Economics Exam

For what values of XX will Germany export cars and import wine? Check all that apply. 1 2 4

1 & 2

A life-saving medicine without any close substitutes will tend to have:

A small elasticity of demand

Governments may intervene in a market economy in order to

All of the above.

Which of the following might lead to an increase in the equilibrium price of jelly and a decrease in the equilibrium quantity of jelly sold?

An increase in the price of grapes, an input to jelly

You are trying to decide whether to take a vacation. Most of the costs of the vacation (airfare, hotel, and forgone wages) are measured in dollars, but the benefits of the vacation are psychological. How can you compare the benefits to the costs?

Determine the benefits of what you give up by going on the vacation, and compare them to the benefits of going on vacation.

When the Japanese car maker Toyota expands one of its car factories in the United States, what is the likely impact of this event on the gross domestic product and gross national product of the United States?

GDP shows a larger increase than GNP.

Jen values her time at $60 an hour. She spends 2 hours giving Colleen a massage. Colleen was willing to pay as much as $300 for the massage, but they negotiate a price of $200.

In this transaction, consumer surplus is $20 larger than producer surplus.

The demand curve for cookies is downward sloping. When the price of cookies is $2, the quantity demanded is 100. If the price rises to $3, what happens to consumer surplus?

It falls by less than $100.

An American buys a pair of shoes manufactured in Italy. How do the U.S. national income accounts treat the transaction?

Net exports fall, while GDP is unchanged.

You are the curator of a museum. The museum is running short of funds, so you decide to increase revenue. When should you raise the admission price in order to increase revenue?

Only when demand is inelastic

The greater the elasticity of demand, the greater the gains from trade. If demand is perfectly inelastic, there are no gains from trade. If demand is perfectly inelastic, consumers do not benefit from trade.

T,F,F

TRUE OR FALSE: 1. Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods. 2. Certain very talented people have a comparative advantage in everything they do. 3. If a certain trade is good for one person, it can't be good for the other one. 4. If a certain trade is good for one person, it is always good for the other one. 5. If trade is good for a country, it must be good for everyone in the country.

T,F,F,F,F

TRUE OR FALSE It would have been better still for Americans to have made this investment because then they would have received the returns on the investment themselves.

TRUE

Movie tickets and film streaming services are substitutes. If the price of film streaming increases, what happens in the market for movie tickets?

The demand curve shifts to the right.

Which of the following does NOT add to U.S. gross domestic product?

The federal government sends a Social Security check to your grandmother.

What is the opportunity cost of investing in human capital?

The goods or resources that could be produced if not investing in human capital

Even if the tax would raise no revenue, why might Senator Moynihan have proposed it?

To discourage the use of hollow-tipped bullets

Two drivers—Walt and Jessie—each drive up to a gas station. Before looking at the price, each places an order. Walt says, "I'd like 10 gallons of gas." Jessie says, "I'd like $10 worth of gas."

Walt=0 Jessie=1

Suppose that a borrower and a lender agree on the nominal interest rate to be paid on a loan. Then inflation turns out to be higher than they both expected. The real interest rate on this loan is_________ than expected.

lower

If England and Scotland decide to trade, Scotland will trade________ to England.

sweaters

If the price of the iPhone had been $500, her consumer surplus would have been_________

$0

A friend of yours is considering two cell phone service providers. Provider A charges $120 per month for the service regardless of the number of phone calls made. Provider B does not have a fixed service fee but instead charges $1 per minute for calls. Your friend's monthly demand for minutes of calling is given by the equation QD=150−50PQD=150−50P , where PP is the price of a minute. With Provider A, the cost of an extra minute is__________. With Provider B, the cost of an extra minute is___________.

$0 $1

Sofia pays Sam $50 to mow her lawn every week. When the government levies a mowing tax of $10 on Sam, he raises his price to $60. Sofia continues to hire him at the higher price.What is the change in producer surplus, change in consumer surplus, and deadweight loss?

