Final Flashcards
Price elasticity is unit elastic at the midpoint of a linear downward sloping demand curve
True
The Price elasticity of demand is calculated as
The percentage change in quantity demanded divided by the percentage change in price
When quantity is measured in gallons the price elasticity of demand for milk will be blank the price elasticity when the quantity is measured in quarts
The same as
The demands for wheat soy beans milk and eggs tend to be
Price inelastic
Suppose the cross price elasticity of demand between quinces and muskmelons is five which of the following must be true
Quinces and muskmelons are substitute
The slope of a vertical line is
Infinitely large
In economics specialization means
Focusing efforts on a particular product or single task
A person who can produce more of a good then another person is said to possess a comparative
False
On a production possibility frontier showing possible output levels of good a good be the opportunity cost of producing the first 10 units of a will usually be
Less than the opportunity cost of producing the second 10 units of A
At various points along the production possibilities frontier
The greatest achievable output levels are illustrated
In the market for chewing gum the current price is $.50 per pack and 100,000 packs are sold which of the following events would lead to a new equilibrium price of $.60 and quantity of 90,000 packs?
An increase in the price of the ingredients used to make chewing gum
The income in fact of a decrease in the price of potatoes and inferior good is a
Decrease in the quantity demanded of potatoes
Why does the supply curve typically slope upward
Opportunity cost of production increases as quantity supplied increases
The income effect of a decrease in the price of legal services a normal good is a
Increase in the quantity demanded of legal services
According to a 2011 pay scale.com survey among college majors with 10 to 20 years of experience economics ranks second only to computer engineering in terms of the median pay
True
A normative economics statement is
A statement of what ought to be not what is
The expression there’s no such thing as a free lunch means
That resources used up in producing the lunch are not available to satisfy other wants
Profit is the payment received by resource owners for the use of their capital
False
all economic models must involve simplifications because
Reality is too complex to understand it in its entirety so we must reduce it to a level that we can understand
On which of the following goods would you expect the revenue generated from the M position of a text to be the greatest
Hey prescription drug ordered by your doctor
If supply is more elastic then demand is the
More tax will fall on consumers
Marginal utility is defined as the
Additional satisfaction gain from consuming one More unit of a product
Consumer preferences
Our individual a valuations of goods and services
Time has a positive value for most people but their opportunity cost of time differ
True
The marginal utility received from each additional unit of a good consume declines other things constant this is a statement of the law of
Diminishing marginal utility
Requiring Medicare participants to pay a small fraction of the cost of their medical care
Reduces their utilization of healthcare without compromising their health
hey business executive who buys a portable computer so that she can work on airplanes is trying to reduce the cost of traveling
True
Basil is maximizing his utility from consuming tea and crumpets if the marginal utility of the last crumpet was 32 units of utility and the prices of tea and crumpets are four dollars and eight dollars respectively what was the marginal utility of the last cup of tea basil consumed
16 units
Which of the following represents the best example of a proprietors income
The revenue that Janet has left over after she pays all the expenses associated with running her software development business
Which of the following is a reason why government is a participant in the market oriented economy
To enforce contracts and protect private property
Restricting imports of Brazilian shoes
Raise the price of both Brazilian and domestically produced shoes
If you were to put the following effects of a decrease in demand into the sequence in which they occur which would be last
A short run loss forces some firms out of business in the long run
The chances of successful conclusion our greatest when
Demand curve and cost curves are similar among the firms in the industry
A formal agreement among the firms in an industry to coordinate their production and pricing decision in order to earn monopoly profits is known as
A cartel
In the long run a monopolistically competitive firm
Produce where price equals average total cost
To maximize cartel profit the members must allocate output so that the marginal cost for the final unit produced by each firm is
Identical
Monopolistic competition is similar to
Pure monopoly because the firms face downward sloping demand curve and similar to perfect competition in that the firms can earn only a normal profit in the long run
Oligopolists are more sensitive to the pricing and output policies of their rivals win
All firms produce identical products
The principal advantage of the game theory approach is that it allows us to
Better understand decision-making when one person’s choices affect another person’s choice
The automobile breakfast cereal and tobacco industries are examples
Oligopoly
What do monopolistic competition pure monopoly and perfect competition have in common
The rule of profit maximization
Suppose that the only maker of the particular type of horse here clothing exists exits the industry because demand is too low the correct analysis of the situation is
The price received by the producer was lower than the average total cost in the long run
In the long run which of the following is not a problem for monopolists earning economic profit
I’ll profit will gradually be converted to consumer surplus
Perfectly competitive firm’s and mono pole list firms both maximize profit
Marginal cost equals marginal revenue
If a Monopolist engages in the perfect price discrimination
The demand curve also becomes the marginal revenue curve
In the long run all of the firms inputs are variable
True
If total product for each of five units of labor is 10, 16, 20, 30 and 34 respectively the marginal product of the third unit is
Four
For each size of plant in manufacture could build there is a difference
Short run average total cost curve
Fixed costs are defined as
Costa do not vary as quantity produced increases
For a person who owns and operates in automobile insurance premiums are a blank and maintenance and repairs are a blank
Fixed cost variable cost
What is true of marginal cost and marginal returns are increasing
It is positive and decreasing
Is marginal product is negative total product must be negative
False
If fixed cost at Q =100 is $130 then
Fixed cost at Q =200 is 130
Total cost is calculated as
Fixed cost plus variable cost
In the long run equilibrium
Perfectly competitive firm’s can earn only normal profits
Supposed to perfectly competitive increasing cost industry is in long-run equilibrium in market demand suddenly decreases what might happen to the typical firm in the long
It would experience a lower equilibrium price
A perfectly competitive firm’s profit per unit of output equals
Price minus average total cost
Commodity products are
Uniform or standardize
In the long run a perfectly competitive industry is Allocatively efficient because
The opportunity cost of resources needed to produce the last unit of output just equals the marginal value to consume the last unit
Economic theory assumes that the goal of firms is to maximize what?
