ECON 2500 Lecture Notes - Lecture 28: Real Wages, Real Interest Rate
ECON 2500 Full Course Notes
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Question 1
The law of demand states that there is a direct relationship between supply and demand.
True
False
4 points
Question 2
Equilibrium is a state of balance between supply and demand.
True
False
4 points
Question 3
Goods are scarce for both rich and poor.
True
False
4 points
Question 4
"The big corporations in this country, like ExxonMobil and GM, have deep pockets and need to be hiring more people." This is a positive statement about economic policy.
True
False
4 points
Question 5
The law of supply states that there is a direct relationship between price and quantity demanded.
True
False
4 points
Question 6
In the circular flow model, firms own economic resources, and householdsbuy the manufactured products and services.
True
False
4 points
Question 7
Households play a dual role of providing the factors of production whilepurchasing the goods and services of firms.
True
False
4 points
Question 8
Opportunity cost is the lowest valued benefit that must be sacrificed asthe result of choosing an alternative.
True
False
4 points
Question 9
Scarcity denotes that our desire for a good exceeds the amount that isfreely available from nature.
True
False
4 points
Question 10
Economics is a social science concerned with satisfying man's unlimitedwants with limited resources.
True
False
4 points
Question 11
Joint output of individuals or nations will be maximized when goods areexchanged between parties in accordance with the law of"comparative advantage".
True
False
4 points
Question 12
The production possibilities frontier assumes that the level of technologyvaries when applying the model.
True
False
4 points
Question 13
Excess demand in the market will cause the price of a product to decline.
True
False
4 points
Question 14
Demand is measured on the vertical axis and supply on the horizontalaxis.
True
False
4 points
Question 15
A change in quantity demanded is a movement along the same demandcurve.
True
False
4 points
Question 16
As globalization and world trade proliferates, individual markets withincountries' economies become more competitive.
True
False
4 points
Question 17
Which growth theory compares a subsistence real wage rate to the actual real wage rate?
Classical growth theory | ||
Inflation growth theory | ||
Neoclassical growth theory | ||
New growth theory |
4 points
Question 18
Suppose the working age population in Tiny Town is 100 people. If 25 of these people are NOT in the labor force, the ________ equals ________.
unemployment rate; 25/100 Ã 100 | ||
employment rate; 25/75 Ã 100 | ||
labor force; 75 | ||
labor force; 25/100 Ã 100 |
4 points
Question 19
Suppose there is a rise in the real wage rate. As a result, the quantity of labor demanded:
increases. | ||
decreases. | ||
does not change because there is no change in the money wage rate. | ||
increases only if the price level also decreases. |
4 points
Question 20
GDP can be computed as the sum of:
all sales that have taken place in an economy over a period of time. | ||
the total expenditures of consumers and business over a period of time. | ||
the total expenditures of consumption, investment, and government expenditure on goods and services over a period of time. | ||
the total expenditures of consumption, investment, government expenditure on goods and services, and net exports over a period of time. |
4 points
Question 21
The real wage rate equals:
(100 x (money wage rate/price level) | ||
(100 x (price level/money wage rate) | ||
(money wage rate x (price level) | ||
(money wage + (number of hours worked/(price level) |
4 points
Question 22
If the CPI was 121.5 at the end of 2007 and 138.3 at the end of 2008, the inflation rate over these two years was:
10.2 percent. | ||
13.8 percent. | ||
12.2 percent. | ||
16.8 percent. |
4 points
Question 23
A movement along the production function is the result of a change in:
the quantity of labor. | ||
technology. | ||
capital. | ||
interest rates. |
4 points
Question 24
All of the following are part of fiscal policy EXCEPT:
setting tax rates. | ||
setting government spending. | ||
choosing the size of the government deficit. | ||
controlling the money supply. |
4 points
Question 25
Along a production possibilities frontier for real GDP and the quantity of leisure time, as leisure time increases, real GDP:
decreases. | ||
increases. | ||
stays the same. | ||
could increase, decrease or stay the same. |
QUESTION 1
The demand for oranges increases while the supply decreases. The equilibrium price of oranges ________, and the equilibrium quantity ________.
