ECON 2000 Chapter : Economics 2000 LSU

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azuremammoth471

15 Mar 2019

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Market: a group of buyers and sellers of a good or services and the institution or arrangement by which they come together to trade. Marginal analysis: analysis that involves comparing marginal benefits and marginal costs. Utility: the satisfaction one receives from a good. Bad: anything from which individuals receive disutility or dissatisfaction. Good: anything from which individuals receive utility or satisfaction. If marginal benefits of doing something exceed the marginal cost do it. If the marginal cost of doing something exceed the marginal benefits don"t do it. Opportunity cost: the most highly valued opportunity or alternative forfeited when a choice is made. Incentives matter: incentives are the costs and benefits of making specific decisions, changing incentives alters people"s behavior, incentives operate on all levels- personal familial, industry and societal level. People respond to incentives: marginal changes in costs or benefits motivate people to respond.

Related Questions

1. The marginal product of labor is:

A. equal to the demand for labor.

B. the payment made to workers for their contribution to the output they produce.

C. the change in a firm's revenue as a result of hiring one more worker.

D. the additional output a firm produces as a result of hiring one more worker.

2. What does the phrase "internalizing an external cost" mean?

A. limiting the extent to which domestic firms can outsource production

B. prohibiting economic activities that create externalities

C. finding a way to address cross-border pollution

D. forcing producers to factor into their production costs the cost of the externalities created in the production of their output

3. The highest-valued alternative that must be given up to engage in an activity is the definition of

A. implicit cost

B. opportunity cost.

C. utility.

D. economic sacrifice.

4. What is market failure?

A. It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal private cost.

B. It refers to a situation where an entire sector of the economy (for example, the airline industry) collapses because of some unforeseen event.

C. It refers to a breakdown in a market economy because of widespread corruption in government.

D. It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost.

5. Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the only input. If the last worker hired increases output by three units per hour, then to maximize profits the firm should

A. lay off some of its workers.

B. does not change the number of workers it currently hires.

C. hire additional workers.

D. There is not enough information to answer the question.

6. When the price of summer tank tops falls and you buy more of them because they are relatively less expensive, this is called

A. the deadweight loss effect.

B. the income effect.

C. the substitution effect.

D. the elasticity effect.

7. An externality is

A. a benefit realized by the purchaser of a good or service.

B. a benefit or cost experienced by someone who is not a producer or consumer of a good or service.

C. a cost paid for by the producer of a good or service.

D. anything that is external or not relevant to the production of a good or service.

8. Firms pay famous individuals to endorse their products because

A. apparently demand is affected not just by the number of people who use a product but also by the type of person that uses the product. '

B. famous people only consume high-quality products.

C. famous people obviously know what are the best goods and services.

D. the firms are irrational and are wasting advertising expenditures.

9. If a consumer receives 20 units of utility from consuming two candy bars, and 25 units of utility from consuming three candy bars, the marginal utility of the second candy bar is

A. 25 utility units.

B. 20 utility units.

C. 5 utility units.

D. unknown as more information is needed to determine the answer.

10. When there is a negative externality, the private cost of production ________ the social cost of production.

A. is less than

B. is greater than

C. eliminates

D. is equal to

pinkmink286

Suppose that, instead of taking this test, you could either have worked and earned income or partied and had a pleasurable time. Your opportunity cost of taking the test is the

	a.	forgone working or partying, depending on which was your next best choice.
	b.	forgone work.
	c.	forgone working and partying.
	d.	test because you are taking it.

1 points

QUESTION 2

A trend is

	a.	a measure of closeness on a scatter diagram.
	b.	a general tendency for a variable to rise or fall.
	c.	the maximum value of a variable.
	d.	the difference between the maximum value of a variable and the minimum value of the variable.

1 points

QUESTION 3

A time-series graph measures

	a.	time on the y-axis and the variable or variables in which we are interested on the x-axis.
	b.	time on the x-axis and the variable or variables in which we are interested on the y-axis.
	c.	the value of one variable against the value of another variable.
	d.	the value of an economic variable for different groups in a population at a point in time.

