MIDTERM 2

The Market for Notebooks. Assume that S and D are the domestic supply and demand curves and that the world price is PW. Identify the area of deadweight loss when a tariff raises the domestic price from the world price to PT.

D+F

In 1971, when the consumer price index was 40.48, women earned a median income of $2,408 per year. If the consumer price index in 2012 was 229.6, how much was $2,408 in 2012 dollars?

b. $13,658

The number of persons in the labor force is _____ million.

b. 32

You open an investment account that earns a nominal interest rate of 3.1% per year. The current consumerprice index is 205. In one year, the consumer price index is expected to go to 203. What is your expected realrate of return?

b. 4.08%

Corinne is offered a job with a salary of $70,000, which she turns down to start her own business. She uses$20,000 of her own savings to help start the business, savings that had been providing her a return of $1,000 peryear. Over her first year in business, Corinne collects total revenue of $180,000 and must cover explicit costs of$105,000. During her first year in business, Corinne's accounting profit is _____, and her economic profit is_____.

b. 75,000; 4,000

Use Figure: The ProfitMaximizing Output and Price in the Diamond Market. Assume that there are no fixed costs and that AC = MC = $200. The profit-maximizing output for a monopolist is:

b. 8

You have four friends. Which of your friends can be described as "frictionally unemployed"? a. Mona, who recently went on medical leave from her work b. Davis, who wants to work as an automation engineer but finds that he is required to get additional certification to qualify for available automation engineer jobs c. Francis, who works part-time at the skating rink until he finishes his training as a snake handler d. Melia, who is has been looking for work for nine months but now believes that there are no jobs available

b. Davis

Entry by firms into an industry is shown by

b. each individual firm's demand curve shift to the left and become flattened.

5. When a firm buys a new machine for its business, it is considered to be:

b. investment spending.

If the frictional rate of unemployment is 1%, the structural rate of unemployment is 2.1%, and the totalunemployment rate is 7%, then we can conclude that:

b. the equilibrium rate is 3.1%

Shoe-leather costs are the costs of:

b. the increased number of transactions when inflation is high

Use Figure: The Profit-Maximizing Output and Price in the Diamond Market. Assume that there are nofixed costs and that AC = MC = $200. The profit-maximizing output for a monopolist is ______, and the profit-maximizing price is _______:

b.8;600

Consider the data shown in the table. Assume that the economy produces only frozen fish. What is the growthrate of real GDP between the two years?

c. 5%

An improvement in technology, with everything else remaining unchanged, is shown in the diagram below

c. B to C

Pedro attends a university that provides antivirus software to all students, faculty, and staff for their personalcomputers as well as all university-owned computers. Why would the university pay for the protection of thepersonal computers of students, faculty, and staff?

c. It reduces the number of viruses on university-owned computers by reducing the probability thatviruses will spread through files transferred from personal computers to university-owned computersand systems

Pedro attends a university that provides antivirus software to all students, faculty, and staff for their personalcomputers as well as all university-owned computers. Why would the university pay for the protection of thepersonal computers of students, faculty, and staff?

c. It reduces the number of viruses on university-owned computers by reducing the probability thatviruses will spread through files transferred from personal computers to university-owned computersand systems.

Which of the following is NOT an example of a corrective tax or subsidy used to address an externality problem?

c. Marlo's customers have been bothered by the noisy, midday deliveries at the business next door. Shearranges to cover part of the delivery costs in order to have the neighbor's deliveries arrive early inthe morning rather than at midday

External benefits are generated by garden supplies that are used to beautify gardens and yards inneighborhoods. In equilibrium, the market will:

c. price garden supplies at less than the marginal social benefit.

In the circular flow diagram, households:

c. supply resources

According to the figure below, if there is international trade in this market, and the world price of a pair of pants is $40, the value of the consumer surplus is:

d. $1,250,000.