$0,-$10,$0

Given your friend's demand for minutes and the cost of an extra minute with each provider, your friend would talk for___________minutes with Provider A and________minutes with Provider B.

$150 $100

Suppose that you were born in 1995. Also, suppose that your mother received a $100 baby shower gift at your birth. How much would it cost to buy a similar amount of goods and services in 2015 given that the CPI was 152.4 in 1995 and 237.0 in 2015?

$155.51

A farmer grows wheat, which she sells to a miller for $100. The miller turns the wheat into flour, which she sells to a baker for $150. The baker turns the wheat into bread, which she sells to consumers for $180. Consumers eat the bread.GDP in this economy is__________. Assuming there are no intermediate goods beyond those previously described, complete the following table by calculating the value added for each of the three producers. Then enter the total value added in the final row. Farmer Miller Baker Total

$180 100,50,30,180

If she had bought the iPhone on sale for $180, her consumer surplus would have been_________.

$220

Melissa buys an iPhone for $240 and gets a consumer surplus of $160. Her willingness to pay for an iPhone is_____________.

$400

Which of the following statements explains how the following event could occur: A drought around the world raises the total revenue that farmers receive from the sale of grain, but a drought only in Kansas reduces the total revenue that Kansas farmers receive. Check all that apply. --A drought in Kansas is not significant enough to affect the worldwide price of grain. --A drought only in Kansas reduces the supply of grain provided by Kansas farmers, but the worldwide rise in price due to this local drought more than offsets this loss. --Demand is elastic, so a worldwide drought decreases the quantity sold but increases the price by a larger percentage. --Demand is inelastic, so a worldwide drought decreases the quantity sold but increases the price by a larger percentage.

-A drought in Kansas is not significant enough to affect the worldwide price of grain. -Demand is inelastic, so a worldwide drought decreases the quantity sold but increases the price by a larger percentage.

Which of the following describe some of the trade-offs faced by a family deciding whether to buy a new car? Check all that apply.

-A larger vehicle means saving time by not having to make multiple trips somewhere, but a smaller vehicle is cheaper. -An increase in the family's car payment means the family will be unable to afford a vacation. -Fuel-efficient cars are more expensive, but regular cars require spending more on gas.

Studies also find that teenagers have a higher price elasticity of demand than do adults. Which of the following statements are consistent with this result? Check all that apply. --Adults are more likely to be addicted to cigarettes. --It is legal for adults to consume alcohol, so many choose to spend their money on that good rather than cigarettes. --Teenagers do not have as much income as adults, so they are more price sensitive.

-Adults are more likely to be addicted to cigarettes. -Teenagers do not have as much income as adults, so they are more price sensitive.

Which of the following describe some of the trade-offs faced by a member of Congress deciding how much to spend on national parks? Check all that apply.

-Congress can spend either a small amount on a lot of parks or a large amount on a single national park. -Money spent on national parks benefits park visitors, but alternatively the money could be spent on highways to benefit drivers.

Which of the following describe some of the trade-offs faced by a recent college graduate deciding whether to go to graduate school? Check all that apply. --Taking out more student loans means she may not able to purchase the new car she needs. --Graduate school means fewer years of on-the-job experience. --If she goes to graduate school, she won't be able to spend as much time with her family. --She is currently studying biology.

-Taking out more student loans means she may not able to purchase the new car she needs. -Graduate school means fewer years of on-the-job experience. -If she goes to graduate school, she won't be able to spend as much time with her family.

After economics class one day, your friend suggests that taxing food would be a good way to raise revenue because the demand for food is quite inelastic. Which of the following statements are true? Check all that apply. --Taxing food will generate a large amount of deadweight loss because people aren't very price sensitive in this market. --Taxing food won't generate any tax revenue because consumers will just start growing their own food on farms. --Taxing food is a bad way to raise revenue from an equity standpoint because poorer people spend a higher proportion of their income on food. --Taxing food is less inefficient than taxing other things because there won't be too much deadweight loss.

