final exam

The central problem of economics is the

fact that human wants exceed the availability of resources

\
Because of scarcity,

Both choices must be madeand there are not enough goods to satisfy everyone. \n

Opportunity cost may be defined as the

value of the most desired goods or services that are forgone to obtain something else

Factors of production are

the resources used to create output.

Based on the figure, if a student wants to achieve a grade-point average of 3.0, he or she should study an average of

30 hours per week

Which of the three basic economic questions deals with choosing the correct mix of \n output?

what to produce

GDP is the total value of all _________ goods and services produced within a nation's \n borders in a given time period

**final**

Economic growth

is an increase in output or real GDP

_________GDP is adjusted for inflation

Real

Nominal GDP is affected by changes in

output and prices

\
A market exists for the sale and purchase of.

\
\n D) illegal drugs, computer services, and nuclear warheads.

Market participants include

consumers, business firms, governments, and foreigners.

A movement along the supply curve is the same as a

change in the quantity supplied

\
If supply is unchanged, a decrease in the demand for soft drinks will cause equilibrium price to

\
\n B) fall and equilibrium quantity to fall.

Which panel represents the changes in the market for beef when the price of corn (cattle feed) \n rises and the Surgeon General reports that red meat contributes to coronary disease?

D

A market shortage occurs when

the market price is below equilibrium.

\
A price ceiling does all of the following except

\
\n B) create excess supply.

Which of the following would not cause the market supply of cell phones to change?

A reduction in the desire for cell phones causes the price to fall.

The law of demand states that

price and quantity demanded are inversely related

The pleasure or satisfaction obtained from goods and services is known as

utility.

The law of demand and the law of diminishing marginal utility are related since both

assume that the first units consumed have more utility than subsequent units.

When income changes, there is a _________ the _________ curve

shift of; demand

The price elasticity of demand is defined as the

percentage change in quantity demanded divided by the percentage change in price

If demand is inelastic, then

quantity demanded is not very responsive to changes in price

A good whose demand is not very responsive to a change in price is

inelastic

If the price elasticity of demand is 0.5 and a firm raises its price by 10 percent, the total \n revenue will

elastic

If the price elasticity of demand is 0.5 and a firm raises its price by 10 percent, the total \n revenue will

rise by 5 percent

The objective of advertising, from an economic perspective, is to shift the demand curve \n to the

right and decrease price elasticity of demand

Which of the following does not influence the price elasticity of demand?

the costs of production

An investment in human and nonhuman capital will result in

an increase in the marginal physical product of labor

A production function describes

he maximum amount of output attainable from a given combination of factor inputs

If the first, second, third, and fourth worker employed by the firm add 15, 21, 12, and 8 \n units of total product respectively, we can conclude that

after the second worker marginal product declines

Profit is the difference between

total revenue and total cost

When producing jeans, which of the following are not a variable cost in the short run?

rent paid for the use of a factory

Marginal cost is equal to

he change in total cost divided by the change in output

Refer to the figure. What is the marginal cost of the 12th unit of output

$72 per unit

As output increases, fixed costs

do not change

The long run refers to

a period of time long enough for all inputs to be varied

Economic cost is

\
he value of all resources, both explicit and implicit, used to produce a good or \n service.

The number and relative size of firms in an industry define the type of

market structure.

Market structure is determined by

he number and relative size of firms in a specific market

Competitive firms cannot individually affect market price because

their individual production is insignificant relative to the production of the industry

Which of the following is characteristic of a perfectly competitive market?

There are low barriers to entry

\
If the market price is $50, marginal cost equals $45, and average total cost equals $40, \n the firm should

increase output

If marginal cost equals price, then _________ is at a maximum

profit

In which of the following industries is the firm referred to as a price taker?

perfect competition

High profits in a perfectly competitive industry indicate that consumers would like

more of that industry's goods

\
In a perfectly competitive industry

marginal cost equals price.

A horizontal demand curve for a firm indicates that

the firm has no market power

Which of the following is true for a monopolist?

