Economics Final
A rule that every imported product must be opened by hand and inspected with a magnifying glass, by one of just three government inspectors available at any given time might be referred to as __________.
a nontariff barrier
In a __________, economic decisions about what, how much and for whom to produce are made by buyers and sellers.
market economy
The Federal Reserve regularly uses three policy tools to manipulate the money supply: open market operations, which affect the __________; changes in the discount rate, which affect the __________ by influencing the quantity of discount loans; and changes in reserve requirements, which affect the __________.
monetary base; monetary base; money multiplier
Which would shift the production possibilities curve inward?
A decrease in the number of hours worked per week as the labor force chooses to watch more Netflix (leisure) instead of working
Mutual interdependence means that
A firm's behavior is affected by other firms' actions.
According to the Taylor rule, if inflation has risen by 6% points above its target of 2%, the Federal Reserve should
Raise the real federal funds rate by 3 percentage points
monetary base; monetary base; money multiplier
Raise the real federal funds rate by 3 percentage points
The best metric to determine if output (production of services and goods) increases or decreases is
Real GDP
Which of the following is CORRECT? Percentage change in
Real income approximates percentage change in nominal income minus percentage change in price level
Econ Consulting LLC findings concluded that the demand for hockey game tickets is price elastic during the week but inelastic on weekends. Given this information, to increase overall revenue the company should
Reduce the hockey game prices for the weekday games, and increase the hockey game prices for the weekend games
In certain markets consumers may purchase many different brands of a good or service. Which of the statements best depicts a situation where demand for a particular brand would be very elastic?
"The different brands are almost identical, so I always buy the cheapest."
Assume that Economics Land has 50 workers, each of whom works 3000 hours per year. If labor productivity is $8, total output for this economy will be
$1,200,000
There are nine buyers and nine sellers, each willing to buy or sell one unit of a good, with values {$14, $13, $12, $11, $10, $9, $8, $7, $6}. Assume no transaction costs and a competitive market, what is the equilibrium price in this market?
$10
Sarah places $10,000 in cash at Econ Bank, where the required reserve ratio is 10%. Econ Bank sends the $10,000 to its Federal Reserve Bank. As a result, the actual reserves, required reserves, and excess reserves of Econ Bank have been increased by
$10,000, $1000, and $9000, respectively
Landon deposits $12,000 in Econ Bank. Econ Bank is required to hold 10% of all deposits on reserve at the regional Federal Reserve Bank. The deposit increases the loan capacity of Econ Bank by
$10,800
When you buy a set of speakers, Econ Electronics asks if you would like to purchase optional insurance for your speakers. Assume that paying for new speakers for customers who listen to music at a reasonable level (thus minimizing damage) costs on average $200, and paying for new speakers for customers who listen to music very loudly (more likely to damage the speakers) costs on average $1200. Individuals know whether they like music at a reasonable level or at a loud level, but Econ Electronics can assume that 50% of listeners are reasonable listeners, and 50% are loud listeners. How much does Econ Electronics have to charge in order to break even?
$1200
A buyer values a car at $25,000, and a seller values the same car at $20,000. If the transaction is completed at $23,000, the transaction will generate
$2,000 worth of buyer surplus and $3,000 of seller surplus
If the exchange rate is $1 = 0.7841 euro, then a French DVD priced at 20 euros would cost to an American buyer (excluding taxes and other fees)
$25.51
Sally, an entrepreneur, makes 50 products each day. Sally spends eight hours in producing those items. If hired elsewhere, Sally could have earned $10 an hour. The products sell for $10 each. Production occurs every day in a 30-day month. If the explicit costs total $10,000 a month, then the monthly economic profit is
$2600 (Rev = $15000 - Explicit = $10,000 - Implicit = $2400)
The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320); imports ($35); exports ($22); personal consumption expenditures ($2,460); and, government purchases ($470). What is GDP in this economy?
$3,237 billion
If Econ Air produces eight units of output with average fixed cost = $40 and average variable cost = $25, what is its total fixed cost?
$320
Suppose Econ Bank has excess reserves of $12,000 and checkable deposits of $125,000. If the reserve requirement is 20%, what are Econ Bank's actual reserves?
$37,000
Given the information provided in the chart below, what will be the marginal cost equal for production at Quantity (Q) Level 4?
$4.00 (TC at quantity x - TC at quantity y)
If Econ Air produces eight units of output with average fixed cost = $40 and average variable cost = $25, what is Econ Air's total cost?
