MT 445-In the United States and in most European countries, aging populations and declining birthrates
Question;Unit 1 1. Question: In the United States and in most European countries, aging populations and declining birthrates threaten public finances. As the population ages, there are fewer workers paying taxes relative to the number of retired people receiving government benefits. Which of the following government policies would NOT help reduce the pressure on public finances?Student Answer: offer financial incentives to increase the birthrate reduce taxes paid by current workers so that they an save for their future reduce retiree benefit payments raise the retirement age2. Question: Consider the following two factors:These statements suggest thatStudent Answer: it is highly likely that the average person will lose her job due to outsourcing. the likelihood that the average person will lose her job due to outsourcing is large small to losing her job due to other causes. the likelihood that the average person will lose her job due to outsourcing is very small compared to losing her job due to other causes. the US is not creating jobs fast enough to offset jobs lost due to outsourcing and other causes.3. Question: What is an economic model?Student Answer: It is a description of an economic issue that includes all possible related information. It is a description of an economic issue based on official government information. It is a detailed version of some aspect of economic life used to analyze an economic issue. It is a simplified version of some aspect of economic life used to analyze an economic issue.4. Question: The term "market" in economics refers toStudent Answer: a place where money changes hands. a legal institution where exchange can take place. a group of buyers and sellers of a product and the arrangement by which they come together to trade. an organization which sells goods and services.Points Received: Comments: 5. Question: If the marginal cost of producing a television is constant at $200, then a firm should produce this itemStudent Answer: only if the marginal benefit it receives is greater than $200 plus an acceptable profit margin. as long as the marginal benefit it receives is just equal to or greater than $200. as long as its marginal cost does not rise. until the marginal benefit it receives reaches zero.6. Question: Table 2-3Table 2-3 shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea.Refer to Table 2-3. What is South Korea's opportunity cost of producing one pound of wheat?Student Answer: 5 digital cameras 60 digital cameras 20 digital cameras 0.05 units of a digital camera7. Question: Table 2-3Table 2-3 shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea.Refer to Table 2-3. What is China's opportunity cost of producing one pound of wheat?Student Answer: 0.04 units of a digital camera 40 digital cameras 25 digital cameras 4 digital camerasPoints Received: Comments: 8. Question: The production possibilities frontier model shows thatStudent Answer: if consumers decide to buy more of a product its price will increase. a market economy is more efficient in producing goods and services than is a centrally planned economy. economic growth can only be achieved by free market economies. if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.Points Received: Comments: 9. Question: A critical function of the government in facilitating the operation of a market economy isStudent Answer: producing goods and services for low income households. setting up and enforcing private property rights. ensuring an equal distribution of income to all citizens. controlling the market prices of food items.10. Question: Comparative advantage meansStudent Answer: the ability to produce more of a product with the same amount of resources than any other producer. the ability to produce a good or service at a lower opportunity cost than any other producer. the ability to produce a good or service at a higher opportunity cost than any other producer. compared to others you are better at producing a product.Unit 21. Question: Buyers scrambled to secure stocks of Australian wool following a forecast of an 11 percent decline in wool production. What happens in the Australian wool market as a result of this announcement?Student Answer: The demand curve for Australian wool shifts to the left in anticipation of higher prices in the future. The demand curve for Australian wool shifts to the right in anticipation of higher prices in the future. The supply curve for Australian wool shifts to the right in anticipation of higher prices in the future. The supply curve for Australian wool shifts to the left in anticipation of lower quantities in the future.2. Question: If the quantity demanded for a product exceeds the quantity supplied the market price will rise untilStudent Answer: the quantity demanded equals the quantity supplied. The product will then no longer be scarce. quantity demanded equals quantity supplied. The equilibrium price will then be greater than the market price. only wealthy consumers will be able to afford the product. quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.3. Question: According to a recent study, "Stricter college alcohol policies, such as raising the price of alcohol, or banning alcohol on campus, decrease the number of students who use marijuana." On the basis of this