Economics Today The Macro View Ch. 7 - The Macroeconomy: Unemployment, Inflation, and Deflation (Terms & Review), Combo with "Economics Today The Macro View Ch. 7 - The Macroeconomy: Unemployment, Inflation, and Deflation (Terms & Review)" and 1 othe...

CH25. Consider the table above and graph to the right. Suppose that after long-run adjustments take place in the used-book market, the business ends up producing 4 units of output. In the long run, the market price will be $ 3.28 and economic profits will be $0.00

$ 3.28; $ 0.00

Which of the following goods would most likely be advertised using largely informative advertising.

A car

stock

A certificate of ownership in a corporation.

marginal cost

cost of one more unit, minimum price producers will accept

the producer surplus from computers is equal to the

cost of producing the computer minus the price summed over the quantity sold

In a perfectly competitive market, if P = ATC in the long run, the firm will

cover direct and implicit costs and have no incentive to leave the industry.

a price ceiling below the equilibrium price ____ search and _____ a deadweight loss

creates, creates

tax incidence

divison of the burdent of a tax between an buyer and a seller

perfectly inelastic supply

seller pays

perfectly elastic demand

seller pays entire tax

price doesnt rise

seller pays tax

government intervene is agricultural markets in all of the following except

setting price ceilings

Information products can be produced at a relatively low and constant per-unit cost, but significant total fixed costs. Their average variable costs are constant, but average fixed costs decline as more books are produced, so publishers short-run average total cost curves slop downward, they realize

short-run economies of operation.

a price ceiling will create a _____ if it is set _____ the equilibrium price

shortage, below

articles of partnership

A partnership agreement that spells out each partner's rights and responsibilities.

Ch.24 Which of the following is not necessary for price discrimination to exist?

A perfectly elastic demand curve. A perfectly elastic Demand curve is horizontal.

Recession

A period of time during which the rate of growth of business activity is consistently less than its long-term trend or is negative.

GDP deflator

A price index measuring the changes in prices of all new goods and services produced in the economy.

Ch.24 A monopolist is defined as

A single supplier of a good or service for which there is no close substitute.

Consumer Price Index (CPI)

A statistical measure of a weighted average of prices of a specified set of goods and services purchased by typical consumers in urban areas.

Producer Price Index (PPI)

A statistical measure of a weighted average of prices of goods and services that firms produce and sell.

Personal Consumption Expenditure Index (PCE)

A statistical measure of average prices that uses annually updated weights based on surveys of consumer spending.

If supply exceeds demand, a surplus will result

A surplus in a market will always cause the market price to decrease

Deflation

A sustained decrease in the average of all prices of goods and services in an economy.

Inflation

A sustained increase in the average of all prices of goods and services in an economy.

service cooperative

A type of cooperative that provides a service rather than a good.

closely held corporation

A type of corporation that issues stock to only a few people, who are often family members.

publicly held corporation

A type of corporation that sells stock on the open market.

Which of the following is most likely to gain from unanticipated​ inflation? A. A consumer with a five year auto loan. B. A restaurant that has printed menus. C. A bank that specializes in mortgage lending. D. A senior citizen who receives Social Security payments.

A. A consumer with a five year auto loan.

Full employment means A. there is a level of unemployment consistent with​ "normal" frictions in the labor market. B. everyone has a job. C. everyone in the labor force has a job. D. there is​ "normal" frictional unemployment and a small amount of cyclical unemployment.

A. there is a level of unemployment consistent with​ "normal" frictions in the labor market.

Peak unemployment rate during a typical U.S. recession

About 10 percent

Depression

An extremely severe recession.

Job leaver

An individual in the labor force who quits voluntarily.

In a competitive market, positive economic profits act to

Attract new entrants into the industry. Positive economic profits would attract competitors.

C23. Average Total Cost =

Average Fixed Cost + Average Variable cost =$0.50 + $6.50 = $7.00

Ch.24 Recently in states across the land, licensing rules have expanded with each passing year. such licensing requirements constitute

Barriers to entry.

The type of unemployment that rises as the economy goes into a recession is called A. structural. B. seasonal. C. cyclical. D. frictional.

C. cyclical.

Which index in the U.S. is most often used in "indexing" and in COLA and escalator clauses in contracts?

CPI

What is the most-used price index in the US?

CPI-U- Consumer Price Index

CH25. Search goods are goods that consumers

Can easily evaluate before consumption.

Ch.24 Suppose a monopolist is producing where the marginal cost curve intersects the demand curve. The monopolist

Can increase profits by selling fewer units since marginal cost is greater than marginal revenue.

Ch.24 A monopoly is socially inefficient because it

Charges a price greater than marginal cost.

CH25. A monopolistically competitive firm

Chooses output first, then charges the highest price they can.

lowest

Comparative advantages are found by determining which activities have the ___________ opportunity costs.

C23. To determine whether the firm should produce in the short-run.

Compare the price with average total cost and average variable cost.

If supply exceeds demand, a surplus will result. The surplus will subsequently cause the market to

Compete for the limited quantity demanded by cutting pricing and reducing output.

opportunity

Cost is a forgone _________.

What is our benchmark for average U.S. real GDP growth per year?

Current US Real GDP Growth Rate is 1.80%.

Ch.24 Which of the following is not a barrier to entry into a market.

Diseconomies of scale.

Prices after World War II

Disinflation

CH25. The monopolistically competitive firm at a level of output of Q 1 in the diagram is

Earning positive economic profits

Leading indicators

Events that have been found to occur before changes in business activity.

Ch.24 In order to price discriminate, a firm must

Face a downward-sloping demand curve.

How much inflation have we had in the U.S. economy since 1967?

Formula#2 Use to figure out inflation/deflation ((Index in Y- Index in X)/Index in X) * 100% = % change in prices from X through Y ((237.1-33.4)/33.4)*100%=609.88%

In 1970, the Puma Shoe Company paid soccer superstar Pele $120,000 to suddenly kneel just before the referee blew his whistle to start to a World Cup match. The television cameras dutifully zeroed in on Pele tying his shoes, showcasing the distinctive Puma logo for all to see. What was the real value of the payment in 2013 dollars?

Formula#3 (Nominal price in X)/Index in X) * Index in Y= $ in year Y ($120000/38.8)*237.1 = $733,298.97

In 1954, Westinghouse was selling its 12.5 inch TV for $1,295. What is the price equivalent to in today's money?

Formula#3 To convert any nominal price into a real value expressed in the dollars from a different time period. (Nominal price in X)/Index in X) Index in Y= $ in year Y($1,295/26.9)237.1= $11,414.3

Laissez-Faire

French term adopted by Smith to describe an economic policy of limited government interference in markets.

What are the four major types of Unemployment?

Frictional Structural Cyclical Seasonal

Ch.24 For a monopoly, the profit max level of output and price will be shown by the point Suppose what will happen in a perfectly competitive industry A society faces economic cost by allowing monopolies to exist because monopolies

G E Charge a price higher than marginal cost and produce less than what society wants.

Fracking is an oil and gas drilling technique that dramatically increases oil and gas output , but it may also generated water pollution. How is this pollution handled in the US measure of real GDP?

GDP is not a measure of nation's overall welfare. There is not a set criteria for net welfare.

Ch.24 A natural monopoly

Has economies of scale over a very large range of output. has decreasing long run marginal costs over a very large range of output. has decreasing long run total costs over a very large range of output.

Information products use information-intensive inputs and are characterized by

High fixed costs but low marginal costs.

When marginal cost is less than marginal revenue, the firm will always make more profit by

INCREASING production.

How does the Federal Reserve feel about "deflation?"

If the US experienced deflation, the price of goods and services would show an overall decline in prices. This in itself is not a danger from the economists perspective. Many prices drop due to seasonal sales, cheaper input (raw commodity) costs, technological advances, demographic shifts or changes in currency rates.

How does a V-recession differ from a U-recession?

In a U-shaped recession, an economy first goes through a sharp recession. After that, instead of seeing a quick recovery (as is the case in a "V-shaped" recession), the economy stagnates and continues to decline for a period of time before finally recovering. A "U-shaped" recession usually lasts 12-24 months. A V-recession is comprised by a fast decline followed by a fast recovery.

What does the 90-10 rule refer to?

In village economies, it took 90 percent of the workforce working in agriculture to feed themselves as well as the remaining 10 percent.

Incentives Problem

Incentives Problem Taxes or distribution based on something other than contribution reduces the incentives to work and invest in the economy.

Seasonal Unemployment

Includes a person who works during the holidays or during the busiest times of the year. Includes a person who is laid-off from a fish cannery that shuts down during the off-season.

A anger of a monopoly argues that the firm must not be maximizing its economic profits.

Incorrect, since profit maximization requires that marginal revenue equals marginal cost but does not require the average total cost to be at any particular level.

CH25. Advertising is used to

Increase demand; Make demand more inelastic.

Labor force

Individuals 16 years or older who either have jobs or who are looking and available for jobs; the number of employed plus the number of unemployed.

What are the CPI and PPI used for?

Inflation or Deflation first shows in the PPI, then in the CPI.

Part of the Production Possibilities Curve, which illustrates scarcity, where inefficient production and/or unemployed resources are

Inside the PPC

Ch.24 In a monopoly market structure, the firm (the monopolist)

Is the whole industry.

What happens to the economy's circular flow if there is a break in one part of the flow?

It affects all areas throughout.

Nixon's 1970 Wage and Price Control Policy

It fell apart because a price control policy can't distinguish between relative price increases and inflation.

While the Reagan Tax Cut of 1981 was about the same size as the Kennedy-Johnson Tax Cut, it had a very different rationale. What was the goal or rationale of the Reagan Tax Cut?

It's goal was to reduce taxes in order to restore production incentives rather than to stimulate demand and spending.

Which of the following is true about your opportunity cost in attending this class?

It's measured by the lost value of what the student would've been doing if he or she didn't come to class.

What are the four types of individuals?

Job loser Reentrant Job leaver New entrant

What did J.M. Keynes think the Great Depression was?

Keynes thought the Great Depression was a permanent depression, and his goal was to get rid of laissez-faire.

The largest component in the Income Approach to measuring GDP is ____

Labor income

zoning laws

Laws in a city or town that designate certain areas, or zones, for residential and business use.

For a monopolist, marginal revenue is Show a possible marginal revenue curve.

Less than the price of the product.

The decline in the price of lithium following the entry of more firms in response to increasing demand indicates that the long-run lithium supply curve slopes downward. Thus, it can be surmised that

Lithium industry is a decreasing-cost industry.

Ch.24 Given the information in the table to at right.

MC= TC-TC/ output MR = Revenue/output or TR-TR/output. 6 units of output is the profit maximizing level.

Drunk drivers cause a large share of emergency room admissions and cause great suffering and huge medical expenses. How do the medical costs associated with drunk driving affect U.S. real GDP?

Medical costs increase GDP.

C23.If the price is less than the average variable cost, the firm should..

Minimize loss by shutting down and paying only the fixed costs because its average variable costs are not covered by the price of the product.

The book publishing industry exhibits the following features: Many competitive sellers, Heterogeneous products considerable advertising, easy entry and exit With these characteristics, the book-publishing industry represents

Monopolistic competition.

CH25. Unlike perfectly competitive firms...

Monopolistically competitive firms will have an incentive to advertise.

Law of Increasing Additional Cost,

More of a certain good produced means giving up more of the other goods.

Law of Supply

More product is brought to market at a higher price than at a lower price

experience goods are goods that consumers

Must consume in order to assess them properly.