$520
A firm has the following costs: labor $5/unit of output, materials $3/unit of output and rent $5000/month. If the business is able to produce 1000 units a month, the total variable costs equal
$8000
What should occur when a country's money supply decreases?
- An increase in interest rates. - The exchange rate would appreciate. - Exports would decrease.
Suppose the price elasticity of supply for soybeans is 2.5. How much would the price have to rise to increase production by 20 percent?
8 percent
Which is an overarching economic concept explored during week 1?In a market economy, the quantity of a good or service that is produced is decided by the interaction of
- Human behavior is strategic. - There is an opportunity cost to every decision. - Wealth is the production, ownership and consumption of goods and services.
Apartment rent controls
- Is an example of a price ceiling - Destroys the creation of wealth by preventing the movement of apartments to higher-valued use
Firms maintain their completive edge by
- Providing a good at lower costs than their rivals - Providing a superior product at the same cost as your rival - Being innovative
Which of the following could potentially capture the value created in a market
- Suppliers - Industry rivals - Buyers
If the United States imports digital cameras and the U.S. government imposes a tariff on digital cameras, then
- Total surplus in the American digital cameras market decreases. - Producer surplus in the American digital cameras market increases. - U.S. imports of foreign digital cameras decrease.
Landon used $4,000,000 from his savings account that paid an annual interest of 5 percent and a $60,000 loan at an annual interest rate of 5 percent to purchase a hockey equipment store. After one year, Landon sold the business for $4,100,000. His economic profit (loss) is
-$103,000
MLB (Major League Baseball) examines pricing data. It finds as the price of a baseball game is raised from $20 to $25, the quantity demanded fell from 1.5 million to 1 million tickets. The price elasticity of demand for baseball games are
-1.8
Suppose the price of a bag of frozen peas decreases from $6.50 to $5.75, and, as a result, the quantity of bags of peas demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen peas in the given price range is
-2.33 (Midpoint formula = [(Q2-Q1)/(Q2+Q1)/2] / [(P2-P1)/(P2-P1)/2]
Suppose that Landon purchases one pizza per month when the price is $19 and three pizzas per month when the price is $15. What is the price elasticity of Landon's demand curve?
-4.25 (Midpoint formula)
In 1980 Greece had a GDP of $70 billion (measured in U.S. dollars) and a population of 5.1 million. In 2000, Greece had a GDP of $160 billion (measured in U.S. dollars) s and a population of 5.3 million. By what percentage did Greece's GDP per capita rise between 1980 and 2000?
120% (GDP 1/Population 1) - (GDP 2/Population 2) / (GDP 1/Population 1)
Econ Pots is debating attending the crafters event. It costs $50 to set up the booth and $20 in transportation to get Econ Pots' pottery to the fair. They sell each piece for $5 each. How many pots must Econ Pots sell to make going to the crafters event worth the cost?
14
The fixed cost of Econ Air's new aircraft, the 711, is $6 billion. The average variable cost is $100,000,000. The sales price is $ 140,000,000. What is the forecasted breakeven volume?
150 (Q = FC/(P-MC), P-MC is also Contribution Margin
If the price index moves from 107 to 110, the rate of inflation is
2.8%
The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in, and it holds 5% of the deposits as reserves. What is the money multiplier in this economy?
20
Economics Land can produce two products: wheat and steel. The chart below is Economics Lands' production possibilities schedule: Refer to the above table. The marginal opportunity cost of the third unit of steel is
20 units of wheat
In 2010, 100 Japanese yen purchased .88 U.S. dollars, and in 2013, it purchased .93 U.S. dollars. How much was 1 U.S. dollar worth in Japanese yen, in 2010 and 2013?
2010: 113.6 yen, 2013: 107.5 yen
Consider the supply and demand curves depicted in the chart above. If the government levied a price ceiling of $15, then sellers will be willing to sell __________, and a black market could develop where the price would be __________.
24 units; above $15 (looking at quantity supply curve and black market would be price above $150.
The commercial banking system has excess reserves of $200,000. Then new loans of $800,000 are subsequently made, and the system ends up just meeting its reserve requirements. The required reserve ratio must be
25%
Assume that for Indy, one hour of study time in economics is perfectly substitutable for an hour of study time in calculus. Indy has exams in both subjects tomorrow, and he determines that if he spends all of his time studying economics, he will receive scores of 96 on his economics exam and 45 on his calculus exam. If he studies only calculus, his economics score will be 81 and his calculus score will be 90. Based on this information and assuming that Indy has no better alternative use of his time, what is the opportunity cost of improving his economics score by one point?
