question

how human beings coordinate their wants and desires given a society's decision-making mechanisms, social customs, and political realities.

answer

Economics is the study of:

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what, how, and for whom.

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The three central coordination problems of the economy are:

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based on the premise that every choice has costs and benefits.

answer

Economic reasoning is:

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marginal cost.

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The extra cost associated with undertaking some action is its:

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economic institutions.

answer

The laws, common practices, and organizations in a society that affect the economy are known as:

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the benefit forgone by not undertaking the next-best activity.

answer

The opportunity cost of undertaking an activity is best defined as:

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Precepts result from theorems, assumptions, and social goals.

answer

What is the relationship between theorems and precepts?

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political forces.

answer

The fact that the U.S. Postal Service has the exclusive right to deliver regular mail is an example of:

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the study of individual choice and how that choice is influenced by economic forces.

answer

Microeconomics is:

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positive analysis.

answer

Suppose that an economic study concludes that an increase in the corporate tax rate would reduce business investment next year. This conclusion is an example of:

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human beings coordinate their wants and desires.

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According to the text, economics is the study of how:

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addresses the questions what is produced, how it is produced, and for whom it is produced.

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Any economic system:

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study for the quiz as long as her hourly wage rate is less than $20.

answer

Alexandra has determined that studying an hour for her economics quiz will improve her grade on the quiz from 75 to 100. She also determines that this improvement is worth $20. To study for an hour for her economics quiz, however, she will have to work one fewer hour at her part-time job. Alexandra should:

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equals the increase in total cost when another unit is consumed.

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The marginal cost of consuming another unit of a good:

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two trips this year.

answer

Refer to the graph shown. If the marginal cost of each weekend trip this year is $299 no matter how many trips Rodney takes, assuming he is rational, Rodney will take:

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additional benefit from the activity exceeds the additional cost.

answer

Marginal analysis suggests that you will engage in more of an activity if the:

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is the net benefit forgone by not undertaking the next best alternative.

answer

Opportunity cost:

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value of the next-best activity forgone by attending college.

answer

The opportunity cost of attending college for one year is best measured by the:

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who is capable of competing successfully in professional tennis.

answer

The opportunity cost of attending college is likely to be highest for a high school graduate:

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Deion Sanders

answer

Deion Sanders is a two-sport athlete who plays both pro football and pro baseball. He could earn $1,000,000 playing either sport. Troy Aikman is also a two-sport athlete who plays both football and auto racing. He could earn $1,000,000 playing football or $200,000 racing cars. Garo Yepremian can play both football and soccer. He could earn $1,000,000 playing football or $50,000 playing soccer. Assuming that all three men have only two options for work and can pursue only one sport full-time, who has the highest opportunity cost of playing football?

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Social and political forces sometimes rein in market forces.

answer

Prostitution is legal in Churchill County, Nevada, but a referendum threatened to close two brothels (prostitution businesses) in that county. What idea from Chapter 1 of the text does this story best illustrate?

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invisible hand.

answer

The price mechanism that guides people's actions is called the:

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a branch of economics that studies the economy through controlled lab experiments.

answer

Experimental economics is:

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A macroeconomist

answer

Who would probably argue that you need to study the forest before you can understand the trees?

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Corporations Government Cultural norms None of these options

answer

Which of the following is not an economic institution?

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an action taken to influence the course of economic events.

answer

An economic policy is:

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objectively explain how the economy functions.

answer

Positive economics seeks to:

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Because urban sprawl is the result of individual choice, it is okay.

answer

Which of the following statements about urban sprawl and traffic congestion is the best illustration of a normative statement?

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blends objective and subjective analyses.

answer

Economics is an art because it:

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normative economics.

answer

"The distribution of income should be left to the market" is an example of:

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What combination of outputs is best

answer

Which of the following cannot be determined by using a production possibility table?

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6 percentage points of inflation

answer

Supposed each of the following rows represents the choice faced by policy makers given the current set of U.S. institutions and technology. What is the opportunity cost of reducing unemployment from 8 percent to 4 percent?

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straight line with negative slope.

answer

Consider the table below, in which each production choice represents a point on a production possibility curve. This production possibility table could be graphed as a:

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downward-sloping.

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Because you can get more of one good only by giving up some of another good, the shape of a production possibility curve is:

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can produce either 40 units of rye or 20 units of eggs.

answer

The graph indicates that with the resources and technology it has available, Ricardia:

question

one economics problem.

answer

Laura's production possibility curve for math and economics problems in one night is shown in the graph. Her opportunity cost of finishing six math problems instead of four math problems is:

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low but increase the more you concentrate on the activity.

answer

The principle of increasing marginal opportunity costs states that the initial opportunity costs are:

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bowed out.

answer

To graphically demonstrate the principle of increasing marginal opportunity cost, the production possibility curve must be:

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increased because the economy is now on the production possibility curve.