Profit
Pegs kegs sells kegs in a perfectly competitive market because low demand forced price below average variable cost pig has made the short run decision to shut down her current loss is
Equal to fixed cost
US exports
Represent approximately 11% of GDP
World output would be maximized if each country
Specialize in producing those goods in which it had has a comparative advantage
Japan is generally considered an economy close to foreign trade
False
As a result
of international
The last two producers in the importing country is less than the game to consumers in the importing country caused by decrease in price
Which country is the United States largest trading partner
Canada
Which of the following does the United States import
Zinc
Which of the following does not explain why US wage rates are higher than wage rates in developing country
Unstable business conditions in United States
When it comes to basic commodities the United States is a net exporter of oil and metals and a net importer of farm crop
False
The Bretton Woods system
Fixed exchange rates in terms of US dollar
Purchasing power parity PPP theory states the prices of identical items will equalize internationally an illustration that supports the theory is the fact the price of McDonald’s big Mac is the same around the world
False
One signal that the US dollar was over valued in the early 1970s was
The reoccurring balance of trade deficits in the United States
If The British pound appreciates US television stations need fewer dollars to buy episodes of Britain COM from British broadcasting company
False
Which of the following components of the US balance of payments includes direct investment by Americans in foreign securities
The capital account
Under a flexible exchange rate system which of the following would not directly affect exchange rate
The salary of the president of the United States
A rightward shift of the Mexican demand curve for foreign exchange will
Make foreign goods more expensive in terms of pesos
If the US dollar depreciates relative to the Swiss Frank then?
Swiss goods become more expensive in the US
When net unilateral transfers are added to the net exports of goods and services the result is called the
Balance on current account
The exchange rate is the
Price of one’s country’s currency in terms of another country’s currency
Which of the following represents a perfectly competitive farmers demand curve for hired hand
Her MRP curve
In the resource market firms demand resources in order to
Maximize profit
If the price of a resource increases other things constant less of that resource will be hired because
Producers will will substitute away from that resource
If the demand for tacos increases
The demand for corn increases
Economic rent is defined as
The payment to a resource in excess of its opportunity cost
In a perfectly competitive labor market a profit maximizing firm will hire labor up to the point at which the
Wage rate equals M RP
Leisure is
Subject to the law of diminishing marginal utility
A stock market crash that reduces the value of an individual’s trust fund would tend to
Increase her supply of labor
If two accountants have had the same education amount of experience and work at the same type of job for the same profit maximizing firm which charges its clients A uniform hourly fee
The one who has a higher marginal product due to ability should be paid more
Which of the following would not shift demand curve for union labor to the right
Increase supply of products that compete with union made products
Jamall maximize utility by allocating his time among leisure market work and household work so that
Expected marginal utility per hour is equal among all three
A college dean has a blank opportunity cost of blank than a college student working in a minimum wage job
Hire and nonmarket work
The union participation rate in the United States is
Lowest among service workers in the private sector
Other things equal the supply of labor will be higher to a job that
Has more amenities
I’m in aggregate demand and aggregate supply graph the great depression can be pictured as
A leftward shift of the aggregate demand curve
The aggregate supply curve indicates
The quantity of aggregate output the producers are willing and able to supply at each possible price level
Which of the following is a flow variable
Investment spending
According to canes if private sector demand is insufficient to maintain full employment the government should
Shock the economy with an increase in aggregate demand
In double entry GDP accounting
The value of output produced must equal the value of resource payments generated and producing output
Which of the following is an injection into the circular flow
Exports
Limitations of the national income accounting system include
Valuing all output at its market price regardless of whether it contributes to a societies economic welfare
Which of the following does not help account for the difference between GDP and national income
Personal income taxes
Inflation is
General and continuing rise in the money prices of goods and services
Uncertainty about inflation
Enhances money’s important as a link between the present and the future
Which of the following people would be classified as an employed
A person who wants a job as a fashion model but cannot find work in the field
Suppose you received a 4% increase in your nominal wage over the year inflation runs about 7% which of the following is true
Although your nominal wage rose your real wage decreased
Over the last hundred years US labor productivity growth rate experiences largest decline
During the Great Depression
Many people believe that government should promote
Greater happiness