Which part of the monthly employment report do business leaders, economist, and government officials watch closely?

New jobs created

Not in the work force

Not in the work force Includes a person who quits work in order to stay home in order to care for a family and household.

Ch.24 If we were to compare the amount produced by firms in a competitive industry to the output produced by a monopoly, the monopolist will produce.

On the elastic portion of the demand curve and charge a higher price.

Soviet Union

Only country to escape the Great Depression

Suppose that we an economy increases its production of consumer goods and gives up capital goods in the process. As it produces more and more consumer goods, what happens to our opportunity cost?

Our opportunity cost increases

Part of the Production Possibilities Curve, which illustrates scarcity, that contains unattainable production levels

Outside to the northeast of the PPC frontier

C23. Profits are maximized for the perfectly competitive firm when the firm produces the quantity where

P = MC. Total revenue exceeds total cost by the greatest amount. MC=MR.

C23. A firm will continue to operate in the short run, even at an economic loss, as long as

P is greater than minimum AVC.

Ch.24 In the graph, the profit-maximizing price for a monopoly is

P1

The perfectly competitive firm in long-run equilibrium produces a level of output such that

P=MC=MR=short-run ATC-long-run ATC.

In long-run equilibrium which of the following is true for the firms in a perfectly competitive industry?

P=MR=MC=ATC

Which panels represent long run EQ for the perfect competitive firm and monopolistic competitive firm/

Panel C and B

fringe benefits

Payments to employees other than wages or salary.

Growth in the Soviet Union was...

Peaked at 15 percent from the '30s to the '80s before shrinking down to 0 percent at the time of the Reagan Administration although the Soviets claimed it was growing at 18 percent annually during the Cold War.

Socialist planning is basically predicated (or based) on the argument that...

People don't actually know what's good for themselves.

Law of Demand

People will buy more of a good or service at a lower price and buy less at at higher price.

Rationality Assumption

People won't knowingly do something that will hurt themselves.

CH25. In comparing the long-run equilibrium of perfect competition and monopolistic competition, which of the following is true?

Perfect competition: P= MC = minimum of ATC and zero economic profit Monopolistic competition: P > MC, P> minimum ATC and zero economic profit.

Ch.24 Charging different prices for similar products that have different marginal costs is called

Price differentiation.

CH25. The grater the monopolistically competitive firms success at product differentiation the lower is ( are ) the firms

Price elasticity of demand. This implies a more relatively inelastic demand.

Ch.24 For a monopoly

Price equals average revenue only. Total Revenue (TR) = Price (P) x Quantity ( Q); Average Revenue (AR) = TR/Q; Therefore AR = (P x Q)/Q = P

Perfect competition is efficient because.

Price equals marginal cost. (P=MC). when an individual pays a price equal to the MC of production, the cost to the user of that product is equal to the sacrifice or cost to society of producing the Q of that good as opposed to more of some other good. It is impossible to increase the output of any good without lowering the Value of the total output produced in the economy.

C23. The perfectly competitive firm is said to be a.

Price taker - it takes the price given by the market.

Ch.24 The monopolist sets price by

Producing the quantity where marginal cost equals marginal revenue and charging the price that corresponds to that quantity.

CH25. The fact that a monopolistically competitive firm does not produce at the minimum ATC can be viewed as the cost of generating

Product differentiation and variety.

The relative size of underdeveloped economies- compared to the U.S.- often depends on how their GDP is converted into dollars. These economies will usually have larger GDPs if we use ____________ rates to convert them to dollars.

Purchasing power parity exchange

Suppose someone asks you what the difference is between real GDP and nominal GDP. Give them a to-the-point answer as to the how the two differ.

Real GDP is equal to the economic output adjusted for the effects of inflation. Nominal GDP is economic output without the inflation adjustment. Nominal GDP is usually higher than real GDP because inflation is typically a positive number. Nominal GDP is used when comparing different quarters of output within the same year

If people do respond to incentives, what may be the unintended (or unwanted) consequence of extending unemployment benefits?

Reduces the incentive to find new jobs. People will spend more time searching for jobs that they hope may be "better" instead of seeking out work that may be readily obtainable. Drives up structural unemployment and increases the measured unemployment rate.

next-highest

Scarcity requires us to choose. Whenever we choose, we lose the _________-________-valued alternative

CH25. In the short run, a monopolistically competitive firm will

Select the rate of output where marginal revenue equals marginal cost.

Adam Smith argued that people were motivated to engage in economic activity by...

Self-interest.

C23.The table at right represents the hourly output and cost structure for local pizza shop. The market is perfectly competitive. Total costs include all implicit opportunity costs. Suppose the market price drops to only $5 per pizza. In the short run, this pizza shop

Should continue to make pizza at the $5 price. So, as long as there is an output level where the total revenue exceeds the total cost, the firm can earn an economic profit.

CH25. The downward slope of the demand curve of a monopolistically competitive firm implies that the firm has

Some monopoly power over price, and therefore advertising may increase profits.

What did Stanley Jevons think caused the business cycle?

Sun spot activity

Ch.24 The table below depicts the daily output, price, and costs of a monopoly dry cleaner.

TR = P x Q(output).

horizontal merger

The combination of two or more firms competing in the same market with the same good or service.

Ch.24 If a public utility company is considered a monopolist, which of the following is not true?

The companies demand curve and supply curve are upward sloping.

Price index

The cost of today's market basket of goods expressed as a percentage of the cost of the same market basket during a base year.

C23. When the marginal revenue equals the marginal cost

The firm is maximizing its profits. MC=MR

Anticipated inflation

The inflation rate that we believe will occur. When it does occur, we are in a situation of fully anticipated inflation.

liability

The legal obligation to pay debts.

The supply curve of the perfectly competitive firm in the short run is equal to

The marginal cost curve above minimum AVC.

C23. The demand curve for the perfect competitor is horizontal because

The market dictates each firm's price. The price is determined by the forces of market supply and demand. This is where the market demand curve intersects the market supply curve.

Nominal rate of interest

The market rate of interest observed in contracts expressed in today's dollars.

Cyclical Unemployment

The only type of unemployment that might be significantly reduced by a government policy of stimulating the economy.

business organization

The ownership structure of a company or firm.

C23. Suppose that a perfectly competitive firm faces a market price of $10 per unit, and at this price the upward-sloping portion of the firm's marginal cost curve crosses its marginal revenue curve at an output level of 1,200 units. If the firm produces 1,200 units, its average variable costs equal $6.50 per unit, and its average fixed costs equal $0.50 per unit.

The price intersects the MC at 1200 units of output. This is the profit maximizing output level. Total profit (Average Revenue - Average Total Cost) * Quantity. Average Revenue = P = $10 Average Fixed Cost + Average Variable cost =$0.50 + $6.50 = $7.00 Total profit (Average Revenue - Average Total Cost) * Quantity( $10-$7) * 1200 = $3600.

Lithium's long-run supply curve must be downward sloping because.

The price of lithium declines following the entry of more firms in response to increasing demand.

Natural rate of unemployment

The rate of unemployment that is estimated to prevail in the long-run macroeconomic equilibrium, when all workers and employers have fully adjusted to any changes in the economy.

What happens to the value (or purchasing power) of money during periods of inflation?

The real value of money will diminish

What happens to the value (or purchasing power) of money during periods of deflation?

The real value of money will increase

royalties

The share of earnings given by a franchisee as payment to the franchiser.

Unemployment

The total number of adults (aged 16 years or older) who are willing and able to work and who are actively looking for work but have not found a job.

Ch.24 A firm can be sole supplier of a good and still not be considered a monopoly if

There are very close substitutes for the good.

Ch.24 Issues and applications

There has been an occupational license explosion in the U.S.

Satiation occurs when people have everything that they need or want. Many economists have been fascinated with satiation. Which of the following is correct regarding satiation?

There has been no indication that we have ever reached satiation or are about to reach it.

Soviet planners rejected the criteria that voluntary exchange because.

They argued that it didn't measure up to their object standards of value.

C23. If a perfectly competitive firm sells the product for a profit-maximizing price of 4.76 and has average total cost per unit of $5.15, in the short run.

This firm should shut down if 4.76 is less than the AVC. This firm is losing money. This firm must hope the market price rises soon or exit the industry.

C23. Total Profit =

Total profit (Average Revenue - Average Total Cost) * Quantity. Average Revenue = P = $10

CH25. Calculate total rev, total profit, marginal rev, and marginal cost table. Based on marginal analysis, what is the profit-maximizing level of output for this business.

Total revenue equals price times output quantity. output of 7 ( MR = MC)

Frictional unemployment

Unemployment due to the fact that workers must search for appropriate job offers. This activity takes time, and so they remain temporarily unemployed.

CH25. When a firm is selling an experience good it is more likely to

Use persuasive advertising.

Voluntary Exchange

What's needed and valued is up to each individual. People know what's good for themselves.

Trough

Where the recession ends.

C23. Is the firm maximizing economic profits?

Yes, they are producing where the marginal revenue equals the marginal cost. ( MR=MC).

CH25. In the long run, monopolistically competitive firms earn

Zero economic profits.

In long-run equilibrium, the perfectly competitive firm makes

Zero economic profits. Long-run eq. occurs after firms have been allowed to either enter or leave. If there are zero economic profits there is no incentive for industry entry or exit. This is consistent with long-run eq.

C23.In the graph, if price is P1, the profit-maximizing rate of output is

Zero. Since the price is below the AVC(the shut-down point), the firm will not produce any output.

wants

________ are unlimited. They include all material desires and all non-material desires, such as love, affection, power, and prestige.

When people pay less for something than it is worth to them, they receive what is called

a consumer surplus.

An inefficient level of production leads to

a deadweight loss.

which of the following statements are true

a goods marginal benefit is the max price someone is willing to pay for another unit

demand curve

a graphical representation of the demand schedule. It is negatively sloped line showing the inverse relationship between the price and quantity demanded (other than being equal)

price ceilngs

a legal maximum price that may be charged for a particular good or service

price floor

a legal minimum price below which a good or service may not be sold. Legal minimum wages are an example

minimum wage

a wage floor legislated by government setting the lowest hourly rate that firms may legally pay workers

physical capital

all manufactured resources, including buildings, equipment, machines, and improvements to land that are used for production

goods

all things form which individuals derive satisfaction or happiness

voluntary exchange

an act of trading, done on an elective basis, in which both parties to the trade expect to be better off after the exchange

behavioral economics

an approach to the study of consumer behavior that emphaize psychological limitations and complications that potentially interfere with rational decision making

price system

an economic system in which relative prices are constantly changing to reflect changes in supply and demand for different commodities. The prices of those commodities are signals to everyone within the system as to what is relatively scarce and what is relatively abundant

black market

an illegal market in which the price exceeds the legally imposed price ceiling

inefficient point

any point below PPC, at which the use of resources is not generating max possible output

CH25. Assume that every time you wanted to take this quiz you were charged a fee. The publisher's cost for developing the quizzes and making them available does not vary with the number of times you or anyone else takes the quizzes. These quizzes

are known as informational product.

big tradeoff

between efficiency and fairness

is price ceilngs fair?

blocks voluntary exchange, does not benefit poor, uses: lottery, queues, discrimination

the crop failure raises the price of the crop, and because the demand for it is inelastic,

boosts farmers revenue

price rises less amount

buyer and seller share

efficiency

case in which a given level of inputs is used to produce max output possible. alternatively, the situation in which given output is produced at min cost

an effective price ________ is one that sets the legan price below the market clearing price and is enforced.

ceiling

Government sometimes impost price controls in the form of price _________ and price ______.

ceilings floors

The three basic economic questions ask what and how much will be produced, how will items be produced, and for whom will items be produced. The two opposing answers are provided by the type of economic system with ____ ______ ____ _____ or the _______.

centralized command and control price system

A change demand comes about only because of a change in the ____ ______ conditions of demand. This change in demand is a shift to the demand curve to the left or to the right

ceteris paribus

Most models use the ______ ________ assumption that all other things are held constant or equal.

ceteris paribus

we measure demand schedule in terms of a time dimensions and in ______ quality units constant

constant

Effecive price _______ lead to nonprice rationing devices and black markets.

controls

Effective rent ________ impede the functioning of rental prices. Construction of new rental units is discouraged. Rent _____ decrease spending on maintenance of existing cones and also lead to housing gridlock

controls controls

production possibilities curve

curve representing all possible combinations of max outputs that could be produced, assuming a fixed amount of productive resources of a given quality

workers decrease

curve shifts left (decrease need for low skilled workers)

MC > MB Marginal cost>Marginal Benefit

decrease production

farmers experience a decrease in total revenue when there is a bumper crop because

demand for agricultural produce in inelastic

the divison of a tax falls heaviest on buyers when

demand is perfectly inelastic

CH25. A firm that produces an information product will

earn zero economic profits in the long run.