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If you move from a point inside the production possibility curve to a point on the production possibility curve, it follows that efficiency is:

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production efficiency is decreased because we are no longer on the production possibility curve.

answer

As you move from point A to point B:

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D

answer

Productive inefficiency occurs at what point?

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cheaply as possible.

answer

The term efficiency involves achieving a goal as:

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From C to D to A to B in diagram a.

answer

Refer to the graph shown. Destruction of some of the resources necessary to produce both guns and butter would result in what movement?

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III

answer

Which of the shifts explains what would happen to the production possibility curve if restrictions were imposed on tuna fishing?

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III

answer

Which of the shifts explains what would happen to the production possibility curve if improved technologies increased the production of prekindergarten (pre-k) toys by 25 percent and the production of children's toys by 50 percent?

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is higher at Second Bakery.

answer

Given the production possibility tables for First and Second Bakeries shown, we know that the opportunity cost of producing pies:

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if its opportunity cost of producing corn is lower than the opportunity cost in other countries.

answer

Mexico has a comparative advantage in producing corn:

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both produce and consume more.

answer

Two countries that specialize their production along the lines of comparative advantage and then trade with each other will be able to:

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consumers in all countries.

answer

Trade based on comparative advantage benefits:

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require creativity and innovation.

answer

The text argues that the United States has had a comparative advantage in goods and services that:

question

competition, combined with transferable goods and resources, drives the prices of similar goods toward equality.

answer

According to the law of one price,

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Wages in India are lower than wages in the United States, and so firms move their call centers to India. This tends to raise wages in India and depress wages in the United States.

answer

Which of the following is an example of the law of one price in action?

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The value of the U.S. dollar falls.

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Which of the following factors will help the United States regain comparative advantages in industries in which it has lost comparative advantages?

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an incentive for Felipe to cross the border to get a job and thus reduce the gap.

answer

Juan works at Texas Burgers in El Paso and earns $8.00 per hour. His twin brother Felipe works in Mexico Burgers in Ciudad Juarez just across the border and earns $3.00 per hour for exactly the same work. An economist looking at this situation sees:

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improve standards of living.

answer

Adam Smith argued that greater specialization and division of labor are likely to:

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downward-sloping.

answer

If there is an inverse relationship between two variables, the graph relating the two variables will be:

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Inverse.

answer

What kind of relationship exists between the price of gas and the quantity demanded for gas if the quantity demanded for gas falls when the price of gas increases?

question

the price mechanism.

answer

Markets coordinate economic activity through:

question

rise

answer

Suppose that at the current price producers of CDs offer 5 million CDs for sale but consumers want to buy 6 million. When the market coordinates the demand and supply for CDs, the price of CDs will:

question

is based on private property and the market.

answer

Capitalism:

question

cooperate with one another to meet their needs.

answer

Socialism in theory is based on the principle that individuals should:

question

more concerned about fairness than capitalism.

answer

In principle, socialism is:

question

mid-1700s and socialism came into existence in the early 1900s.

answer

Capitalism and socialism have not existed forever. Capitalism came into existence in the:

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households supply factors of production to business and are paid by business for doing so.

answer

In the factor market:

question

supply labor services to businesses in the factor market.

answer

Governments do all of the following except:

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the difference between its total revenue and its total cost is $100.

answer

A firm's profits equal $100 if

question

maximizes profits.

answer

Business decisions about what and how much to produce are based on what:

question

each owner is liable only to the extent of his or her own investment.

answer

A business is most likely to be characterized as a corporation if:

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Businesses are required to produce certain goods, called public goods, for the government.

answer

In the United States, the government regulates business in its role as a "referee". Which of the following is not among the laws regulating the interaction between households and businesses?

question

consumer sovereignty

answer

When Coca Cola introduced a new, low-calorie version of Coca Cola called C2, despite a major marketing effort, sales of C2 were weak and many doubted that the product would last. Coke's experience with C2 illustrates the economic concept of:

question

20 percent

answer

All levels of government (federal, state, and local) consume about what percentage of the total output of the United States?

question

income taxes; state and local governments rely to a greater extent on sales and property taxes.

answer

The tax revenues of federal, state, and local governments have different sources, in that the federal government relies primarily on:

question

Equal opportunity and labor laws that restrict businesses' freedom to hire and fire whomever they want

answer

Which of the following is not an example of government's role as an actor?

question

Promoting effective and workable competition

answer

Enron executives were charged with numerous counts of corporate fraud and corruption. Among the charges was insider trading, which involves the trading of a corporation's stock by insiders who may have access to information that the public does not. Which role is the government playing when it makes insider trading illegal?

question

determining production levels.

answer

In the United States, government performs all of the following functions except:

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cigarette smoke

answer

Which of the following would most likely generate a negative externality?

question

positive externality

answer

Flu vaccinations of school children have the unintended effect of protecting the vulnerable elderly from contracting the virus. This is an example of a:

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actions with negative externalities should be restricted and actions with positive externalities should be encouraged.

