity demanded is equal to the quantity supplied O The price at which the quantity demanded is equal to the quantity supplied P A situation in which the quantity supplied is greater than the quantity demanded
13. P 14. M 15. O 16. N
5. Normal good ____ 6. Inferior good ____ 7. Substitutes ____ 8. Complements E A decrease in the price of one good leads to a decrease in demand for the other good F A good for which demand decreases when income increases G A decrease in the price of one good leads to an increase in demand for the other good H A good for which demand increases when income increases
5. H 6. F 7. E 8. G
____ 9. Supply curve ____ 10. Quantity supplied ____ 11. Producer surplus ____ 12. Total producer surplus I The amount of a good that sellers are willing and able to sell at a particular price J The producer's gain from exchange, or the difference between the market price and the minimum price at which a producer would be willing to sell a particular quantity K A function that shows the quantity supplied at different prices L Measured by the area above the supply curve and below the price
9. K 10. I 11. J 12. L
Assume two countries (A and B), each of which can produce two goods (gizmos and widgets). Which statement below is FALSE? A If country A enjoys an absolute advantage in the production of both goods, there cannot be scope for international specialization and exchange B If country A has a comparative advantage in the production of gizmos, it follows that country B has a comparative advantage in the production of widgets.
A
Business fluctuations have been a feature of national economies since at least the A industrial revolution B beginning of the twentieth century C the Great Depression of the 1930s
A
Economic growth that occurs as a result of organizational change—like the development of markets and monetization leading to increased specialization and division of labor—is known as A Smithian growth B Promethean growth
A
Economic growth that occurs as the labor force expands but there is no increase in output per capita, is known as A extensive growth B intensive growth
A
If the average level of prices (as measured by a price index) is rising, nominal GDP would A rise faster than real GDP B rise slower than real GDP C fall
A
If the purchasing power of money rose, the average level of prices would A fall B rise
A
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. Who has an absolute advantage in picking apples? A Amy B Bob C neither D both
A
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. Choose the correct statement below. A Although Amy is faster than Bob in picking apples and picking grapes, there is scope for specialization and exchange. B Since Amy is faster than Bob in picking apples and picking grapes, there can never be any scope for specialization and exchange
A
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. If Amy spends part of her day picking grapes for Bob and Bob spends part of his day picking apples for Amy, A both might be better off B both could never be better off
A
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. Who has a comparative advantage in picking grapes? A Amy B Bob C neither D both
A
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. Who has an absolute advantage in picking grapes? A Amy B Bob C neither D both
A
Which statement below is FALSE? A A supply curve slopes downward from left to right. B As price rises, quantity supplied increases. C The market supply curve is found by adding horizontally the individual supply curves.
A
Which statement below is FALSE? A. A country's population cannot produce within that country's domestic production possibilities frontier. B A country's population cannot produce beyond that country's domestic production possibilities frontier. C International trade enables a country's population to consume beyond that country's domestic production possibilities frontier.
A
Which statement below is TRUE? A Net exports equal the foreign purchases of domestically produced goods minus the domestic purchases of foreign goods. B Net exports are positive when the balance of trade is in deficit.
A
Consider the dynamic version of the quantity theory of money. Which variables are exogenous? (Choose one or more.) A The rate of change of the stock of money. B The rate of change of the demand to hold money. C The rate of change of the (exchange) value of money. D The rate of change of the purchasing power of money. E The inflation rate.
A and B
Consider the simple quantity theory of money. Which variables are exogenous? (Choose one or more.) A The stock of money. B The demand to hold money. C The (exchange) value of money. D The purchasing power of money. E The average level of prices
A and B
Which statements below are TRUE? (Choose one or more.) A Adam Smith's account of the division of labor illustrates the inductive method. B David Ricardo's explanation of comparative cost illustrates the deductive method. C Neither statement is true
A and B
Which statements below are TRUE? (Choose one or more.) A At the time that Adam Smith wrote The Wealth of Nations (1776) his views would have been regarded as heterodox. B In the nineteenth century classical political economy was the ruling orthodoxy until the 1870s. C Neither statement is true
A and B
In An Essay on the History of Civil Society (1767), Adam Ferguson famously wrote that "Every step and every movement of the multitude, even in what are termed enlightened ages, are made with equal blindness to the future; and nations stumble upon establishments, which are indeed the result of human action, but not the execution of any human design." Here are four examples of what Ferguson would have called "establishments." Which are "the result of human action, but not the execution of any human design"? (Choose one or more.) A the English language B correctly shelved books in a public library C the schedule of trains on the BART system D the free market E None of the above.