CH25. Monopolistically competitive firms will

earn zero economic profits, charge higher prices than perfectly competitive firms not produce the efficient level of output.

Assuming that this firm has positive fixed costs, the firm

earned Zero economic profits. To maximize economic profits today, this firm should produce LESS THAN 10000 bricks if the price exceeds the average variable cost.

Ch.24 As opposed to other types of monopoly, a natural monopoly typically owes it monopoly position to

economies of scale.

Consumption and net exports are part of the

expenditure approach to measuring GDP

in order to price discriminate, a firm must

face a downward-sloping demand curve.

Prices in a market economy perform a rationing function because they reflect relative scarcity, allowing the market to clean. Other ways to ration goods include ____ _____, ________ _____________, _________ __________, ___________ _____________, ________ _____________, and ____________.

first come first served political power physical force random assignment coupons

unemployment

gap betweenquantitiy demanded and quantity supplied

taxes are usually levied on

goods and services with inelastic demand

inferior good

goods for which demand falls as income rises

normal goods

goods for which demand rises as income rises. Most goods are normal goods

economic goods

goods that are scarce, for which the quantity demanded exceeds the quantity supplied at zero price

price controls

government mandated minimum or maximum prices that may be charged for goods and services

Whenever the price is _______ than the equilibrium price, there is an excess quantity supplied (a surplus)

greater

In a Production Possibilities Curve depicting the trade-off between capital goods vs. consumer goods, an economy choosing more capital goods and less consumptions goods will, ceteris paribus ____________

have more growth.

Other things being equal, a price - discriminating firm will charge less to the customers who

have the most elastic demand for the product.

lines and payments on the black market

help allocate apartments among potential renters

market supply curve

horizontal sum

community demand curve

horizontal sum of individual demand curves

MB > MC Marginal Benefit>Marginal cost

increase production

long run adjustment

increase supply, supply curve shifts right

Ch.24 If a monopolist marginal cost curve shifts upward, the monopolist price will ______, the output rate will ____.

increase, decrease.

most economist believe that a rises in minimum wage

increases unemployment

a subsidy paid to corn farmers ____ the supply of corn and _____ a deadweight loss

increases, creates

As the number of imperfect substitutes for a monopoly firms product increases, the price elasticity of demand

increases.

Ch.24 As the number of imperfect substitutes for a monopoly firms product increases, the price elasticity of demand

increases.

a rent ceiling below the equilibrium rent creates

inefficiency and deadweight loss

When the marginal social benefit of a good exceeds its marginal social cost, resource use is

inefficient.

alcohol, tabacco, gas

inelastic demand buyers pay more

Books that can be produced at a relatively low and constant per-unit cost but at significant total fixed costs are known as

information products

The market clearing price occurs at the ________ of the market demand curve and the market supply curve. It is also called the _______ price, the price from which there is no tendency to change in demand or supply

intersection equilibrium

The law of demand posits an ______ relationship between the quantity demanded of a good and its price of other things being equal

inverse

deflation

is a decrease in the general price level of goods and services.Deflation occurs when the inflation rate falls below 0% (a negative inflation rate).

inflation

is a sustained increase in the general price level of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services.

according to the fair results approach to fairness, a minimum wage _____ fair and according to the fair rules approach to fairness a minimum wage ___ fair

is not, is not

Since lithium is homogenous and indistinguishable across firms, the market for lithium

is perfectly competitive.

C23. Profit-Maximizing rate of production

is the rate of production that maximizes total profits, or the difference between total revenues and total costs. Also, it is the rate of production at which marginal revenue equals marginal cost.

In a monopoly market structure, the firm

is the whole industry.

If minimum wage is set above the equilibrium price

it creates a surplus of labor and a deadweight loss,

minum wage above equilibrium price

leads to unemployment quantity supplied exceeds demand

Whenever the price is _______ than the equilibrium price, there is an excess quantity demanded (a shortage)

less

deadweight loss

loss of consumer or producer surplus, no one gains, loss in total surplus area a measure of inefficiency. it is equal to the decrease surplus that results from inefficient level of production

labor

low elastic supply, seller pays

you want

marginal cost to equal marginal benefit, efficient allocation

As the quantity consumed of a good or service increases, its

marginal social benefit decreases.

The minimum price that producers must receive to induce them to produce another unit of a good or service is equal to the good's

marginal social cost.

The ________ __________ curve is derived by summing the quantity demanded by individuals at each price. Graphically, we add the individual demand curves horizontally to derive the total, or market, demand curve

market demand

services

mental or physical labor or assistance purchased by consumers. Examples are the assistance of physicians, lawyers, dentists, repair personnel, housecleaners, educators, retailers, and wholesalers; items purchased or used by consumers that do not have physical characteristics

_____, the study of the decision-making process of individuals (or households) and firms, and ______, the study of the performance of the economy as a whole are the two main branches into which the study of economics are divided.

microeconomics macroeconomics

At the long-run equilibrium the firm's average total cost is

minimized.

the market supply curve shows the

minimum price suppliers must receive in order to produce another unit of the good

price floor applied to labor

minimum wage

If the price changes, we ____ _______ a curve- there is a change in quantity demanded or supplied. IF some other determinant changes we _______ a curve - there is a change in demand and supply

move along shift

Ch.24 Monopoly producers are faced with

no competitive producers of the same product.

minum wage set above equilibrum wage rate has

powerful effects

obstacles of efficiency

price and quantity regulations, taxes and subsidies, externalities, public goods and common resources, monopoly, high transaction costs

making the supply of a good or service illegal _____ the price and ______ the quantity bought and sold

raises, decreases

in general a tax ____ the price demanders pay _____ the price suppliers keep for themselves

raises, lowers

a production quota set on sugar below the equilibrium quantity of sugar ___ paid by buyers and ___ the price received by sellers

raises, raises

price ceiling

regulation that makes it illegal to change a price higher than specific amount

price floor

regulation that makes it illegal to trade at a price lower than a specified level

individual supply

relationship between price and quantity suppliec

market demand

relationship between price of a good and quantity demanded by all buyers in the market

rent ceiling leads to inefficient use of resources

shortage

A competitive equilibrium is efficient when the

sum of consumer surplus and producer surplus is maximized.

with the price control, there was a shortage of gasoline when the price rises

suppliers produce more gas and demanders are able to buy more

the _____ curve normally shows a direct relationship between price and quantity supplied. The _______ _____ curve is obtained by horizontally adding individual supply curves in the market.

supply market supply

by raising the wage that must be paid firms respond by decreasing he quantity of workers they deamand

that decreases the number of workers they will hire

the fact that the sum of consumer surplus and producer surplus is as large as possible indicates

that gains from trade are as large as possible

rationally assumption

the assumption that people do not intentionally make decisions that would leave them worse off

ceteris paribus

the assumptions that nothing changes except the factors or factors being studied

equilibrium

the situation when quantity supplied equals quantity demanded at a particular price

microeconomics

the study of decision making undertaken by individuals (or households) and by firms

economics

the study of how people allocate their limited resources to satisfy their unlimited wants

producing quota

upper limit of the quantity of a good that may be produced in specified period

consumption

use of goods and services for personal satisfaction

A principle that states that we should strive to achieve "the greatest happiness for the greatest number is

utilitarianism

marginal benefit

value (what we get) from one more unit

People receive a consumer surplus in a market transaction if the good's

value exceeds its price.

consumer surplus

value of good minus the price paid for it, summed over quantify bought

Economics is a social science that involves the study of how individuals choose among alternatives to satisfy their ______, which are what people would buy if their incomes were ________.

wants unlimited

Prior to the industrial revolution and the spread of capitalism, most people____

were directly employed in agriculture.

sole proprietorship

A business owned and managed by a single individual.

C23. Values are at the profit maximizing out at

(MR = P = MC)

How do you calculate Price Index?

(NGDP/RGDP) x 100

the increases in quantity means that the price on world market falls

...

Formula #1: Suppose a basket of goods in the base year cost $4,971. In Year X, the same basket cost $8,909. What is the index number for Year X?

4971 * 100 / 8909 = 55.8

What is the Natural Rate of Unemployment (percent)?

5%

Expansion

A business fluctuation in which the pace of national economic activity is speeding up.

The Soviet Union never produced very many automobiles. This was primarily due to...

A Soviet planner's decision to not devote resources to consumer goods.

division

A _________ of labor occurs when different workers are assigned different tasks. Together, the workers produce a desired product.

bond

A formal contract issued by a corporation or other entity that includes a promise to repay borrowed money with interest at fixed intervals.

business association

A group organized to promote the collective business interests of an area or group of similar businesses.

CH25. All of the following are key characteristics of a monopolistically competitive industry except

A homogenous product.

Real Price

A price that has been adjusted for both inflation and deflation.

Nominal Price

A price that isn't adjusted for inflation or deflation.

fixed

A production possibilities curve is drawn holding the quantity and quality of all resources _________ over the time period under study.

Flow

A quantity measured per unit of time; something that occurs over time, such as the income you make per week or per year or the number of individuals who are fired every month.

Market

All of the arrangements that individuals have for exchanging with one another. Thus, for example, we can speak of the labor market, the automobile market, and the credit market.

producer cooperative

An agricultural marketing cooperative that helps members sell their products.

Job loser

An individual in the labor force whose employment was involuntarily terminated.

business license

Authorization to operate a business issued by a local government.

CH25. The advertising of credence goods contains

Both informational and persuasive advertising, so as to provide detailed information and at the same time persuade the consumer to try the product.

Consider an economy with only two groups of​ people: Wage earners and Goods sellers. If the price level increases by​ 20% while the nominal wages remains the​ same, A. income will be redistributed from goods sellers to wage earners. B. income will be redistributed from wage earners to goods sellers. C. no income redistribution will occur as nominal wages are same as before. D. real wages will not be affected as nominal wages remained the same.

B. income will be redistributed from wage earners to goods sellers.

CH25. Why are brand names and advertising important features of monopolistic competition.

Both of these techniques can be used to increase the demand for the product.