1 points

QUESTION 4

Canada has nationalized health care, so that everyone, regardless of their ability to pay, has some access to health care. Based on this observation, Canada has decided that "everyone, regardless of their ability to pay" is the answer to what microeconomic question?

	a.	Why will we offer health care?
	b.	How will health care be produced?
	c.	For whom will health care be produced?
	d.	What type of health care will be produced and in what quantity?

1 points

QUESTION 5

As a shoe factory adds more workers, shoe production grows, reaches a maximum, and then shrinks. In a diagram that has the number of workers on the horizontal axis and the number of shoes on the vertical axis, the relationship between the number of workers and the number of shoes starts as ________ and then, after the maximum point, is ________.

	a.	positive; negative
	b.	negative; positive
	c.	linear; negative
	d.	positive; linear

1 points

QUESTION 6

Microeconomics includes the study of the

	a.	choices made by individuals and businesses.
	b.	recessions and inflation in the global economy.
	c.	aggregate effects on the national economy.
	d.	reasons why the government changes interest rates.

1 points

QUESTION 7

When Fresh Express Salads decides to mechanically pick all of its lettuce, it directly answers the ________ question.

	a.	when
	b.	for whom
	c.	how
	d.	what

1 points

QUESTION 8

Proponents of cuts in income tax rates argue that when income tax rates are cut, workers have an incentive to increase their work hours. This argument is based on the assumption that

	a.	the opportunity cost of working is negative.
	b.	the marginal cost of each additional work hour is not important to most workers.
	c.	workers are irrational.
	d.	workers make decisions based on the marginal benefit of each hour worked compared to the marginal cost of work.

1 points

QUESTION 9

A choice made by comparing all relevant alternatives systematically and incrementally is

	a.	an opportunity cost.
	b.	a benefit.
	c.	a sunk cost.
	d.	a choice on the margin.

1 points

QUESTION 10

A normative statement

i. can be tested as to whether it is true or false.

ii. is considered negative.

iii. depends on a person's values.

	a.	i, ii, and iii
	b.	iii only
	c.	i and iii
	d.	ii and iii

1 points

QUESTION 11

Normative statements

i. describe how the world is.

ii. describe how the world ought to be.

iii. depend on people's values and cannot be tested.

	a.	iii only.
	b.	i only.
	c.	ii and iii.
	d.	ii only.

1 points

QUESTION 12

In order to determine whether to major in economics, a rational individual compares the ________ of the decision.

	a.	positive benefits and normative costs
	b.	normative benefits and positive costs
	c.	marginal benefit and marginal cost
	d.	opportunity cost and the sunk cost

1 points

QUESTION 13

If x increases whenever y decreases, then x and y are

	a.	positively related.
	b.	negatively related.
	c.	not related.
	d.	related but whether positively or negatively related depends on whether the x variable or the y variable is plotted on the vertical axis.

1 points

QUESTION 14

Rational choice

	a.	is what you must give up get what you want.
	b.	is made by comparing different incentives.
	c.	making the choice.
	d.	provides the answer to only the "how" question.

1 points

QUESTION 15

Scarcity results from the fact that

	a.	choices made in self-interest rare not always in the social interest.
	b.	not all goals are desirable.
	c.	people's wants exceed the resources available to satisfy them
	d.	we cannot answer the major economic questions.

1 points

QUESTION 16

When Delta decides to quit flying to Lithuania, it directly answers the ________ question.

	a.	what
	b.	why
	c.	for whom
	d.	how

1 points

QUESTION 17

A normative statement

	a.	says what is currently believed about the way the world operates.
	b.	depends on someone's values.
	c.	cannot use the word "should."
	d.	must be tested to determine if it is correct.

1 points

QUESTION 18

Which of the following statements best describes the study of economics? Economics studies how

	a.	to organize production so that scarcity does not occur.
	b.	to create incentives so that scarcity does not exist.
	c.	firms make profits.
	d.	we make choices in the face of scarcity.

1 points

QUESTION 19

Which of the following best defines economics?

	a.	Economics teaches how to limit our wants.
	b.	Economics is concerned with prices and quantities of goods and services, both at the individual level and at the industry level.
	c.	Economics helps you earn as much money as possible.
	d.	Economics studies how to choose the best alternative when coping with scarcity.