falls; increases | ||
falls; perhaps changes but we can't say if it increases, decreases, or stays the same | ||
rises; decreases | ||
rises; perhaps changes but we can't say if it increases, decreases, or stays the same |
1 points
QUESTION 2
Assume a competitive market is in equilibrium. There is an increase in demand, but no change in supply. As a result the equilibrium price ________, and the equilibrium quantity is ________.
rises; increases | ||
falls; decreases | ||
falls; does not change | ||
rises; does not change |
1 points
QUESTION 3
Bagels and cream cheese are complementary goods. Suppose that the price for flour, which is used to produce bagels, increases. The equilibrium price of cream cheese ________ and the equilibrium quantity of cream cheese ________.
does not change; does not change | ||
rises; increases | ||
falls; decreases | ||
rises; decreases |
1 points
QUESTION 4
If consumers buy a large number of plug-in electric cars, the equilibrium price of electricity will ________ and the equilibrium quantity of electricity will ________.
rise; increase | ||
rise; decrease | ||
fall; increase | ||
fall; decrease |
1 points
QUESTION 5
Which of the following shifts the supply curve for oranges?
an increase in income for all orange consumers if oranges are a normal good | ||
disastrous weather that destroys about half of this year's orange crop | ||
an increase in the price of bananas, a substitute in consumption for oranges | ||
a newly discovered increase in the nutritional value of oranges |
1 points
QUESTION 6
Which of the following shifts the supply curve of rutabagas rightward? (A rutabaga is a potato-like vegetable.)
normal goods in production. | ||
an exceptionally cold summer that killed much of the rutabaga crop. | ||
a fall in the price of fertilizer used to grow rutabagas. | ||
an increase in the price of a rutabaga |
1 points
QUESTION 7
Suppose over the next several years the productivity of firms producing electric cars improves dramatically. The advance in productivity leads to
an increase in the supply electric cars so that the supply curve shifts rightward. | ||
an increase in the supply of electric cars so that the supply curve shifts leftward. | ||
a decrease in the supply of electric cars so that the supply curve shifts rightward. | ||
a decrease in the supply of electric cars so that the supply curve shifts leftward. |
1 points
QUESTION 8
Hot dogs and hot dog buns are complements. If the price of a hot dog falls, then
the demand for hot dogs will increase. | ||
the demand for hot dog buns will decrease. | ||
the quantity demanded of hotdogs will decrease. | ||
the demand for hot dog buns will increase. |
1 points
QUESTION 9
Demand curves slope ________ because as the price increases and other things remain the same, the quantity demanded ________.
upward; increases | ||
downward; decreases | ||
upward; decreases | ||
downward; increases |
1 points
QUESTION 10
Water bottlers announce that next month the price of bottled water will rise by 25 percent. Which of the following occurs immediately?
The quantity of bottled water demanded increases. | ||
The demand for bottled water increases. | ||
The quantity of bottled water demanded decreases. | ||
The demand for bottled water decreases. |
1 points
QUESTION 11
If the price of carrots is below the equilibrium price, the
quantity supplied of carrots exceeds the quantity demanded and a shortage exists. | ||
quantity demanded of carrots exceeds the quantity supplied and a shortage exists. | ||
quantity supplied of carrots exceeds the quantity demanded and a surplus exists. | ||
quantity demanded of carrots exceeds the quantity supplied and a surplus exists. |
1 points
QUESTION 12
Which of the following is true regarding demand?
i. Demand is the relationship between quantity demanded and the price of a good when all other influences on buying plans remain the same.
ii. Demand refers to one quantity at one time.
iii. "Demand" and " quantity demanded" are the same thing.
both i and ii | ||
i only. | ||
ii only. | ||
iii only. |
1 points
QUESTION 13
Suppose the current price of a pound of steak is $6 per pound and the equilibrium price is $9 per pound. What takes place?
There is a shortage, so the price rises and quantity demanded decreases. | ||
There is a shortage, so the price rises and quantity demanded increases. | ||
There is a shortage, so the price falls and quantity demanded increases. | ||
There is a surplus, so the price falls and quantity demanded increases. |
1 points
QUESTION 14
The number of corn producers increases, so the supply of corn ________ and the supply curve of corn ________.
decreases; shifts leftward | ||
decrease; shifts rightward | ||
increases; shifts rightward | ||
increases; shifts leftward |
1 points
QUESTION 15
Market equilibrium
i. can never occur because there are always people who want a good but cannot afford it.
ii. occurs at the intersection of the supply and demand curves.
iii. is the point where the price equals the quantity.
iii only | ||
ii and iii | ||
ii only | ||
i only |
1 points
QUESTION 16
Milk can be used to produce cheese or butter. If the price of a pound of butter rises, what happens to the supply of cheese?