-Taxing food is a bad way to raise revenue from an equity standpoint because poorer people spend a higher proportion of their income on food. -Taxing food is less inefficient than taxing other things because there won't be too much deadweight loss.

Which of the following describe some of the trade-offs faced by a professor deciding how much time to spend preparing for class? Check all that apply. --The better the lecture, the better his chances of tenure, but time spent preparing the lecture decreases the time he has available to work on research. --He likes his students a lot. --He has taught the same subject for 4 years. --The more he prepares, the better his lectures, but the less he prepares, the more free time he can enjoy doing something else.

-The better the lecture, the better his chances of tenure, but time spent preparing the lecture decreases the time he has available to work on research. -The more he prepares, the better his lectures, but the less he prepares, the more free time he can enjoy doing something else.

Which of the following describe some of the trade-offs faced by a company president deciding whether to open a new factory? Check all that apply. --The firm can either pay out more of its profit to shareholders or earn additional profit next year by increasing production. --The president has been with the company for 20 years. --The firm can either open a new factory or upgrade existing equipment. --The factory currently employs 100 workers.

-The firm can either pay out more of its profit to shareholders or earn additional profit next year by increasing production. -The firm can either open a new factory or upgrade existing equipment.

Which of the following statements are true about groups in society that would benefit from or be hurt by this change? Check all that apply. --There might be a transition period in which workers and owners in consumption-good industries would get lower incomes. --Some people will have higher incomes as the result of faster economic growth. --There might be a transition period in which workers and owners in investment-good industries would get lower incomes. --All groups can increase their spending.

-There might be a transition period in which workers and owners in consumption-good industries would get lower incomes. -Some people will have higher incomes as the result of faster economic growth.

Which of the following statements are true about transfer payments with regard to computing GDP? Check all that apply. --Transfer payments alter household income, but they do not reflect the economy's production. --Transfer payments are not accounted for in the consumption component of GDP. --Transfer payments are accounted for in the investment component of GDP. --Social security is an example of a transfer payment and is not included in GDP.

-Transfer payments alter household income, but they do not reflect the economy's production. -Transfer payments are not accounted for in the consumption component of GDP. -Social security is an example of a transfer payment and is not included in GDP.

The New York Times reported (Feb. 17, 1996) that subway ridership declined after a fare increase: "There were nearly four million fewer riders in December 1995, the first full month after the price of a token increased 25 cents to $1.50, than in the previous December, a 4.3 percent decline." Using these data, an estimate of the price elasticity of demand for subway rides is_______using the midpoint method.

0.24

The CPI for "All Items" was 233.707 in January 2015, and 236.916 in January 2016. Over this period, the rate of inflation as measured by the rate of change of the CPI was_______________.

1.4%

The price of a good rises from $8 to $12, and the quantity demanded falls from 110 to 90 units. Calculated with the midpoint method, the elasticity is:

1/2

The world's rich countries, such as the United States and Germany, have income per person that is about _____ times income per person in the world's poor countries, such as Pakistan and India.

10

Your friend would obtain$________in consumer surplus with Provider A and$_________in consumer surplus with Provider B.

105 100

This means your friend would pay$___________for service with Provider A and$________for service with Provider B.

120 100

A dozen eggs cost $0.88 in January 1980 and $2.11 in January 2015. The average wage for production workers was $7.58 per hour in January 1980 and $19.64 in January 2015. By what percentage did the price of a dozen eggs rise?

140%

If the price of a hot dog is $2 and the price of a hamburger is $4, then 30 hot dogs contribute as much to GDP as _____ hamburgers.

15

By what percentage did the wage rise?

159%

A German worker takes 400 hours to produce a car and 2 hours to produce a case of wine. A French worker takes 600 hours to produce a car and XX hours to produce a case of wine. For what values of XX will gains from trade be possible? Check all that apply. 2 3 300

2 & 300

Over the past century, real GDP per person in the United States has grown about _____ percent per year, which means it doubles about every _____ years.