Suppose consumers reduce their expenditure and take their savings to the bank, What do banks do with these savings?

Banks turn this money into real investment by loaning money to business firms.

Ch.24 Suppose a monopolist faces the demand 12- 0.1 x Q the corresponding marginal revenue function is 12 - 0.2 x Q. Further suppose that marginal cost is constant $2.

Basic formula would be 12-2 = 10 [5 ]* 10 = 50 (profit maximizing Quantity) 12 +2 = 14 14 /2 = 7.00 ( Profit maximizing price) To graph this just use 12 * 10 = 120 (max output) Demand 120/2 = 60 (Marginal revenue) line

The U.S. business cycle can be traced back to the mid-1850s. However, the U.S. as a nation can be traced back to 1780s. Why do we not discuss the U.S. business cycle from 1780-1850?

Because it wasn't until 1860 that Clement Juglar initiated the first systematic inquiry into dating and tracking business cycles.

C23. Which of the following is NOT one of the assumptions of a perfectly competitive market?

Better information for producers than consumers.

If a firm is making zero economic profit it should

Continue operating. Zero economic, or normal profits are sufficient to cover all costs and keep the firm operating.

C23. The decision making process for the perfectly competitive firm boils down to

Deciding how much to produce.

Prices before World War II

Deflation

Shortage

Demand exceeds supply.

Which of the following is not a characteristic of a monopoly?

Free entry and exit

Discouraged workers

Individuals who have stopped looking for a job because they are convinced that they will not find a suitable one.

Frictional Unemployment

Includes a person who quits in order to find a better job.

A perfectly elastic long-run supply curve

Indicates that input prices do not change when firms enter or exit the industry. Industry uses a small percentage of the total supply inputs required for industry-wide production that firms can enter the industry without bidding up input prices, so the long -run industry supply curve is therefore horizontal or perfectly elastic.

How is the underground economy treated or handled in the measurement of GDP?

Individuals will not report these activities so they will not be counted in the GDP.

Unanticipated inflation

Inflation at a rate that comes as a surprise, either higher or lower than the rate anticipated.

CH25. In the long run, monopolistically competitive firms

Make zero economic profits.

In a perfectly competitive industry in the short run, if wages increase, which of the following will occur.

Marginal costs will increase, and industry supply will decrease.

Consider the market for DVD movie rentals, which is perfectly competitive. The market supply curve slopes upward, the market demand curve slopes downward, and the equilibrium rental price equals $3.50. indicate how each of the following events will have an effect on the market clear price and on the demand curve faced by the individual rental store. People's tastes change in favor of going to see more movies at cinemas with their friends and family members. National DVD-rental chains open a number of new stores in this market. There is a significant increase in the price of downloading movies on the internet.

Market clearing price DECREASES. Firm's demand curve SHIFTS DOWN. DECREASES, SHIFTS DOWN. INCREASES SHIFTSUP.

As a consequence of European efforts to minimize churn, most European economies have had "full-employment levels of unemployment" that are...

Much higher than the U.S. full-employment level of unemployment.

outside; inside

Points ________ the PPC are unattainable. Points _______ are attainable but represent an inefficient use or underuse of available resources

Compared to PPP (Purchasing Power Parity) rates, exchange rates are____

Simpler, less expensive.

Which part of the economy was responsible for the revival of Western European economies after 950 A.D., and again during the revival after 1500 A.D.?

The market side of the economy caused the revival.

assets

The money and other valuables belonging to an individual or business.

CH25. If the average total costs are the same for a perfectly competitive firm and a monopolistically competitive firm, then we know that

The monopolistically competitive firm will produce fewer units than the perfectly competitive firm.

Real rate of interest

The nominal rate of interest minus the anticipated rate of inflation.

Labor force participation rate

The percentage of noninstitutionalized working-aged individuals who are employed or seeking employment.

dividend

The portion of corporate profits paid out to stockholders.

With marginal cost pricing

The price charged is equal to the opportunity cost to society of producing one more unit of the good.

With marginal cost pricing,

The price charged is equal to the opportunity cost to society of producing one more unit of the good.

Purchasing power

The value of money for buying goods and services. If your money income stays the same but the price of one good that you are buying goes up, your effective purchasing power falls.

Which of the following statements is true bout the price that a monopolist charges?

The value that society places on the last unit produced in a monopoly is greater than its cost.

Base year

The year that is chosen as the point of reference for comparison of prices in other years.

CH25. Interactive marketing.

This advertising approach allows a consumer to respond directly to an advertising message; often the consumer is able to search for more detailed information and place an order as part of the response. Sales booths and some types of internet advertising, such as banner ads with links to sellers web pages.

Measurement of a Business Cycle

Usually from peak to peak.

The graph to the right depicts the average cost curves and the marginal cost curve for a typical firm in a competitive industry. Draw the firms demand curve at a market price such that the firm is breaking even. Draw the firms demand curve at a market price such that the firm is at its shutdown price.

When the firm is at its break even price, accounting profits are positive.

Which of the following is the most true of economics before Adam Smith?

Which of the following is the most true of economics before Adam Smith? There was no division of economics into micro and micro economics.

import quota

a physical supply restriction on imports of a particular good, such as sugar. Foreign exporters are unable to sell in the US more than quality specified in the import quota

human capital

accumulated training and education of workers

ceteris paribus conditions

determinants of the relationship between price and quantity that are unchanged along a curve. Changes in these factors causes the curve to shift.

When a _____ is place on wages at a rate that is above market equilibrium, the results is an excess quantity of labor supplied at that minimum wage.

floor

resource allocation methods

market price, command, majority rule, contest, first come first serve, sharing equality, lottery, personal characteristics, force

the more elastic the

more the buyer pays

the opportunity cost of a good included the market price as well as the

opportunity cost of time spent acquiring the good

market demand

the demand of all consumers in the marketplace for a particular good or service. The summation at each price of the quantity demanded by each individual.

consumer surplus (dunn)

what consumer actually pays for an item vs what they are willing to pay

wants

what people would buy if their incomes were unlimited

cost

what the producer gives up

C23. The graph to the right depicts the per unit cost curves and demand curve facing a shirt manufacturer in a competitive industry. How much profit is this firm making per minute.

$-108.9 4.78(MR) - 6.76(ATC) =-1.98 * 55(quantity) = $-108.9

Consider the diagram at the right depicting the revenue and cost conditions faced by a monopolistically competitive firm. What are the total revenues experienced by this firm? What are the total costs experienced by this firm? What are the economic profits experienced by this firm? This firm is more likely in ___ - run equilibrium because ________.

$2800 $2800 $0 Long. Normal profits will not stimulate entry, which is a long-run change.

susan is willing to pay $5 for the second slice of pizza she eats. the price she actually pays is $4. susans consumer surplus for this slice of pizza is

$4

Ch.24 A monopolist maximized rate of economic profits is $800 per week. Its weekly output is 400 units, and at this output rate, the firm's marginal cost is $37 per unit. The price at which it sells each unit is $49 per unit.

$800/400 = 2 Thus P - ATC = $2. But P is given to be $49. so ATC = 49-2 or $47 Profit maximized at an output level where MC= MR. since MC is $37, MR must be 37

C23. Four fundamental characteristics of a perfectly competitive industry

(1)There is a large number of buyers and sellers, (2)Firms in the industry produce and sell a homogeneous product, (3)Information is equally Accessible to both buyers and sellers, and (4)There are insignificant barriers to industry entry or exit.

C23. If the market clearing price drops. The firm should

*Continue to produce since the price exceeds the average variable cost. *Continue to produce since the firm can pay some of its fixed cost. *Continue to produce since the loss is less than the fixed cost.

C23. For each example below, identify which statement is NOT characteristic of perfectly competitive industry.

*One Firm produces a large portion of the industry's total output. *The product differ slightly in quality from firm to firm. *The government also limits the number of taxicab companies that can operate within the city's boundaries.

Ch.24 A monopolist company

-ts price must be higher than its marginal revenue For the company to practice price discrimination, there should not be any resale of its product. Its profit maximizing quantity is determined where its marginal revenue equals its marginal cost.

When we compare European GDP per capita to U.S. GDP per capita, the European GDP per capita is ____

...

the amount of the tax paid by buyer is the same regardless of whether the tax is imposed on the buyer or seller

...

the amount paid by buyers depends on the relative elasticity of demand and supply

...

the greater the elasticity of demand, the more the tax decreases the equilibrium quantity consumed

...

the more elastic the demand, the larger the amount of tax payed for by seller

...

Consider the short-run cost curve shown on the graph. the U-shaped curve is perfectly competitive firm's short-run average variable cost curve, and the upward -sloping curve is its marginal cost curve. The market price is equal to $30. What is the firms profit-maximizing output in the short run?

0 If MP is $30 per unit, the firm should shut down and produce no output in the short run.

CH25. The key characteristics of a monopolistically competitive industry are: A. A large number of firms that sell differentiated products that are close substitutes B. Firms can easily enter or exit a monopolistically competitive industry. C. Because monopolistically competitive firms can increase their profits if they can successfully distinguish their products from those of their rivals, they have an incentive to engage in sales promotions and advertising. For each examples below, indicate which of the above characteristics (A,B,C) Is being illustrated. 1.some restaurants cook their hamburgers over open flames, others fry their hamburgers 2.There is vast number of colleges and universities across the count. Each compete for top students.

1. A 2. A

CH25. Categorize each of the following as an experience good, a search good, or a credence good or service, and justify your answer. 1.A restaurant meal represents______________ 2.Psychotherapy represents____________ 3. A heavy-duty filing cabinet represents__________ 4. A wool overcoat represents___________

1. An experience good, since people must actually consume before they can determine their qualities. 2. A credence good, one with qualities that might be difficult for consumers lacking expertise to assess without assistance. 3. A search good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase. 4. A search good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase.

C23. In the figure to the right, the firm should produce. In the figure to the right, at the output level between 5 units and 13 units.

10 units since economic profits are the greatest. The firm's economic profits are positive. Since the Total Revenue(TR) is above the total cost(TC), there are positive economic profits.

In​ 2002, the price index was 180. In​ 2003, the price index was 198. The inflation rate between 2002 and 2003 is___​%. ​(Round your answer to two decimal​ places.)

10%

Suppose in 2014​, the cost of a market basket of goods was ​$2,044. In 2016​, the cost of the same market basket of goods was ​$2,067. Calculate the price index for 2016​, using the price index​ formula, assume 2014 is the base year. _____ ​(Enter your response as an index number rounded to one decimal​ place.)

101.1

Number of new jobs created per month to keep the unemployment rate from rising

150,000

suppose that the government wants to discourage the use of cigarettes. if it imposes a tax on cigarettes, the equilibrium quantity decreases the most when elasticity of demand equals

2

A nation has a workforce of 300 workers. In every​ month, 6 workers leave​ jobs, and 6 different workers find jobs. ​ However, there are also 12 workers who lack the skills to be​ employed, and thus remain unemployed throughout the year. There is no seasonal unemployment in this​ economy, and the economy is considered to be at full employment. ​(Enter your responses rounded to the nearest​ percent.) In this​ economy, the rate of frictional unemployment is ___​%. In this​ economy, the rate of structural unemployment is ___​%. In this​ economy, the rate of cyclical unemployment is___​%.

