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Price elasticity of supply measures how much the quantity supplied responds to changes in the price.
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A tax on a market with elastic demand and elastic supply will shrink the market more than a tax on a market with inelastic demand and inelastic supply will shrink the market
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ECON FINAL
| Question | Answer |
|---|---|
| Price elasticity of supply measures how much the quantity supplied responds to changes in the price. | True |
| A tax on a market with elastic demand and elastic supply will shrink the market more than a tax on a market with inelastic demand and inelastic supply will shrink the market | True |
| The demand for beer is more elastic than the demand for milk, so a tax on beer would have a smaller deadweight loss than an equivalent tax on milk, all else equal | False |
| Gary's wealth is $1 million. Economists would say that Gary has $1 million worth of money. | False |
| Economists use the term inflation to describe a situation in which the economy’s overall price level is rising. | True |
| When the price of an asset rises above what appears to be its fundamental value, the market is said to be experiencing a speculative bubble | True |
| Credit cards are a medium of exchange | False |
| When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic. | True |
| Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie. | True |
| The more elastic the supply, the larger the deadweight loss from a tax, all else equal. | True |
| When demand increases so that market price increases, producer surplus increases because (1) producer surplus received by existing sellers increases, and (2) new sellers enter the market. | True |
| In years of economic contraction, firms throughout the economy increase their production of goods and services, employment rises, and jobs are easy to find. | False |
| Studies confirm that controlling for other variables such as the percentage of GDP devoted to investment, poor countries tend to grow at a faster rate than rich countries. | True |
| Trade with any nation can be mutually beneficial. | True |
| If a country’s domestic price of a good is lower than the world price, then that country has a comparative advantage in producing that good. | True |
| The tax burden falls more heavily on the side of the market that is more inelastic. | True |
| Economists devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories. | True |
| Suppose there is an increase in supply that reduces market price. Consumer surplus increases because (1) consumer surplus received by existing buyers increases and (2) new buyers enter the market. | True |
| Other things the same, another unit of capital will increase output by more in a poor country than in a rich country. | True |
| Historical episodes allow economists to illustrate and evaluate current economic theories. | True |
| The CPI does not reflect the increase in the value of the dollar that arises from the introduction of new goods. | True |
| If the equilibrium wage is $4 per hour and the minimum wage is $5.15 per hour, then a shortage of labor will exist. | False |
| Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double-coincidence of wants. | True |
| If someone in the United States buys a surfboard produced in Australia, then that purchase is included in both the consumption component of U.S. GDP and the net exports component of U.S. GDP. | True |
| The larger the deadweight loss from taxation, the larger the cost of government programs. | True |
| Producer surplus is the amount a seller is paid minus the cost of production. | True |
| Because taxes distort incentives, they cause markets to allocate resources inefficiently. | True |
| If the producers of canned green beans expect the price of canned green beans to increase in the future due to an increase in demand, they may put some of their current production into storage and supply less in the market today. | True |
| Jason plans to buy shrimp in Florida and sell them in Manhattan, Kansas where the price is higher. Jason plans to engage in arbitrage | True |
| If prices in Mexico rise at a higher rate than prices in the U.S., then according to purchasing-power parity the U.S. nominal exchange rate with Mexico should rise. | True |
| The market for insurance is one example of reducing risk by using diversification. | True |
| When a seller expects the price of its product to decrease in the future, the seller's supply curve shifts left now. | False |
| A decrease in the price of sugar will shift the supply curve for cookies to the right. | True |
| Substitution bias occurs because the CPI ignores the possibility of consumer substitution toward goods that have become relatively less expensive. | True |
| Purchasing-power parity says that the nominal exchange rate must equal the real exchange rate. | False |
| In the circular-flow diagram, one loop represents the flow of goods and services, and the other loop represents the flow of factors of production. | False |
| Generally, if people begin to expect a company to have higher future profits, the price of the company’s stock will begin to decrease. | False |