Profit is maximized at a production level where marginal cost equals marginal \n revenue

Refer to the figure. The profit-maximizing level of output for this monopolist is

3 units per hour

firm were forced to behave as if it were in a perfectly competitive market, the profit-maximizing \n price would be

between $6 and $7 per unit

How do monopolists set the output level and price for their products?

Output is set at the intersection of marginal revenue and marginal cost, while price is \n set based on the demand curve

A monopolist

charges a higher price than a competitive firm, ceteris paribus

Under both monopoly and perfect competition, a firm

operates where marginal revenue equals marginal cost.

Which of the following is not consistent with a monopoly industry?

Many firms produce identical or similar products.

Monopolists are price

makers, but perfectly competitive firms are price takers

An industry dominated by one firm is

a monopoly

The market structure for the airline industry is determined by

he number of carriers servicing a given route

A monopolist sets its price

on the demand curve, at the rate of output where marginal revenue equals marginal cost

Obstacles that make it difficult or impossible for would-be producers to enter a market \n are known as

barriers to entry

An industry in which only two firms compete to supply a particular product is best \n characterized by which of the following market structures?

duopoly

Which of the following is an example of monopolistic competition?

Many firms supply similar products, each with some consumers who show significant \n brand loyalty

If a firm can change market prices by altering its output, then it

faces a horizontal demand curve

The demand for labor is a derived demand because

we demand what labor produces and not labor itself

A firm should continue to hire workers until the marginal revenue product is equal to

the market wage rate

A minimum wage impacts the labor market by causing

an increase in the quantity of labor supplied and a decrease in the quantity of labor \n demanded.

Unions are able to maintain above-equilibrium wages by

excluding some workers

The opportunity cost of working is the

value of leisure time that is given up in the process

A market failure means that the economy is definitely producing

a suboptimal mix of output.

The optimal mix of output is

the most desirable combination of output attainable with existing resources, \n technology, and social values

A private good is unique because

nonpayers can be prevented from consuming it

Which of the following is most likely a private good?

cars

A public good is

the source of the free-rider dilemma

Public goods

can be consumed by more than one person at the same time

Which of the following is most likely a public good

a park

Externalities are the

generate a gap between social costs or benefits and private costs or benefits

If a good generates an external cost, the market will produce

too much of the good

The term externalities refers to

all costs and benefits of a market activity borne by a third party

Alternating periods of growth and contraction in real GDP define

the business cycle

Which of the following is a basic measure of macroeconomic performance?

growth in output

GDP is defined as

he market value of all final goods and services produced in a country in a year

A recession is technically _________ quarters or more of declining output or real GDP

2

The unemployment rate is calculated by dividing

the number of unemployed by the size of the labor force and multiplying by 100

According to the Population and Labor Force Data table, what is the unemployment rate in \n Year 10?

10\.00 percent

Joseph is unemployed. He was working at a thrift shop in Indiana but decided to go back to \n school full time to become an engineer. He would be classified as

not in the labor force

Unemployment that occurs when there are not enough jobs for the number of people in the \n labor force is referred to as

cyclical unemployment

According to macroeconomists, a goal for the economy is

zero cyclical unemployment.

Price stability refers to

the absence of significant changes in the average price level

The difference between market demand and aggregate demand is that

aggregate demand applies to all goods and market demand applies to a specific good

According to the Aggregate Supply and Demand table, at what output level does macro \n equilibrium occur?

$1,400

What fiscal policy tools are used to shift the aggregate demand curve?

government spending and taxes

Inflation occurs when

aggregate demand increases faster than output

Expenditures by households on final goods and services is referred to as

consumption

When money is used to pay for goods and services, it is functioning as a

medium of exchange

Money is functioning as a store of value when you

decide to save your cash to pay for tuition next semester

Money creation occurs when

banks make loans to borrowers

Banks are most profitable when

loans are initiated

The key decision-maker for U.S. monetary policy ise

the Board of Governors

Which of the following is not a basic monetary policy tool used by the Fed

the income tax rate