2% 4% 0%

Federal Reserve's benchmark for price stability

2.0% inflation

Consider an economy​ where: The real rate of interest 3.71​% The nominal rate of interest 6.3​% Calculate the anticipated rate of inflation. ___​% ​(Enter your response as a percentage rounded to two decimal​ places)

2.6% ( the difference between the nominal rate and the real rate of interest)

During the worst year of the Great Depression in the United States, unemployment reached ____

24.9% percent in 1933.

During the course of a​ year, the labor force consists of the same 866 people. Of​ these, 23 lack skills that employers desire and hence remain unemployed throughout the year. At the same​ time, every month during the​ year, 35 different people become​ unemployed, and 35 other different people who were unemployed find jobs. There is no cyclical unemployment. a. Calculate the frictional unemployment rate.___​%. ​(Enter your response as a percentage rounded to two decimal​ places). b. Calculate the unemployment rate.___​%. ​(Enter your response as a percentage rounded to two decimal​ places). c. Suppose that a system of unemployment compensation is established. Each​ month, 35 new people​ (not including the 23 lacking required​ skills) continue to become​ unemployed, but each monthly group of newly unemployed now takes two months to find a job. Calculate the frictional unemployment rate after this change.___​%. ​(Enter your response as a percentage rounded to two decimal​ places). d. After the change discussed in part ​(c​), calculate the unemployment rate.___​%. ​(Enter your response as a percentage rounded to two decimal​ places).

4.04% 6.7% 8.08% 10.74%

Currently in​ Economica, the frictional rate of unemployment is 2.0​%, the structural rate of unemployment is 2.5​%, and the cyclical rate of unemployment is 3.0​%. In the​ winter, there is seasonal unemployment of​ 1%. In this​ country, the seasonally adjusted natural rate of unemployment would be considered to be ___​%. ​(Round your response to one decimal​ place.) ​Currently, this economy (is or is not) at full employment.

4.5% is not

​Suppose, the current year is the base year for the price index​ calculation, and Nominal interest rate 8.13​% Expected inflation rate 3.61​% a. Calculate the expected real interest rate. ___​% ​(Enter your response as a percentage rounded to two decimal​ places.) b. What is the anticipated value of the price index next​ year? ___ ​(Enter your response rounded to one decimal​ place.)

4.52% 103.6

The graph to the right depicts the per unit cost curves and demand curve facing a shirt manufacturer in a competitive industry. How much profit is this firm making per minute?

4.95(MR) - 6.73(ATC) = - 1.78 1.78 * 56(QTY) = -99.68 -99.68 Per minute. In the long run, Firms will EXIT this industry until there is a tendency for the firms in the industry to be making ZERO economic profit.

Ch.24 Consider the revenue and cost conditions for a monopolist that are depicted in the figure at right. What is this producers profit-maximizing output? What are the firms economic profits?

4000 -4000

In this​ country, ___ million people are​ unemployed, and the unemployment rate is ___​%. ​(Round your responses to one decimal​ place.) The labor force participation rate is ___​%. ​ (Round your answer to the nearest​ percent.)

45 million 15% 75%

Labor force - 300.0 million Adults in the military - 15.0 million Employed adults - 255 million Nonadult population - 15.0 million Institutionalized adults - 10.0 million ​Nonmilitary, noninstitutionalized adults not in labor force - 100.0 million -------------------------------------------------------- In this​ country, ___ million people are​ unemployed, and the unemployment rate is ___​%. ​(Round your responses to one decimal​ place.) The labor force participation rate is ___%. ​ (Round your answer to the nearest​ percent.)

45 million people unemployed unemployment rate is 15% labor force participation rate is 75%

C23. In the figure shown at the right, what is the profit maximizing output and price in the short run?

46, $ 50 When 46 units are produced at price $50, MR = MC, so profits are maximized. What is the profit maximizing output and price? 50MR-41ATC=9 *46(quantity)=$414

In the country of​ Economica, the total labor force consists of 5,000 workers. 300 of these workers are​ unemployed, and thus the current unemployment rate is 6.0​%. This​ year, 100 workers will lose their​ jobs, 85 workers will return to the labor force after an​ absence, 50 workers will voluntarily leave their​ jobs, and 250 new workers will enter the labor force. At the same​ time, 363 workers will find​ jobs, and 150 workers will retire or leave the labor force for other reasons. ​Thus, at the end of the​ year, the labor force will consist of _____ ​workers, and the unemployment rate will be ___%. ​(Round your responses to one decimal​ place.)

5,185 8.1%

What is the current U.S. unemployment rate?

5.7 % as of Jan 2015 5.5% (May 2015)

Given the information in the table.

6 units max profit. MC=MR

production possibilities

A _______ ___________ curve graphically shows the trade-off that occurs when more of one output is obtained at the sacrifice of another. This curve is a graphical representation of, among other things, opportunity cost.

conglomerate

A business combination merging more than three businesses that produce unrelated products or services.

Contraction

A business fluctuation during which the pace of national economic activity is slowing down.

cooperative

A business organization owned and operated by a group of individuals for their shared benefit.

partnership

A business organization owned by tow or more persons who agree on a specific division of responsibilities and profits.

multinational corporation

A large corporation that produces and sells the goods and services in more than one country.

corporation

A legal entity, or being, owned by individual stockholders, each of whom has limited liability for the firm's debts.

certificate of incorporation

A license to form a corporation issued by a state government.

Ch.24 Given the cost curves in the diagram, what market situation would you expect to occur.

A natural monopoly

professional organization

A nonprofit organization that works to improve the image, working conditions, and skill levels of people in particular occupations.

Which of the following is an example of an experience good?

A restaurant meal.

consumer cooperative

A retail outlet owned and operated by consumers that sells merchandise to members at reduced prices.

Demand

A schedule showing how much of a good or service people will purchase at any price during a specified time period, other things being constant

business franchise

A semi-independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service in a given area.

more; smaller

A trade-off is involved between current consumption and capital goods or, alternatively, between current consumption and future consumption. The __________ we invest in capital goods today, the greater the amount of consumer goods we can produce in the future and the ________ the amount of consumer goods we can produce today.

limited liability corporation

A type of business with limited liability for its owners, with the advantage of not paying corporate income tax.

limited liability partnership

A type of partnership in which all partners are limited.

general partnership

A type of partnership in which all partners share equally in both responsibility and liability.

limited partnership

A type of partnership in which only one partner is required to be a general partner.

C23. The short-run break-even price for the perfectly competitive firm occurs when price equals

ATC. When P = ATC the firm will have sufficient revenue to cover their variable and fixed costs, and will break even earning zero economic or normal profits.

As a benchmark, how long have U.S. recessions averaged during 1854-2009?

About 16 months

During the worst year of the Great Depression in the United States, unemployment reached...

About 25 percent.

As a benchmark, how long have U.S. expansions averaged during 1854-2009?

About 42 months

Current "full-employment level of unemployment" for the U.S.

About 5.0% - 6.0%

Which of the following markets has a barrier to entry?

An aluminum company owns all bauxite mines, an essential input. There are large economies of scale in the production widgets. crystal develops a new product and patents it. Joes bar owns the only liquor license issued by the town.

Full employment

An arbitrary level of Unemployment that corresponds to "normal" friction in the labor market.

The services of a carpet cleaning company A new cancer treatment Athletic socks a silk necktie

An experience good, since people must actually consume before they can determine their qualities. a credence good, with qualities that might be difficult for consumers lacking expertise to assess. A search good, easy for consumers to assess. A search good, easy for consumers to assess.

In several markets for digital devices that can be viewed as perfectly competitive, persistent increases in demand eventually have generated long-run reductions in the market prices of these devices. Which of the following explanations best describes the types of adjustments that must have occurred in these markets to have brought about this outcome? Such digital device industries can be characterized as

An increase in demand initially leads to an increase in price and profits of the firms. New firms enter the market and the equilibrium quantity increases with a reduction in market price along a downward sloping long-run industry supply curve. Decreasing cost-industries.

New entrant

An individual who has never held a full-time job lasting two weeks or longer but is now seeking employment.

Reentrant

An individual who used to work full-time but left the labor force and has now reentered it looking for a job.

nonprofit organization

An institution that functions much like a business, but does not operate for the purpose of generating profit.

next-best

Another way to look at opportunity cost is the trade-off that occurs when one activity is undertaken rather than the ____-________ alternative activity.

Jim's favorite breakfast is two​ eggs, 1/5 lb. of​ bacon, 1/7 lb. of white​ toast, 1/6 can​ (16 ounce​ can) of frozen concentrate orange​ juice, and 1 lb. of grapefruit. The following table contains 1991 and 2001 prices for these five items. Using 1991 as the base​ year, compute the price index for​ Jim's breakfast for 2001. Items in 1991 Price in 2001 Price 1dz eggs ​$1.08 | ​$1.02 1lb bacon ​$2.15 | ​$2.75 1lb bread ​$0.63 | ​$0.98 1can OJ ​$1.98 | ​$1.86 1lb grapefruit ​$0.57 | ​$0.55 ------------------------------------------------------- A. 89.53 B. 107.5 C. 111.7 D. 93.02

B. 107.5

Which of the following measures will lower the natural rate of​ unemployment? A. The labor force becomes less educated over time. B. More high school graduates enter college without looking for employment right away. C. Government increases spending to reduce the job loss during a recession. D. Government increases the duration of unemployment compensation benefits.

B. More high school graduates enter college without looking for employment right away.

Which of the following statements is true concerning the historical picture of business activity in the United​ States? A. The largest expansion since World War II took place in the early 1960s. B. The frequency and size of fluctuations around the trend has decreased since World War II. C. All recessions have been caused by external shocks. D. Business fluctuations are regular and take 8 years from the start of a recession to the end of the peak period.

B. The frequency and size of fluctuations around the trend has decreased since World War II.

Which of the following is the definition of the PCE Index? A. Upper A broad price index measuring the changes in prices of all new goods and services produced. B. Upper A statistical measure of average prices using annually updated weights based on surveys of consumer spending. C. Upper A weighted average of of prices of a market basket of goods and services purchased by typical urban consumers. D. Upper A statistical measure of a weighted average of prices of goods and services that firms produce and sell.

B. Upper A statistical measure of average prices using annually updated weights based on surveys of consumer spending.

Marisa has just graduated from college and is seeking a job, but hasn't found one yet. Which type of unemployment is​ this? A. structural unemployment B. frictional unemployment C. cyclical unemployment D. seasonal unemployment

B. frictional unemployment

The natural rate of unemployment is best defined a A. the rate of unemployment when there is no cyclical or structural unemployment. B. the rate of unemployment after all workers and employers have fully adjusted to all changes in the economy. C. the rate of unemployment when there is no frictional or cyclical unemployment. D. the state of the economy when there is zero unemployment.

B. the rate of unemployment after all workers and employers have fully adjusted to all changes in the economy.

outward

Because many resources are better suited for certain productive tasks than for others, the PPC is bowed __________, reflecting the law of increasing additional costs.

Like all indexes, the CPI-U and the CPI-W follow a basket of goods. The two baskets for these indexes are different. Why?

Because you can't measure all the goods and services in the same basket, these need to be appropriately separated by category. Some items will weight themselves and others will need quantities added to them.

During periods of unanticipated inflation...

Borrowers usually benefit.

Consider the monopolistically competitive firm with the revenue and cost conditions. Which statements best describe the firms behavior. The firm is charging a price over and above the minimum ATC to cover for costs of product differentiation. Consumers willingly accept the increased production costs in return for more choice and variety of output.

Both 2 and 3.

CH25. Which of the following is NOT true of both firms in monopolistic competition and firms in perfect competition?