answer

Assuming government's goal is to benefit society as much as possible:

question

Maintaining full employment

answer

Which of the following is a good example of government's attempt to correct for macroeconomic externalities?

question

when consumed by one individual, can still be consumed by others.

answer

A public good is a good that:

question

channel low-interest loans to developing countries to foster economic growth.

answer

A primary goal of the World Bank is to:

question

work out repayment plans for developing countries with large international debts.

answer

A primary goal of the International Monetary Fund (IMF) is to:

question

the capitalist class exploited the proletariat class, which created all the value inherent in goods.

answer

The Marxist critique of capitalism was based on the notion that:

question

There would be significant differentiation between workers and owners of factories.

answer

Which of the following was a Marxist prediction?

question

markets operate, but government regulates markets significantly.

answer

Welfare capitalism is an economic system in which:

question

a market failure.

answer

Suppose a single firm gains control of an industry by preventing other firms from entering the industry. As a result, the price charged by the single firm is much higher than the price that would be charged by many different firms producing this product in a competitive market. This situation can best be described as:

question

differentiated primarily by the degree to which they depend on markets.

answer

Most economies today are:

question

When to produce it.

answer

Which of the following is not one of the three coordination problems facing an economy?

question

remain above $0.40.

answer

Shawna likes to download MP3s. Her favorite source for such music charges $10 per year. After paying that fee, Shawna can download MP3s for forty cents per song. Assume these are the only downloading costs Shawna faces. If she follows economic reasoning, she will continue downloading as long as her per-song marginal benefits:

question

Voters demand the state legislature to lower taxes and then discover tuition at public universities and fees at state parks increase sharply.

answer

Which of the following best illustrates the important economic principle of TANSTAAFL?

question

the opportunity cost of studying economics.

answer

Whatever you would be doing if you weren't studying economics right now represents:

question

individual choice.

answer

Microeconomics focuses on:

question

More competition tends to lower prices.

answer

Which of the following statements is an example of positive economics?

question

marginal benefits are greater than marginal costs.

answer

Economic reasoning says you should continue doing something as long as:

question

are all examples of institutions of which economists must be aware.

answer

Laws, cultural norms, religious practices, and family structures:

question

the price mechanism.

answer

The invisible hand refers to:

question

economic forces constrained by social and legal forces.

answer

Human organs are not sold on the open market, though there are many people in need of organs who would be willing to pay high prices. Instead, recipients are put on waiting lists for organ donations. This rationing process reflects:

question

must be a straight line.

answer

If you move along the production possibility curve and the opportunity cost of producing one good in terms of another never changes, it follows that the production possibility curve:

question

not all resources are equally effective in the production of all goods.

answer

Comparative advantage arises because:

question

increasing marginal opportunity costs.

answer

When you produce wheat, it is initially relatively inexpensive to produce it, but then per-unit costs tend to increase as more is produced. This is an example of:

question

attainable and inefficient.

answer

Points below the production possibilities curve are:

question

shift the production possibilities curve outward.

answer

An increase in productive resources available for use in an economy will:

question

can change over time.

answer

A country's pattern of comparative advantage:

question

not differ significantly.

answer

If two countries have similar institutions, then wages of equal workers in the two countries will:

question

400 cars and 100 tractors

answer

Suppose country A can produce a maximum of 200 cars (if it produces no tractors) or 100 tractors (if it produces no cars), while country B can produce a maximum of 400 cars (if it produces no tractors) or 100 tractors (if it produces no cars). Suppose that both countries consume both goods. Which of the following is a combination of goods that can be produced by the two countries together only if they both specialize according to comparative advantage?

question

Mexico since the cost per unit of output will be lower.

answer

If the hourly wage of U.S. workers is $12, the hourly wage of Mexican workers is $3, and U.S. workers produce 3 times as much output per hour as Mexican workers, then it would be efficient to locate production facilities in:

question

creates new jobs but also eliminates jobs.

answer

Globalization:

question

an important and useful part of market economies.

answer

Self interest is:

question

people's good will towards others and society's determination of the answers to the three economic questions.

answer

In theory, socialism is an economic system that relies on:

question

businesses

answer

In market-oriented economies like the United States, the actual decisions of what to produce, how to produce it, and for whom to produce it, are predominately made by:

question

says that, ultimately, consumer preferences shape what is produced.

answer

The principle of consumer sovereignty:

question

a corporation.

answer

Of the three types of businesses, the one that can attract financing most easily is:

question

sets the rules of interaction between households and businesses and it acts as a referee to enforce these rules.

answer

Government is an important part of the US economy because it:

question

International trade requires complex rules and laws which are usually enforced by the government, but there is no central world government.

answer

Which of the following is a reason real-world international trade can be difficult?

question

"market failures."

answer

The reasons economists give for government intervention in the market can be summed up by the phrase:

question

free riders may refuse to pay for a good in the hope that others will.

answer

It is difficult for the market to provide appropriate levels of a public good because:

question

market incentives to produce would be inadequate.