The process of adding more capital per worker is known as capital deepening
True
Labor productivity is measured by
Total output divided by total employment
What does the marginal propensity to consume Tell us
How much additional income is spent on consumption
The simple multiplier is eight the marginal propensity to consume is
7/8
I decline in the US price level other things constant work
Stimulate US exports but discouraging imports causing a rightward movement along a given aggregate demand curve
If the marginal propensity to consume in your classmates nation is 3/5 and the marginal propensity to save in your country is 1/10 which of the following must be true
The spending multiplier is smaller in your classmates nation than in your country
If household save 30 billion more at each level of income and the MPC equals 0.9 the aggregate expenditure line will
Shift downward by 30 billion
Expected price level is assumed to be constant along a given short run aggregate supply curve
True
Potential output is the amount produced when
Firms and workers expectations about the price level are realized
If wages are flexible the long run aggregate supply curve is vertical
True
Which of the following would cause the long run aggregate supply curve to shift rightward
Hey technological breakthrough with widespread practical applications that occurs in the micro computer industry
Which of the following is a true contractionary gap
In the long run this gap clothes when resource of pliers negotiate lower resource payments
If government purchases increased and net Taxes decrease
Output and employment will increase
The difference between the classical approach and the Keenans approach to fiscal policy is
Kindians believe that it may be necessary that government increase aggregate demand so as to stimulate output and employment if the economy is to achieve its potential output
John Maynard teens believed that
Wages and prices were relatively inflexible and interest-rate would not fall fast enough to restore full employment
When the government clothes close is an expansionary gap with the change in government spending the blank in government spending leads to blank
Decrease a decrease in both real GDP in the price level
Discretionary fiscal policy is policy that
is an intentional change in taxation our government spending
One lesson of the great depression was the potential GDP could
Exceed equilibrium GDP
One rationale for the sizable wartime deficits run by the US government is at the alternative to defending the country from an aggressor may involve substantial long-term costs
True
With few exceptions the US federal government has historically run a deficit
True
Federal budget experience surpluses from
1998 to 2001
A possible explanation for the persistence of US federal budget deficit is that
It is easier politically to increased government spending then to increase taxes
Which of the following is true of an annually based federal budget
That’s your policy could worsen a contractionary gap
Assume an Thomas net taxes rise by 400 the marginal propensity to consume equals three fourths net exports planned investment’s taxes and government purchases are on Thomas and remain fixed as a result savings will initially
Fall by $100
A decrease in taxes
Raises aggregate expenditure by raising disposable income thereby increasing consumption
The emergence of the subprime mortgage market following the recession of 2001 made it increasingly difficult for low income individuals to obtain a mortgage
False
The Dodd Frank Wall Street reform and consumer protection act included all of the following present provisions except for one which is the exception
The law gives the federal reserve the authority to establish a reserve requirement for all financial institution
The deregulation of US banking in the 1980s lead to
Any bank failures as banks began to hold riskier assets
The US has more banks per capita than most other countries primarily because it
How do restricted branch banking
The interest rate charged by the federal reserve bank’s on loans to banking institutions is
The discount rate
The media effective at banks purchase of US government securities from the Fed is
The crease in the feds assets
When a check is cleared again spank a after being deposited at bank b
Thank 80s liabilities decreased and being bees liabilities increase
The majority of the feds liabilities are
Federal reserve notes
If a banks reserves are exactly equal to the required amount of reserves than it has no excess reserves
True
What proportion of M1 is accounted for by checkable deposits and travelers checks
About 55%
From a bank’s point of view it’s deposits or liabilities not asset
True
An increase in aggregate demand will have a smaller long run effect on real GDP if
Economy is already a potential output
If the money supply decreases the opportunity cost of holding money blank and people want to blank quantity of money
Rises a smaller
If the Fed sells US government securities to drain reserves from banks which of the following will probably occur
Interest rate will rise in the quantity of money demanded will fall
If the Fed wanted to stimulate the economy it might
Lower the discount rate to increase the money supply
Rational expectations school advocate
Passive approach to policy
The Fed is not completely independent because
Congress could rewrite the laws that create the fed
The change in equilibrium price depends on which curve shifts more. If demand shifts more…
Equilibrium price increases
The change in equilibrium price depends on which curve shifts more. If supply shifts more…
Equilibrium price decreases
Price elasticity
% change in quantity demanded devised by % change in price