Both types of firm produce at minimum ATC Production occurs at minimum ATC for perfectly competitive firms only.

In the long run, all firms in a perfectly competitive industry

Break even

C23. If the Price equals the Average total cost, the firm

Breaks even earning a zero economic profit, or normal profit.

First country to experience the Business Cycle (or Trade Cycle)

Britain since 1790

Only two types of economies have successfully devised institutions that facilitate this choice. They are ____

Capitalism and Socialism.

Which types of economies have managed to grow and develop at a rate fast enough to meet modern expectations?

Capitalist and socialist economies have.

Consider a price discriminating monopolist. Which of the following is true.

Charging different prices to different customers does not mean the monopoly is necessarily using a price discrimination. a monopoly will engage in price discrimination whenever feasible o increase profits. the monopolist will sell some of its output at higher prices to consumers with less elastic demand.

Cost-of-living adjustments (COLAs)

Clauses in contracts that allow for increases in specified nominal values to take account of changes in the cost of living.

According to Adam Smith, the essential requirement needed to make Smith's Formula work

Competition

C23. The campus barber faces stiff competition from the large number of shops that surround the campus area, and for practical purposes the market is perfectly competitive. He charges $8 for a haircut and cuts hair for 20 people a day. His shop is open 3 days week.

Compute the daily revenue, then multiply by the number of operating days. Daily total revenue = Price * Quantity = $_ 8 * 20 . Multiply this by the number of days = $ 160 * 3 days = $ 480 The average revenue is the total revenue/total quantity or $480/60 = $8, which is equal to the price. The marginal revenue is the additional revenue from an additional unit increase in quantity. Since this is a perfectly competitive market the barber cannot influence the price, but must accept the price as given. For each additional haircut, the increase in revenue will be $8, which is the price.

Economists usually argue that market transactions (trades) make society better off because...

Conflicting self-interests provides checks and balances to one another.

Churn

Constant laying off and repositioning.

What are the most common price indexes?

Consumer Price Index (CPI) Producer Price Index (PPI) GDP deflator Personal Consumption Expenditure Index (PCE)

The largest component in the Expenditure Approach to measuring GDP is ____

Consumption expenditure

In capitalism, distribution tends to be based on...

Contribution.

A monopolist sells a homogenous good in several distinct submarkets, and the elasticity's of demand differ in these submarkets. If the monopolist selects the rate of output to sell in each submarket by equating marginal revenue and marginal cost then.

Customers in markets with more elastic demand will pay lower prices than customers in markets with less elastic demand.

Which two types of Unemployment are bad for the economy?

Cyclical Seasonal

CH25. Classify each of the following as an example of direct (D), interactive (I), and/or mass marketing (MM). A mortgage compact targets a list of specific low risk borrowers ____ The sales force of a pharmaceutical company visits physician's offices to promote new medication__ An online book seller pays fees to an internet search engine to post ad banners__ A national rental car chain runs advertisements on all nations major TV networks__

D D I MM

CH25. Existing firms will see a decrease in demand for their products:

Demand curve for each firms product shifts to the left Price falls Each firm produces less output ATC rises Profits fall

Communist Principle of Distribution

Distribution should be based on need.

C23. The demand curve for the perfectly competitive industry is

Downward sloping. The demand curve for a perfectly competitive industry is downward sloping. The demand schedule for a perfectly competitive firm is horizontal.

C23. Economic profits

EX. Price per unit of $20 minus the average total cost of 15.75 multiplied by the output level of : 10000= 4.25 x 10000=42,500

What types of activities are included in the underground economy?

Economic activity that may be illegal such as prostitution, criminal acts, drugs, illegal gambling. Also includes workers getting paid cash that does not get reported.

Many European countries have enacted laws restricting the ability of firms to reduce their labor force through cut-backs and lay-offs. These policies have been well-intended, but they have had an unanticipated consequence; these restrictions tend to reduce...

Employment.

In a perfectly competitive market, if P > ATC in the short run, there is apt to be

Entry of new firms into the market. Positive economic profits will attract.

C23. For a perfectly competitive firm, price

Equals both average revenue and marginal revenue.

When the perfect competitor earns less than normal profits in the long run, the firm will

Exit the industry The competitor will move resources to a market where normal profits can be earned.

CH25. Mass Marketing.

Firms aim advertising messages at as many consumers as possible via media such as television, newspapers, radio, and magazines.

CH25. Direct marketing

Firms engage in personalized advertising using postal mailing, phone calls, and e-mails. Targets specific consumers.

The graph to the right shows demand, marginal revenue, and marginal cost curves for a monopolistically competitive firm. Draw and label the profit max price and quantity. ID the profits or losses for the firm. If every firm in this industry is like the representative firm above,

Firms will exit the industry.

CH25. Information products entail relatively high ___ costs associated with the use of knowledge and other information-intensive inputs as a key factors of production Once the first unit has been produced it is possible to produce additional units at a relatively low per-unit cost. The sum of all these up-front costs constitutes a relatively sizable ____ cost that the company must incur to generate the first copy of the computer game Therefore, for the producer of an information product such as a computer game, the short-run average total cost curve slopes downward. When this occurs the marginal cost is ____ the average total cost. Marginal cost pricing is not feasible since it would result in losses for the firm. After all entry or exit from the market has occurred, the price of the computer game will equal the producers ____.

Fixed; Fixed; Downward; Below; Average.

In village economies, economic decisions such as what to produce, how to produce it, and how to distribute it were usually made by...

Following tradition.

How did US prices change from 1930 through 1933?

Formula#2 Use to figure out inflation/deflation and how much prices have changed ((Index in 1933 - Index in 1930)/Index in 1930) * 100%= ((13.0-16.7)/16.7)x100%= -22.15```% Prices fell about 22.2%

First country to break the 90-10 rule

Great Britain

How does the Obama Recession compare to the Great Depression and to the Reagan Recession of the early 1980s?

Great Depression: -High contraction -High unemployment rate- 24.9% worse year -Deflation -Duration: 1 decade -GDP was created in 1929 Typical Recession: -Real GDP diminishes- 3-5% -Unemployment rises to about 10% -Disinflation -Duration: About 16 months

Ch.24 The better the substitutes for a monopoly firms product, the

Greater the price elasticity of demand.

Economies that devote more scarce resources to the production of capital goods (rather than consumer goods), tend to...

Grow and develop faster.

Ch.24 The demand curve faced by the monopolist

Has greater price elasticity of demand as close substitutes for the monopoly product are developed.

Adam Smith

He elevated positive economic analysis over normative economic analysis.

CH25. When a firm produces an information product, the initial or fixed costs are ________. Consequently the average fixed costs and average total cost ______ as the volume of output increases. Since most of the costs are initial fixed costs of development, once the product is developed, the _____ cost of producing more units of the product are typically low and _____. In this case, then, the low and constant marginal cost is ____ the average cost. If the firm set the price, or average revenue, of the product equal to the marginal cost, the firm would have _____ Since the marginal cost is _________ the average cost.

High; Decreases; Marginal; Constant; Below. Economic losses. Less than

In Europe, Denmark has taken the lead in reforming its labor market laws. Specifically, the Danes have made it much easier for firms to lay-off or fire workers. This has caused...

Higher job growth.

If people do tend to respond to incentives, what may be the unintended (or unwanted) consequence of extending unemployment benefits?

Higher unemployment

Ch.24 The marginal revenue curve for a perfectly competitive firm is ____ while the marginal revenue curve of the monopolist is ______.

Horizontal, downward sloping.

What type of activities are included in household production?

Housecleaning, child care, and other tasks performed by people in their own households and for which they receive no payments through the marketplace.

the graph to the right shows demand, marginal revenue, and cost curves for a monopolist.

ID the max profit and draw rectangle.

Equilibrium

In a competitive market, it's neither good, bad, fair, or unfair; it's a positive statement about where a market will go and stay.

C23. Suppose that the market price in a perfectly competitive industry is $40 per unit. Plot a possible MR line given this price.

In a perfectly competitive industry, each firms MR = MP at any given output rate. Thus, the marginal revenue schedule is horizontal at the market price.

Monopolistic competition is similar to monopoly because

In both industry structures, the firms demand curve is downward sloping.

Monopolistic competition is similar to perfect competition because

In both industry structures, there are no barriers to entry.

CH25. The monopolistically competitive firm at a level of output of Q 1 in the diagram is

In long-run equilibrium

Discouraged Worker

Includes a person who has given up looking for a job because he or she thinks it is just a waste of time.

Frictional Unemployment

Includes a person who is fired from his or her job.

Structural Unemployment

Includes a person who lacks basic job skills and job experience.

Cyclical Unemployment

Includes a person who loses a job due to lay-offs during a recession.

comparative

Individuals and nations specialize in their areas of _________ advantage in order to reap the gains of specialization.

How does inflation affect the ability of businesses to engage in contracting?

Individuals may be reluctant to enter into contracts when inflation cannot be predicted making relative prices uncertain. This reluctance to enter into contracts over time will inhibit investment which will affect economic growth. In this case inflation will inhibit investment and could result in financial recession(Hellerstein, 1997). In an inflationary environment intermediaries will be less eager to provide long-term financing for capital formation and growth. Both lenders and borrowers will also be less willing to enter long-term contracts. High inflation is often associated with financial repression as governments take actions to protect certain sectors of the economy. For example, interest rate ceilings are common in high inflation environments. Such controls lead to inefficient allocations of capital that inhibit economic growth

Ch.24 You observe that the revenue of a monopolist vary directly with changes in price. This firm _____ maximizing its economic profits because.

Is NOT When demand is elastic, as price falls the Q rises and R rise When demand is inelastic, price falls, Q rises and R falls When demand is elastic, P rises and Q falls and R falls When demand is inelastic as P rise, the Q falls and revenues rise.

Ch.24 The demand curve of the monopolist

Is the same as the industry demand curve.

What was the unemployment rate in the worst month of the Great Depression?

It was 33 percent in March 1933.

Which historical event was most responsible for the creation of macroeconomics?

It was the Great Depression.

"A good economy is an economy that produces more goods and services that people need and want."

It's a normative statement because it involves an ethical criteria.

"An increase in the minimum wage is good for workers."

It's a normative statement because it involves an ethical criteria.

Consider the statement: The Minimum wage causes unemployment to increase. Is this a positive or normative statement? Why?

It's a positive statement because it's a purely descriptive statement.

Ceteris Paribus

It's an analytical assumption that means that when you consider a relationship, you assume that all other factors and variables are constant and don't change.

How is household production treated or handled in the measurement of GDP?

It's not a market transaction therefore it's excluded from GDP calculations with the exception of the materials purchased for household production purposes.

Labor force participation rate (formula)

Labor force = -------------------------------------------------- X 100 Labor force nonmilitary & noninstitutionalized adults

Classify each of the following as an example of direct. interactive. and mass marketing. A cosmetics firm pays for full page display ads a magazine distributor mails a fold out fly advertising its products An online gambling operation arranges for pop-up ads on computers A car dealership places ads in newspapers.

MM; D; I; MM

Using the line drawing tool and the data above, draw 3 industry supply curves assuming there are 10, 15 and 20 firms. Label these lines S1, S2, and S3, respectively.

MR=3 Max Price = 8 Firm * minimum Output = starting units. Firm * Maximum output = ending units.

Ch.24 In the graph to the right, the monopoly is

Making a economic profit.

Which of the following is most true of economics before Adam Smith?