answer

Market economies require private property rights because without these rights:

question

Them that works, gets; them that don't, starve.

answer

The underlying concept of fairness embodied by a market economy is best represented by which statement?

question

Distribution according to need.

answer

Which of the following is a characteristic of socialism in theory?

question

factor market.

answer

The market where households supply factors of production to businesses and are paid by businesses for doing so is the:

question

sole proprietorships.

answer

Most businesses in the United States are:

question

limited liability.

answer

One advantage of a corporation over a partnership is:

question

alters health and safety standards for certain industries.

answer

The government serves as a referee in the economy when it:

question

Any good that is provided by government is a public good.

answer

Each of the following statements about public goods is true except:

question

more difficult to conduct than domestic trade.

answer

In general, international trade is:

question

the effect of a decision on a third party that is ignored by the decision maker.

answer

An externality is defined as:

question

will decrease quantity demanded.

answer

The law of demand states that an increase in price, other things constant:

question

how an individual's tendency to substitute between goods can explain the law of demand.

answer

When the price of his cable TV increased, Michael switched to satellite TV. This illustrates:

question

a rightward shift of the demand curve.

answer

Assume movies are a normal good. Therefore, in the market for movies, an increase in income will lead to:

question

an increase in the price of a complement like eggs.

answer

Which of the following would economists expect to shift the demand curve for bacon to the left?

question

a higher price and a lower quantity of oranges traded in the market.

answer

If the market supply of oranges decreases, this will create:

question

A technological advance that decreases the cost of electronic memory.

answer

Which of the following would cause the supply of MP3 players to shift to the right?

question

higher prices for parking passes, which would decrease quantity demanded.

answer

There is a shortage of parking spaces on campus, but there is no room for any additional parking spots. If campus administrators let the free market work, it could eliminate this shortage by creating:

question

an increase in the price of new housing and a decrease in the number of new homes built.

answer

Other things constant, if the price of timber increases, we would expect to see:

question

a decrease in the equilibrium price and quantity of macaroni and cheese.

answer

If scientists discovered that eating too much macaroni and cheese can cause your hair to fall out then, ceteris paribus, we would expect to see:

question

The belief that, since an individual with a larger salary can buy more goods, if everybody had higher salaries they could all buy more goods.

answer

Which of the following is an example of the fallacy of composition?

question

an inverse relationship between price and the quantity demanded.

answer

The law of demand states that, other things constant, there is:

question

An increase in family incomes.

answer

Which of the following would most likely result in an increase in the demand for beef?

question

the price of the good in question rose.

answer

We would speak of a movement along a demand curve—rather than of a shift in demand—if:

question

positively-sloped.

answer

To be consistent with the law of supply, a graph depicting the relationship between price and quantity supplied will be:

question

a decrease in the price of the item.

answer

According to the law of supply, the quantity of an item supplied will fall as a result of:

question

A decrease in the price of feed for cows.

answer

Which of the following events can be expected to cause an increase in the supply of milk?

question

the current price is below the equilibrium price.

answer

If, at a good's current price, the quantity demanded is 2,000 units and the quantity supplied is 1,000 units then:

question

prices will rise because some suppliers will be able to sell their goods at higher prices.

answer

If there is excess demand in the market, we can expect that:

question

a higher equilibrium price and a higher equilibrium quantity.

answer

An increase in the demand for a product will cause:

question

improved technology which has caused supply to shift rightward.

answer

For many years, the price of personal computers has fallen and the quantity sold has risen. This can best be attributed to:

question

Movie-goers react to an increase in the price of a theater ticket by seeing fewer movies per year.

answer

Which of the following situations best demonstrates the law of demand?

question

decrease the quantity demanded of gasoline, other things constant.

answer

According to the law of demand an increase in the price of gasoline will:

question

demand is represented graphically by a curve and quantity demanded as a point on that curve.

answer

The distinction between demand and the quantity demanded is best made by saying that:

question

we are considering changes in just one factor.

answer

The use of the phrase "other things constant" in supply and demand analysis indicates that:

question

Income in the United States has risen

answer

Tuition and fees for four year colleges in the United States have risen over five percent per year in the recent past. One cause for the increase in price has been an increase in demand for college education. In the standard model, what could be a possible explanation for the increase in the demand for college education?

question

increase the demand for hybrid cars and decrease the demand for the gas guzzler Hummer.

answer

The effect of higher gasoline prices is most likely to:

question

C.

answer

Refer to the graphs shown. If consumers began purchasing more of this product due to a decrease in price, this would be shown by arrow:

question

a decrease in the price of CDs from $16.00 to $12.00.

answer

Refer to the graph shown. A movement from point E to point D is caused by:

question

sum the curves horizontally, adding quantities demanded at each price.

answer

To derive a market demand curve from individual demand curves, it would be necessary to:

question

up, the quantity supplied goes up.

