Modern Political Economy

n Figure 1.1, which labeled points are attainable?

A, B, and C

In Figure 1.1, which labeled point indicates that there are sufficient resources and technology to produce the combination of goods represented by that point?

A,B, and C on curve and inside

In the aggregate supply-aggregate demand diagram in Figure 8.1, Box 4 should be filled with

AD for Aggregate Demand.

An increase in confidence will cause

AD to increase (move to the right)

The elasticity of demand can change with

Both of these are correct.

Which of the following is not an assumption of perfect competition?

Branded products

How does GDP account for something that was produced for sale in one year and sold in the next year?

It is counted as an addition to inventory (which is in business investment) in the year it was produced, and the markup is counted in the year in which it is sold.

How does GDP deal with a Ford produced in Mexico?

It is not counted at all.

Which of the following algebraic expressions is inaccurate?

MC=ATC-AVC

In Figure 1.1, which labeled points represent the existence of unemployment?

Only A inside the curve

In Figure 5.5, a monopolist would charge which price?

P3

In Figure 5.1, what output would a perfect competitor produce?

Q2

A surplus exists when

QD

n Figure 3.1, which figure shows a situation that is perfectly inelastic?

Figure 2. the vertical straight line up

Of the collection of supply and demand diagrams in Figure 2.2, which one(s) could show the result of a decrease in income?

Figures 1 and 2 The Demand moves right and left

Congress and the President have control of the tax system and government spending. As a result, their policies will directly impact

aggregate demand

A strengthening of the dollar will immediately shift

aggregate demand to the left

Economic incentives can come from

all of the options are correct

In early 2005, inflation increased unexpectedly due to an increase oil prices. This helped

borrowers

There will be long-run pressure on the price to rise whenever

both P

A pure private good is such that

both rivalry and exclusivity hold.

Midwestern grain farmers are characterized as "perfectly competitive" because they

can increase the quantity that they sell without affecting the market price.

Policies focused on putting people to work by having them construct parks would be considered

demand-side policies

When firms add workers and find that the additional workers add less to output than their predecessors did, they are experiencing

diminishing returns

If the unemployment rate falls because the number of people not working but searching for work falls, economists would attribute this to the

discouraged worker effect

If the percentage change in quantity supplied is 10%, and the percentage change in price is 5%, then the supply for the good is

elastic

Referring to Figure 4.1, the increase in output from point B to C is greater than the increase in output from point C to D because

eventually workers are up against the fact that there are fixed inputs and more workers do not add as much.

Chapter 1 entitled "Economics: The Study of Opportunity Cost" makes the point that we

face tradeoffs because we have limited resources

Of the collection of supply and demand diagrams in Figure 2.2, which one shows the result of a decrease in the price of a complement for a good?

figure 1 the demand shifts right

Of the collection of supply and demand diagrams in Figure 2.2, which one shows the result of an increase in the price of a substitute for a good?

figure 1. demand moves to the right

Of the collection of supply and demand diagrams in Figure 2.2, which one shows the result of a decrease in the price of a substitute for a good?

figure 2 the demand is going to move left

Of the collection of supply and demand diagrams in Figure 2.2, which one shows the result of a decrease in the number of sellers in the market for anything?

figure 4 supply moves to the left

cost which do not increase with an increase in output are called

fixed cost

The development of a new energy source that could be used to produce or transport any good would be a source of

generalized growth.

In reaction to the terrorist attacks of September 11, 2001, the Federal Reserve moved to lower interest rates. This was intended to

increase aggregate demand

If the price of a good increases by 10% and the quantity demanded decreases by 5%, then at that price, the good is

inelastic

The fact that snow cones sales fall when snow accumulated from the sky suggests that snow cones sales and snow on the ground are

inversely correlated.

If there are two airlines selling service between city A and city B, the best model to analyze this market is

monopoly

There are hundreds of local water companies, but economists insist that in each community they are ________ because consumers have no other choices in the local market in which they live.

monopoly

If there is an expectation that the price of a good will decrease in the next month, this would immediately

move its demand curve to the left.

If a good is inferior, the income elasticity of demand must be

negative

If good A and good B are complements, then the cross-price elasticity of demand of good A for a change in the price of good B is

negative

If a competitive firm routinely earns a larger profit than the "normal profit" for its industry,

new firms are likely to enter the industry, depressing the prevailing market price.

Economists suggest that a market can fail if

no market for the product exists

The income elasticity of demand helps determine, empirically, whether a good is unit elastic or perfectly inelastic in its own demand.

normal or inferior

A firm that has a branded product is

not likely to be in perfect competition.

If you drive on a rural stretch of highway and come upon an intersection in which there are two gas stations, and you know them to be the only ones for 100 miles, they are

oligopolists.

Local telephone service was once an area in which consumers had no choices. Many young people no longer use "land lines", preferring instead to use their cellular phones. This means that the market has moved toward

oligopoly

Suppose you can get the typical cable channels (ESPN, MTV, Bravo, etc.) from a cable company, from DIRECTV, or from DISH Network. This market would be described by

oligopoly

The soft drink industry (colas in particular) can be best modeled using the model of

oligopoly.

In Figure 1.1, which labeled points are unattainable?

only D. point outside of curve

In Figure 1.1, which labeled point indicates that there are insufficient resources or technology to produce the combination of goods represented by that point?

only D. the point outside of curve

In the 1970s and 1980s, Wal-Mart entered several markets outside of its home base of Arkansas. As a result, it brought lower prices on a variety of goods. The Bureau of Labor Statistics did not send its shoppers into these new stores until there was a new survey, leading to the CPI

overstating inflation because they were missing "where people shop"

Agricultural Products can be modeled best using the model of

perfect competition.

