Macroeconomics Test 2

Front 1

Suppose that the market for chocolate is in equilibrium and that the federal government places a binding price floor on chocolate. To help support the price floor, the government purchases all chocolate that consumers do not buy. If the price floor remains in place for a number of years, what do you expect to happen to the quantity of chocolate demanded by consumers?

Back 1

it will decrease

Front 2

The difference between ___ and the ___ of a product is called the producer surplus

Back 2

lowest price a firm would have been willing to accept ; price it actually receives

Front 3

The purpose of advertising a good or service is to cause the demand for the product being advertised to ____ and make the demand for it relatively more price _____.

Back 3

increase;inelastic

Front 4

If a 5 percent increase in price results in a 2 percent ___ in the quantity supplied, then it can be concluded that supply is ___, everything else held constant.

Back 4

increase; price inelastic

Front 5

Marko's Polos table and question. Question 4.6

Back 5

yup

Front 6

If a $100 drop in the price of a $10000 car resulted in an increase in the quantity of cars purchased from 100 to 110 and a $100 drop in the price of a $5000 vacation rental resulted in an increase in the quantity of weekly vacation homes rented from 100 to 110, the price elasticity of demand is :

Back 6

greater for the car.

Front 7

Price gouging laws may result in

Back 7

creating a shortage and a black market

Front 8

GreenTree Corporation sells live Christmas trees. It observes that when it increases the price of Christmas trees by 20% , total revenue rised by 15%. Based on this information we can conclude that in the relevant region, the demand for Christmas trees is:

Back 8

inelastic

Front 9

Assuming the equilibrium wage is $7.25 per hour and the City of St. Louis imposes a minimum of wage of $11.00 per hour, the labor market will experience:

Back 9

a surplus of labor (unemployment)

Front 10

Your entertainment price index (EPI) was computed based on three goods: movie tickets, popcorn and limeade. If you change the quantity of these goods from this year to next year and the prices of two of the three goods increase while the other price falls, then:

Back 10

your EPI might rise or fall, contingent only on the percentage of the market basket that these goods constituted and the percentage that each good occupied with the basket regardless of the quantity change from year to year.

Front 11

If your nominal wage rises but you think that it automatically means your real wage rose, then:

Back 11

you are suffering from money illusion

Front 12

Donna Newton made $0.30 per hour in 1946 at a small restaurant in Clearfield, Pennsylvania. If the consumper price index (CPI) was 18.3 in 1946 and 202.4 in 2011, then Donna's inflation-adjusted wage would be:

Back 12

$3.32

Front 13

If 51% of all goods in the consumer price index (CPI) became more expensive and 49% became cheaper:

Back 13

inflation or deflation could occur, depending on the weight of these goods in the basket of goods and the actual percent changes

Front 14

You know that the consumer price index (CPI) at the beginning of this year was 250 and the rate of inflation was 14%; this would mean

Back 14

the CPI at the end of the year was 285

Front 15

Wages are often tied to expected rates of inflation; thus one reason why inflation is important is that:

Back 15

inflation creates uncertainty about costs and prices, which affects both employees and employers.

Front 16

To convert the current price of a product to its price in the past

Back 16

multiply by the ratio of the previous price index to the current price index

Front 17

Suppose a basket of goods and services has been selected to calculate the consumer price index (CPI) and 2002 has been selected as the base year. In 2002, the basket's cost was $600; in 2004, the basket's cost was $650; and in 2006, the basket's cost was $700. The value of the CPI in 2004 was (round to one decimal place):

Back 17

Price index = basket price / basket price in base year x 100$650/$600 = 1.083 x 100 = 108.3

Front 18

You are offered two jobs, one in Chicago paying $67,000 and one in Philadelphia paying $79,000. The price index in Chicago is 110.8, and in Philadelphia it is 126.5. If real wages are the only consideration, then:

Back 18

you would definitely take the job in Philadelphia because the real wage is higher there.

Front 19

A price confusion problem is best described as:

Back 19

the difficulty producers have in determining whether higher prices are due to increased demand or inflation.