3 points on his calculus exam
If the required reserve ratio is 20% and commercial bankers decide to hold additional excess reserves equal to 5% of any newly acquired checkable deposits, then the effective monetary multiplier for the banking system will be
4
In the market for used motorcycles we have 10 sellers, willing to sell at the prices of $1000, $2000, $3000, $4000, $5000, $6000, $7000, $8000, $9000 and $10000. If the equilibrium price in the market is $4000, how many motorcycles would be sold?
4
The real interest rate is 1%, and the expected inflation is 5%. How much is the nominal interest rate?
4
A consumer values a car at $25,000, and a producer values the same car at $20,000. If the transaction is completed at $24,000, which value for sales tax will result in an unconsummated transaction?
4 percent
The real interest rate is 1%, and the expected inflation is 5%. How much is the nominal interest rate?
4%
The real interest rate is 11%, and the nominal interest rate is 15%. How much is the expected inflation?
4%
The total population of Economics Land is 175 million, the labor force is 125 million, and the number of employed workers is 117 million. The unemployment rate for Economics Land is
6.4% (125 - 117 = 8/125 = 6.4%)
If the percent leakage (marginal propensity to save) from the income-expenditures cycle is 15%, then the income multiplier is about: (Multiplier=1/MPS)
6.67
Which of the following is an example of a potentially effective and successful screening technique? (Hint: a signal is when one provides information to lessen information asymmetry while screening is when one party requests information to lessen information asymmetry)
A company asking you about speeding tickets
A transfer payment is
A form of government spending that is not made in exchange for a currently produced good or service
An increase in the market demand in a competitive market leads to
Above-average profits in the short run and average profits in the long run & New firms being attracted to the industry
To figure out Gross Domestic Product (GDP), we
Add up the market values of all final goods and services
Decreasing interest rates generally leads to what outcomes?
All of these
Question 8 What happens when a country's money supply increases (generally, all else equal)?
All of these
Which of the following are ways to sell a customer additional units without dropping the price on previous purchases?
All of these
Refer to figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is
All points on the production possibilities frontier are equally efficient. (all points along the graph)
If the equilibrium price is $10, any price lower than $10 would cause
An excess demand
What does specialization lead to?
An increase in overall good and services
Under a system of freely flexible (floating) exchange rates, a U.S. trade deficit with Mexico will tend to cause
An increase in the dollar price of pesos
What can influence decision-making with irrelevant information?
Anchoring
Which of the following is a valid criticism of the use of money as a store of value in modern economies?
Annual inflationary loss of buying power.
If Japanese motorcycles surge in popularity in the United States, then this event is most likely to cause the Japanese yen to
Appreciate and the U.S. dollar to depreciate
According to behavioral economics, cognitive biases
Are misunderstandings or misperceptions that cause systematic error
Which of the following is an example of the government inhibiting the creation of wealth?
Assessing taxes to redistribute wealth
Where does the marginal cost curve intersect the average total cost curve in monopolistic competition?
At the minimum average total cost
Which of the following statements is TRUE?
Average cost (AC) is irrelevant to extent decisions.
A firewood producer has a very seasonal demand for its product. Its transport trucks lay idle during the warmer parts of the year. It can exploit economies of scope if
B and C: B:It turns into a rental trucking company during the warmer months for other seasonal producers such as ice-cream makers. C:It starts producing other seasonal products that would sell mostly during the warmer months such as rustic lawn chairs.
Increasing interest rates tend to do what?
Both A and B: A: Slow the growth of output B: Lower investment
Which of the following is more likely to be able to command a higher price for its products?
Both A and C: A: A specialty frozen yogurt producer, with a high quality product. C: A specialty toy store that allows customers to self-design teddy bears
To signal to your insurance company that you are a low-risk buyer, to obtain a lower payment you should
Both A and C: A: Accept an insurance policy with a high deductible C: Accept an insurance policy with a copayment
The income elasticity of demand for low-quality rental apartments is -1.50. Due to a recession, you expect incomes to drop by 5% next year. How will consumers adjust their purchase for apartments?