2,35

The inflation rate as measured by the GDP deflator from year 2 to year 3 is__________.

20%

The percentage growth rate of real GDP from year 2 to year 3 is_________________.

25%

One day, Barry the Barber, Inc., collects $400 for haircuts. Over this day, his equipment depreciates in value by $50. Of the remaining $350, Barry sends $30 to the government in sales taxes, takes home $220 in wages, and retains $100 in his business to add new equipment in the future. From the $220 that Barry takes home, he pays $70 in income taxes. Measure of Income Gross Domestic Product x Net National Product x National Income x Personal Income x Disposable Personal Income x

400,350,350,220,150

You deposit $2,000 in a savings account, and a year later you have $2,100. Meanwhile, the consumer price index rises from 200 to 204. In this case, the nominal interest rate is _____ percent, and the real interest rate is _____ percent.

5,3

Consider public policy aimed at smoking. Studies indicate that the price elasticity of demand for cigarettes is about 0.4.If a pack of cigarettes currently costs $5 and the government wants to reduce smoking by 20%, it should increase the price by_________.

50%

In order to earn enough to buy a dozen eggs, a worker had to work_________minutes in January 1980 and_________minutes in January 2015.Workers' purchasing power in terms of eggs________between 1980 and 2015.

6.98;6.45; rose

Angus the sheep farmer sells $20 worth of wool to Barnaby the knitter. Barnaby makes two sweaters, each of which has a market price of $40. Collette buys one of them, while the other remains on the shelf of Barnaby's store to be sold later. What is GDP here?

80

If the consumer price index is 200 in year 1980 and 300 today, then $600 in 1980 has the same purchasing power as ________ today.

900

During the Revolutionary War, the American colonies could not raise enough tax revenue to fund the war effort fully; to make up the difference, the colonies decided to print more money. Printing money to cover expenditures is sometimes referred to as an inflation tax. Who is being taxed when more money is printed?---------Anyone who is holding money ---Banks only ---Families of soldiers in active duty

Anyone who is holding money

Which of the following statements are consistent with a country possibly overinvesting in capital? Check all that apply. --People would prefer to have lower consumption spending and higher future growth. --As the stock of capital rises, the extra output produced from an additional unit of capital falls. --As the stock of capital rises, the extra output produced from an additional unit of capital rises. --People would prefer to have higher consumption spending and less future growth.

As the stock of capital rises, the extra output produced from an additional unit of capital falls. People would prefer to have higher consumption spending and less future growth.

Suppose that in the United States, producing an aircraft takes 10,000 hours of labor and producing a shirt takes 2 hours of labor. In China, producing an aircraft takes 40,000 hours of labor, while producing a shirt takes 4 hours of labor.What will these nations trade?

China will export shirts, while the United States will export aircraft.

When the nation of Ectenia opens itself to world trade in coffee beans, the domestic price of coffee beans falls. Which of the following describes the situation?

Domestic production of coffee falls, and Ectenia becomes a coffee importer.

England and Scotland both produce scones and sweaters. Suppose that an English worker can produce 50 scones per hour or 1 sweater per hour. Suppose that a Scottish worker can produce 40 scones per hour or 2 sweaters per hour. ____________ workers have an absolute advantage in producing scones, and_________workers have an absolute advantage in producing

English; Scottish

__________workers have a comparative advantage in producing scones, and_____________ workers have a comparative advantage in producing sweaters.

English; Scottish

True or False: An increase in the demand for notebooks raises the quantity of notebooks demanded but not the quantity supplied.

FALSE

True or False: Labor unions are the primary reason the standard of living in the United States has changed over time.

FALSE

A price change causes the quantity demanded of a good to decrease by 30%, while the total revenue of that good increases by 15%. True or False: The demand curve is elastic in this region.

False

True or False: Society receives a "free lunch" when it builds new factories.

False

True or False: The total value added for the three producers in this economy does not equal the economy's GDP.