Mercantilism was the world's first systematic economic policy. It was practiced by businesspeople and governments. There was no interest in economics prior to the Great Depression although it existed. Macroeconomics came after the Great Depression in the '30s, but mercantilism was practiced from 1500 to 1850 as the world's first systematic economic policy. Smith created economics and disliked mercantilism.

Ch.24 People in licensed occupations earn about 15% more income because consumers pay higher prices to obtain the services. Therefore, licenses create.

Monopoly profits

Law of Increasing Additional Cost

More of a certain good produced means giving up more of the other goods.

From a Production Possibilities Curve or economic development perspective, the "cost" of more capital goods production for a fully employed economy will be...

More unemployment.

According to the Communist Principle of Distribution, distribution should be based on

Need

In socialism, distribution tends to be based on...

Need.

What are Net Exports

Net exports refer to the value of a country's total exports minus the value of its total imports. It is used to calculate a country's aggregate expenditures, or GDP, in an open economy

How can makers of TVs earn economic profits during the first few months after the introduction of new models? What economic forces result In the dissipation of economic porfits earned by the manufacturers.

New models create product differentiation that increases demand and raises prices above average total cost. Thus, firms will earn positive economic profits in the short run. Positive profits induce new firms to enter the market causing existing firms' demand to fall, which lowers prices toward average total cost.

If people are motivated by self-interest, does this preclude (or prevent) them from doing charitable acts?

No! It doesn't preclude charity because self-interest can (and often does) put a value on the well-being of others.

C23. Suppose that a firm in a perfectly competitive industry finds that at its current output rate, marginal revenue exceeds the minimum average total cost of producing any feasible rate of output. Furthermore, the firm is producing an output rate at which marginal cost is less than the average total cost at that rate of output.

No, if the firm was maximizing its economic profits the marginal cost would not be less than the average total cost at that rate of output. If the MC is less than the AVC, than the average cost must be declining at the output level where the firm is producing. To maximize its economic profits the MC must also exceed the Minimum Average total cost(ATC). Therefore, both MR and MC would be greater than ATC.

Does unemployment rate quickly decline in most U.S. recoveries

No, job recovery is the last thing that turns around

If lenders make loans at 7% rate of interest and the economy experiences inflation of 3%, what is the real interest rate?

Nominal rate - Anticipated rate of inflation = Real interest rate 7%-3%= 4%

Compared to developed countries, the size of underdeveloped economies is often under-reported because the measurement of GDP does not include...

Nonmarket production such as household services of homemakers.

trade association

Nonprofit organizations that promote the interests of particular industries.

C23. A perfectly competitive firm wants higher profits and has decided to raise the price of its product. As an economic consultant you would advice them to

Not do this since they would lose all of their sales to competitors.

Throughout history, traditional economies have tended to...

Not grow or develop.

The efficient allocation of scarce and productive resources

Occurs when the price of a good equals the cost of producing that quantity, rather than a larger quantity of some other good. Occurs when all resources are used in the most advantageous way possible. means that is impossible to increase the production of one good without lowering the value of total output produced in the economy.

Ch.24 Monopoly has a social costs because

P is greater than MC and this implies economic inefficiency. a monopoly produces less and charges higher prices than a perfect competitive firm. Too few resources used.

CH25. If there is no product differentiation at all, then the individual firm has a demand curve that is

Perfectly elastic and identical to the firm in perfect competition.

C23. The demand curve for the perfectly competitive firm is

Perfectly elastic. The firm can sell all it wants at a given price. The firms demand curve is horizontal, or perfectly elastic.

Refer to the figure at right. Profits for this firm are

Positive.

C23. The table to the right gives the per unit cost data for a shirt manufacturer in a competitive industry. If the market price is 9/97, how much profit is this firm making per minute?

Profit = (P-ATC)* Q = (9.97-6.87) * 77 = (round to nearest penny) $238.70

C23. Average revenue =

The average revenue per unit is the same as the price.

The best measure of economic development is ____

The best measure of economic development is ____ Real GDP per capita

need

The concept of _______ is difficult to define objectively for every person. Consequently, we simply consider every person's wants to be unlimited.

Peak

The critical turning point that initiates a recession.

What happens when new firms enter a monopolistically competitive market?

The demand curve of the existing firm shifts to the left.

Which is not a necessary condition for price discrimination to exist?

The firm must establish different prices to reflect marginal cost.

In long-run equilibrium in perfect competition,

The firm produces at the minimum point of its long-run and short-run and short-run average total cost curves. Because profits must be Zero in the long-run, the firms short-run Average costs(SAC) must equal P at the minimum SAC. In addition, in long-run eq. any economies of scale must be exhausted, and P must equal the minimum point of the long-run average cost curve (LAC).

CH25. In a perfectly competitive market, price equals marginal cost, but this condition is not satisfied for the firm with the revenue and cost conditions depicted in the figure on the right. In the long run, what would happen if the government decided to require the firm in the figure to charge a price equal to marginal cost at the firms long run output rate?

The firm will incur a loss of $8 per unit and this and other firms will leave the industry.

Two years ago, a large number of firms entered a market in which existing firms had been earning positive economic profits. By the end of last year, the typical firm in this industry had begun earning negative economic profits. No other events occurred in this market during the past two years. During the last year, All of the following adjustments will take place in this market beginning this year except.

The firms incurred losses, as the market output expanded and the market price fell. That price and cost will fall.

In the graph, the firm's supply curve is

The marginal cost curve that lies above price P2. The price or MR is equated to the MC to determine the profit maximizing output. in the short run. As long as the P is above the minimum of the AVC, the firm will supply the product.

Which statistic-the unemployment rate or the number of jobs created- do most business leaders, government officials and academics primarily watch?

The number of new jobs created.

CH25. What does the long-run price equal for an informational product?

The price equals average total cost.

C23. In a perfectly competitive market

The price equals the marginal revenue. P=MR

Stock

The quantity of something, measured at a given point in time -- for example, an inventory of goods or a bank account. Stocks are defined independently of time, although they are assessed at a point in time.

What was the goal of the Kennedy-Johnson Tax Cut of 1964?

The tax cut was a Keynesian policy designed to stimulate demand to address a recession.

What was the goal of the Reagan Tax Cut of 1982?

The tax cut was an attempt to address the incentives problem and thereby increases economic activity.

What is the most-watched macroeconomic statistic among the general public?

The unemployment rate

Seasonal unemployment is measured in the unemployment rate. What would it take in order to get rid of all seasonal unemployment?

The unemployment rate the Bureau of Labor Statistics releases each month is "seasonally adjusted" to remove the effects of variations in seasonal unemployment.

To gauge the health and strength of the macroeconomy, the general public watch...

The unemployment rate.

Business Fluctuations

The ups and downs in business activity throughout the economy.

Why did Western economists argue that the Pet Rock had to be a socially beneficial product?

They argued that no one was ever forced to buy or sell a Pet Rock, so it must have made them better off.

Ch.24 Why is there a social cost of monopoly?

Too few resources are being used in a monopoly

C23. Profit = Maximum profit =

Total Revenue (TR) minus Total Cost (TC). and it is maximized at the output level at which TR exceeds TC by the largest amount. EX. TR(154) - TC(154)= 1540 - 1053 = 487.00 Note: The number in parentheses is the profit maximizing quantity.

The employment report for Jan 2014 reported that the U.S. economy created 113, 000 new jobs. Given the level of churn in the U.S. labor markets, the 113,000 new jobs resulted from....

Total of jobs created minus total jobs lost.

production possibilities

Trade-offs are represented graphically by a _________ _______ curve showing the max quantity of one good or service that can be produced, given a specific quantity of another, from a given set of resources over a specific period of time.

Ch.24 Evaluate the following statement. A profit maximizing monopolist will never operate in a price range in which price elasticity of demand is inelastic.

True.

vertical merger

Two or more firms involved in different stages of producing the same good or service.

China's real GDP has been growing at the rate of about 9 percent per year over the last few decades. Suppose that you're asked whether this is fast or slow? Based on the US benchmark, put China's experience in context.

U.S. average real GDP growth rate per year since 1800 is about 3%. China's economy has increasingly embraced markets and if able to sustain this rate of growth will make the transition to a developed economy.

Refer to the figure at right Which of the following is true.

Under perfect competition price equals marginal cost ( P3) while under monopoly price (P4) is greater than marginal cost (P1)

Structural unemployment

Unemployment of workers over lengthy intervals resulting from skill mismatches with position requirements of employers and from fewer jobs being offered by employers constrained by government business regulations and labor market policies.

Cyclical unemployment

Unemployment resulting from business recessions that occur when aggregate (total) demand is insufficient to create full employment.

Seasonal unemployment

Unemployment resulting from the seasonal pattern of work in specific industries (agriculture, construction, tourism)

CH25. If a firm is selling a search good it is more likely to

Use informational advertising.

C23. A perfectly competitive firm is charging $6 and selling 1300 units a month. The firm lowers its price by a nickel below the market price. Its profit

Will decrease. Because the firm is competitive in a market, it can sell all it wants at the market price of $6. If the firm lowers the price it charges, it will sell same amount and its profit will decrease.

C23. If the price is less than the average total cost, buy greater than the average variable cost, the firm

Will have a loss in the short-run, but should still operate because its average variable costs are covered by the price of the product. Loss will be minimized by producing the output level where marginal revenue equals marginal cost. In this case, the loss will be less than the fixed cost the firm would lose if it shuts down.

Ch.24 A monopolist that produces where the ATC is greater than price

Will make economic losses

If markets are perfectly competitive then the production of goods

Will use the least costly combination of resources. No other combination of resources, such as labor and capital, will result in an output that is higher in total value than the value of all goods and services already being produced.

higher

With a given set of resources, specialization results in __________ output. In other words, there are gains to specialization in terms of greater material and well-being.

capital

________ goods are goods that will later be used to produce consumer goods.

scarcity

_________ is the situation in which human wants always exceed what can be produced with the limited resources and time that nature makes available

which of the following is an example of a black market

a market where illegal transactions take place at prices higher than a government imposed price ceiling

black market

a market which goods are traded at prices above their legal maximum prices or in which illegal goods are sold

command system

a method of allocating resources by the order (command) of someone in authority. in a firm managerial hierarchy organizes production

subsidy

a negative tax, a payment to a producer from the government, usually in the form of a cash grant per unit

minimum wage

a regulation that makes the hiring of labor below a specified wage rate illegal. the lowest wage at which a firm may legally hire labor

supply

a schedule showing the relationship between price and quantity supplied for a specified period of time, other things being equal

CH25. When the qualities of a good are relatively easy to assess in advance of their purchase, the good is known as

a search good.

a monopolist is defined as

a single supplier of a good or service for which there is no close substitute.

shortage

a situation in which quantity demanded is greater than quantity supplied at a price below the market clearing price

surplus

a situation in which quantity supplied is greater than quantity demanded at a price above market clearing price

scarcity

a situation in which the ingredients for producing the things that people desire are insufficient to satisfy all wants at a zero price

economic system

a society institutional mechanism for determining the way which scarce resources are used to satisfy human desires

In a country with a labor force of 200​, a different group of 7 people becomes unemployed each​ month, but becomes employed once again a month later. No others outside these groups are unemployed. a. Calculate this​ country's unemployment rate. ___​% (Enter your response as a percentage rounded to two decimal​ places.) b. The average duration of unemployment in this country is ____. c. Suppose the establishment of a system of unemployment compensation increases to two months the interval that it takes each group of job losers to become employed each month.​ Nevertheless, a different group of 7 people still becomes unemployed each month. Now the average duration of unemployment is _____. d. Following the establishment of a system of unemployment​ compensation, calculate the​ country's unemployment rate. ___​% ​(Enter your response as a percentage rounded to two decimal​ places.)

a. 3.5% b. one month c. two months d. 7%

comparative advantage

ability to produce a good or service at a lower opportunity cost compared to other producers

absolute advantage

ability to produce more units of a good or service using a given quantity of labor or resource inputs. Equivalently, ability to produce the same quantity of a good or service using fewer units of labor or resource inputs.

the deadweight loss from the minimum wage is larger when the minimum wage is set ____ the equilibrium wage rate

above

production surplus

above supply curve, under price line

non price rationing devices

all methods used to ration scarce goods that are price controlled. Whenever the price system is not allowed to work, non price rationing devices will evolved to ration the affected goods and services.

transacition costs

all of the costs associated with exchange including the informational costs of finding out the price and quality, service record and durability of a product, plus the cost of contacting and enforcing that contract

normative economics

analysis involving value judgements about economic policies; relates to whether outcomes are good or bad. A statement of what ought to be.

positive economics

analysis that is strictly limited to making either purely descriptive statements or scientific predictions: for example, "If A, then B" A statement of what is.

