ECONOMICS FINAL REVIEW!!!

$10,000

31. Assume an economy produces only hamburgers and hotdogs and the base year is 2005. Given the data in the table above, what is the value of real GDP in 2006?

$21,700

32. Bob's Barber Shop cut 3,000 heads of hair in 2014 and 3,100 in 2015. The price of a haircut was $7 in 2014 and $8 in 2015. If 2014 is the base year, what was Bob's contribution to real GDP in 2015?

200,000

33. Based on the information in table, how many people are out of labor force?

1

34. Suppose the total expenditures for a typical household in 2010 equaled $2,500 per month, while the cost of purchasing exactly the same items in 2015 was $3,000. If 2010 is the base year, the CPI for 2010 equals:

-11.8

35. The CPI 1930 equaled 0.17. The CPI in 1931 equaled 0.15. The rate of inflation between 1930 and 1931 was _______ percent.

Increased

36. The price of a gallon of gasoline was $0.35 in 1972 when the CPI equaled 0.418. The cost of a gallon of gasoline was $2.25 in 2005 when the CPI equaled 1.68. The real cost of a gallon of gasoline between 1972 and 2005:

A medium of exchange

37. If you use $1,000 to purchase silver bullion, which you plan to keep in a safe, you are using money as:

Currency, checking deposits, and travelers' check.

38. The M1 measure of money consists of the sum of:

Cash and similar assets held to meet depositors withdrawals or payment.

39. Bank reserves are:

There is neither excess demand nor excess supply

2. When a market is in equilibrium:

Unemployment rate

50. The number of unemployed divided by the labor force equals the:

$4

12. For a given seller, the accompanying figure shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. What is this seller's reservation price for the 250th unit?

borrow the book from the library if the cost of doing so (in terms of the extra time it takes) is less than $13.

1. You are trying to decide whether to purchase the latest Harry Potter book online or borrow from the library no charge for borrowing a book from the library, but going to the library takes more time than ordering a book online Regardless of how you get the book, its benefit to you is the same. If the cost of buying the book online is $13, then you should

0.5

10. Refer to the figure below. What is the price elasticity of demand when the price of rice is $3 per pound?

The line labeled A; the line labeled B

11. Suppose that a new drug has been approved to treat a life-threatening disease. The demand for that drug is shown on the graph below. Prior to approval of this drug, the only treatment for this condition was any one of several non-prescription, or over-the-counter, pain relievers. The demand for one brand of the several non-prescription pain relievers is also shown on the graph. Demand for the new drug is ________ while demand for one brand of the over-the-counter pain reliever is ______.

More than 30 additional employee-hours

13. Suppose 30 employee-hour can produce 50 units of output. Assuming the law of diminishing marginal returns is present, to produce 100 units of output would require:

Loss; $15

14. Suppose Sarah owns a small company that makes wedding cakes. The table below shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day. If the market for wedding cakes is perfectly competitive, and wedding cake sell for $95 each, then at her profit-maximizing level output, Sarah will earn a ______ of_______ per day.

Output per person

16. The standard of living in an economy is best measured by:

$33,333

17. The country of Southland produced $2,000 billion of output in one year. The population of Southland was 100 million, of whom 60 million were employed. What was average labor productivity in Southland?

Increases

18. If average labor productivity increases while population and the number of employed workers remain constant, then total output:

Percentage of the labor force that is out of work.

19. The unemployment rate is the:

How do monopoly firms set prices and determine quantities to produce?

20. Major macroeconomics question include all of the following EXCEPT:

Government budget surplus

21. When government revenue exceeds government spending, the nation has a:

Structural

22. When a government moves from a centrally planned economy to a market economy, this is an example of _______ policy.

positive; normative

23. "U.S. exports will increase as a result of joined CAFTA," is an example of a _____ statement, while "The U.S. should join CAFTA," is an example of a _____ statement.

Aggregation

24. The adding up of individual economic variables to obtain economy wide totals is called:

The economy produces $7 worth of food

25. Suppose that the total production of an economy consists of 10 oranges and 5 candy bars, each orange sells for $0.20, and each candy bar sells for $1. Which expression of the output of this economy is most consistent with the concept of GDP?

Revenue; the cost of inputs purchased from other firms

26. The value added by any equals the firm's ______ from selling the product minus _____.

$200,000

27. In 2015, Pete Rich purchases a 1642 painting by Rembrandt for $20 million. He also pays a one percent commission to the auction house that sold the painting. What is the contribution of these transactions to GDP in the year 2015?

A laundry in Seattle purchases a new clothes-washing machine produced in the U.S.