Buy 7.5% more apartments
In a market economy, the quantity of a good or service that is produced is decided by the interaction of
Buyers and sellers
If Economics Land were encountering a severe recession, proper monetary and fiscal policies would call for
Buying government securities, reducing the reserve ratio, reducing the discount rate, reducing interest paid on reserves held at Fed banks, and a budgetary deficit
More buyer power means buyers would
Find it easier to capture the value created
In a purely competitive market
Firms have no cost or pricing advantage
In a competitive market, in the long run, a firm
Can expect to earn an average rate of return
Anchoring
Can influence decision-making with irrelevant information
Suppose that at 500 units of production output marginal revenue is equal to marginal cost. The manufacturer is selling its product output at $5 per unit, and average total cost at 500 units of production output is $6. On the basis of this information, we
Cannot determine whether the firm should produce or shut down in the short run
Under a system of freely floating exchange rates, an increase in the international value of a nation's currency will
Cause its imports to rise
What is NOT one of the three basic tools of monetary policy?
Changing the tax rate and/or government spending
Specialization and trade are closely linked to
Comparative advantage
A company invested $500,000 in a technology that reduced the overall costs of production by reducing its cost per unit from $2 to $1.80. Later, a manager has an opportunity to outsource production to another company at a cost per unit of $1.70. If you are the manager, you should
Consider the $500,000 a sunk cost, not relevant to the decision
The likelihood of a cartel being successful is greater when
Cost and demand curves of various participants are very similar.
From an economic perspective, when Landon decides to go to a hockey game instead of studying for a test, it indicates that in the Landon's thinking the marginal
Cost of going to the hockey game is less than the marginal benefit of going to the hockey game
A symphony is considering reducing its rates to increase attendance. Which of the following costs is not relevant to that decision?
Cost of rent payments
Credit card companies require small minimum payment amounts on their customers' monthly credit card statements. Why?
Credit card companies want to increase profits by promoting slower repayment, and actual customer payments will be anchored by the smaller payment requirements.
Which of the following is a reason why individual firms under pure competition would not find it gainful to advertise the products they sell?
Firms produce a homogeneous product.
Which of the following is NOT true if a production firm shuts down and produces zero production in the short run?
Fixed costs will be zero.
Dr. Osmo is an eye doctor who performs both cataract and Lasik surgeries. A competitor starts offering Lasik surgery as well, causing a decrease in the price Dr. Osmo can charge for Lasik. This price decrease
Reduces the opportunity cost of performing cataract surgeries
When the economy of a country is operating close to its full capacity
Cyclical unemployment is close to zero.
The price elasticity of demand for a hockey stick is estimated to be -2. This means that an increase in price by 10 percent will
Decrease quantity demanded by 20%
A pure monopoly firm will never charge a price in the inelastic range of its demand curve because lowering price to get into this region will
Decrease total revenue, increase total cost, and decrease profit
Buyers consider chips and cheese to be complements. If chips just increased its prices, what would you expect to occur in the cheese market?
Demand would fall.
It costs firm Econ Air $800 to produce five radios, and it costs firm ACCT Air $500 to produce five batteries. If Econ Air merges with ACCT Air, it can produce both the five radios and the five batteries for $1500. The merged firm has experienced
Diseconomies of Scope
Which of the following is NOT a barrier to entry, according to Porter?
Equal access to distribution channels
A purchasing power index estimates the dollar/pound exchange rate is $1.38/pound, and the current market rate (spot rate) is observed to be $1.48/pound. Based on these two rates, you should
Expect the dollar to appreciate against the pound
If expected inflation is constant, then when the nominal interest rate decreases, the real interest rate
Falls by the change in the nominal interest rate
Low-wage U.S. laborers suffer from protectionism in all the industries that they do not work in, because protectionism
Forces them to pay higher prices for basic necessities like clothing and food
In a command economy, the __________ makes economic decisions or strongly influences how the decisions are made.
Government
The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good
Has an absolute advantage in the production of that good
Which of the below does NOT characterize a competitive market?
High barriers to entry
The nation of Economics Land has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing rice, exporting steel, and neither importing nor exporting TVs. We can conclude that producer surplus in Economics Land is now
Higher in the steel market, lower in the rice market, and unchanged in the TV market
Best Buy and Fry's have both recently adopted a price-matching policy. If they are the only two electronic retailers in town, and based on our understanding of game theory, which is the likely outcome of the price-matching policies?