False

True or False: When one calculates a single rate of inflation using the CPI for "All Items," it means that all categories of goods and services experienced the same rate of price change over that period.

False

A tax that has no deadweight loss cannot raise any revenue for the government. A tax that raises no revenue for the government cannot have any deadweight loss.

False, False

True or False: Only factory owners will benefit from the higher productivity because they will receive a return on their additional investment.

Faster

In many developing nations, young women have lower enrollment rates in secondary school than do young men. Which of the following observations are consistent with greater educational opportunities for young women leading to faster economic growth in these countries? Check all that apply. --There are external costs from greater knowledge in a country. --Increased human capital increases productivity. --The opportunity cost of having a child is higher, leading to a lower population growth rate and thus a small drain on existing capital

Increased human capital increases productivity. The opportunity cost of having a child is higher, leading to a lower population growth rate and thus a small drain on existing capital

Which of the following is a positive, rather than a normative, statement? --Law X will reduce national income. --Law X is a good piece of legislation. --Congress ought to pass law X. --The President should veto law X.

Law X will reduce national income.

Society faces a short-run trade-off between inflation and unemployment. A reduction in the rate of money growth will reduce the rate of inflation. The Federal Reserve should reduce the rate of money growth. Society ought to require welfare recipients to look for jobs. Lower tax rates encourage more work and more saving.

P,P,N,N,P

If the economy goes into a recession and incomes fall, what happens in the markets for inferior goods?

Prices and quantities both rise.

Given this information, which provider would you recommend that your friend choose?

Provider A

If all quantities produced rise by 10 percent, and all prices fall by 10 percent, which of the following occurs?

Real GDP rises by 10 percent, while nominal GDP is unchanged.

Which of the following trade policies would benefit producers, hurt consumers, and increase the amount of trade?

Starting to allow trade when the world price is greater than the domestic price

An increase in ________ will cause a movement along a given demand curve, which is called a change in ________.

Supply, quantity demanded

You win $100 in a basketball pool. You have a choice between spending the money now or putting it away for a year in a bank account that pays 5% interest. Which of the following is included in the opportunity cost of spending $100 now?

The $105 you would have a year from now if you put it in the bank

Which of the following statements are consistent with a country possibly overinvesting in human capital? Check all that apply.

The best job a Ph.D. in philosophy can find is managing a restaurant.

Now suppose you had been planning to spend the day studying at the library. What is the cost of going skiing in this case? Check all that apply. --The cost of a lift ticket --The cost of your ski jacket you purchased last year --The value of your time spent studying --The wages you forgo by going skiing --The rental of any ski equipment you need

The cost of a lift ticket The value of your time spent studying The rental of any ski equipment you need

What is the opportunity cost of investing in capital?

The loss of consumption that results from redirecting resources toward investment

A change in which of the following will not shift the demand curve for hamburgers?

The price of hamburgers

You were planning to spend Saturday working at your part-time job, but a friend asks you to go skiing. Which of the following are included in the true cost of going skiing? Check all that apply. --The wages you forgo by going skiing --The cost of your ski jacket you purchased last year --The cost of a lift ticket --The rental of any ski equipment you need

The wages you forgo by going skiing The cost of a lift ticket The rental of any ski equipment you need

Kayla can cook dinner in 30 minutes and wash the laundry in 20 minutes. Her roommate takes half as long to do each task. How should the roommates allocate the work?

There are no gains from trade in this situation.

Daniel Patrick Moynihan, the late senator from New York, once introduced a bill that would levy a 10,000 percent tax on certain hollow-tipped bullets. How would you expect this to affect the amount of tax revenue raised? --This tax will increase tax revenue by 10,000 percent. --This tax will generate a lot of tax revenue because of its high rate. --This tax likely won't raise much revenue because the high tax rate will probably cause the equilibrium quantity to be near zero

This tax likely won't raise much revenue because the high tax rate will probably cause the equilibrium quantity to be near zero.

TRUE OR FALSE: Free trade allows a country to specialize in the production of what it produces best, increasing both its production of goods and services and its living standard.

