Final

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Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good?

Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then

the demand for the good is said to be inelastic.

If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase amounted to

2%.

In which of these cases will the tax burden fall most heavily on buyers of the good?

The demand curve is relatively steep and the supply curve is relatively flat.

Which of the following will cause a decrease in producer surplus?

the imposition of a binding price ceiling in the market

Which of the following statements is not correct about a market in equilibrium?

Consumer surplus will be equal to producer surplus.

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

smaller is the price elasticity of supply.

When the production of a good results in a positive externality, the social value curve is:

above the demand curve, indicating the total value to society is greater than the private benefit.

Most taxes distort incentives and move the allocation of resources away from the social optimum. Why do corrective taxes avoid the disadvantages of most other taxes?

Because corrective taxes correct for market externalities, they take into consideration the well-being of bystanders.

If one person's use of a good diminishes another person's enjoyment of it, the good is

rival in consumption.

If Kelsey sells 300 glasses of lemonade at $0.50 each, her total revenues are

$150.

David's firm experiences diminishing marginal product for all ranges of inputs. The total cost curve associated with David's firm

gets steeper as output increases.

Economies of scale occur when a firm's

long-run average total costs are decreasing as output increases.

When a competitive firm doubles the amount of output it sells, its

total revenue doubles.

If there is an increase in market demand in a perfectly competitive market, then in the short run prices will

rise

A firm cannot price discriminate if

it operates in a competitive market.

Social Security payments are

excluded from GDP because they do not reflect the economy's production.

If nominal GDP is $8 trillion and real GDP is $10 trillion, then the GDP deflator is

80, and this indicates that the price level has decreased by 20 percent since the base year.

A barber shop produces 96 haircuts a day. Each barber in the shop works 8 hours per day and produces the same number of haircuts per hour. If the shop's productivity is 3 haircuts per hour of labor, then how many barbers does the shop employ?

4

Suppose the issuer of a bond fails to pay some of the interest or principal that was promised to the bondholders. This failure is referred to as a

default.

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

The government's tax revenue is equal to its expenditures.

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,

there is a surplus and the interest rate is above the equilibrium level.

The measure of the money stock called M1 includes

wealth held by people in their checking accounts.

A bank's liabilities include

the deposits of its customers, but not its reserves.

If Y and M are constant, and V doubles, the quantity equation implies that the price level

doubles.

Most economists believe the principle of monetary neutrality is

mostly relevant to the long run

Higher inflation makes relative prices

more variable, making it less likely that resources will be allocated to their best use.

As recessions begin, production

falls and unemployment rises.

The quantity of money has no real impact on things people really care about like whether or not they have a job. Most economists would agree that this statement is appropriate concerning

the long run, but not the short run

Aggregate demand shifts left when the government

cuts military expenditures.

The Financial Bailout bill (the Emergency Economic Stabilization Act of 2008) did which of the following:

Authorized funding for the government to buy troubled assets or purchase stock in financial firms.

One purpose of securitization of mortgages is to:

d.
Reduce risk to lenders by pooling many mortgages together.

Which of the following shifts short-run aggregate supply right?

a decrease in the price of oil

The aggregate-demand curve

shows an inverse relation between the price level and the quantity of all goods and services demanded

The variables on the vertical and horizontal axes of the aggregate demand and supply graph are

the price level and real output.

Which part of real GDP fluctuates most over the course of the business cycle?

investment expenditures

If inflation is higher than what was expected,

creditors receive a lower real interest rate than they had anticipated

According to the classical dichotomy, when the money supply doubles which of the following doubles?

the price level and nominal GDP

Credit cards

are not included in any measure of the money supply.

If a reform of the tax laws encourages greater saving, the result would be

lower interest rates and greater investment.

In a closed economy, what does (T - G) represent?

public saving

If a firm sells a total of 100 shares of stock, then

each share represents ownership of 1 percent of the firm.

The market demand curve for a monopolist is typically

downward sloping.

Changes in the output of a perfectly competitive firm, without any change in the price of the product, will change the firm's

total revenue.

Some reasons that firms may experience diseconomies of scale include that

large management structures may be bureaucratic and inefficient.

The marginal product of any input is the

increase in total output obtained from one additional unit of that input

Which of the following goods is rival in consumption and excludable?

a slice of pizza

Suppose that smoking creates a negative externality. If the government does not interfere in the cigarette market, then

the equilibrium quantity of cigarettes smoked will be greater than the socially optimal quantity of cigarettes smoked.

Consider a good to which a per-unit tax applies. The greater the price elasticities of demand and supply for the good, the

greater the deadweight loss from the tax.

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

zero.

The term tax incidence refers to

the distribution of the tax burden between buyers and sellers

As rationing mechanisms, prices

are efficient, but long lines are inefficient.

When supply is perfectly elastic, the value of the price elasticity of supply is

infinity.

An increase in price causes an increase in total revenue when

demand is inelastic.

Holding all other things constant, a higher price for ski lift tickets would

decrease the number of skis sold.

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