Higher prices
Which of the following would reduce the supply of microcomputers?
Higher wage rates for the workers that assemble the computers
Econ Screws is experiencing constant returns to scale. It will have a long-run average cost curve that is
Horizontal
The movement of workers from lower-productivity jobs to higher-productivity jobs would be an example of a(n)
Improved resource allocation
Landon sees an opportunity to produce and sell a new product but dismisses it because there is no way to gain from it personally. This situation best identifies the
Incentive problem under communist central planning
In the following question you are asked to determine, other things being equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X. Consumers expect that the price of X will increase sharply in the future. At the same time, technology used in producing X improves. When both of these occur, what outcome will most likely occur?
Increase D, increase S, increase Q and effect on P uncertain
If Landon's Root Beer, a restaurant, increased the price of a pint of root beer by 10 percent, it estimates the number of MBA students purchasing root beer would decrease by 9 percent. Based on this data, total revenues would
Increase because demand is inelastic
Depreciation of the USD will
Increase the prices of U.S. imports but decrease the prices to foreigners of U.S. exports
Your real income will increase by 3% if your nominal income
Increases by 5% while the price index rises by 2%
Cost-reduction generates
Increases in long-run profitability only if the cost reduction is difficult to imitate
Honduras is an importer of goose-down pillows. The world price of these pillows is $50. Honduras imposes a $7 tariff on pillows. Honduras is a price-taker in the pillow market. As a result of the tariff, the price of goose-down pillows in Honduras
Increases to $57 and the quantity of goose-down pillows purchased in Honduras decreases
The trade deficit has had the effect of
Increasing direct foreign investment in the United States
The price elasticity of demand for tickets to local soccer games is estimated to be equal to -.91. In order to boost ticket revenues, what do you suggest?
Increasing the price of game tickets because demand is inelastic
When an economist is demonstrating examples of a demand or supply curve that resembles a vertical line, she is attempting to show that demand or supply curve as
Inelastic
Absolute advantage is found by comparing different producers'
Input requirements per unit of output
The ways to address agency costs include all EXCEPT
Instituting longer work days
If the amount of money demanded exceeds the amount supplied, the
Interest rate will rise.
"Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of the restricted products at the expense of domestic consumers." This statement
Is essentially correct.
If a monopolist is operating at an output level where marginal revenue is positive, the firm
Is operating on the elastic portion of its demand curve
When depicting the market supply and demand for British pounds in terms of U.S. dollars, the demand-of-pounds curve is downward sloping because
More British pounds can be purchased per dollar when the pound depreciates relative to the USD, thus making British exports more competitive and increasing demand for the British pound.
Suppose that Econ Dairy produces a regular cottage cheese with 10 grams of fat per serving and a "low-fat" cottage cheese with only 5 grams of fat per serving (assume that this is still considered a lot of fat to consume per serving). According to prospect theory, how should Econ Dairy promote its "low-fat" cottage cheese?
It should advertise that the "low-fat" cottage cheese has only "half the fat" of the regular cottage cheese.
The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Landon just graduated from college and is now looking for work. Landon has had three job interviews in the past month but still has not gotten a job offer. 2. Brandon used to work in an automotive assembly plant. He was laid off 6 months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3. Catherine worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills. 4. Greg lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work. Refer to the above information. Which individual is frictionally unemployed?
Landon
The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Landon just graduated from college and is now looking for work. Landon has had three job interviews in the past month but still has not gotten a job offer. 2. Brandon used to work in an automotive assembly plant. He was laid off 6 months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3. Catherine worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills. 4. Greg lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work. Refer to the above information. Which individual is frictionally unemployed?
Landon
After a promotional campaign of Econ Jazz group's latest music album, the producers decided to raise the prices on the album. This implies that the producers expect the promotion to have made the demand for the album
More inelastic
Apple has continued to be innovative to ensure that the demand for its products stays or becomes
More inelastic
Inventories increase when firms produce
More than they sell and the inventory increase is added to GDP
What is the number-one lesson of business?
Moving assets from lower- to higher-value uses, thereby creating wealth
What is the number-one lesson of business?
Moving assets from lower- to higher-value uses, therefore creating wealth
The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. 1. Landon just graduated from college and is now looking for work. Landon has had three job interviews in the past month but still has not gotten a job offer. 2. Brandon used to work in an automotive assembly plant. He was laid off 6 months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. 3. Catherine worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills. 4. Greg lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work. Refer to the above information. Which individual(s) would be included in the calculation of the natural unemployment rate?