1 points

QUESTION 20

In economics, cost is ________, and benefit is ________.

	a.	the amount of money that you pay for something; the amount of money that someone else is willing to pay you
	b.	what you are willing to pay on the margin; what the government pays you when you are unemployed or retired
	c.	what you must give up to get something; what you are willing to give up to get it
	d.	the amount of money that you pay on the margin; the amount of money that you receive on the margin

1 points

QUESTION 21

If Jessie studies economics for two hours instead of going to the movies with her friends, then

	a.	the opportunity cost of studying is the missed movie.
	b.	Jessie is ignoring a sunk cost
	c.	Jessie is not responding to any incentives.
	d.	Jesse definitely is making a rational choice.

1 points

QUESTION 22

Going skiing will cost Adam $80 a day. He also loses $40 per day in wages because he has to take time off from work. Adam still decides to go skiing.

	a.	The $80 price of skiing is a sunk cost and so did not affect Adam's decision.
	b.	He loses a total of $120 per day, so his decision is irrational.
	c.	His decision is rational if Adam's marginal benefit of spending a day skiing is greater than his marginal cost.
	d.	Adam's lost $40 per day in wages is a sunk cost and so did not affect his decision.

1 points

QUESTION 23

If a curve falls and then rises, it

	a.	has a maximum.
	b.	has a linear relationship.
	c.	has a minimum.
	d.	has a constant slope relationship.

1 points

QUESTION 24

In 2003, Michael Jordan decided to retire from professional basketball. Which of the following was an opportunity cost of his decision?

	a.	the avoidance of pain and injury from playing one more year
	b.	the time he could spend with his family while retired
	c.	the lost salary from playing one more year
	d.	the value of new employment opportunities that would await him

1 points

QUESTION 25

Which of the following statements is a normative statement?

	a.	Military spending as a percent of government spending decreased by 5 percent in the 1990s.
	b.	Every American household should have health care insurance coverage.
	c.	Welfare reform has decreased the amount the government spends on welfare.
	d.	The price of computers fell last year.

