Review Chap 8 and 23 Macro

$20

(Figure: Costs of Price Ceilings 2) Refer to figure. What is the dollar amount of the deadweight loss after the price ceiling of $4 has been implemented?

a. Consumer surplus, if the goods were allocated to only the highest-value uses, would be the total area (A+B+C+D) = $1,560. b. $13 = (20 + 6)/2 c. Consumer surplus, if the goods were allocated randomly, would be the total area (C + D) = $840. Alternatively, consumer surplus is also (13 - 6) 120 = $840

(Refer to figure) Using the information provided in the graph, answer the following questions: a. If the goods were allocated only to those users who had the highest-value uses, find the total dollar amount of consumer surplus. b. If the goods are allocated randomly between the high-value uses and the low-value uses, then what is the average value of the good? c. If goods are allocated randomly, what is the total dollar amount of consumer surplus?

mutual funds on average underperform the S&P 500 at least half of the time

A comparison of historical performance of mutual funds and the S&P 500 suggests that:

A) all buyers who are willing to pay positive prices are able to receive goods from trade.

A free market maximizes the gains from trade, the sum of consumer and producer surplus, meeting all of the following conditions EXCEPT: A) all buyers who are willing to pay positive prices are able to receive goods from trade. B) the supply of goods is bought by the buyers with the highest willingness to pay. C) the supply of goods is sold by the sellers with the lowest costs. D) there are no unexploited gains form trade between buyers and sellers.

A) True

A price ceiling is a legal maximum on the price of the good or service. A) True B) False

prevents rents from rising to equilibrium levels

A rent control is a regulation that:

a situation in which high stock prices cannot be explained by companies' prospects and profits

A speculative bubble is :

stock in gun manufacturing, ammunition and rifle companies

An individual who buys __________ has a poor diversification strategy.

C) U.S. T-Bills, corporate bonds, S&P 500 Index fund, small stocks

Choose the series that places these financial instruments in order of increasing average risk. A) U.S. T-Bills, corporate bonds,small stocks, S&P 500 Index fund. B) corporate bonds, U.S. T-Bills, small stocks, S&P 500 Index fund C) U.S. T-Bills, corporate bonds, S&P 500 Index fund, small stocks D) corporate bonds, US T-Bills, S&P 500 Index fund, small stocks.

B) The businessman would have the higher-valued use and the retiree would have the lower opportunity cost.

If a price ceiling on gasoline results in long lines at the gas station and a rich businessman and an elderly retiree both need gasoline, who would have the higher-valued use for gasoline, and who would have the lower opportunity cost of waiting in line?

A) True

If price ceilings do not allow prices to rise, then demanders will be unable to signal their needs to suppliers. A) True B) False

B) False

If price controls are imposed, gains form trade, including consumer and producer surplus, are likely to increase. A) True B) False

equal to a free market equilibrium price

In the case of a nonbinding price floor, the price paid in the market will be:

very low rents turned portions of city housing into a state of disrepair and slum-like conditions.

Vietnam's foreign minister said, "The Americans couldn't destroy Hanoi, but we have destroyed our city by very low rents." He was referring to the fact that:

of random allocation

When a price ceiling is binding, the goods that are on sale are allocated to buyers using a method:

B) False

When the maximum price that can be legally charged is above the market price we say that there is a price floor. A) True B) False

Ronald Reagan

Which President ended the price controls on oil?

C) I, II, and IV only

Which events occurred during the 1973 - 1974 oil crisis in the United States? I. Gas stations were ordered to be closed between 9 PM on Saturday and 12:01 AM on Monday. II. The government decided to allocate oil by command. III. The 55 mph speed limit was repealed. IV. Daylight savings time was implemented.

B) efficient markets hypothesis

Which principle explains why it is hard to beat the market? A) technical investing principle B) efficient markets hypothesis C) systematic risk evaluation principle D) buy and hold principle

Relatively few

_______________ mutual fund managers can consistently beat the market average.

reflect all publicly available information about the stock market.

According to the efficient markets hypothesis, stock prices:

many; many

One best reduces risk by buying _______ stocks in _______ sectors.

buy and hold

One's best trading strategy according to the efficient markets hypothesis is summarized as:

no forms of technical analysis are shown

Over time, __________ to beat the market.

B) False

Since for every buyer of a stock there is a seller of that stock, someone can likely become very rich acting on public information. A) True B)False

while auditing a dishonest company realizes that its profit estimates are greatly inflated and immediately sells her stock in the company.

Someone who is using information outside the efficient markets hypothesis:

C) I and III only

Stocks are a good investment if: I. one is prepared to hold them for a while through market fluctuations. II. one can buy them immediately after prices have fallen. III. one is averse to risk.

After each year, 25% of the people will have made a correct prediction. To make a correct prediction for all four years, the probability is 0.25^4 = 0.0039. The number of people who make the right prediction for each year is 1,800 x 0.0039 = 7.

Suppose that the stock market for any given year can be characterized as being one of the following: (1) poor, (2) average (3) good, or (4) excellent. If there are 1,800 people who randomly predict stock market performance for this and each of the next three years, how many people will have been right four years in a row?

increase

The disaster at Chernobyl caused the price of oil to:

more than the minimum wage

The influence of the minimum wage in the American economy is very small because MOST workers earn:

A) True

The minimum wage is an example of a price floor in the labor market. A) True B) False

A) True

The prices of traded assets, such as stocks and bonds, reflect all publicly available information. A) True B)False