Landon and Catherine
Landon will receive a salary of $100,000 next year. According to prospect theory
Landon's satisfaction with that salary depends on how much he made in the past
The monopolistically competitive firm's demand curve will become more elastic the
Larger the number of competitor
You go to see a movie that you believe would turn out to be amazing. The ticket costs you $20. Once in the theater you realize that the movie is awful. If you leave now, you can still catch your favorite TV show. What should you do?
Leave the movie. It is a sunk cost.
According to the Taylor rule, if real GDP is 4% below potential GDP, the Fed should
Lower the federal funds rate by 2 percentage points
Which of the following did/will not result in economic growth?
Many citizens emigrating from Zimbabwe when a politically repressive regime took office
The unemployment rate may underestimate the true extent of unemployment if
Many people become discouraged and cease looking for work.
A manufacturer produces 1000 hockey sticks each day, which it sells to customers for $30 each. All costs associated with production and sales total $10,000; however, if the manufacturer were to produce one additional hockey stick per day, total costs would increase to $10,100. From these amounts, we can tell that
Marginal cost equals $100.
Question 3 If Econ Air's average cost is falling (economies of scale) with output, then
Marginal cost is less than average cost
Question 9 Production should continue until the point where the
Marginal revenue - marginal cost = 0
To profit maximize, you should produce until
Marginal revenue and marginal costs are just equal.
A reason the demand curves slope downward is
Marginal value declines with each purchase.
Which of the following functions of money enables people in an economy to gain the benefits of geographic and labor specialization?
Medium of exchange
One of the below statements about monopolistic competition is FALSE. Which one is it?
Monopolistic competition does not lead to any economic inefficiency because firms in this industry cannot sustain economic profits.
Other things being equal, in the short run, assuming the demand effect is greater than other factors, an increase in the U.S. rate of inflation is likely to cause an increase in the
Quantity of U.S. imports
Nation Y's real GDP was $520 billion in 2013 and $550 billion in 2014. Its population was 150 million in 2013 and 155 million in 2014. On the other hand, Nation Z's real GDP was $200 billion in 2013 and $210 billion in 2014; and its population was 53 million in 2013 and 55 million in 2014. Which of the following statements is TRUE?
Nation Y's and Nation Z's GDP per capita both increased from 2013 to 2014.
In a transaction for a good valued at $250,000 by a buyer and $245,000 by a seller, what amount of tax would result in an unconsummated transaction?
Need Answer
The Phillips curve shows
Negative correlation between the rate of unemployment and the rate of inflation
The demand curve for a normal good has a(n)
Negative slope because some consumers switch to other goods as the price rises
The Econ Corporation issued $25 million in new common stock in 2016. It used $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans. As a result, investment
Of $18 million has occurred
Babe Ruth, the famous New York Yankee baseball player, earned $80,000 in 1931. Today, the best baseball players can earn more than 400 times as much as Babe Ruth earned in 1933. However, prices have also risen since 1931. We can conclude that
One cannot determine whether baseball stars today enjoy a higher standard of living than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931.
To stay one step ahead of the forces of competition, a firm can adopt any one of these strategies except
Operating where marginal benefits equal marginal costs
Comparative advantage is related most closely to which of the following?
Opportunity cost
What is the biggest factor that accounts for a nation's prosperity
Output
As costs rise, some businesses reduce the quality or quantity of the goods they produce rather than maintain quality or quantity and increase prices. How would behavioral economics explain this strategy?
People have an aversion to losses, and consumers are more likely to feel the loss of a price increase than a quality reduction.
Which of the following statements about human behavior is most likely to be recognized and accepted by behavioral economists?
People have preferences that are unstable and vary by context.
Because of "mental accounting,"
People isolate purchases and sometimes make irrational decisions
In analyzing human decision and action, economists assume that
People's behavior reflects rational self-interest.
Which of the following grocery store strategies to increase sales would be most consistent with a behavioral economics (versus neoclassical economics) approach?
Positioning frequently purchased items at the back of the store
Which idea is inconsistent with pure competition?