| Currently, bank runs are a major problem for the U.S. banking system and the Fed. | False |
| . A company that can build a project that will cost $50,000, but returns $52,000 in one year would make a good decision by turning this project down if the interest rate were 3 percent. | False |
| Data from the Bureau of Labor Statistics show that the largest category of consumer spending is housing. | True |
| New home construction is included in the consumption component of GDP. | False |
| A country that made its courts less corrupt and its government more stable would likely see its standard of living rise. | True |
| The market for insurance is an example of diversification. | True |
| Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's productivity. | True |
| When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse off. | True |
| The present value of any future sum of money is the amount that would be needed today, at current interest rates, to produce that future sum. | True |
| The Federal Reserve was created in 1913 after a series of bank failures in 1907. | True |
| Demand deposits are balances in bank accounts that depositors can access by writing a check or using a debit card. | True |
| A tax on sellers shifts the supply curve but not the demand curve. | True |
| The financial system coordinates investment and saving, which are important determinants of long-run real GDP. | True |
| Trade can make everyone better off except in the case where one person is better at doing everything. | False |
| According to the principle of comparative advantage, all countries can benefit from trading with one another because trade allows each country to specialize in doing what it does best. | True |
| If you are faced with the choice of receiving $500 today or $800 6 years from today, you will be indifferent between the two possibilities if the interest rate is 8.148 percent. | True |
| To state that national saving is equal to investment, for a closed economy, is to state an accounting identity. | True |
| Periods during which real GDP rises are called recessions. | False |
| Tariffs cause deadweight loss because they move the price of an imported product closer to the equilibrium without trade, thus reducing the gains from trade. | True |
| If the consumer price index was 93 in Year 1, 97 in Year 2, and 100 in Year 3, then the base year must be | Year 3. |
| Turkey is an importer of wheat. The world price of a bushel of wheat is $7. Turkey imposes a $3-per-bushel tariff on wheat. Turkey is a price-taker in the wheat market. As a result of the tariff, | Turkish consumers of wheat become worse off and Turkish producers of wheat become better off. |
| Which of the following domestically produced items is not included in GDP? | All of the above are included in GDP. |
| Refer to Figure 5-4. If the price increases in the region of the demand curve between points A and B, we can expect total revenue to | decrease |
| Refer to Table 4-12. If both members and non-members are allowed to purchase tickets to this year's celebrity golf tournament, then what will be the equilibrium price? | $25 |
| Refer to Figure 7-23. The equilibrium price is | P2 |
| Which of the following changes would increase the present value of a future payment? | A decrease in the interest rate |
| Total surplus is | the total value of the good to buyers minus the cost to sellers of providing the good. |
| When the nation of Duxembourg allows trade and becomes an importer of software, | residents of Duxembourg who produce software become worse off; residents of Duxembourg who buy software become better off; and the economic well-being of Duxembourg rises. |
| Refer to Table 4-11. If the price were $8, a | surplus of 25 units would exist, and price would tend to fall. |
| The purchase of rice produced this period is included in GDP if the rice is | B and C are correct. |
| Refer to Figure 2-12. Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B? | a general technological advance |
| Refer to Figure 6-24. In the after-tax equilibrium, government collects | $1,680 in tax revenue; of this amount, $1,260 represents a burden on buyers and $420 represents a burden on sellers. |
| The percentage change in the price level from one period to another is called | the inflation rate. |
| Food and clothing tend to have | small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods. |
| Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is | $24, and the equilibrium quantity is 25 |
| In 2010 the U.S. government was running a large deficit. Some were concerned that pressures might be put on the Federal Reserve to purchase government bonds to help the government finance this deficit. If the Fed were to buy governmen | rise, so the value of money would fall. |
| Refer to Table 6-5. Which of the following price floors would be binding in this market? | $9 |
| Refer to Figure 26-3. Which of the following movements shows the effects of households’ decision to save more? | a movement from Point C to Point F |
| Assuming the Fisher Effect holds, and given U.S. tax laws, an increase in inflation | does not change the real interest rate but reduces the after-tax real rate of interest. |