A and D
Business fluctuations are sometimes known as (choose one or more) A business cycles B trade cycles C economic fluctuations
A, B, C
Which statements about business fluctuations are true? (Choose one or more.) A Business fluctuations are irregular. B Business fluctuations are unpredictable. C Recessions are characterized by falling output and employment. D Generally speaking, recoveries last longer than recessions.
A, B, C, D
Economic growth in output per capita, is known as A extensive growth B intensive growth
B
Economic growth that occurs as a result of a growth in the stock of capital per worker likely accompanied by technological innovation, is known as A Smithian growth B Promethean growth
B
If the average level of prices (as measured by a price index) is falling, nominal GDP would A rise B fall faster than real GDP C fall slower than real GDP
B
If the demand to hold money increased, the (exchange) value of money would A fall B rise
B
If the supply of money increased, the average level of prices would A fall B rise
B
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. If Amy spends part of her day picking apples for Bob and Bob spends part of his day picking grapes for Amy, A both might be better off B both could never be better off
B
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. Who has a comparative advantage in picking apples? A Amy B Bob C neither D both
B
The first country or region to experience the Industrial Revolution was A Belgium and northeastern France in the early nineteenth century B Britain in the second half of the eighteenth century C the United States in the early nineteenth century
B
Which statement below is FALSE? A.Macroeconomics looks at topics like economic growth, money, and the business cycle. B. An analysis of how raising the California sales tax affects the price and output of restaurant meals is principally a topic in macroeconomics. C. Microeconomics looks at topics like consumer behavior and industrial organization.
B
Which statement below is TRUE? (Choose one.) A Changes in endogenous variables are used to explain changes in exogenous variables. B Changes in exogenous variables are used to explain changes in endogenous variables.
B
Which statement below is TRUE? A Government purchases do not include spending on goods and services by local and state governments. B Government purchases do not include unemployment benefits to those actively seeking work. C Government purchases do not include expenditure on diplomatic representation abroad because embassies are located outside of the United States.
B TRUE. Unemployment benefits are a transfer payment and are not paid to labor for its contribution to the current production of goods and services.
Which statement below is TRUE? A Consumption is spending by households on goods and services, and includes purchases of new housing. B Consumption is spending by households on goods and services, and excludes purchases of new housing C Consumption is spending by households on goods and services, and excludes purchases of new housing and consumer durables.
B. Consumption includes household purchases of new consumer durables, which are regarded as consumed in the quarter in which they are purchased. Consumption also includes household purchases of housing services, both the rents paid for the accommodation provided by landlords and the imputed rental value of owner-occupied accommodation. TRUE by definition
If the demand curve were to shift to the left and cause the price to fall, the fall in price would A increase the total producer surplus received by sellers of the good B not change the total producer surplus received by sellers of the good C reduce the total producer surplus received by sellers of the good
C
If the supply curve were to shift to the left and cause the price to rise, the rise in price would A increase the total consumer surplus received by buyers of the good B not change the total consumer surplus received by buyers of the good C reduce the total consumer surplus received by buyers of the good
C
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. What is Amy's opportunity cost of picking one basket of apples? A three baskets of grapes B two baskets of grapes C one-and-a-half baskets of grapes D two-thirds of a basket of grapes E one basket of grapes
C
International specialization and trade may be explained with reference to A. a difference in comparative advantage between countries B. the existence of increasing returns in production C. both A and B
C
What is the likely outcome if the instructor were to offer a graded quiz at the beginning of class? Every student in the class would arrive promptly. Fewer students in the class would arrive promptly. More students in the class would arrive promptly. There would be no change in student arrival times.
C
Which is the most volatile category of spending? A consumption B government purchases C investment
C
Which statement below is FALSE? A A demand curve slopes downward from left to right. B As price falls, quantity demanded increases. C The market demand curve is found by adding vertically the individual demand curves.
C
Which statement below is unambiguously a normative statement? Cutting income tax rates for high earners would lower tax revenues. Cutting income tax rates for high earners would encourage them to work harder and would raise tax revenues. High earners deserve to keep more of what they earn.
C
f the average level of prices (as measured by a price index) is rising, nominal GDP would A rise B fall C either A or B
C
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. What is Amy's opportunity cost of picking one basket of grapes? A three baskets of apples B two baskets of apples C one-and-a-half baskets of apples D two-thirds of a basket of apples E one basket of apples
D
What is the opportunity cost of your decision to take this quiz? A. The feeling of relief you will experience when you finish this quiz. B. The grade you will receive from taking this course. C. The score you will receive as a result of taking this quiz. D. What you would have done if you hadn't taken this quiz. E. What you would have done if you weren't registered for this course.