Price above marginal revenue
Suppose that when the price of corn is $2 per bushel, farmers can sell 10 million bushels. When the price of corn is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true? The demand for corn is
Price inelastic, so an increase in the price of corn will increase the total revenue of corn farmers
In a firm that falls under monopolistic competition, assume there is an underallocation of resources at the profit-maximizing level of output, which means that
Price is greater than MC.
The threat of new entrants would be higher under which of the following conditions?
Product differentiation in the industry is low.
Shocks to the economy often result in imbalance. Why are markets ineffective at correcting these imbalances quickly by themselves?
Product prices are often "sticky" or inflexible, keeping markets from correcting imbalances quickly.
The one factor that stands out as the most significant explanation of large variations in living standards around the world is
Productivity
If oligopolistic firms facing similar cost and demand conditions successfully collude, price and output results in this industry will be most accurately predicted by which of the following models?
Pure monopoly model
Sarah was willing to pay $50 for the new limited edition Olympic hockey puck. When Sarah received it as a gift, she was willing to sell it but for no less than $80. According to behavioral economists
Sarah's behavior is consistent with the endowment effect.
Recent research shows that red meat is one of the leading causes of heart disease and baldness. This would cause the demand for red meat to
Shift to the left
A potential employee tells employers he or she just completed an MBA. What is this an example of?
Signaling mechanism
If a firm in a perfectly competitive market is experiencing higher than normal returns, in the long run
Some firms will enter the industry, and price will fall.
As it relates to real (Gross Domestic Product) GDP, "investment" can be defined as
Spending on capital equipment, inventories, and structures
Behavioral economists suggest that brand loyalty, which can be a source of monopoly power for businesses, may be explained by consumers' tendency to have the
Status quo bias
Which would NOT cause a shift in the demand curve for turkeys?
Sudden decrease in price of turkey meat
Businesses that have a large cost of monitoring select their employees more carefully because
They are more confident that after getting the job, the employee would not shirk & They are afraid that without screening, the employee would be more likely to shirk.
In which of the following instances would an acquisition make the most sense?
Synergies exist between the acquirer and the acquired company.
Sarah decides to spend an hour playing hockey rather than studying. Her opportunity cost is
The benefit to her grades for studying for an hour
A major difference between the command system and laissez-faire capitalism is that in command systems
The division of output is decided by central planning rather than by individuals operating freely through markets.
Following an increase in Mexican interest rates relative to U.S. interest rates, which caused consumers in Mexico to borrow abroad and consume and invest domestically, which of the following is expected to occur?
The dollar would depreciate relative to the peso, and Mexican prices would increase.
The leader of a political party made the following campaign promise: "My administration will increase defense spending without requiring sacrifices elsewhere." The promise can be kept if
The economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve. & The production possibilities frontier shifts outward due to an improvement in technology.
Price ceilings can often be viewed as
The government setting price below market equilibrium price and a tax (implicit) on producers and a subsidy (implicit) to consumers
Why does a supply curve slope upward?
The higher the price, the higher the quantity that the sellers are willing to supply.
Which of the following is the best example of a supply shock?
The introduction of new innovations in production
Of the following types of costs, which is most likely a fixed cost for a shoe manufacturer?
The lease on the factory producing shoes
Sarah has purchased five pretzels and is considering the purchase of a sixth. It is likely she will purchase the sixth pretzels if
The marginal benefit of the sixth pretzels exceeds its price.
Cruise ships often offer last-minute deals because
The marginal costs of an additional passenger are very low at that point, and companies gain by lowering prices.
Canada and the United States both produce wheat and computer software. Canada is said to have the comparative advantage in producing wheat if
The opportunity cost of producing a bushel of wheat is lower for Canada than it is for the United States
Landon's Hamburgers sells both hamburgers and pizza. Landon's wants to increase the sales of hamburgers. If Landon's decides to increase the price of the pizza, it is assuming that
The pizza and hamburgers are substitutes.
Which statement is correct?
The production of nondurable consumer goods is more stable than the production of durable consumer goods over the business cycle.
A distinguishing characteristic of public transfer payments is that
The recipients make no contribution to current production in return for them.
If one firm operating in an oligopoly raises its price, and other firms do not do so
The sales of the firm that increased its price will decline sharply.
Which of the following would be expected if the tariff on foreign-produced automobiles were increased?
The supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise.
Which of the following would most likely make the demand for an item more inelastic?
There are high costs of switching to competitors' products.
According to the law of supply
There is a positive relationship between price and the quantity supplied.