answer

The law of supply states that, other things equal, as the price of a good goes:

question

Quantity supplied of a good is inversely related to the good's price.

answer

Which statement is not consistent with the law of supply?

question

Price

answer

According to the law of supply, what will motivate firms to increase their quantity supplied of a product?

question

supply is represented graphically by a curve and quantity supplied as a point on that curve.

answer

The distinction between supply and the quantity supplied is best made by saying that:

question

X

answer

Refer to the graphs shown. The arrow that best captures the impact of a decline in price on quantity supplied is:

question

A decrease in the cost of producing CDs

answer

Refer to the graph shown. A shift from S0 to S1 would most likely occur for what reason?

question

Charlie will stop supplying any of this product.

answer

Refer to the graph shown. If price changes from $4.00 to $2.00 then:

question

greater the resulting surplus will be.

answer

The more the current price exceeds the equilibrium price, the:

question

A rise in quantity supplied and a fall in quantity demanded.

answer

Suppose a market has an excess demand and price starts to rise. What will the rise in price cause?

question

fall.

answer

When quantity supplied is greater than quantity demanded, prices tend to:

question

equals quantity demanded, prices don't change.

answer

Price tends to be in equilibrium where supply and demand intersect because when quantity supplied:

question

price to fall to restore equilibrium.

answer

If quantity supplied exceeds quantity demanded, there is a tendency for:

question

quantity demanded is just equal to quantity supplied.

answer

Refer to the graph shown. At a price of $0.90 per dozen:

question

There would be a shortage of pork bellies if the price were $0.25 per pound.

answer

Suppose that the table shown shows the demand and supply schedules for pork bellies. Which of the following statements is true?

question

C.

answer

Refer to the graphs shown. The relevant market is corn. The impact of a poor corn harvest on the market for corn would most likely be demonstrated by which graph?

question

rises, but the equilibrium price may rise, fall, or stay the same.

answer

If supply and demand both shift to the right, equilibrium quantity:

question

the fallacy of composition.

answer

The statement, "Assuming that if it is rational for one person to stand at a football game to get a better view then it is rational for everyone to stand at a football game to get a better view" is an example of:

question

The price of that good

answer

Which of the following is not held constant as you move along the demand curve?

question

apple prices rose, and quantity sold fell.

answer

When hurricane Irene tore through the northeastern United States, destroying a significant portion of the Hudson Valley apple crop:

question

the demand curve of CDs to the left.

answer

Online music stores such as Apple's iTunes provide an alternative to buying CDs. The introduction of online music stores has shifted:

question

IV

answer

Floods in the U.S. Midwest reduce the U.S. corn crop. Which graph depicts the effect of the floods on the U.S. corn market?

question

was below equilibrium.

answer

At a Chicago Bulls game 20,000 tickets were sold at $30 apiece. The game was sold out and some people did not get tickets. This suggests that the selling price:

question

Supply shifted to the right, demand shifted to the left, and price declined.

answer

Helped by desktop publishing, the number of vintage baseball card forgeries has flooded the market for vintage baseball cards. Dealers left the market for fear of purchasing a phony. What was the effect on the market for vintage baseball cards assuming phonies cannot be detected?

question

imposed by government below equilibrium price.

answer

An effective price ceiling is best defined as a price:

question

shortages

answer

To keep the price of gas from rising quickly after Katrina, the government instituted price ceilings on the price of gasoline in some states. These price ceilings caused ______ in the gasoline market.

question

the rent to rise in those neighborhoods.

answer

Some years ago, Stuyvesant Town and Peter Cooper Village in Manhattan were sold for redevelopment. These villages had been rent controlled, but now that these neighborhoods are no longer rent controlled, one would expect:

question

$1.50.

answer

A price ceiling would be binding, resulting in a market shortage if it is set at:

question

a surplus will develop.

answer

The most likely impact of an effective price floor is:

question

the removal of a price floor.

answer

A surplus of a good could possibly be eliminated by:

question

$1

answer

Which price ceiling will cause the greatest excess demand?

question

Excess supply of milk

answer

The invention of a machine that increases milk production is discovered. If farmers were to decry the effect of this new technology on the price of milk and lobby government to set the price of milk at the price before the invention, what would be the result?

question

$7.25

answer

Refer to the graph shown. Which of the following wage rates would be an effective price floor?

question

domestic consumption of the imported good falls.

answer

When a country imposes a tariff:

question

increase the wages of taxi drivers.

answer

Taxi medallions were issued in New York City to:

question

Existing suppliers

answer

Quantity restrictions benefit which group the most?

question

total expenditures generally rise.

answer

In a third-party payer system:

question

an increase in the price and quantity of power generators.

answer

Suppose an ice storm knocks down power lines, and it is announced on the news that the local area would be without power for one week. We would expect to see:

question

a decrease in the price and quantity of hybrid cars.

answer

If gas prices fell sharply, what would economists expect to happen in the market for fuel-efficient hybrid cars?

question

Very low interest rates have increased the demand for homes.