In the production of corn, millions of farmers world-wide are ________, so there is ________ on economic profits to go to zero.

perfect competitors; pressure

The firm's supply curve is made up of the

points where MC=MR above the minimum of AVC.

If you were to conclude, after carefully examining data and using proper evaluation techniques, that a tax credit for attending college benefits the poor more than a tax deduction (of equal total cost to the government) would, you would have engaged in ________ analysis to reach that conclusion.

positive

If you see that a firm's marginal revenue curve is downward sloping, you can infer that it is a

price maker

A graph that maps output against the input required to make that output is called a/an

production function.

If MR>MC, then when an additional unit is sold, the firm's

profit will increase.

Suppose a satellite radio signal can be received by any number of devices without the quality being diminished but that the devices are only activated when consumers pay a subscription. Which recognized characteristic of goods does not hold?

rivalry

If a person is unemployed because their industry has moved to another country, economists refer to the person as

structurally unemployed

In the market for money, the behavior of savers is represented by the

supply curve

If the number of sellers decreases, the

supply curve will shift to the left

If people (who used to neither borrow nor save) are now saving for their retirement, then this will cause the

supply for loanable funds to increase.

Elimination of government regulations undertaken explicitly to influence the aggregate supply curve would be an example of

supply-side economics

At the equilibrium price,

the amount buyers wish to purchase equals the amount producers wish to sell

If goods A and B are considered complements, a decrease in the price of A would cause

the demand curve for B to shift to the right

n Figure 5.8, if the supply curve moves from S3 to S4,

the firm will go from making a normal profit to a loss but one that is not big enough to make it want to shutdown.

In Figure 5.8, if the supply curve moves from S2 to S5,

the firm will go from making an economic profit to a loss that is big enough to make it want to shutdown.

The income elasticity of demand is (mathematically)

the percentage change in quantity demanded divided by the percentage change in income.

The formula for elasticity of demand (in words) is

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

The notion that when the price of the good you want rises you will buy less of it because you will find another good that will do instead is provided as the explanation for

the substitution effect

If technology increases, then

the supply curve will shift to the right

Suppose you have a firm in which the owner pays $10,000 per month on rent of the plant and equipment and will pay that regardless of much output they produce. If they get going they need $10 in materials and $20 in labor for each unit they produce,

their fixed costs are $10,000 and variable costs are $30 per unit

If a business makes the determination that an investment makes sense at the current interest rate, but before they can act, the interest rates rises,

they will have to recalculate whether it still makes sense

Referring to Figure 1.5, the opportunity cost of producing the second unit of pizza is

three units of soda

If the percentage change in quantity supplied is 10%, and the percentage change in price is 10%, then the supply for the good is

unit elastic.

If an input must be increased for output to increase, it is called a

variable input.

The Latin phrase "ceteris paribus" is used by economists to mean

"all other things being equal" or "all other things held constant"

Referring to Table 4.1, Box A should be filled with OutputTotal Fixed CostsTotal Variable CostTotal Cost0$100$0Box E1Box A$10Box F2Box B$15Box G3Box C$25Box H4Box D$50Box I

$100

If your grandmother gives you a high school graduation gift of $5,000, and you do not spend the gift, but invest it to earn an interest rate of 6% per year compounded annually, upon your graduation from college after exactly four years, your gift will be worth

$5,000 x (1.06) 4

In Figure 5.3, what output would a perfect competitor produce?

0

Referring to Table 4.1, Box I should be filled with OutputTotal Fixed CostsTotal Variable CostTotal Cost.

150

If the inflation rate is 5% and the real interest rate is 4%, then the nominal interest rate is around

9%

In the aggregate supply-aggregate demand diagram in Figure 8.1, Box 3 should be filled with

AS for Aggregate Supply

A decrease in regulation will cause

AS to increase (move down and to the right).

AFC is the same as

ATC-AVC

A reduction in the market price of the product is most likely to be required to enable

Apple to sell more of its iPhones.

In Figure 5.5, what profit would the monopolist earn?

a loss less than its total fixed cost

In Figure 5.1, what profit would a perfect competitor earn?

a positive profit

A reduction in the market price of the product is least likely to be required to enable

a single Midwestern grain farmer to sell a larger harvest of grain.

For a market to be characterized by monopoly, there must be

a single seller.

Referring to Figure 4.1, the increase in output from point A to B is less than the increase in output from point B to C because. Production function curve

a small number of workers cannot take as good advantage of the division of labor as a larger number.

In Figure 4.2, the reason that the increase in output from point B to C is much greater than the increase in output from point C to D is that. Total cost function curve

it is very difficult and very expensive to increase output once the capacity of the machinery has been reached.

If the inflation rate turns out to be less than was is expected to be, the clear winners are

lenders.

In Figure 5.7, assuming perfect competition, at MR2 there will be

long-run pressure on the price to rise.

If a good is normal, the income elasticity of demand must be

merely positive (not necessarily greater than 1).

If you drive on a rural stretch of highway and come upon an intersection in which there is only one gas station, and you know it to be the only one for 100 miles, it is a

monopolist

Suppose ten companies begin introducing new genetically engineered apples. Each has their own distinctive taste and brand name. This market would be described by

monopolistic competition