| Mixster Concrete Company is considering buying a new cement truck. The owners and their accountants decide that this is the profitable thing to do. Before they can buy the truck, the interest rate and price of trucks change. In which case do these chang | Interest rates rise and truck prices rise. |
| Which of the following is a true statement? | International data leave few doubts that a nation’s GDP per person is associated with its citizens’ standard of living. |
| If the Chinese nominal exchange rate (foreign currency per Chinese Yuan) does not change, but prices rise slower in China than in all other countries, then the Chinese real exchange rate | falls. |
| When a country allows trade and becomes an importer of a good, | consumer surplus increases and producer surplus decreases. |
| Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The price that sellers receive is | P8 |
| Which of the following actions best illustrates moral hazard? | Roberto buys home owners insurance and then is less careful to make sure he’s put out his cigarettes. |
| If the government allowed a free market for transplant organs such as kidneys to exist, the | shortage of organs would be eliminated, and there would be no surplus of organs. |
| The U.S. Congress first instituted a minimum wage in | 1938 |
| Money is | the most liquid asset but an imperfect store of value. |
| If the government were to intervene and set a wage for unskilled labor above the market wage, then we would expect, relative to the market outcome, | a decrease in the number of unskilled jobs available. |
| Suppose there are six bait and tackle shops that sell worms in a lakeside resort town in Minnesota. If we add the respective quantities that each shop would produce and sell at each of the six bait and tackle shops when the price of worms is $2 per buc | market supply curve. |
| Cash, rare paintings, and silver are all | stores of value. |
| A policy that increases saving will | improve economic growth and health outcomes. |
| Benefits from trade would not include | less competition. |
| If the government removes a binding price floor from a market, then the price received by sellers will | decrease, and the quantity sold in the market will increase. |
| Refer to Figure 7-12. If the equilibrium price is $350, what is the producer surplus? | $30,000 |
| If your firm's production function has constant returns to scale, then if you double all your inputs, your firm's output will | double but productivity will not change. |
| Corn chips and potato chips are substitutes. Good weather that sharply increases the corn harvest would | increase consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips. |
| Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is | 1 |
| If Faith attends college, it will take her four years, during which time she will earn no income. She will pay $50,000 for tuition, $12,000 for room and board, and $5,000 for books. If she spends the four years working rather than attending college, she w | $18,000 instead of attending college. |
| The primary economic function of the financial system is to | match one person’s saving with another person’s investment. |
| If a U.S. citizen buys a television made in Korea by a Korean firm, then | U.S. net exports decrease and U.S. GDP is unaffected. |
| If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is | −2 percent. |
| Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the | supply of the product is more elastic than the demand for the product. |
| Suppose the world price of a television is $300. Before Paraguay allowed trade in televisions, the price of a television there was $350. Once Paraguay began allowing trade in televisions with other countries, Paraguay began | importing televisions and the price of a television in Paraguay decreased to $300. |
| The goal of an economist who formulates new theories is to | contribute to an understanding of how the world works. |
| Industrial machinery is an example of | a factor of production that in the past was an output from the production process. |
| When a country allows international trade and becomes an exporter of a good, | All of the above are correct. |
| Suppose you are deciding whether to buy a particular bond. If you buy the bond and hold it for 4 years, then at that time you will receive a payment of $10,000. If the interest rate is 6 percent, you will buy the bond if its price today is no greater than | $7,920.94 |
| During some year a country had exports of $85 billion, imports of $60 billion, and domestic investment of $130 billion. What was its saving during the year? | $155 billion |
| The tax burden will fall most heavily on buyers of the good when the demand curve | is relatively steep, and the supply curve is relatively flat. |
| Which of the following events is consistent with an increase in the deadweight loss of the gasoline tax from $30 million to $120 million? | The tax on gasoline increases from $0.30 per gallon to $0.60 per gallon. |
| Total surplus in a market is equal to | value to buyers - costs of sellers. |
| Government intervention is necessary to correct all externalities. | False |
| Refer to Table 24-1. If Year 1 is the base year, then the CPI for Year 2 was | b. 96.20. |
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