answer

Housing prices have been rising sharply over the past few years. At the same time, sales of new homes have reached record highs. Which of the following explains this phenomenon?

question

C

answer

Which of the following graphs best illustrates what would happen in the market for onion dip, if the price of potato chips (a complement to onion dip) increased?

question

a surplus of 60 units.

answer

Given the market illustrated below, if the government set a price floor at $4, the result would be:

question

often result in a shortage of housing.

answer

Rent controls:

question

reduced employment; no change

answer

A minimum wage of $15 per hour would probably cause ________ in the market for unskilled labor and ________ in the market for neurosurgeons.

question

the price of Canadian maple syrup to increase in the U.S. and its quantity to decrease.

answer

If the U.S. government imposed a tariff on maple syrup imported from Canada, economists would expect:

question

the price of legal services to decrease.

answer

If individuals no longer needed a license to practice law, we might reasonably expect:

question

the equilibrium price increases. the quantity supplied increases. the quantity demanded increases. All of the above are correct.

answer

With a third-party-payer market for healthcare, the total spending on healthcare increases because:

question

Price rose and then fell; quantity sold fell and then rose.

answer

In 1991 Congress imposed a 10 percent luxury tax on luxury boats. Because of the uproar from consumers, the tax was repealed in 1993. What was the effect of the two events on equilibrium price and quantity of luxury boats?

question

rightward shift in demand and no shift in supply.

answer

An increase in price and quantity is consistent with a:

question

$20.

answer

Suppose you wish to purchase a blanket at a shop in Mexico. If the cost of one peso is $0.10 and the cost of the blanket is 200 pesos, then the dollar cost of the blanket is:

question

neither equilibrium price nor quantity will be affected.

answer

If a price ceiling is set above the equilibrium price:

question

$60 is below the equilibrium price.

answer

Students at State U pay $60 per year for a parking permit, but many complain that they are not able to find a parking place in designated university lots. This suggests that:

question

shortages due to a price ceiling.

answer

The best explanation for the existence of non-market rationing mechanisms is:

question

there will be an excess demand for apartment housing.

answer

If rent control is applied to apartment housing, the prediction of basic supply and demand analysis is that:

question

on a specific good.

answer

An excise tax is a tax that is levied:

question

increase the price of an imported good and the competing domestic good.

answer

The introduction of a tariff is expected to:

question

the person who chooses how much to purchase doesn't pay the entire cost.

answer

Under a third-party payer system:

question

market value of an economy's production of final goods and services in a one year period.

answer

GDP is the:

question

excluded from both GDP and GNP

answer

The value of intermediate goods is:

question

transfers, and are not included in government spending as part of GDP.

answer

Government expenditures for social security and unemployment insurance are, for GDP accounting purposes, considered:

question

the economy can produce more goods and services than it did before.

answer

When real wealth increases:

question

A flow concept has meaning over a specified period of time, while a stock concept is a value at a point in time.

answer

How does stock differ from flow?

question

number of watersheds.

answer

Great Basin National Park, the only national park wholly within the borders of Nevada, occupies 77,180 acres and contains 42 known caves. In 2003, it had 25 permanent staff who with the seasonal staff collected $281,241 in fees for 2003, mostly for the 2,344 cave tours they gave during that year. The park also had 79 volunteers contribute 9,410 hours of work during 2003. No acres of land were burned in 2003, a year in which the park was surveying for springs in the 25 watersheds. During 2003, 87,679 people visited the park. Some of the data in the paragraph shown are flow measurements and some are stock measurements. An example of a stock measurement is:

question

The lumber produced by Boise Cascade and sold to a builder of old houses

answer

Which of the following is an example of an intermediate product?

question

would be double counted otherwise.

answer

The reason economists include only the value of final goods and services when they calculate GDP is that intermediate goods:

question

sales of final output.

answer

Double counting in the national income accounts will be avoided if GDP is computed by totaling all:

question

subtracting the cost of materials used in production from the value of sales.

answer

Value added is calculated by:

question

the sum of the value added at all stages of production.

answer

Conceptually, a country's GDP equals:

question

not included in GDP because they do not increase domestic production.

answer

Transfers of assets, such as stock sales are:

question

aggregate income equals aggregate production

answer

According to the aggregate accounting identity:

question

uses the factors payments made by businesses to households to estimate GDP.

answer

The income approach to measuring GDP:

question

the sum of consumption, investment, government purchases, and net exports.

answer

Using the expenditure approach, gross domestic product equals:

question

Social security payments

answer

For the purposes of calculating GDP using the expenditure approach, which of the following payments is not included in the government purchases component?

question

7,500

answer

Calculate GDP using the information shown.

question

It is counted as consumption.

answer

In what category is the purchase of a computer by a person for household use in national income accounting?

question

federal police protection

answer

Which of the following would not be included in personal consumption expenditure?

question

the value of new residential construction.

answer

For the purposes of calculating GDP, gross private domestic investment includes:

question

net private investment.