Which of the following diagrams represents the demand andaverage cost curves of a firm in the long run, given free entry and exit?

d. Firm D

What is a progressive tax system?

d. It is a system where those with more income pay a higher share of their income in taxes than thosewith lower incomes

You make some new friends at a party. Which of your new friends described here is unemployed?

d. Melinda, who was recently laid off

According to diminishing marginal utility, which of the following people would gain the highest marginalbenefit from an extra $100 of income?

d. Seru, a single father of three young children with an annual household income of $19,000

You own an orange juice stand in a competitive market, and so you are a price-taking firm. Which eventwould MOST likely increase your market power?

d. You acquire exclusive rights to harvest oranges from all domestic citrus orchards.

Most U.S. grocery stores sell a variety of boxed breakfast cereals. This observation indicates that the boxedbreakfast cereal market is

d. a monopoloistically competitive market

The graph shows the marginal social cost, demand, and supply curves in the soda market. In this market, thesocially optimal output is _____, and the market-determined output is _____. Suppose the government impose asugar tax on soda, this corrective tax should be ______ dollars per unit of soda.

d. eight; 12; 2

Which price measure indicates changes in the cost of a market basket containing raw commodities such as steel, electricity, and coal?

d. the producer price index

Consider the labor market shown here. If an efficiency wage of $45 is instituted, the number of workers who are:

d. willing to work will rise by 10,000.

16. Economists observe that the official unemployment rate can understate the true level of unemployment because it only includes:

d. workers without jobs who have looked for work in the past four weeks.

Which item would NOT be included in GDP for 2019?

d. your purchase of your neighbor's 2015 Toyota

The socially optimal outcome is the outcome that:

a. is most efficent for society as whole, including buyers, sellers, and bystanders.

The catch-up effect would be largest in an economy where:

a. the initial level of capital is low

WinSun, a Chinese firm, began producing 3-D printed houses in late 2013. These houses were produced in afraction of the time it would take to produce a house in the regular way and at a much lower cost. This is anexample of:

a. an advance in technology leading to a rise in productivity

According to the figure, if there is international trade in this market, and theworld price of televisions is $400:

a. domestic consumers will import 60,000 units

Rahul owns a salmon farm with market power in Washington. Rahul's optimal output occurs where marginal revenue _____ marginal cost. Because of monopoly power, Rahul's supply curve _____.

a. equals; does not exist

If the consumer price index changes from 120 to 125 between December 2018 and December 2019, the

a. inflation rate for 2010 is 4.2%.

The construction of new housing is considered part of:

a. investment spending

Jillian runs a cupcake shop where she sells cupcakes for $1 each. She employs five people, each of whomworked a total of 500 hours last year; she paid them $10 per hour. Her costs of equipment and raw materials addup to $75,000. Her business ability is legendary, and other companies have offered to pay Jillian $100,000 tocome to work for them. She also knows she could sell her cupcake shop for $150,000. The bank in town pays anannual interest rate of 3% on all funds deposited with it.

a. $100,000.

The graph shows the marginal social cost, demand, and supply curves in the cinnamon roll market. A corrective Page 3 tax of _____ per unit will move the cinnamon roll market to the socially optimal output of _____ units.

a. $4, 4

The aggregate production function Y = f(L, H, K) shows that economic growth can occur if:(i) the government provides free college education.(ii) labor productivity falls.(iii) the capital stock in the country depreciates.(iv) the government removed an existing tax credit on investment

a. (i) only

Use Table: Pizza Economy III. Considering 2018 as the base year, nominal GDP in 2019 was

a. 47,000

If the labor force participation rate is 70%, the unemployment rate is _____.

a. 7.6%

Use Figure: Technological Progress and Productivity Growth. An increase in physical capital per worker, with all other factors remaining unchanged, is BEST indicated by a move from:

a. A to B

____allow a profitable company to maintain profits over time

a. Barriers to entry

Based on the demand curves for four sellers, which of the following firms has theleast market power?

a. Firm A

Which tax is regressive? Arturo pays an 8% tax on the first $9,000 he earns plus _____ tax on any additionalincome

a. a 5%

Which item is NOT included in calculations of GDP?

a. a monthly Social Security payment