D
Which statement below is TRUE? A Investment is spending on capital equipment. B Investment is spending on capital equipment and inventories. C Investment is spending on capital equipment, inventories, and structures by firms. D Investment is spending on capital equipment, inventories, and structures, and includes purchases of new housing by firms and households.
D
If the average level of prices (as measured by a price index) is falling, nominal GDP would A rise faster than real GDP B rise slower than real GDP C fall D either A or B E either B or C
E
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. What is Bob's opportunity cost of picking one basket of apples? A three baskets of grapes B two baskets of grapes C one-and-a-half baskets of grapes D two-thirds of a basket of grapes E one basket of grapes
E
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. What is Bob's opportunity cost of picking one basket of grapes? A three baskets of apples B two baskets of apples C one-and-a-half baskets of apples D two-thirds of a basket of apples E one basket of apples
E
If an input price rises, the supply curve shifts to the right
False
If consumers regard Mercedes and BMWs as close substitutes and the price of BMWs rises, the demand curve for Mercedes shifts to the left.
False
If income falls, the demand curve for a normal good shifts to the right.
False
International specialization and trade enables a country's population to produce beyond that country's domestic production possibilities frontier.
False
Now assume that Amy has gotten better at picking apples so that in an hour she can pick either three baskets of apples or three baskets of grapes. And assume that Bob has gotten better at both activities so that in an hour he can either pick either two baskets of apples or two baskets of grapes. Here are three statements, each of which may be true or false. Identify the correct statement(s). A Amy and Bob will continue to specialize and trade to mutual advantage. B Amy is better off than she was before. C Bob is better off than he was before. 1.False 2.A 3.B 4.C
False, C, B
1. Gross domestic product (GDP) 2. GDP per capita 3. Gross national product (GNP) 4. Nominal variables 5. Real variables 6. Recession 7. Business fluctuations (business cycles) 8. Consumption 9. Investment 10. Government purchases 11. Net exports A. A significant, widespread decline in real GDP and employment B Private spending on tools, plant, and equipment used to produce future output C Short-run movements in real GDP around its long-term trend D The value of exports minus the value of imports E Spending by all levels of government on finished goods and services F The market value of all finished goods and services produced by a country's residents, wherever located, in a year G Private spending on finished goods and services H These variables have not been adjusted for changes in prices I GDP divided by population J The market value of all finished goods and services produced within a country in a year K These variables have been adjusted for changes in prices by using the same set of prices in all time periods
J, I, F, H, K, A, C, G, B, E, D
The division of economics into macroeconomics and microeconomics occurred as the consequence of the
Keynesian revolution of the 1930s and 1940s
Comparative advantage may explain specialization and trade.
True
If buyers expect the price to fall next period, they would be willing to buy fewer units at each price in the current period and the demand curve shifts to the left.
True
If buyers expect the price to rise next period, they would be willing to buy more units at each price in the current period and the demand curve shifts to the right.
True
If consumers regard cars and gas as complements and the price of gas rises, the demand curve for cars shifts to the left.
True
If productive capacity is destroyed in a war, the supply curve shifts to the left
True
If sellers expect the price to fall next period, they would be willing to sell more units at each price in the current period and the supply curve shifts to the right.
True
If sellers expect the price to rise next period, they would be willing to sell fewer units at each price in the current period and the supply curve shifts to the left.
True
International specialization and trade enables a country's population to consume beyond that country's domestic production possibilities frontier.
True
Which name explicitly recognizes the importance of markets
catallactics
If one economy has an absolute advantage in the production of both goods
each economy specializes in the production of the good in which it has a comparative advantage, output of both goods would increase.
comparative advantage
if the opportunity cost of producing one good in terms of the other good differs between two countries, there is a basis for specialization and trade.
If each economy has an absolute advantage in the production of one or other good
it specializes in the production of the good in which it has a comparative advantage, output of both goods would increase.
According to Professor Lionel Robbins, an economic problem would arise if there exist
limited means that can be applied to more than one end together with multiple ends that can be ranked in order of importance
From the second half of the eighteenth century until the beginning of the twentieth century, which was the most popular name in English to describe what today we study as economics?
political economy
Almost all trade (exchange) occurs as a result of
specialization.
absolute advantage
the same amount of human effort—produces more in one location than in another.
In the course of two hundred years economics has changed its focus from
the study of wealth to the study of purposeful human action
If a new technology is adopted, the supply curve shifts to the right
true
If income rises, the demand curve for an inferior good shifts to the left.
true
Only where one economy has proportionately the same absolute advantage in the production of both goods and thus the slopes of the two PPFs are identical
would there be no differences in comparative advantage and therefore no scope to raise output through specialization and trade.