Inflation is less disruptive to the economy when it is _____

anticipated

production

any activity that results in the conversion of resources into products that can be used in consumption

C23. Total revenues

are the price per unit times the total quantity sold.

_________ economics emphasizes psychological constraints and complexities that potentially interfere with rational decision making. This approach utilizes _____ _______ hypothesis that people are not quite rational, because they cannot study every possible alternative but instead use simple rules of thumb to decide among choices.

behavioral bounded rationality

price rises full amount

buyer and seller share tax burden

perfectly elastic supply

buyer pays

perfectly inelastic demand

buyer pays all taxes

when demand is perfectly inelastic, the price of the product rises by the entire amount of the tax

buyers pay entire tax

a monopoly is socially inefficient because it

charges a price greater than marginal cost.

invisible hand

competitive markets send resources to highest valued use in society

entrepreneurship

component of human resources that performs the functions of raising capital; organizing, managing, and assembling other factors of production; making basic business policy decisions; and taking risks

The law of ___________ applies when other things, such as income and the price of all other goods and services, are held constant.

demand

When the _______ curve shirts outward or inward with an unchanged ______ curve, equilibrium price and quantity increase or decrease, respectively. When the ______ curve shifts outward or inward given an unchanged __________ curve, equilibrium price moves in the direction opposite to equilibrium quantity.

demand supply supply demand

CH25. Costs are higher for MC firms than the PC firms due to product differentiation.

developing new products marketing/advertising lack of competitive pressure to be efficient.

There is normally a _______ relationship between price and quantity of a good supplied, other things being held constant

direct

Ch.24 Marginal revenue for a monopolist

downward sloping and always less than price.

living wage

enables a pwerson who works 40 hours a week to rent adequate housing for no more than 30% amount earned

When there is a shift in demand or supply, the new equilibrium price is not obtained _______. Adjustment takes ______.

immediately time

Quantity restrictions may take the form of _____ ______, which are limits on the quantity of specific foreign goods can be brought into the US fo resale purposes.

import quotas

demand curves are drawn with determinants other than the price of the good held constant. These other determinants, called ceteris paribus conditions are 1) ____ 2)______ 3)_____ 4)______ and 5)________

income taste and prefreces prices of related goods expectations about future priees and incomes market size (number of potential buyers in the market)

In a competitive market, whenever demand exceeds supply, the market price will

increase

The supply curve is drawn with other things held constant. If these ceteris paribus conditions of supply change, the supply curve will shift. The major ceteris paribus conditions are 1)________ 2)_________3)____________ 4)__________ and 5)_______________

input prices technology and productivity taxes and subsidies expectations of future prices the number of firms in the industry

Disinflation

is a decrease in the rate of inflation - a slowdown in the rate of increase of the general price level of goods and services in a nation's gross domestic product over time. It is the opposite of reflation.

if minimum wage is set equal to or below equilibrium wage

it does not create a surplue of labor or a deadweight loss

There are numerous way to evade rent controls _______ _________ is one

key money

We use scarce resources, such as ____________, _______________, ___________ and ____________ capital, and _________________, to produce economic goods.

land; labor; physical; human; entrepreneurship

the more inelastic the demand the

larger the buyers share of the tax is

if the government wants to raise the maximum tax revenue, it should tax goods and services that have

low elastic demand

the marginal social benefit curve for a good is the same as the goods

market demand curve

being on PPF

means production efficiency

a _______, or _________, uses assumptions and is by nature a simplification of the real world. The usefulness of a _______ can be evaluated by bringing emperical evidence to bear on its predictions

model theory model

A change in the quantity demanded comes about when there is a change in the price of the good (other things held constant) Such a change in quantity demanded involes a __ ______ a given demand curve

movement along

specialization

organization of economic activity so that what each person (or region) consumes is not identical to what that person (or region) produces.

subsides

payment made by gov to a producer

the symmetry principle is the assertion that

people in similar circumstances should be treated similarly

symmetry principle

people in similar situations should get treated equal a requirement that people in similiar situations be treated similary

________ economics is value free and relates to statements that can be refutes, such as "if A, then B" _______ economics involves peoples values and typically uses the word should

positive normative

deadweight loss caused by

price ceiling and floor, taxes and subsidies and quotas, monopoly power

rent control

price ceilings on rent

a minimum wage is an example of

price floor

Commodity Mrkt Bskt '01price '02price Qty --------------------------------------------------------- Wheat 30lbs. $3.00 $3.60 Cherries 25lbs. $3.50 $3.75 --------------------------------------------------------- Assuming that 2001 is the base​ year, calculate the price index for 2002. In​ 2002, the price index is _____. ​(Round your answer to two decimal​ places.) The inflation rate between 2001 and 2002 is _____​%. ​(Round your answer to two decimal​ places.)

price index is 113.66 inflation rate is 13.66%

producer surplus

price received for a good minus the minimum supply price summed over quantity sold

If the price exceeds the marginal cost of production, the producer receives a

producer surplus

because of decreaseing marginal benefit, the consumer surplus from the first unit of a good is that goods

producer surplus

the marginal cost of the one millionth pizza is the cost of

producing only the one millionth pizza

labor

productive contributions of humans who work

Even when business people can change prices, some rationing by waiting may occur. Such _______ arrises when there are large changes in demand coupled with high costs of satisfying those changes immediately.

queuing

In economics we assume that people do not intentionally make decisions that will leave them worse off. This is known as the ______ assumption.

rationality

individual demand

relationship between price of a good and the quantity demanded by one person

market supply

relationship between price of a good and the quantity supplied by all producers in the market

relative price

relative price the money price of one commodity divided by the money price of another commodity; the number of units of one commodity that must be sacrificed to purchase one unit of another commodity

empirical

relying on real world data in evaluating the usefulness of model

price ceiling applied to housing

rent ceiling set below equilibrium rent, very powerful effects

_______ prices perform three functions 1 allocating exsisiting scarce housing among competinf claimats, 2 promoting efficient maintenance of exsisiting houses and stimulating new housing consturction and 3 rationing the use of existing houses by current demanders

rental

if the marginal benefit exceeds the marginal cost

resources are use more efficiently if production of the good is increased

allocative efficiency occurs when

resources are used in the ways that people value most highly

resources

resources things used to make a goods or services to satisfy peoples wants

incentives

rewards or penitiles for engaging in a particular activity

division of labor

segregation of resources into different specific tasks. For instance, one automobile worker puts on bumpers, another doors, and so on.

The role of profits in the model of perfect competition is to

signal entrepreneurs to enter the industry. If the industry is characterized by firms showing economic profits this will signal owners of capital elsewhere in the economy that they, too, should enter this industry.

models v. theories

simplified representations of the real world used as the basis for predictions or explantions

he more elastic the supply the

smaller the amount of any tax imposed on the product paid by suppliers

market response to decrease in supply

supply shifts left, increases in price

With a price-_______ system, the government sets a minimum price at which say qualifying farm products can be sold. Any farmers who cannot sell at that price in the market can "sell" their surplus to the government. The only way a price ________ system can survive is for the government or some other entity to buy up the excess quantity suppled the support price.

support support

currently the government makes some goods and services illegal to sell. an alternative that would have the same effect on the price and quantity bought is a

tax imposed on the good or service

law of increasing additional cost

the fact that the opportunity cost of additional unit of a good generally increases as people attempt to produce more of that good. This accounts for the bowed-out shape of the PPC.

Zero economic profits means

the firm is covering all of its opportunity costs and will stay in business.

Which of the following is not necessary for price discrimination to occur?

the firm must be selling a durable good.

a production quota set on wheat below the equilibrium quantity of gives wheat farmers that incentive to cheat on the quota. a subsidy paid to peanut farmers raises the price paid by buyers

the first sentence is correct and the second is incorrect

supply curve

the graphical representation of the supply schedule; a line (curve) showing the supply schedule which generally slopes upward (has a positive slope) other things being equal

opportunity cost

the highest-valued, next best alternative that must be sacrificed to obtain something or to satisfy a want

bounded rationally

the hypothesis that people are nearly, but not fully, rational, so that they cannot examine every possible choice available to them but instead use simple rules of thumb to sort among the alternatives that happen to occur to them

C23. The lowest profit a firm should ever make in the short run is

the losses associated with the fixed costs of the firm

land

the natural resources that are available from nature. includes location, original fertility and mineral deposits, topography, climate, water and vegetation

law of supply

the observation that the higher price of a good, the more of that good sellers will make available over a specified time period, other things being equal

law of demand

the observation that there is a negative, or inverse, relationship between the price of any good or service and the quantity demanded, holding other factors constant

transactions costs

the opportunity cost of making trades in a market. the costs that arise from finding someone with whom to do business, of reaching an agreement about the price and other aspects of the exchange, and ensuring that the terms of the agreement are fulfilled

the price of an illegal good rises if

the penalties are more severe on sellers and falls in they are more severe on buyers

money price

the price expressed in today's dollars; also called the absolute or nominal price

market clearing or equilibrium price

the price that clears the market, at which quantity demanded equals quantity supplied, the price where the demand curve intersects the supply curve

macroeconomics

the study of the behavior of the economy as a whole, including such economy wide phenomena as changes in unemployment, the general price level, and national income

if a government sets a price ceiling on pizza that is below the equilibrium price of pizza then

there will be a shortage of pizza

if a rent ceiling is set above the equilibrium rent, it does not make the equilibrium rent illegal

therefore has no impact

aggregates

total amounts or quantities. aggregate demand, for example, is is total planned expenditures throughout a nation

technology

total pool of applied knowledge concerning how goods and services can be produced

equilibrium quantity = marginal benefit = marginal cost

true

supply curve = marginal cost curve

true

complements

two goods are complements when a change in the price of one causes an opposite shift in the demand for the other

subsitutes

two goods are substitutes when a change in the price of one causes a shift in demand for the other in same direction as the price change

a minimum wage set above equilibrium wage rate leads to

unemployment

price

what the producer recieves

the production quota decreases the supply

which increases the price

C23. A perfectly competitive firm charging $4 and selling 1000 units a month. The firm raises its price by a nickel above the market price. Its profit

will go to zero.

demand curve = marginal benefit curve

willingness to pay