ECON

What do economists means by market equilibrium?

A market outcome where quantity is equal to quantity demanded.

What do economics mean when they use the Latin expression ceteris paribus?

All else equal

Even if GDP included these types of production, why would it still be an imperfect measure of economic well-being?

All of the above

How does real GDP deal with the problem inflation causes with nominal GDP?

All of the above

Why in microeconomics can we measure production in terms of quantity, but in macroeconomics we measure production in terms of market value?

All of the above

From the list below, select the variable that will cause the demand curve to shift:

Consumer income

What are the four major components of expenditures in GDP?

Consumption, Investment, Government Purchases, and Net Exports.

Scarcity is central to the study of economics because it implies that

Every choice involves an opportunity cost

In the circular flow of expenditure and income, why must the total value of production in an economy equal the total value of income?

Every penny spent on a good or service must end up as someone's income.

Indicate whether each of the following is a final good, an intermediate good, or neither. A new home purchased by a family

Final good

Indicate whether each of the following is a final good, an intermediate good, or neither. A new pick-up truck purchased by a consumer

Final good

How is the GDP deflator calculated?

GDP deflator= (nominal GDP/ real GDP) x 100

Why is GDP an imperfect measurement of total production in the economy?

GDP does not include household production or production from the underground economy.

how does the size of a country's GDP affect the quality of life of the country's people?

Generally, the more goods and services people have, the better off they are.

GDP is an imperfect measure of economic well-being because it fails to measure what types of production?

Household production and the underground economy.

Scarcity implies that every society and every individual face trade-offs because scarcity means that

Human wants are greater than what available resources can produce

Indicate whether each of the following is a final good, an intermediate good, or neither. Coffee beans purchased by a coffee shop

Intermediate good

If the U.S. Bureau of Economic Analysis (BEA) added up the values of every good and service sold during the year, would the total be larger or smaller than measured gross domestic product (GDP)?

Larger: The value of all goods and services sold would include intermediate goods.

When economics develop models designed to explain the choices people make, they generally assume that

People are rational

Which of the following statements about the consumption component of GDP is not correct?

Spending on services is smaller than the amount of consumption spending on durable and nondurable goods.

From the list below, select the variable that will cause the supply curve to shift:

The cost of raw materials

Opportunity cost is

The highest valued alternative that must be give up to engage in an activity.

What is the difference between the value of a firm's final product and the value added by the firm to the final product?

The value of a firm's final product is the sale price; value added is the difference between the sale price and the price of intermediate goods.

Which of the following best describes scarcity?

Unlimited wants exceeds the limited resources available

Which equation represents the relationships between GDP and the four major expenditure components?

Y=C+I+G+NX

When the price of Microsoft stock is increased more than 27 percent in the first part of 2013, Bill Gates, who owns 436 million shares of Microsoft stock, once again became the worlds richest man. Does Bill Gates, the richest person in the world, face scarcity?

Yes

Is the value of intermediate goods and services produced during the year included in GDP? For example, is aluminum used to produce a new mountain bike included in GDP?

Yes. The value of the aluminum is not directly counted in GDP, but the production of aluminum is included in the value-added method of measuring GDP.

A recession occurs when an economy experiences a period in which there is

a decrease in total production

Productive efficiency means that

a good or service is produced at the lowest possible cost.

"When there is a shortage of a good ____________. the process continues until the market is finally in equilibrium."

consumers compete against one another by bidding the price upward.

Allocative efficiency means that

every good or service is produced up to the point where marginal benefit is equal to marginal cost.

Inventories are part of investment and therefore included in GDP because

firms produce goods, however sometimes the goods may be unsold at the time GDP is computed.

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

marginal benefit equals marginal cost

Indicate whether each of the following is a final good, an intermediate good, or neither. One share of Google Stock

neither

Consumer and producer surplus measure the _____ benefit rather than the _____ benefit.

net; total

"Rent controls, government farm programs, and other price ceilings and price floors are bad." This is an example of a

normative statement. The statement is concerned with what should be.

When the government imposes price floor or price ceilings,

some people win, some people lose, and there is a loss of economic efficiency.

Tax incidence is

the actual division of the burden of a tax between buyers and sellers in a market.

GDP is

the market value of all final goods and services produced in a country during a period of time.

Economics assume that people are rational in the sense that

they use all available information as they take actions intended to achieve their goals

A business cycle exists because

total production experiences periods of increases and periods of decreases.

Transfer payments are not included in GDP calculations because

transfer payments are simply transfers of income from one group to another and not a purchase of a new good or service.

why does inflation make nominal GDP a poor measure of the increase in total production from one year to the next?

when nominal GDP increases from year to year, the increase is due partly to changes in quantities.

Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational?

when we assume the managers at microsoft have used all available information and have weighed all known benefits and costs, we are assuming rationality.