answer

Gross private investment minus depreciation equals:

question

consumption + investment + government purchases + net exports - depreciation.

answer

Net domestic product equals:

question

transfer payments

answer

Aggregate income includes all of the following except:

question

employee compensation

answer

The largest component of aggregate income is:

question

$900

answer

Given the following information, we can infer that aggregate income equals:

question

either the price level or output or both.

answer

An increase in nominal GDP implies an increase in:

question

percent change in real GDP = percent change in nominal GDP - inflation.

answer

The relationship between real GDP and nominal GDP can be expressed by:

question

it measures market activity, not social welfare.

answer

One of the limitations of aggregate accounting is that:

question

Pure services, such as haircuts

answer

Which of the following economic activities would be included in U.S. gross domestic product (GDP)?

question

toward which the economy gravitates in the short-run.

answer

Equilibrium income is that level of income:

question

an economy is capable of producing without generating higher inflation.

answer

Potential income is that level of income that:

question

not fixed at the economy's potential income.

answer

Keynes believed equilibrium income was:

question

can create problems because borrowers would lose collateral and reduce expenditures.

answer

In the short run, deflation in asset prices

question

decline and remain there.

answer

In 2009, the personal savings rate rose. If the additional savings were not translated into investment, Keynes would predict that aggregate income would:

question

an increase in saving reduces output.

answer

The paradox of thrift occurs when:

question

reduce aggregate demand by reducing consumption.

answer

Keynes believed that an increase in savings would:

question

the short run is a more important policy concern than the long run.

answer

Keynes argued that:

question

the money wealth effect.

answer

As prices fall, people become richer and buy more. This occurs as a result of:

question

and the quantity of aggregate demand to decrease.

answer

If the price level rises, the interest rate effect will cause investment:

question

Substitution effect

answer

Which of the following is not a reason why the AD curve slopes downward?

question

production and expenditures are interdependent.

answer

The multiplier effect exists because:

question

a reduction in U.S. exports, so the U.S. aggregate demand curve shifts left.

answer

A fall in a foreign country's income will most likely cause:

question

workers are more likely than stockholders to spend the income they receive.

answer

A change in the distribution of income affects the AD curve because:

question

shift to the right.

answer

If total income in Sweden remains the same but the wage share of income rises, the Swedish AD curve will most likely:

question

shifted the AD curve to the right

answer

In the early 1930s, U.S. government expenditures increased as part of the New Deal without any change in taxes. This:

question

A to C.

answer

Refer to the graph shown. During the Reagan Administration (1981 to 1989), tax rates were reduced significantly, while federal defense spending rose by 80 percent. The effect of these policies on the AD curve is best shown as a movement from:

question

will shift by more than initial shift factor when the multiplier is greater than one.

answer

The AD curve:

question

all inputs are fully utilized in the short run.

answer

The short-run aggregate supply curve is upward sloping for all of the following reasons except:

question

short-run aggregate supply curve up (to the left).

answer

An increase in production costs is most likely to shift the:

question

an increase in input prices.

answer

Refer to the graph shown. A movement from A to B is most likely to be caused by:

question

output in the long run.

answer

The long-run aggregate supply curve plays an important role in determining:

question

supply curve down (to the right) with little change in aggregate demand.

answer

The rapid development of Internet technologies during the 1990s allowed businesses to produce goods and services cheaper than before and also gave rise to completely new services. We would show this change in the AD/AS model by moving the aggregate:

question

a short-run equilibrium but not necessarily a long-run equilibrium.

answer

At the intersection of the short-run aggregate supply curve and the aggregate demand curve, the economy is in:

question

government spending and taxes.

answer

Fiscal policies are policies that directly affect:

question

aggregate demand.

answer

An expansionary fiscal policy increases:

question

equilibrium income fell below potential income.

answer

An expansionary fiscal policy would be countercyclical if it was enacted after:

question

keep the economy always at its target or potential level of income.

answer

Governments are said to fine tune the economy when they attempt to use fiscal policy to:

question

short-run fluctuations.

answer

As a result of the Great Depression, economic thought placed greater emphasis on:

question

John M. Keynes's explanation of depression.

answer

Macroeconomics emerged as a separate field largely in response to:

question

shifting the production possibility curve outward.

answer

We can show economic growth in terms of the production possibility curve by:

question

supply goods in order to obtain other goods.

answer

According to Say's Law, people:

question

has a relatively large effect on living standards over long periods of time.

answer

Economic growth:

question

compounding.

answer

Small differences in growth rates can create large differences in income levels because of:

question

more productive and more dependent on others.

answer

The effect of specialization and the division of labor is to make us:

question

12 years.

answer

The Rule of 72 implies that a country with a growth rate of 6 percent will double its income in about:

question

increasing specialization and the division of labor.

answer

Markets help to promote growth by:

question

makes the average person better off but may worsen the distribution of income.