information, how would you describe alcohol and marijuana?Student Answer: The two goods are substitutes in consumption. There is no relationship between the two goods. The two goods are complements in consumption. They are both luxury goods.Points Received: Comments: 4. Question: To compete with the iPod from Apple, Microsoft began marketing its own digital music player, called Zune. The textbook mentioned one strategy Microsoft could use to overcome the advantages Apple has from selling the most popular brand of music player. What was this strategy?Student Answer: Microsoft could advertise Zune by sending emails to the many consumers who use the company's software. Microsoft could spend some of its large advertising budget to run television and magazine ads for Zune. Microsoft is considering suing Apple for copyright infringement, Microsoft was the first company to develop the technology used to produce digital music players. Microsoft could try to sell Zune or downloaded songs at prices lower than those charged by Apple.5. Question: Although it is a popular product, Apple makes little profit from each song downloaded through iTunes. Why does Apple charge only $0.99 to download a song?Student Answer: Although Apple makes a small amount of profit per song, total profit is large because the quantity sold is large. Apple cannot raise the price above $0.99 per song because consumers can download songs at even lower prices from Apple's competitors. The low price makes it more likely that consumers will buy iPods, which are relatively expensive. Apple plans to increase the price of downloading songs after it sells a large enough number of iPods.Points Received: Comments: 6. Question: Figure 4-1Figure 4-1 shows Kendra's demand for ice-cream cones curve. Refer to Figure 4-1. If the market price is $2.50, what is the maximum number of ice cream cones that Kendra will buy?Student Answer: 1 2 4 3Points Received: Comments: 7. Question:Figure 4-5Refer to Figure 4-5. The figure above represents the market for iced tea. Assume that this is a competitive market. If 20,000 units of iced tea are soldStudent Answer: the deadweight loss is equal to economic surplus. producer surplus equals consumer surplus. the marginal benefit of each of the 20,000 units of iced tea equals $3. marginal benefit is equal to marginal cost.8. Question: Table 4-3Table 4-3 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. Refer to Table 4-3. If a minimum wage of $7.50 an hour is mandated, what is the quantity of labor supplied?Student Answer: 390,000 370,000 340,000 380,0009. Question: The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is calledStudent Answer: producer surplus. the substitution effect. the income effect. consumer surplus.10. Question: John List and Jason Shogren conducted a study that tried to explain why people continue to give presents rather than cash for birthdays and holidays. Their study found thatStudent Answer: the deadweight loss from giving cash was twice as great as the deadweight loss from giving presents. on average, families and friends paid much more for presents than the recipients were willing to pay for them. government restrictions are responsible for most of the deadweight losses associated with gift giving. as much as half the value of a gift to a recipient was its sentimental value.Unit 3 1. Question: Suppose the demand curve for hybrid cars shifts to the right. This will cause a relatively small increase in the price of hybrid cars ifStudent Answer: demand is elastic and supply is inelastic. demand is inelastic and supply is elastic. both demand and supply are inelastic. both demand and supply are elastic.Points Received: Comments: 2. Question: If at a price of $10, Yesenia sells 5 packages of her home-made Mediterranean flat-bread per day. When she raised her price to $15, she still sold 5 packages per day. Based on this information, the demand for her flat-bread isStudent Answer: perfectly price elastic. price inelastic. perfectly price inelastic. unit price elastic.Points Received: Comments: 3. Question: Using cross-sectional data from the two Housing Assistance Supply Experiment (HASE) sites--Brown County, Wisconsin, and St. Joseph County, Indiana, John Mulford of Rand Research, estimates that the long-run "permanent" income elasticity of housing expenditures to be 0.45 for owners. Using this information, what is likely to happen to housing expenditures if the government increases income transfers to recipients in HASE sites?Student Answer: Housing expenditures will increase significantly. Housing expenditures in HASE sites significantly will fall as recipients moved out of these areas to higher-income areas. Housing expenditures will increase, but not significantly. Housing expenditures will decrease by a small amount.4. Question: Which of the following statements about the price elasticity of demand is correct?Student Answer: The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good. The absolute value of the elasticity of demand ranges from zero to one. Demand is more elastic in the long run than it is in the short run. Demand is more elastic the smaller percentage of the consumer's budget the item takes up.5. Question: Figure 6-7Refer to Figure 6-7. A perfectly inelastic supply curve is shown inStudent Answer: Panel A. Panel B. Panel C. Panel D.6. Question: Table 10-2Table 10-2 shows cost data for Lotus