28. Which of the following would increase the investment component of U.S. GDP?

150

29. The following table provides data for an economy in a certain year. Given the data in table, compute the value of GDP.

5

3. Suppose the total benefit of watching 1 baseball game is 100, the total benefit of watching 2 games is 120, and the total benefit of watching 3 games is 125. In this case, the marginal benefit of watching the 3rd game is:

real GDP

30. A measure of GDP in which quantities produced are valued at the prices of a fixed base year is called:

$12

4. You have two options for how to spend the afternoon. You can either go see a movie with your roommate or work as a tutor for the Math Department. From experience, you know that going to see a movie gives you $20 worth of enjoyment, and with your student discount, a movie ticket only costs $12. If you spend the afternoon working as a math tutor, you will get paid $45. On a typical day, you wouldn't be willing to spend the afternoon working as a math tutor for less than $35. What is your opportunity cost of seeing a movie this afternoon?

Make more loans

40. When the actual reserve/deposit ratio exceeds the desired reserve/deposit ratio banks:

Decrease

41. If banks' desired reserve ratio increases from 0.10 to 0.15, the public still desires to hold the same amount of currency, and the Fed takes no actions, the money supply will:

1,000; 1,400

42. If bank reserves are 200, the public holds 400 currency, and the desired reserve/deposit ratio is 0.20, the deposits are ______ and the money supply is _______.

Conduct monetary policy; oversee financial markets

43. The two main responsibilities of the Federal Reserve System are to ______ and to ______.

Sells ; decreases

44. In an open-market sale the Federal Reserve ______ government bonds and the supply of bank reserves ______.

dollar value

45. To aggregate 300 tons of steel, 5,000 bushels of wheat, and 1 million barrels of crude oil, economists add together the _____ of the three products

Increases it by a percentage equals to rate of inflation for that year

46. To ensure that a nominal payment represents a constant level of purchasing power over time, one should:

Decrease

47. Inflation makes it difficult to distinguish relative price changes from changes in the general level of prices. Consequently, inflation ______ the efficiency of the market system.

$530 billion; $4,230 billion

48. Based on the following information, the value of the M1 measure of the money supply is ______ and the value of the M2 measure of the money supply is _______.

Leisure time

49. GDP excludes important factors that affects people's well-being, such as the value of:

An increase in the price of tennis racquets.

5. Which of the following is likely to lead to a decrease in the demand for tennis balls?

Forest has to make trade-offs.

51. Forest lives in complete isolation in Montana. He is self-sufficient and feeds himself through hunting, fishing, and farming. Which of the following statements about Forest is true?

Its benefits exceed its costs

52. The Cost-Benefit Principle indicates that an action should be taken if, and only if:

The benefits of studying for an additional hour exceed the costs of studying for an additional hour.

53. According to the Cost-Benefit Principle, you should spend an additional hour studying for an exam if, and only if:

The next-best alternative that must be forgone.

54. The opportunity cost of an activity includes the value of:

The opportunity cost of attending State U. includes the money Alex could have earned working for four years

55. Alex received a four-year scholarship to State U. that covered tuition and fees, room and board, and books and supplies. If Alex becomes a full-time student, then:

Economic surplus; $3000

56. Suppose Mary is willing to pay up to $15,000 for a used Ford pick-up truck. If she buys one for $12,000 her ______ would be _______.

$4

57. For the Fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat all your meals, your average cost for a meal is:

$20

58. Refer to the table below. The marginal cost of the 3rd unit of this activity is:

Its marginal benefit is less than its marginal cost

59. The following table shows the relationship between the speed of a computer's CPU and its benefits and costs. Assume that all other features of the computer are the same (that is, CPU speed is the only source of variation), and only the CPU speeds listed below are available for purchase. Choosing a 3.5GHz computer would be irrational because:

Decrease in the supply of T-shirts

6. Suppose that the equilibrium price of T-shirts increases and the equilibrium quantity of T-shirts decreases. This is best explained by a(n)

Normative economics

60. An editorial in the paper argues that a person only should be allowed to attend school if the marginal cost of educating that person is less than the marginal benefit of educating that person. The writer's reasoning is an application of:

The reflects sellers' reservation prices

61. Which of the following is NOT true of a demand curve?

Neither buyers nor sellers want the price to change

62. Which of the following is NOT a characteristic of a market in equilibrium?

Excess supply

63. If price is above the equilibrium price, then there will be:

$6 ; 4

64. Refer to the figure below. The equilibrium price is ______, and the equilibrium quantity is ______.

There would be an excess demand of 25 units

65. Refer to the figure below. If the current market price were $20:

An increase in the price of a substitute

66. What might cause a demand curve to shift to the right?

Good X and good Y are complements

67. If an increase in the price of good X leads to a decrease in the demand for good Y, then:

Rises, less of the activity will occur

68. The law of demand indicates that as the cost of an activity:

9 doughnuts

69. Fran runs a doughnut shop in a tiny 3-person town. The table below shows the quantity demanded by the 3 townspeople at various prices. When the price of a doughnut is 50 cents, what is the market demand for doughnuts?

