Econ HW 2

(Table: Labor and Output) Look at the table Labor and Output. From the table, the marginal product of the fifth worker is

4

Rachel agrees to lend Phoebe $100 for six months and charges her interest of 2 percent. At the end of the six-month period, prices have risen by 4 percent.

Purchasing power has been redistributed to Phoebe.

For the purpose of our class, "scarcity rent" can be defined as

The amount a seller can charge for a good, over and above his cost of producing it.

Which retail operation would have the highest costs per book sold?

a small independent bookstore

Which of the following groups would most likely be harmed by inflation?

retirees.

The economic benefits of owning a home are greater when home prices are

rising and interest rates are low.

Older people often reminisce about the "good old days" when prices were much lower. This is misplaced nostalgia primarily because in the "good old days,"

wages were much lower also.

The rate of interest written on a contract between a borrower and lender is the

nominal interest rate.

GDP equals hours of work times

output per hour.

In the 60 minute Story "The Price of Oil" Steve Croft argues that the sudden rise in the price of oil was NOT due to supply and demand. This statement is . . .

False, because the opportunity to profit by re-selling the oil at a later time increased buyers' demand for it.

Which of the following services have experienced declines in relative prices due to productivity increases?

Internet access services

If the price of pizzas has risen from $4 to $5 at the same time that the price of an hour of spinning class has risen from $20 to $30, then

aerobics' classes have become relatively more expensive.

Combining various good and services into a convenient grouping is called

aggregation

Last year your job at the university cafeteria paid you $9 an hour and the price of a ten-minute long distance call to your girlfriend in California was $4. This year your cafeteria job pays $9.90 per hour and then ten-minute phone call now costs $4.10. You are clearly

better off because the phone call costs less work.

In economics, aggregation refers to

combining many markets into one overall economy

The idea of diminishing returns to an input in production suggests that if a local college adds more custodians, the marginal product of labor for the custodial staff will

decrease

If the population increase in India is smaller than the increase in Indian real GDP, then GDP per capita will

increase.

If Marie Marionettes is operating under conditions of diminishing marginal product, the marginal costs will be

increasing

The growth rate of potential GDP is the sum of the growth rates of

labor force and labor productivity.

Potential GDP is an estimate of the economy's ability to produce goods and services if the

labor force is fully employed.

The growth rate of potential GDP is the sum of two other growth rates. These other growth rates are

labor input and labor productivity.

If the capital stock increases, then the economy can produce ______ output with the _______ amount of labor.

more, same.

Americans viewed 12 percent mortgage interest rates of the 1980s as exorbitantly high while they considered the 7 percent mortgage interest rates of the late 1990s as reasonable. This represents confusion of

real versus nominal interest rates.

If aggregate demand shifts inward, with aggregate supply held constant, the economy should experience

recession

If a Florida strawberry wholesaler operates in a perfectly competitive market, that wholesaler will have a ________ share of the market, and consumers will consider her strawberries to be _______. Therefore, _________ advertising will take place in this market.

small; standardized (commodity); little, if any

GDP per capita is the best measure of an economy's

standard of living.

Perfect competition is characterized by

the inability of any one firm to influence price

If two firms are identical in all respects except that one has more capital than another, the marginal product curve for the firm with more capital

will lie above the marginal product curve for the firm with less capital.