EC120 Lecture Notes - Lecture 8: West Bank Areas In The Oslo Ii Accord, Economic Equilibrium, Price Floor

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EC120 Lecture Notes - Lecture 7: Demand Curve, Indifference Curve

EC120 Lecture Notes - Lecture 8: West Bank Areas In The Oslo Ii Accord, Economic Equilibrium, Price Floor

EC120 Lecture Notes - Lecture 11: Average Variable Cost, Marginal Cost, Diminishing Returns

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Question review: opp cost for food= price of food/price of books (/). Increase price of books, decrease price of food. Opp cost for books= opposite: more video games, same amount of houses. Frontier will allow for the video intercept to be large but the house intercept to be the same. Not shifting in parallel fashion, slope and opportunity cost is going to change. Opportunity cost is given by the slope, you can look at the slope and interpret what it means. Slope gives you opportunity cost on of the good on the horizontal axis. To produce houses, you need to take workers out of video production. Opportunity cost of houses=productivity (not prices) in video divided by productivity in houses. Increase productivity in videos, therefore increasing productivity in houses. This means that the opportunity cost os videos is going lower: - an increase in supply will increase supply - wrong.

Related Questions

1. Which of the following cannot be determined using a production possibility table?

What combination of outputs can be produced.
How much less of one output can be produced if more of another output is produced.
What combination of outputs is best.
How much output can be produced from a given level of inputs.

2. Internal government debt is:

debt owed by citizens to their government.
debt owed by one government to another government.
government debt owed to citizens.
government debt owed to foreigners.

3. In general, budget deficits should:

never be run since they slow economic growth over the long run.
never be run since they crowd out investment in the short run.
be run on a temporary basis whenever the economy is below potential output.
be run on a permanent basis since they can always be financed over and over again.

4. If taxes and government outlays were constant and did not vary with income, then:

passive deficits would increase.
passive deficits would not exist.
structural deficits would increase.
structural deficits would not exist.

5. If the debt of the federal government increases by $10 billion in one year, then the budget:

deficit in that year must be $10 billion.
surplus in that year must be $10 billion.
deficit in that year decreased by $10 billion.
surplus in that year increased by $10 billion.

6. Which of the following would make the impending Social Security problem worse?

Raising income taxes when the baby boomers begin to retire.
Reducing the age at which one is eligible to receive payments.
Reducing Social Security retirement benefits.
Introducing means testing.

7. The price mechanism is: (Points : 5)

not affected by social and political forces.
affected by social but not political forces.
affected by political but not social forces.
affected by both political and social forces.

8. Social forces:

affect the price mechanism through cultural norms.
affect the price mechanism, but not the legal system.
affect the price mechanism through scarcity.
do not affect the price mechanism.

9. Opportunity cost is the same as marginal cost.

True
False

10. Which of the following is a characteristic of a market economy?

Private property.
Government ownership of the means of production.
Distribution according to need.
Tradition determines the what, how, and for whom decisions.

11. Mexico has a comparative advantage in producing corn:

if its opportunity cost of producing corn is higher than the opportunity cost in other countries.
if its opportunity cost of producing corn is the same as the opportunity cost in other countries.
if its opportunity cost of producing corn is lower than the opportunity cost in other countries.
regardless of the opportunity cost in other countries.

12. The opportunity cost for a student of attending college for a year is best measured by the:

benefit received by the student.
tuition paid for the year.
value of the next-best activity forgone by attending college.
total money outlays associated with attending college.

13. A passive deficit is the portion of the deficit that exists when:

the economy is at potential income.
the economy is beneath potential income.
inflation is not fully anticipated.
inflation is fully anticipated.

14. An important international lending institution is the:

IMF.
The Group of Eight.
EU.
WTO.

15. Private property rights:

are essential elements of a market economies.
do not need to be enforced in market economies.
must be established before a socialist economy can function properly.
ensure an equitable distribution of income in market economies.

16. If a country has a comparative advantage in the production of a good, then its resources are better suited to the production of that good than the resources of other countries.