Lanterns, a producer of whimsical night lights.Refer to Table 10-2. What is the average variable cost per unit of production when the firm produces 90 lanterns?Student Answer: $490 $33.67 $7.67 $5.407. Question: If diminishing marginal returns have already set in for Golden Lark Woodworks, and the marginal product of the 6th carpenter is 8 chairs, then the marginal product of the 7th carpenter isStudent Answer: negative. less than 8 chairs. more than 8 chairs. zero.Points Received: Comments: 8. Question: Table 10-1Table 10-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May 2007. Refer to Table 10-1. What is the average product of labor when the farm hires 5 workers?Student Answer: 4 pounds 10.8 bushels 38.2 pounds 54 pounds.Points Received: Comments: 9. Question: If 11 workers can produce a total of 54 units of a product and a 12th worker has a marginal product of 6 units, then the average product of 12 workers isStudent Answer: 60 units. 54 units. 48 units. 5 units.10. Question: Figure 10-1Refer to Figure 10-1. The average product of the 4th workerStudent Answer: is 68. is 17. is 11. cannot be determined.Unit 41. Question: Figure 11-1Refer to Figure 11-1. If the firm is producing 200 units,Student Answer: it breaks even. it is making a loss. it should cut back its output to maximize profit. it should increase its output to maximize profit.2. Question: All of the following can be used to compute average profit exceptStudent Answer: marginal profit minus marginal cost. total profit divided by quantity. average revenue minus average total cost price minus average total cost.3. Question: Figure 11-5Figure 11-5 shows cost and demand curves facing a typical firm in a constant-cost perfectly competitive industry. Refer to Figure 11-5. If the market price is $20, what is the average profit at the profit maximizing quantity?Student Answer: $5 $6 $9 $20Points Received: Comments: 4. Question: Figure 11-6Figure 11-6 shows cost and demand curves facing a profit-maximizing perfectly competitive firm.Refer to Figure 11-6. At price P3, the firm wouldStudent Answer: lose an amount equal to its fixed costs. lose an amount more than fixed costs. lose an amount less than fixed costs. break even.Points Received: Comments: 5. Question: Figure 11-5Figure 11-5 shows cost and demand curves facing a typical firm in a constant-cost perfectly competitive industry. Refer to Figure 11-5. If the market price is $20, what is the amount of the firm's profit?Student Answer: $5,400 $6,750 $8,100 $16,2006. Question: Figure 14-2Figure 14-2 above shows the demand and cost curves facing a monopolist.Refer to Figure 14-2. Suppose the monopolist represented in the diagram above produces positive output. What is the profit/loss per unit?Student Answer: loss of $7 per unit profit of $30 per unit loss of $21 per unit profit of $14 per unit7. Question: Suppose an industry is made up of 25 firms, all with equal market share. The four-firm concentration ratio of this industry isStudent Answer: 16%. 20%. 25%. It cannot be determined from the information given.Points Received: Comments: 8. Question: If a theatre company expects $250,000 in ticket revenue from five performances and 288,000 in ticket revenue if it adds a sixth performance, theStudent Answer: marginal revenue of the sixth performance is $48,000. marginal revenue of the sixth performance is $38,000. cost of staging the sixth performance is probably higher than the cost of staging the previous five. company will be making a loss on the sixth performance because its ticket sales will be less than average received from the previous five.9. Question: A public franchiseStudent Answer: is a corporation that is owned by stockholders. results from ownership of a key raw material. is a government designation that a private firm is the only legal producer of a good or service. is an unregulated monopoly necessary for the public good.10. Question: Market power refers toStudent Answer: the ability of consumers to dictate what products should be produced. the ability of a firm to advertise its product and succeed in selling more output. the ability of a firm to sell at a lower price than rival sellers. the ability of a firm to charge a price higher than the marginal cost of production.Unit 5 1. Question: You are planning to open a new Italian restaurant in your hometown where there are three other Italian restaurants. You plan to distinguish your restaurant from your competitors by offering northern Italian cuisine and using locally grown organic produce. What is likely to happen in the restaurant market in your hometown after you open?Student Answer: Your competitors are likely to change their menus to make their products more similar to yours. The demand curve facing each restaurant owner shifts to the right. The demand curve facing each restaurant owner becomes more elastic. While the demand curves facing your competitors becomes more elastic, your demand curve will be inelastic.2. Question: Brand management refers toStudent Answer: picking a brand name for a new product that will attract attention. the efforts to maintain the differentiation of a product over time. efforts to reduce the cost of production. selling the right to use a brand name in a particular market.3. Question: Unlike a perfectly competitive firm, for a monopolistically competitive firmStudent Answer: price marginal cost for all output