True or False- Average cost (AC) is irrelevant to extent decisions.
True
In the U.S. balance of payments, U.S. purchases of assets abroad are a(n)
U.S. Dollar outflow
In the U.S. balance of payments, U.S. purchases of assets abroad are a(n)
U.S. dollar outflow
The main difference between risk and uncertainty is
Uncertainty refers to not knowing possible outcomes or their probabilities.
Official unemployment rate figures may
Understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment
Total costs increase from $1600 to $1900 when Econ Air increases output from 40 to 50 units. How much with VC rise?
VC rise by $300.
A monopolistic competitor has the following information about cost and demand. If this industry were perfectly competitive, what price would the good sell for?
Where MR = MC
Refer to the above table. If demand is represented by columns (3) and (2) and supply is represented by columns (3) and (4), the table suggests that equilibrium price and quantity
Will be $8.50 and 55 units. (take the averages of both quantities and prices)
If a 10 percent increase in the price of the cell phones causes the demand for cell phone cases to decrease by 15 percent, then
X and Y are compliments
Recently a teachers' union argued that the standard of living of teachers working for the school district was falling. The school board replied that this was not true because the teachers had received significant increases in nominal income. Could the union statement be accurate?
Yes, because real income may fall if price increases are proportionately greater than the increases in nominal income.
Considering the markup rule, (P-MC)/P=1/|e|. What is a false statement?
You can use the markup rule regardless of whether or not you are in the inelastic or elastic part of the demand curve.
Which explains the reason for the presence of substantial black markets?
a command economy
In a market economy, the quantity of a good or service that is produced is decided by the interaction of
buyers and sellers
What happens when a country's money supply increases (generally, all else equal)?
decrease interest rates, exchange rate depreciates, exports increase
One strategy insurance companies have adopted to reduce moral hazard is to require an injured party to pay a(n) __________.
deductible
What is the economic concept that demonstrates the consumption of the first units of any good or service tends to bring a higher level of satisfaction to a person than the consumption of later units?
diminishing marginal utility
In "Wealth of Nations," Adam Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.
division of labor
The demand curve in a purely competitive market is _________, whereas the demand curve to a single firm in that market is __________.
downsloping; perfectly elastic
__________ means selling goods below their cost of production.
dumping
The __________ holds that a rise in price level will make domestic goods relatively more expensive, __________ exports and __________ imports.
foreign price effect; discouraging; encouraging
Economists would say tariffs
limit voluntary exchanges.
If two firms producing substitutes agree to fix prices, then their prices will __________. If two firms producing complements agree to fix prices, then their prices will __________.
increase; decrease
A potential issue(s) related to deficit spending during fiscal expansion is
increased inflation
You are a consultant for a concert company. You find after review of sales data that customers enthusiastically attend (every ticket would be sold) even after a 35 percent increase in the price of admission. The company is operating in the __________ portion of their __________ curve.
inelastic, demand
Econ Tire Co. knows that when customers buy insurance for their tires, it will increase the likelihood of the customers being reckless; there is a problem of __________. To mitigate this problem, the Econ Tire Co. should __________.
moral hazard; require the customer to sign a contract stating that insurance does not cover tire repair for reckless driving
For economists, "myopia" refers to
people's difficulty in conceptualizing the future
Expectations about the future play a role in
price bubbles, inflation, exchange rates
Monopolistic competitors can make a __________ in the short run, but in the long run, ___________ will drive these firms toward ____________.
profit or loss; entry and exit; a zero-profit outcome
Recent research shows that red meat is one of the leading causes of heart disease and baldness. This would cause the demand for red meat to
shift to the left
If a theater decided to increase the price for tickets, holding other factors constant, what would happen to the demand for soda in the theaters?
the demand for soda would shift to the left because soda and movies or complementary goods
Last month Sarah saw the value of her stock portfolio rise by $50,000. This month Sarah saw the value of her portfolio decline by $50,000. According to behavioral economics:
the positive utility Sarah received from seeing her portfolio value rise was less than the disutility she felt when its value declined.
Examine the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."
the statement is correct
The __________ means that a higher price level leads to lower real wealth.
wealth effect
International trade is most closely a __________.
win-win situation
If quantity demanded for cell phones falls by 4 percent when price increases 8 percent, we know that the absolute value of the own-price elasticity of cell phones is
-0.5.
The demand for Diet Coke is __________ than the demand for soda in general.
more elastic