True
False

17. As the interest rate rises, debt service:

decreases.
does not change, but debt increases.
increases.
does not change and neither does the debt.

18. Your opportunity cost of taking this course is:

the tuition you paid for the course.
the benefit of the activity you would have chosen if you had not taken the course.
the benefit you get from taking this course.
the cost of the activity you would have chosen if you had not taken the course.

19. One advantage of a corporation over a sole proprietorship is:

greater accountability.
avoidance of double taxation.
ease of formation.
greater ability to obtain funds.

20. Maintaining objectivity is easiest in:

positive economics.
the art of economics.
normative economics.
it is just as easy in all of the above

byzantiumimpala567

Use your knowledge about price-searching firms and two-part pricing to advise the company below. A company has a bar and is trying to decide on the cover charge (if any) and price for each drink. It has done a modest regression study in which it asked customers to classify themselves as light drinkers or heavy drinkers and to indicate the number of drinks they would typically consume during the evening. The estimate from the regression study is that a change in the price equal to $1 per drink causes light drinkers to change their consumption on average by 0.5 drinks per night. However, a change in the price of $1 causes heavy drinkers to change their consumption on average by 1.0 drinks per night. For both groups, a typical consumer will not consume anything once the price reaches $9 per drink. (They may instead go to another bar or not go to a bar at all.) Draw a demand curve for a typical light drinker and for a typical heavy drinker on the same diagram. Explain your diagram. Write equations for the curves in slope-intercept form.

If 300 people visit the bar on a typical evening, with 200 people being light drinkers and 100 people being heavy drinkers, draw an overall demand curve for all of the consumers combined. What is the slope and what is the intercept for this demand curve? Write an equation in slope-intercept form. If the marginal cost of making drinks (the alcohol, the bartender's labor, and the amortized cost of purchasing glasses and cleaning them repeatedly) is constant at $5 per drink, and if no cover charge is assessed, what is the best price to charge for drinks? How many drinks would be sold on a typical evening? What would your profits be? If you cut your price by $1 per drink and assess the maximum possible cover charge without causing a typical light drinker to refuse to enter the bar, would your profits improve? How high would the cover charge be? Calculate both the cover charge and your total profits. Would the new pricing increase profit?

Maybe the best price cut is not exactly $1. Write a profit equation. Profits equal to total revenue minus total cost. Total cost equals $5 times the number of drinks sold. Total revenue equals the price for drinks times the number of drinks sold, plus 300 people times the cover charge. The cover charge equals, for a light drinker, the triangle of consumer surplus above the price but below the demand curve for a light drinker. (The area of a triangle equals one half the base times the height.) You will take the derivative of the profit equation with respect to P or Q and set it equal to zero. For example, use the equation for the total demand curve and solve for Q in terms of P. Then in the profit equation substitute in an expression involving P in place of every Q that was in the original profit equation. Now you can take a derivative of profits with respect to P and set the derivative equal to zero. Eventually, you can solve for the exact best P, Q, and cover charge.

Review of the slope-intercept form: Y= a - bX; a = the intercept on the Y-axis and b = the absolute value of the slope (slope=(change in Y)/(change in X)) For a demand curve: P=a-b Q. The intercept on the vertical axis would indicate a price that is so high that the quantity demanded becomes zero. The slope is the ratio of a change in price divided by the change in quantity demanded; the extra credit problem gives you information to determine the slope for a light drinker and the slope for a heavy drinker.

fuchsiasnail971

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

lilacbear730

EC120 Lecture Notes - Lecture 8: West Bank Areas In The Oslo Ii Accord, Economic Equilibrium, Price Floor

EC120 Lecture Notes - Lecture 7: Demand Curve, Indifference Curve

EC120 Lecture Notes - Lecture 8: West Bank Areas In The Oslo Ii Accord, Economic Equilibrium, Price Floor

EC120 Lecture Notes - Lecture 11: Average Variable Cost, Marginal Cost, Diminishing Returns

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