True

True or False: According to your estimate, the Transit Authority's revenue rises when the fare rises.

True

As the chapter states, GDP does not include the value of used goods that are resold. True or False: Including the value of used goods that are resold would make GDP a less informative measure of economic well-being. If GDP included goods that are resold, it would

True double-count goods that were sold more than once.

Once again, in an hour, Mateo can wash 2 cars or mow 1 lawn, and Tyler can wash 3 cars or mow 1 lawn. Who has the comparative advantage in car washing, and who has the comparative advantage in lawn mowing?

Tyler in washing, Mateo in mowing.

In an hour, Mateo can wash 2 cars or mow 1 lawn, and Tyler can wash 3 cars or mow 1 lawn. Who has the absolute advantage in car washing, and who has the absolute advantage in lawn mowing?

Tyler in washing, neither in mowing.

An economic model is: --a mechanical machine that replicates the functioning of the economy. --a fully detailed, realistic description of the economy. --a simplified representation of some aspect of the economy. --a computer program that predicts the future of the economy.

a simplified representation of some aspect of the economy.

Over the past 40 years, technological advances have reduced the cost of computer chips. This has led to_________ in the supply of computers, causing the price of computers to__________ . Because computers and computer software are______________, this change in price causes the demand for computer software to___________. However, computers and typewriters are_____________, so the change in the price of computers_________________ the demand for typewriters

an increase; fall; complements;increase;substitute;decrease

Inflation during the 1970s was much higher than most people had expected when the decade began. Homeowners who obtained fixed-rate mortgages during the 1960s_____________ the unexpected inflation, and the banks that made the mortgage loans were______________.

benefited from; harmed.

John has been working as a tutor for $300 a semester. When the university raises the price it pays tutors to $400, Jasmine enters the market and begins tutoring as well. How much does producer surplus rise as a result of this price increase?

between $100 and $200

An efficient allocation of resources maximizes

consumer surplus plus producer surplus.

Which is the largest component of GDP?

consumption

Suppose the price elasticity of demand for heating oil is 0.2 in the short run and 0.7 in the long run. If the price of heating oil rises from $1.80 to $2.20 per gallon, the quantity of heating oil demanded in the short run will__________by__________in the short run and by______________in the long run. The change is_________ in the long run because people can respond____________easily to the change in the price of heating oil.

fall; 4%; 14%; larger; more

Ketchup is a complement (as well as a condiment) for hot dogs. If the price of hot dogs rises, the quantity of hot dogs demanded_____________ , which _______________the demand for ketchup. Because of the change in the equilibrium quantity of ketchup, the demand for tomatoes by ketchup producers____________ , causing the equilibrium price of tomatoes to______________. This means producers of tomato juice face___________ input prices, and the supply of tomato juice____________. The resulting_______________in the price of tomato juice causes people to substitute ____________________________________, so the demand for orange juice___________.

falls; lowers; falls; decrease; lower; increase; fall; away from orange juice and toward tomato juice; falls

Suppose that society decided to reduce consumption and increase investment. More investment leads to___________ economic growth in the short run.

faster

Suppose Americans decide to save more of their incomes. If banks lend this extra saving to businesses, which use the funds to build new factories, this leads to ___________(FASTER OR SLOWER) growth in productivity because workers will have__________(MORE OR LESS)equipment with which to work.

faster, more

A point inside the production possibilities frontier is --efficient, but not feasible. --feasible, but not efficient. --both efficient and feasible. --neither efficient nor feasible.

feasible, but not efficient.

Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the quantity produced is 5 bars and the price is $6. Using year 1 as the base year, compute nominal GDP, real GDP, and the GDP deflator for each year. Year Nominal GDP Real GDP GDP Deflator Year 1 x x x Year 2 x x x Year 3 x x x

going across then down 12,12,100 20,16,125 30,20,150

The main difference between imposing a tariff and handing out licenses under an import quota is that a tariff increases

government revenue.