The supply of cheese stays the same and there is a decrease in the quantity supplied of cheese. | ||
The supply of cheese decreases. | ||
The supply of cheese stays the same and there is no change in the quantity supplied of cheese. | ||
The supply of cheese increases. |
1 points
QUESTION 17
Consumers regard Dell computers and Apple computers as substitutes. If the price of a Dell computer decreases, the
demand for Dell computers decreases. | ||
demand for Apple computers increases. | ||
demand for Apple computers decreases. | ||
demand for Dell computers increases. |
1 points
QUESTION 18
Suppose the current price of a pound of steak is $12 per pound and the equilibrium price is $9 per pound. In this case, there is a
surplus, so the price rises and quantity demanded increases. | ||
shortage, so the price rises and quantity demanded decreases. | ||
surplus, so the price falls and quantity demanded increases. | ||
shortage, so the price falls and quantity demanded increases. |
1 points
QUESTION 19
Plywood is used in the construction of houses. If the price of plywood rises, what happens to the supply of houses?
The supply increases so that the supply curve shifts rightward. | ||
The quantity supplied increases but there is no shift in the supply curve. | ||
The supply decreases so that the supply curve shifts leftward. | ||
The quantity supplied decreases but there is no shift in the supply curve. |
1 points
QUESTION 20
In stores, it is common to find seasonal products marked down when the season ends. What explains this behavior?
The store is trying to increase its customers' demand for the product. | ||
The law of demand is being used to increase the quantity demanded. | ||
The store manager must be trying to drive away customers by selling low quality products. | ||
The store is trying to increase its consumer's incomes by increasing their purchasing power. |
1 points
QUESTION 21
Suppose that the price of flour used to produce bagels increases. Hence the equilibrium price of a bagel ________ and the equilibrium quantity ________.
rises; increases | ||
rises; decreases | ||
falls; increases | ||
falls; decreases |
1 points
QUESTION 22
If both the supply and demand curves shift simultaneously, we can always predict what will happen to
either the price or the quantity, but not both. | ||
only the quantity. | ||
only the price. | ||
both the price and the quantity. |
1 points
QUESTION 23
If income increases and the demand for bus rides decreases,
bus rides are a substitute good. | ||
consumers are behaving irrationally. | ||
bus rides are an inferior good. | ||
bus rides are a normal good. |
1 points
QUESTION 24
A surplus of cardboard boxes means that
at the current price of a cardboard box, the quantity demanded equals the quantity supplied and the price will fall to restore the equilibrium.. | ||
the current price of a cardboard box is less than the equilibrium price. | ||
at the current price of a cardboard box, the quantity demanded exceeds the quantity supplied. | ||
at the current price of a cardboard box, the quantity demanded is less than the quantity supplied. |
1 points
QUESTION 25
If a freeze destroys oranges before they are harvested, the equilibrium price of an orange ________ and the equilibrium quantity ________.
rises; increases | ||
rises; decreases | ||
falls; increases | ||
falls; decreases |
1 points
1. Suppose that there is a tax of $1 per unit, and the elasticity of supply is 3 and the elasticity of demand is 2 (in absolute value). How much of the $1 tax is paid by sellers?
$0.60 | ||
$0.40 | ||
$0.75 | ||
$0.67 |
2. In Market X, the external benefit of consumption is $5. In Market Y, the external cost of consumption is $10. Efficiency in both markets could be achieved by:
a tax of $5 in Market X and a subsidy of $10 in Market Y. | ||
subsidizing both markets. | ||
taxing Market Y and subsidizing Market X. | ||
taxing both markets. |
3.Economic theory suggests that a natural monopoly should be:
eliminated whenever it arises. | ||
regulated to take advantage of economies of scale. | ||
left alone to operate with excess capacity. | ||
taken over by the government. |
4.When the size of the production is the most efficient:
total cost is at the minimum. | ||
average cost is at the minimum. | ||
marginal cost is at the minimum. | ||
fixed cost is at the minimum. |
5.A firm should exit the industry if which of the following conditions apply?
