Midterm I Answers

The calculation of GDP does not include the value of:

Bridgestone tires purchased by Ford Motor Co

Use Figure: Four Markets for Online Movie Rentals. Which of the graphs shows what may happen in the market for online movie rentals if D1 or S1 is the original curve and D2 or S2 is the new curve and if the cost of buying content for online movie distributors like Apple decreases?

D

Use Figure: The Market for Laptops. Assume that S and D are the domestic supply and demand curves and the world price is Pw. Identify the area of government tax revenue when a tariff raises the domestic price from the world price to Pt.

E

Import tariffs always benefit domestic producers more than the hurt domestic consumers

False

Promotion of employment and growth in the economy as a whole is the focus of:

macroeconomics

A decrease in the price of eggs will result in a(n):

movement along the demand curve for eggs

The study of Economics arises because of the necessity of choice, and the necessity of choice arises because of the fundamental problem of scarcity of resources.

True

Use Figure: The Market for Computers. Assume that Pa is the autarky price and Pw is the world price. Consumer surplus with international trade is area:

W

Which scenario is most likely too increase consumer surplus in the market for cotton T-shirts?

Weather provides for a bountiful cotton harvest

Use Scenario: Countries A and B. If countries A and B both specialize and trade:

country A and country B will gain if they both specialize in the good in which they have a comparative advantage

If supply is upward sloping, a decrease in demand with no change in supply will lead to a(n) _______ in equilibrium quantity and a(n) _____ in equilibrium price.

decrease; decrease

Consider a production possibility frontier for Italy. If in 2016 Italy's resources are not being fully utilized, Italy will be somewhere ... of its production possibility frontier.

inside

Which of the following is sold in the factor market?

labor

Price ceilings will impose costs on society because they:

lead to a smaller quantity offered on the market

Use Figure: The Supply of Online Movie Rentals. A decrease in the price of online movies sold by movie producers to rental outlets like Amazon and Apple would result in a change illustrated by the move from:

n to o in panel A

the total value of all final goods and services produced in a country in a given year, calculated with the prices in the current year in which the output is produced, is:

nominal GDP

Use Figure: Production Possibilities and Circular-Flow Diagram. Assume the two figures represent the same economy. Suppose that in the circular-flow diagram most firms undergo a significant increase in productivity. This results in a significant increase in the output of both coconuts and fish. If all other variable remain unchanged then the adjustment in this economy would be BEST represented in the production possibilities figure by a movement from point A toward:

point D (an outward shift of the entire curve

Investment spending is spending on:

productive physical capital

Corner office es in high-rise office buildings usually cost more to rent than other offices. This best illustrates the Economic concept of:

scarcity

If the economy booms and peoples' incomes rise, then the demand curve for a normal good like new houses will ________ and the equilibrium quantity of new houses produced will ________.

shift to the right; increase

An example of a government transfer is a(n):

social security payment

Use Table: The Market for Chocolate-Covered Peanuts, If the price of peanuts is $.80 there is a monthly:

surplus of 140 bags per month

Use Figure: The Demand and Supply of Wheat. If a price of $10 temporarily exists in this market, a ... or ... bushels per period will result.

surplus; 8000

If countries engage in international trade

they can consume outside their production possibility frontiers

Assume that, in the base year (2011), a country's nominal GDP is $10,000 billion. The country has had 5% inflation each year since 2006. Real GDP of 2011 is equal to:

$10,000 billion

Use Table: Real and Nominal Output. Assuming year 3 is the base year, real output in year 3 is:

$100

Mark and Rasheed are at the bookstore buying new calculators for the semester. Mark is willing to pay $75 and Rasheed is willing to pay $100 for a graphing calculator. The price for a calculator at the bookstore is $65. How much is their total consumer surplus?

$45

In 2011, consumption spending is $7,000, government purchases of goods and services is $2,000, and investment spending is $1,500. If GDP for 2011 is $10,300, exports are...and imports are...

$600, $800

Refer to Figure: A Market in Equilibrium. AT the equilibrium price, this market's consumer surplus is equal to the area:

ADI

___ is considered to be an IOU.

A bond

Which statement is true?

Inflation means an increase in the overall level of prices

If the United States can produce 30 computers for every car it produces and Japan can produce 15 computers for every car it produces, ... has the ... advantage in car production.

Japan; comparative

Use Figure: Shifts in Demand and Supply. The figure shows how supply and demand might shift in response to specific events. Suppose a fall frost destroys one-third of the nations's orange crop. Which panel BEST describes how this will affect the market for vitamin C tablets, which are a substitute in consumption for oranges?

Panel C

Which statement is a positive economic statement?

There has been an increase in the rate of inflation

Which statement is normative?

To improve our economic security, we should reduce our dependence on oil imports.

Between 1980 and 2018, inflation wiped out most of the wage gains of the typical worker.

True

An announcement that smoking will harm your ability to think clearly will most likely result in:

a decrease in the demand of cigarettes

Use Figure: Supply and Demand. A price ceiling of P3 causes:

a shortage equal to the distance DE

The production possibility frontier will shift outward because of:

better technology that improves worker productivity

Suppose oranges and clementines are considered to be substitutes. Holding everything else constant, if the price of oranges increases, then the demand for _____ will _____.

clementines; increase

If the demand for tires goes down when the price of gas goes up, then tires and gas are:

complements

Consumer surplus for an individual buyer is equal to the :

consumers willingness to pay for the good minus the price paid for the good

All else equal, if a price floor above the equilibrium is imposed on a market and the gov't buys the surplus, consumer surplus will ... and producer surplus will ...

fall; rise

Use Figure: A Tariff on Oranges in South Africa. When the gov't imposes a tariff on imported oranges, the price of oranges in South Africa rises from Pw to Pr and domestic surplus ... to ...

falls; F+L

Changing government spending and taxes to affect overall spending is use of ... policy

fiscal

Use of fiscal policy involves changes in:

government spending

If we add up the consumer spending on goods and services, investment spending, government purchases of goods and services, and the value of exports, then subtract the value of imports, we have measured the nation's:

gross domestic product

A high-school graduate who gets a college degree is adding to the economy's stock of:

human capital

Purchases of foreign-produced goods and services are:

imports

Use figure: Strawberries and Submarines II. Suppose the economy is operating at point B. Achieving production at point F would require that the economy:

improve its technology or increase its resources

Along a given downward-sloping demand curve, a decrease in the price of a good will ... consumer surplus.

increase

If workers' nominal wages have risen by 50% over a 10 years and prices have increased by 40% in that same period, then we can safely conclude that the amount of goods and services workers can buy has:

increased

Refer to Figure: The Gains From Trade. When demand increases from D1 to D2, equilibrium total surplus:

increases by $27.50

Use Figure: Strawberries and Submarines. Suppose the economy is operating at point G. This implies that:

the economy has unemployment and/or inefficiently allocates resources

Which item is included in GDP?

the purchase of a ticket to a lady gaga concert