The Laffer curve illustrates that, in some circumstances, the government can reduce a tax on a good and increase the

government's tax revenue.

Because capital is subject to diminishing returns, higher saving and investment does not lead to higher

growth in the long run.

When a market is in equilibrium, the buyers are those with the ________ willingness to pay, and the sellers are those with the ________ costs.

highest, lowest

The circular-flow diagram illustrates that, in markets for the factors of production, --households are sellers, and firms are buyers. --households are buyers, and firms are sellers. --households and firms are both buyers. --households and firms are both sellers.

households are sellers, and firms are buyers.

The largest component in the basket of goods and services used to compute the CPI is

housing

Economics is best defined as the study of

how society manages its scarce resources.

THE BLANKS WILL EITHER BE INCREASE OR DECREASE- Guaranteeing everyone in society the best healthcare possible will likely________ equality and_______ efficiency. Paying laid-off worker s unemployment benefits until they find a new job will likely______ equality and________ efficiency. Which of the following provides an explanation for your answers regarding efficiency? --Too many workers will want to become medical doctors. --People may overconsume healthcare and reduce their effort when searching for a job. --People will work more hours than is optimal. --There will likely be insufficient job openings.

increase, decrease increase, decrease People may overconsume healthcare and reduce their effort when searching for a job.

The participation of women in the U.S. labor force has risen dramatically since 1970. This rise likely_______ GDP in the U.S. Now imagine a measure of well-being that includes time spent working in the home and taking leisure. The change in this measure of well-being would be_______ the change in GDP.

increased; less than

Peanut butter has an upward-sloping supply curve and a downward-sloping demand curve. If a 10 cent per pound tax is increased to 15 cents, the government's tax revenue

increases by less than 50 percent and may even decline.

Eggs have a supply curve that is linear and upward-sloping and a demand curve that is linear and downward-sloping. If a 2 cent per egg tax is increased to 3 cents, the deadweight loss of the tax

increases by more than 50 percent.

A marginal change is one that

incrementally alters an existing plan.

A linear, downward-sloping demand curve is

inelastic at some points and elastic at others.

Suppose that the government imposes a tax on heating oil. The deadweight loss from a tax on heating oil is likely to be_________ in the fifth year after it is imposed than in the first year. The tax revenue collected from a tax on heating oil is likely to be___________ in the fifth year after it is imposed than in the first year.

larger, smaller

The lender___________ from this unexpectedly high inflation, and the borrower_________under these circumstances.

loses;gains

In the 1990s and the first decade of the 2000s, investors from the Asian economies of Japan and China made significant direct and portfolio investments in the United States. At the time, many Americans were unhappy that this investment was occurring. It was better for the United States to receive this foreign investment than not to receive it because it

made the capital stock larger

Goods and services that are not sold in markets, such as food produced and consumed at home, are generally not included in GDP. As a result, you would expect that GDP per person in India and the United States will differ by_________than their actual comparative economic well-being.

more

A 1996 bill reforming the federal government's antipoverty programs limited many welfare recipients to only two years of benefits. This change gives people the incentive to find a job________(more or less) quickly than if welfare benefits lasted forever. The loss of benefits after two years will result in the distribution of income becoming__________(more or less) equal. In addition, the economy will be__________(more or less) efficient because of the change in working incentives.

more less more

An economy produces hot dogs and hamburgers. If a discovery of the remarkable health benefits of hot dogs were to change consumers' preferences, it would --expand the production possibilities frontier. --contract the production possibilities frontier. --move the economy along the production possibilities frontier. --move the economy inside the production possibilities frontier.

move the economy along the production possibilities frontier.

Most economists are ________ that natural resources will eventually limit economic growth. As evidence, they note that the prices of most natural resources, adjusted for overall inflation, have tended to ________ over time.

not concerned, fall

Producing a quantity larger than the equilibrium of supply and demand is inefficient because the marginal buyer's willingness to pay is

positive but less than the marginal seller's cost.