TR > TC | ||
P < AC | ||
Lifetime expected profit is positive. | ||
Prices are low now but expected to rise. |
6.Figure: Costs
Reference: Ref 11-6
(Figure: Costs) Use the figure. At a price of $20, the firm earns profit of:
$75. | ||
$300. | ||
$225. | ||
$0, because P = MC at P = $20. |
7.When external benefits are present, the market price is ________, however when external costs are present, the market price is ________.
too low; too high | ||
equal to the efficient price; too low | ||
too high; too low | ||
equal to the efficient price; too high |
8.Which of the following statements is TRUE?
I. The EPA's tradeable allowances program for sulfur dioxide establishes property rights to pollute and helps reduce transaction costs by distributing allowances, maintaining databases, and monitoring emissions.
II. One criticism of tradeable allowances is that they prohibit non-businesses and environmental groups from purchasing the allowances.
III. The tradeable allowances for sulfur dioxide have performed poorly because electricity output has increased, causing a rise in sulfur dioxide levels.
I only | ||
II and III only | ||
I, II, and III | ||
III only |
9.Price floors make it illegal to compete for more customers by lowering prices, so firms compete by offering customers:
various options. | ||
more quantity. | ||
more discount. | ||
higher quality. |
10.Figure: Government Price Controls
Reference: Ref 8-3
(Figure: Government Price Controls) Refer to the figure. If the government sets the price ceiling at $31, there will be:
a shortage of 15 units. | ||
a surplus of 15 units. | ||
a supply of 20 units. | ||
no effect on the market. |
11.In which of these instances does price function as a signal in the market?
Suppliers invest more in exploration when the price of oil increases. | ||
Consumers complain of price gouging as the price of oil skyrockets. | ||
Government imposes price controls on the skyrocketing price of oil. | ||
All of the answers are correct. |
12.Ethanol and sugar are both made from sugar cane, and ethanol can be used as substitute fuel for oil. Increasing oil prices cause the demand for ethanol to increase. This will cause the ______ sugar to ______ and its price to ______.
demand for; decrease; decrease | ||
supply of; increase; increase | ||
supply of; decrease; increase | ||
demand for; increase; increase |
13.Why do cotton growers spend billions of dollars to dam rivers and transport water hundreds of miles to grow cotton in California deserts?
Cotton growers in California don't pay payroll taxes. | ||
The water used to grow California cotton is highly subsidized by the government. | ||
Cotton growers in California are mostly operated as nonprofit enterprises. | ||
The water used to grow California cotton is high in mineral contents, making for a bigger cotton yield. |
14.Suppose that the equilibrium price in the market is $10. If the current market price is $7.50:
the equilibrium price will fall to $7.50. | ||
competition among buyers will increase the current price. | ||
the current price will fall below $7.50 as sellers compete for market share. | ||
There is not enough information provided to answer the question. |
15.Which of the following would increase the demand for beef?
lower pork prices | ||
higher consumer income | ||
higher prices of feed grains used to feed beef cattle | ||
an increase in the price of beef |
16.A change in quantity supplied is reflected by a movement along the same supply curve while a change in supply refers to a shift in the entire supply curve.
True
False
17.Table: Production in the United States and Germany
Labor units required to produce: |
One Clock | One Sofa |
United States | 2 | 5 | |
Germany | 3 | 9 |
Reference: Ref 2-8
(Table: Production in the United States and Germany) According to the table, the opportunity cost of producing one sofa in the United States is _________, and the opportunity cost of producing one sofa in Germany is _______.
two clocks; three clocks | ||
10 clocks; 27 clocks | ||
0.4 clocks; 0.33 clocks | ||
2.5 clocks; three clocks |
18.Mark values his drum set at $800 and Ella values her guitar at $1,000. Suppose that Mark trades his drum set for Ella's guitar.
This trade makes Ella worse off by $200. | ||
This trade makes Mark better off by $200. | ||
Mark must value Ella's guitar for at least $1,000, and Ella must value Mark's drum set for at least $800. | ||
This trade creates value by moving the guitar and drum set to people who value them more. |