greencat417

1.
John just bought shares of stock in IBM for $10,000 and paid a $90commission to his broker. How did this affect GDP?
A) It had no impact on GDP.
B) GDP increased by $90.
C) GDP increased by $10,000.
D) GDP increased by $9,990.
E) GDP increased by $10,090.
2.
Opportunity cost is the ____ alternative forfeited when a choice ismade.
A) least-valued
B) most highly-valued
C) most convenient
D) most recently considered
3.
If there is an increase in the amount of good B foregone as everyadditional unit of good A is produced, the PPF between A and Bwould
A) be a straight line.
B) be a bowed-outward curve.
C) be a bowed-inward curve.
D) not exist.
4.
Persons who are retired or engaged in own-home housework areconsidered to be in which of the following categories?
A) in the civilian labor force
B) not in the labor force
C) employed
D) unemployed
5.
A recessionary gap exists if (actual) Real GDP is ____ Natural RealGDP.
A) less than
B) greater than
C) equal to
D) b and c
E) none of the above
6.
Decision making "at the margin" means making a choice based on ____of a decision.
A) the total benefits
B) the total costs
C) comparing the total benefits and costs
D) comparing the additional benefits and costs
7.
When Claudia trades $100 for good X, economists assume that sheis
A) trading something of less value to her for something of morevalue to her.
B) trading something of more value to her for something of lessvalue to her.
C) trading something that gives her less utility for something thatgives her more utility.
D) a and c
E) none of the above
8.
An increase in investment at a given price level
A) shifts the AD curve to the right.
B) shifts the AD curve to the left.
C) causes an upward movement along the existing AD curve.
D) causes a downward movement along the existing AD curve.
E) none of the above
9.
If the demand for a good falls by less than the supply of the goodrises, then equilibrium price will ____ and equilibrium quantitywill ____.
A) rise; fall
B) rise; rise
C) fall; fall
D) fall; rise
10.
The CPI was 140 in one year and 144 the following year.Approximately how much did prices rise between the two years?
A) 2.86 percent
B) 2.78 percent
C) 0.03 percent
D) 1.03 percent
E) none of the above
11.
The expenditure approach to measuring GDP sums
A) consumption, investment, government purchases, and netexports.
B) sales, revenues, income, and wages.
C) profits, compensation of employees, consumption, andinvestment.
D) net exports, consumption, wages, and salaries.
12.
Which of the following would not be included in the calculation ofthis year's GDP?
A) a headlight bulb purchased at Joe's Auto Supply by Susan toreplace a burnt out bulb in her car
B) a headlight bulb purchased by Ford Motor Co. from asupplier
C) a headlight bulb produced but not sold this year and thus endingup as inventory
D) none of the above, i.e., all would be included
13.
Suppose the government decides that every family should own its ownhome. To bring this about, the government decides to subsidize thehome-construction industry by giving the home-constructioncompanies $10,000 for every house that they build. As a result ofthis,
A) the supply curve of new houses would shift leftward, since itnow costs $10,000 more for builders to produce a house.
B) the demand curve for new houses would shift rightward, since nowevery family would want to buy a house.
C) the demand curve for new houses would shift leftward.
D) the supply curve of new houses would shift rightward, sincebuilders would be willing to produce and sell more houses at eachgiven price.
E) c and d
14.
Which set of changes will raise demand?
A) an increase in income (assuming demand is for a normal good), adecline in wage rates, and a rise in the per-unit tax placed on theproduction of a good
B) an increase in the number of buyers, a decline in the price of asubstitute, and an increase in the prices of relevantresources
C) an increase in the price of a substitute, a decrease in theprice of a complement, and an increase in expected (future)price
D) a decline in the number of buyers, an increase in the price of acomplement, and a decline in a per-unit tax placed on theproduction of a good
E) none of the above
15.
Both country 1 and country 2 are located on their respectiveproduction possibilities frontiers (PPFs), but country 1 producestwice the output that country 2 produces. It follows that
A) country 1's PPF lies further to the right than country 2'sPPF.
B) country 1 has a smaller population than country 2.
C) country 1 has a bigger population than country 2.
D) country 1 is efficient and country 2 is inefficient.
E) none of the above
16.
Suppose aggregate demand is too low to bring about the Natural RealGDP level. A Keynesian policy prescription would call for a(n) ____to close this recessionary gap.
A) increase in government spending
B) decrease in government spending
C) increase in taxes
D) decrease in taxes
E) a or d
17.
The structural unemployment rate is 3.1 percent, the frictionalunemployment rate is 2.1 percent, and the current unemployment rateis 4.9 percent. The economy is in
A) a recessionary gap producing less than Natural Real GDP.
B) an inflationary gap producing more than Natural Real GDP.
C) long-run equilibrium.
D) an inflationary gap producing Natural Real GDP.
E) a recessionary gap producing more than Natural Real GDP.
18.
A fall in the price level changes the purchasing power of money.This is relevant to the ____ effect.
A) international trade
B) real balance
C) aggregate demand
D) interest rate
E) aggregate supply
19.
An economic policy initiative results in the AD curve shifting tothe right. As a result,
A) the price level will rise.
B) the price level will stay constant.
C) the price level will fall.
D) Real GDP will rise in the short run.