answer

The growth produced by markets:

question

occurs when there is an increase in goods and services per person.

answer

Per capita growth:

question

$283.

answer

If a country's population is 30 million and its GDP is $8.5 billion, its per capita output is:

question

increasing at a rate of 1 percent.

answer

If per capita output increases by 3 percent and output grows by 4 percent, the population must be:

question

a more informative measure of growth than growth in per capita income when the gains from growth are concentrated on a small segment of the population.

answer

If the distribution of the gains from growth matter, growth in median income is:

question

they move funds from those who save to those who invest.

answer

Financial markets are a key institution of growth because:

question

human capital.

answer

In the early 2000s, analysts feared that low academic achievement in math in the United States may reduce U.S. economic growth by as much as half a percentage point a year. In terms of factors leading to growth, the low math scores indicate that the U.S. may be at a disadvantage in terms of:

question

Growth-compatible institutions

answer

When the government of India lowered tariff barriers and removed the need for approvals for routine industrial expansion, what source of growth did this reform change directly?

question

limits growth by limiting access to loans.

answer

Economist Hernando DeSoto believes that the lack of formal property rights:

question

decreasing returns to scale.

answer

All of the following are important sources of growth except:

question

physical capital.

answer

Factory buildings are an example of:

question

social capital.

answer

The legal system is an example of:

question

lead to smaller and smaller increases in output.

answer

The law of diminishing marginal productivity implies that increasing only one input will:

question

capital accumulation.

answer

According to the Classical growth model, the most important source of economic growth was:

question

quickly since the increase in saving will permit greater investment.

answer

According to the Classical growth model, an economy that increases its saving will grow:

question

in the law of diminishing marginal productivity.

answer

Classical economists predicted that population growth would eventually reduce economic growth because they believed:

question

Technology.

answer

New growth theory emphasizes the importance of increases in what factor in explaining growth?

question

the common knowledge embodied in many technologies.

answer

Positive externalities of technological change result from:

question

if it can be readily exchanged for another asset or good.

answer

A financial asset is liquid:

question

Medium of exchage

answer

When a clerk gives you a pair of jeans for your $20 bill, money is serving which function?

question

be generally accepted in exchange for goods and services.

answer

In order to function as a medium of exchange, money must:

question

served as money because they served as a unit of account, medium of exchange, and store of wealth.

answer

In POW camps during World War II, everything was traded for cigarettes. For example, one bar of soap cost two cigarettes, two candy bars cost four cigarettes. During the time of the POW camps, cigarettes:

question

store of wealth.

answer

When money is held as an asset, it is serving as a:

question

Checking account deposits

answer

M1 includes which of the following?

question

M1.

answer

The measure of money that best fulfills the medium of exchange function because it is most liquid is:

question

they can be readily used in the making of purchases and the payment of debts.

answer

Checking account deposits are classified as money because:

question

M2.

answer

The measure of money most closely correlated with the price level and economic activity is:

question

M2 includes assets with a lower liquidity than those in M1.

answer

The chief difference between the M1 and M2 measures of the money supply is:

question

Debit cards can be considered money but credit cards cannot.

answer

Which of the following statements best summarizes the relationship between debit cards and credit cards?

question

deposits allow banks to make profitable loans.

answer

Banks hold people's cash for free, and sometimes even pay for the privilege of holding it, because:

question

how a bank attracts deposits and what it pays for them.

answer

Liability management refers to:

question

gold receipts were rarely exchanged for gold.

answer

The goldsmith's ability to create money was based on the fact that:

question

deposits.

answer

A commercial bank's reserve ratio equals the ratio of its reserves to its:

question

cash and deposits a bank keeps on hand or at the central bank.

answer

Bank reserves are:

question

focus on both asset management and liability management.

answer

Modern bankers:

question

required reserves to its deposits.

answer

The required reserve ratio refers to the ratio of a bank's:

question

$9,000.

answer

A bank has a reserve requirement of 10 percent. This means that if a customer deposits $10,000, the bank may lend:

question

increases.

answer

When a bank makes a loan, the money supply:

question

Fed and the banks.

answer

The organizations that can create money are the:

question

1/r where r is the reserve ratio.

answer

The formula for the money multiplier is:

question

down, and less money will be created.

answer

As the reserve ratio goes up, the money multiplier goes:

question

banks will extend fewer loans.

answer

As the reserve ratio goes up, less money will be created because:

question

Mortgages and government bonds

answer

Which of the following are examples of financial assets that pay a long-term interest rate?

question

likely include a risk premium.

answer

If a loan has a probability of not being paid back the interest rate will:

question

cash can earn interest.

answer

The following are reasons why people hold cash money except:

question

precautionary motive.

answer

Some colleges charge for student parking. Currently, your college does not charge for parking but the administration announced a possible charge of $2 per day. You are not sure when the new parking policy will start; therefore you decide to maintain a $5 bill in your wallet. You hold cash for the:

ECON V01A Principles of Macroeconomics – Flashcards

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