When a nation opens itself to trade in a good and becomes an importer,

producer surplus decreases, but consumer surplus and total surplus both increase.

Social Security benefits are increased each year in proportion to the increase in the CPI, even though most economists believe that the CPI overstates actual inflation. If the elderly consume the same market basket as other people, then Social Security would____________their standard of living.

provide an increase in

Thomas Robert Malthus believed that population growth would

put stress on the economy's ability to produce food, dooming humans to remain in poverty.

The company that you manage has invested $5 million in developing a new product, but the development is not quite finished. At a recent meeting, your salespeople report that the introduction of competing products has reduced the expected sales of your new product to $3 million. If it would cost $1 million to finish development and make the product, you________(should/shouldnt) go ahead and do so. The most you should pay to complete development is_______million.

should/$3

If a policymaker wants to raise revenue by taxing goods while minimizing the deadweight losses, he should look for goods with ________ elasticities of demand and ________ elasticities of supply.

small, small

If the government permanently increases the price of cigarettes, the effect on smoking 1 year from now will be____________than the effect 5 years from now.

smaller

The discovery of a large new reserve of crude oil will shift the ________ curve for gasoline, leading to a ________ equilibrium price.

supply, lower

Because consumers can sometimes substitute cheaper goods for those that have risen in price,

the CPI overstates inflation.

If a Pennsylvania gun manufacturer raises the price of rifles it sells to the U.S. Army, its price hikes will increase

the GDP deflator but not the CPI.

The consumer price index measures approximately the same economic phenomenon as

the GDP deflator.

Adam Smith's phrase "invisible hand" refers to

the ability of free markets to reach desirable outcomes, despite the self-interest of market participants.

If a nation has high and persistent inflation, the most likely explanation is

the central bank creating excessive amounts of money.

An increase in the supply of a good will decrease the total revenue producers receive if

the demand curve is inelastic.

If a nation that imports a good imposes a tariff, it will increase

the domestic quantity supplied.

All of the following topics fall within the study of microeconomics EXCEPT --the impact of cigarette taxes on the smoking behavior of teenagers. --the role of Microsoft's market power in the pricing of software. --the effectiveness of antipoverty programs in reducing homelessness. --the influence of the government budget deficit on economic growth.

the influence of the government budget deficit on economic growth.

If a nation that does not allow international trade in steel has a domestic price of steel lower than the world price, then

the nation has a comparative advantage in producing steel and would become a steel exporter if it opened up trade.

A tax on a good has a deadweight loss if

the reduction in consumer and producer surplus is greater than the tax revenue.

The ability of firms to enter and exit a market over time means that, in the long run,

the supply curve is more elastic.

Your opportunity cost of going to a movie is

the total cash expenditure needed to go to the movie plus the value of your time.

When two individuals produce efficiently and then make a mutually beneficial trade based on comparative advantage,

they both obtain consumption outside their production possibilities frontier.

Which goods will a nation typically import?

those goods in which other nations have a comparative advantage

If the elderly consume a market basket that includes more healthcare than other people, then Social Security provides____________their standard of living.

uncertain impact on

Consider a small country that exports steel. Suppose that a "pro-trade" government decides to subsidize the export of steel by paying a certain amount for each ton sold abroad. Indicate the effect this export subsidy has on each economic object in the following table. Price paid by domestic consumers Price received by domestic producers Quantity of steel produced by domestic producers Quantity of steel consumed by domestic consumers Quantity of steel exported Consumer surplus Producer surplus Government revenue Total surplus

unchanged, increase, increase, unchanged, increase, unchanged., increase, decrease, decrease

If a Scottish worker could produce only 1 sweater per hour, Scotland______________gain from trade, and England___________gain from trade.

would still; would still

Over time, technological advance increases consumers' incomes and reduces the price of smartphones. Each of these forces increases the amount consumers spend on smartphones if the income elasticity of demand is greater than _____ and if the price elasticity of demand is greater than _____.

zero, one