E) a and d
20.
Which of the following is consistent with the classical position onwages and prices?
A) Wages and prices are sticky in the downward direction.
B) Wages are sticky in the downward direction, but prices areflexible.
C) Wages and prices are flexible.
D) Prices are sticky in the downward direction, but wages areflexible.
21.
If the bottom half of all U.S. income tax payers were allowed tostop paying the income tax entirely and the top 50% continued topay as they do now, tax revenues to the government would drop byabout
A) 3.6 percent.
B) 10.2 percent.
C) 13.9 percent.
D) 33.3 percent.
22.
Which of the following is most nearly consistent with Say'slaw?
A) When a person produces one good, he or she plans to demand othergoods.
B) When a person produces a good, he or she plans to sell it.
C) When a person buys a good, he or she plans to pay for it withmoney.
D) When a person goes to work, he or she plans to produce.
23.
The economy was at point A producing 100X and 200Y. It moved topoint B where it produces 200X and 300Y. It follows that
A) point A may have been a point below the economy's PPF, whilepoint B may lie on the PPF.
B) the economy's PPF could have shifted outward and point A was apoint on the economy's old PPF.
C) the economy has moved from one point on its PPF to another pointon the same PPF.
D) a or b
E) a or c
24.
The condition in an economy that makes a "rationing device" anecessity is the fact that
A) the economy is organized around free markets.
B) the economy is centrally planned by the government.
C) scarcity exists.
D) there are fewer types of goods than there are people in theeconomy.
25.
Expansionary fiscal policy actions include ____ government spendingand/or ____ taxes, while contractionary fiscal policy actionsinclude ____ government spending and/or ____ taxes.
A) increasing; increasing; decreasing; decreasing
B) decreasing; decreasing; increasing; increasing
C) increasing; decreasing; increasing; decreasing
D) decreasing; increasing; increasing; decreasing
E) increasing; decreasing; decreasing; increasing
26.
A price ceiling is a government-mandated
A) minimum price below which legal trades cannot be made.
B) maximum price above which legal trades cannot be made.
C) minimum price above which legal trades cannot be made.
D) maximum price below which legal trades cannot be made.
27.
In year 1 the CPI is 144.1, and in year 2 the CPI is 151. IfSarah's salary was $33,500 in year 1, what salary in year 2 wouldcause her to exactly "keep up with inflation"?
A) $50,585
B) $48,274
C) $40,508
D) $35,104
28.
One measure of the inflation rate is the
A) sum of the CPIs of adjacent years.
B) percentage change in the CPI of adjacent years.
C) percentage change in the Real GDP of adjacent years.
D) GDP minus the Real GDP in a year.
29.
Expansionary fiscal policy is ineffective if
A) there are idle resources in the economy.
B) the MPC is less than 0.60.
C) the government has a budget surplus.
D) there is complete crowding out.
E) a and d
30.
Suppose the economy goes from a point on its unchanging PPF to apoint down and to the left of it. This could be due to
A) a gain of resources.
B) a loss of resources.
C) technological improvement in the production of both goods.
D) a new law that interferes with economic efficiency.
31.
A decrease in the price of electricity will cause
A) a movement down the SRAS curve.
B) a movement up the SRAS curve.
C) a leftward shift in the SRAS curve.
D) a rightward shift in the SRAS curve.
E) no change regarding the SRAS curve
32.
Which of the following is an example of crowding out?
A) A decrease in the rate of growth of the stock of money decreasesGDP.
B) A deficit causes an increase in interest rates, which causes adecrease in investment spending.
C) An increase in tariffs causes a decrease in imports.
D) A decrease in government housing subsidies causes an increase inprivate spending on housing.
33.
A rightward shift in the demand curve for tennis balls could becaused by
A) a fall in the price of tennis balls.
B) a fall in the price of tennis rackets.
C) a rise in the price of tennis lessons.
D) a fall in income, assuming tennis balls are a normal good.
34.
Here is a consumption function: C = C0 + MPC(Yd). If MPC is 0.80,then we know that
A) as Yd rises by $1, Co rises by $0.80.
B) as Yd rises by $1, C rises by $0.80.
C) Yd rises by $0.80.
D) as C0 rises by $0.80, Yd rises by $1.
35.
Suppose a drop in stock prices makes people feel less wealthy. Thiswould cause ____ the economy's AD curve.
A) movement down along
B) movement up along
C) a rightward shift of
D) a leftward shift of
36.
An economy is producing its Natural Real GDP when the rate ofunemployment is equal to the ____ unemployment rate.
A) frictional
B) structural
C) sum of the frictional unemployment rate and the structural
D) seasonal
E) cyclical
37.
Who would be most likely to agree that "People do not always savemore as interest rates rise"?
A) a classical economist
B) John Maynard Keynes
C) an efficiency wage theorist
D) a and b
E) a, b, and c
38.
The U.S. income tax is currently a ____ tax.
A) progressive
B) proportional
C) regressive
D) proactive
39.
The question of U.S. budget deficits and their impact on the U.S.economy is dealt with in the study of
A) microeconomics.
B) managerial economics.
C) macroeconomics.
D) consumer economics.
40.
John Maynard Keynes believed that wages may be inflexible in thedownward direction. Consequently, an economy
A) could get stuck in long-run equilibrium.
B) could get stuck in a recessionary gap.
C) could get stuck in an inflationary gap.
D) would always produce more than Natural Real GDP.
E) b and c

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ECON 2000 Chapter : Economics 2000 LSU

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