levels. price marginal revenue for all output levels. price average revenue for all output levels. marginal revenue = marginal cost at the profit maximizing output.4. Question: If a monopolistically competitive firm breaks even, the firmStudent Answer: is earning an accounting profit and will have to pay taxes on that profit. is earning zero accounting and zero economic profit. should advertise its product to stimulate demand. expand production.5. Question: If price exceeds average variable cost but is less than average total cost, a firmStudent Answer: should further differentiate its product. should stay in business for a while longer until its fixed costs expire. is making some profit but less than maximum profit. should shut down.6. Question: Table 13-2Refer to Table 13-2. If Coke produces a high quantity, what is Pepsi's best response?Student Answer: Produce a high quantity and earn a profit of $25 million. Produce a low quantity and earn a profit of $25 million. It does not matter what Pepsi does, its profit will be $10 million with a low or a high quantity. Produce a high quantity and earn a profit of $10 million.7. Question: Oligopolies exist and do not attract new rivals becauseStudent Answer: of competition. of barriers to entry. the firms keep profits and prices so low that no rivals are attracted. there can be no product differentiation.8. Question: The "Discount Department Stores" industry is highly concentrated. What does this mean?Student Answer: There are many large stores such as Wal-Mart, Target, Kohl's, in this industry. A few large stores account for a significant portion of industry sales. There is cut-throat competition in this industry because there are no entry barriers. The sales volume in this industry is consistently high.9. Question: A key part of Sam Walton's business strategy for Wal-Mart involved placing stores in small towns where the main competition was from small, locally owned stores. What is the rationale behind this strategy?Student Answer: to increase consumer welfare by offering consumers in small towns a wider variety of goods and services to create employment opportunities for those living in small towns to maintain a competitive edge - small stores cannot compete with Wal-Mart's prices because Wal-Mart is able to pass to consumers some of its cost savings from economies of scale locating in small towns requires a lower financial outlay than locating in big cities10. Question: Why does a prisoners' dilemma lead to a noncooperative equilibrium?Student Answer: because each player had agreed before the game started to minimize the harm that he can inflict on the other players because each player is uncertain how other players will play the game because players must choose from have a limited number of non-dominant strategies because each rational player has a dominant strategy to play a certain way regardless of what other players doUnit 6 1. Question: Figure 16-2Refer to Figure 16-2. Which of the following statements is true?Student Answer: Panel B correctly describes a situation in which the income effect dominate the substitution effect at low wages (segment i) and again at very high wages (segment iii). Panel B incorrectly describes a situation in which the income effect dominate the substitution effect at low wages (segment i) and a situation in which the substitution effect dominate the income effect at very high wages (segment iii). Panel B incorrectly describes a situation in which the income effect dominate the substitution effect at low wages (segment i). Panel B incorrectly describes a situation in which the income effect dominate the substitution effect at very high wages (segment iii)2. Question: Which of the following statements about commission systems of compensation is false?Student Answer: They increase the risk to workers because sometimes output declines for reasons not connected to the worker's effort. During sluggish periods, an employer's payroll expenses will decline along with sales. If workers are paid on the basis of the number of units produced, they may become less concerned about quality. The lack of income stability will induce the more productive workers to leave in search of more secure employment.3. Question: Suppose a competitive firm is paying a wage of $12 an hour. Assume that labor is the only input. If, hiring another worker would increase output by four units per hour, then to maximize profits the firm shouldStudent Answer: not change the number of workers it currently hires. hire the extra worker. layoff some workers. There is not enough information is given to answer the question.4. Question: Table 16-2Refer to Table 16-2. What is the profit-maximizing quantity of labor that the firm should hire?Student Answer: 5 units $4 units $3 units 2 units5. Question: Scenario: In academia, professors in some disciplines receive higher salaries than others. For example, professors teaching in business schools receive higher salaries than professors in the English department. Suppose in Unity College, assistant professors in the business school earn $Wb while assistant professors in the English department earn $We < Wb. Now suppose the government passes comparable worth legislation that requires academic institutions to pay all faculty the same salaries.Following the passage of comparable worth legislation, Unity College responds by placing salaries at $Wa between the two existing salaries. Which of the following is the result of the legislation?Student Answer: The supply of English professors increase and the supply of business professors decrease. The demand for English professors decrease and the demand for business professors increase. There will be a surplus in the market for English professors and a shortage in the market for business professors. There will be a surplus in the market for English professors and the market for business professors will not be affected.6. Question: Figure 16-3Figure 16-3 shows two different compensation schemes for the Safelite Glass Corporation, an installer of auto glass windshields. Under Scheme I, the firm pays a consistent daily wage of $80 per day based on an 8-hour workday. QMin represents the cut-off point under the hourly-wage system: if a worker installed fewer than QMin windshields, the worker got fired. Scheme II represents a piece-rate scheme with an earnings floor: no worker would get less than $80 per day (for an 8-hour workday) and would have to produce at least QMin. For any output level beyond Q* the worker earned an additional $20 for each unit produced.Refer to Figure 16-3. Which of the following statements about Scheme II is false?Student Answer: It is likely to draw highly productive workers who see the opportunity to increase their wages. It could discourage less productive workers and induce them to leave the firm. It allows workers to increase their daily wage without penalizing those who are content with their daily wage. It is more risky for senior employees.7. Question: Consider the market for pilots. What is likely to happen to the equilibrium wage and quantity of pilots if the government enforces a lower mandatory retirement age, say from the age 65 years to the age 62?Student Answer: The equilibrium wage and the equilibrium quantity of pilots rise. The equilibrium wage and the equilibrium quantity of pilots fall. The equilibrium wage falls and the equilibrium quantity of pilots rises. The equilibrium wage rises and the equilibrium quantity of pilots falls.8. Question: The labor supply for an industry would decrease ifStudent Answer: the wage rate falls. the percentage of the population of ages 16 to 65 decreases. the government welcomes foreign workers into the country. a greater percentage of women want to work outside the home.: 9. Question: According to the marginal productivity theory of income,Student Answer: the greater the quantity of resources owned by an individual, the greater his incentive to increase productivity and his income. the average income received by an individual who supplies resources is influenced by the resources owner's marginal productivity. the income received by an individual who supplies labor services equals the incremental benefit generated to the firm by that individual's labor. the income received by an individual who supplies labor services equals the profit generated to the firm by that individual's labor.10. Question: Figure 16-1Figure 16-1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies. Refer to Figure 16-1. If the wage rate is $40, how many workers should Dale hire?Student Answer: 6 units 5 units 4 units 3 unitsUnit 71. Question: Increases in real GDP would overstate the increase in the well-being of a country over time if, over that time period, theStudent Answer: average hours worked per week increased. amount of pollution decreased. price level increased. crime rate decreased.2. Question: Which of the following is not a durable good?Student Answer: furniture automobile clothing refrigerator3. Question: The best measure of the income households actually have available to spend isStudent Answer: personal income. disposable personal income. national income. net national income.4. Question: The sum of the value added of every firm involved in producing all final goods and services ________ gross domestic product.Student Answer: equals is greater than is less than is sometimes greater than and other times less than5. Question: Table 19-5Consider the table above showing three stages of production of an automobile.Refer to Table 19-5. The value added by the automobile dealer equalsStudent Answer: $7,000. $15,000. $18,000. $25,000.6. Question: Under which of the following circumstances would the government be running a deficit?Student Answer: G = $5 trillionT = $5 trillionTR = $1 trillion G = $5 trillionT = $7 trillionTR = $1 trillion G = $7 trillionT = $7 trillionTR = $0 G = $7 trillionT = $10 trillionTR = $3 trillion7. Question: If real GDP in a small country in 2005 is $8 billion and real GDP in the same country in 2006 is $8.3 billion, the growth rate of real GDP between 2005 and 2006Student Answer: is 3.0%. is 3.75%. is 3.6%. cannot be determined from the information given.8. Question: Financial securities that represent promises to repay a fixed amount of funds are known asStudent Answer: bonds. stocks. pension funds. insurance premiums.9. Question: Since 1900, real GDP in the U.S. has grownStudent Answer: more rapidly than the population. more slowly than the population. as rapidly as the population. in a random unpredictable manner relative to the population.10. Question: A firm can fund an expansion of its operations byStudent Answer: issuing bonds. buying stock. paying dividends. loaning money.
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