$10

7. Suppose that Tom bought a bike from Helen for $195. If Helen's reservation price was $185, and Tom's reservation price was $215, the seller's surplus from this transaction was:

3

70. If the price of cheese falls by 1 percent and the quantity demanded rises by 3 percent, then the price elasticity of demanded for cheese is equal to:

Inelastic

71. If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then demand for textbooks is:

Elastic

72. When the price of NBA tickets is $25 each, 30,000 tickets are sold. After the price rises to $30 each, 20,000 tickets are sold. At the original price, the demand for NBA ticket is:

Nike running shoes

73. Which of the following is likely to have the highest price elasticity of demand?

$8

74. John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: A 2nd hour cleaning windows will yield additional earnings of _______.

How much to produce

75. The most important challenge facing a firm in a perfectly competitive market is deciding:

Profit; $170

76. Assume that each day a firm uses 13 employee-hours and an office to produce 100 units of output. The price of each unit output is $5, the hourly wage rate is $10, and rent on the office is $200 per day. Each day the firm earns a _____ of ______.

Variable costs

77. A firm should shut down if its total revenue is less than its _____ even where the firm produces the level of output at which price equals marginal cost.

$105

78. Suppose Sarah owns a small company that makes wedding cakes. The table below shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day. If the market for the wedding cakes is perfectly competitive, and the wedding cakes sell for $125 each, then at her profit-maximizing level of output, Sarah's profit will be _____ per day.

Quantity supplied; increase in supply

79. An increase in consumers' demand for espresso will lead to an increase in ______, while an increase in the number of firms producing espresso will lead to a(n) ______.

The change in quantity demanded of a good that results from a change in its price.

8. The price elasticity of demand is a measure of:

Population size

80. If Country A and Country B have the same total output, then the standard of living in these two countries can be different depending on:

Output per person; output per worker

81. Average consumption in an economy is best measured by ______, while average productivity in an economy is best measured by ______.

Monetary; Structural

82. ______ policy focuses on the nation's money supply, while ______ policy aims at changing the underlying structures or institutions of the economy.

$0.75

83. Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process: What is the value added to Citrus Growers Inc?

$0.50

84. Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process: If the oranges were grown and the jam produced in the year 2015, but the marmalade was sold at The Corner Store in the year 2016, what is the contribution of these transactions to GDP in the year 2016?

Consumption, investment, government spending, and net exports.

85. The four components of aggregate expenditure are:

90

86. Given the following data for the economy, compute the value of GDP.

$10,000

87. Assume an economy produces only hamburgers and hotdogs and the base year is 2005. Given the data in the table above, what is the value of real GDP in 2006?

1

88. Suppose that the total expenditure for a typical household in 2010 equaled $2,500 per month, while the cost of purchasing exactly the same items in 2015 was $3,000. If 2010 is the base year, the CPI for 2010 equals:

13.4 percent

89. A consumer expenditure survey reports the following information on consumer protein spending: Using 2005 as the base year, by how much does a "cost of protein" index increase between 2005 and 2006?

become more elastic

9. Satellite TV is a close substitute for cable TV. In the 1990's small satellite TV units were developed that made it more practical for individual consumers to subscribe to Satellite TV service. This caused the price elasticity of demand for cable TV service to:

Deflation

90. In 1929, the CPI equaled 0.171 and in 1930, the CPI equaled 0.167. These data provide evidence of a period of:

Indexing and deflating

91. Two methods used to adjust nominal values for inflation are:

Fractional-reserve

92. The consolidated balance sheet of the all banks in Macroland is present below: Based on this balance sheet the banking system of Macroland can be described as a(n) _________ banking system.

1,000 ; 1,400

93. If bank reserves are 200, the public holds 400 in currency, and the desired reserve/deposit ratio is 0.20, the deposits are _____ and the money supply is ______.

Increase bank reserves, and the money supply will increase

94. An open-market purchase of government securities by the Fed will:

The percentage change in quantity supplied divided by the percentage change in price.

The price elasticity of supply at a point is: