ECON 110 Quiz 5 Government Intervention The Business Cycle solutions complete answers

ECON 110 Quiz 5 Government Intervention The Business Cycle solutions complete answers 

 

The purpose of antitrust laws is to ______ concentrations of market power and ______ competition.

 

An office worker who loses her job because she does not have the necessary computer skills is likely

 

One of the problems of using the CPI is that it

 

Which of the following individuals is frictionally unemployed?

 

When the production of a good or service results in a negative externality

 

The Great Depression

 

A decrease in the average level of prices of goods and services is known as

 

The production of goods and services in the U.S. has risen steadily since 1929.

 

In economics, a public good

 

Public goods

 

Market failure implies that the forces of supply and demand have not led society to the optimal mix of output.

 

Which of the following is an economic justification for a policy of laissez-faire?

 

Nominal GDP is defined as the

 

The CPI is used to measure the change in the average price of consumer goods and services.

 

External costs arise when

 

Which of the following types of unemployment would best characterize a swimming instructor's unemployment during the winter months?

 

Whenever external costs exist

 

The term externalities refers to

 

The impact of World War II on the U.S. economy was

 

The federal government's role in antitrust enforcement is justified by considerations of

 

When firms have the ability to change the market price of a good or service, the market failure involved is

 

A basic purpose of macroeconomics is to explain

 

The alternative combinations of goods and services that can be produced in a given time period with available resources and technology is referred to as

 

Government antitrust activity led to the breakup of AT&T in the 1980s because, among other things, it felt that AT&T had too much control over the telecommunications market. What type of market failure was most likely involved?

 

The total value of goods and services produced within a nation's borders, measured in constant prices refers to

 

A market failure occurs when

 

A private good is unique because

 

The business cycle is the alternating periods of economic growth and contraction.

 

If relative prices change, then the inflation rate must change.

 

A stock person who is laid off by a department store because retail sales across the country have decreased is _______ unemployed.

 

The free-rider dilemma is associated with

 

Income transfers are a government response to the market's failure to provide an equitable distribution of goods.

 

The labor force is smaller than the total population because the labor force does not include

 

The free-rider dilemma refers to a situation in which an individual can consume a good or service without having to pay for it.

 

Costs of Reducing Water Pollution

Using the Costs of Reducing Water Pollution table, which of the following explains why the lake should not be made entirely free of pollution?

 

The uncertainty of inflation is likely to affect

 

The most desirable combination of output attainable with available resources, technology and social values is known as the:

 

If market prices and sales are used to signal desired output, then the optimal mix of output is determined by:

 

Which of the following is an economic justification for a policy of laissez-faire?

 

In a market economy, producers will produce the goods and services that:

 

Market failure occurs when:

 

Market failure means that the economy is definitely producing:

 

Market failure implies that a policy of laissez-faire:

 

Which of the following does not explain why the market sometimes fails to produce the optimal mix of output?

 

The optimal mix of output is:

 

The tendency for the market to under produce public goods and overproduce private goods results from:

 

Which of the following is not an example of market failure?

 

Market failure establishes a basis for:

 

Sources of microeconomic failure that may require government intervention include all of the following except:

 

A private good is unique because:

 

A private good is a good that:

 

Which of the following is most likely a private good?

 

Which of the following is most likely a private good?

 

In economics, a public good:

 

A public good is a good that:

 

In economics, a public good:

 

A public good is:

 

Public goods:

 

Which of the following is most likely a public good?

 

The communal nature of a highway means that no one individual is motivated to pay for it because even those who do not pay will still benefit from using it. This is an example of:

 

The free-rider problem arises because those who:

 

The free-rider problem arises because:

 

The problem with public goods is that those who do not pay receive:

 

Since those who do not pay for the goods still get to benefit, _____ goods have ____.

 

The free-rider dilemma is associated with:

 

When public goods are marketed like private goods:

 

If the economy relies entirely on markets to answer the WHAT question, it tends to:

 

The distinction between public goods and private goods is based on:

 

The market produces too few public goods because:

 

The market under produces public goods because:

 

The term externalities refers to:

 

Externalities are a type of market failure because:

 

Externalities are the:

 

An individual firm will not normally have any Incentive to internalize external costs because to do so would:

 

The federal government's role in protecting the environment is justified by considerations of:

 

Firms in Colorado dump waste into the Colorado River and as a result the people in California and Mexico cannot use the water. What type of market failure is most likely involved?

 

Noise generated by an airport best illustrates:

 

Social demand is equal to market:

 

If the economy relies entirely on markets to answer the WHAT question, it tends to _____ goods with external benefits and _____ goods with external costs.

 

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

 

Whenever external costs exist:

 

The market will:

 

Whenever external benefits exist:

 

If external benefits exist:

 

If external benefits occur when a good is consumed, then the government should:

 

Social demand exceeds market demand whenever:

 

Which of the following is most likely to have social demand greater than market demand?

 

The most important motivation for producers is the desire to:

 

Other things being equal, if a perfectly competitive firm is forced to switch to a more expensive, nonpolluting production process:

 

External costs are partly caused by:

 

Whenever net external benefits exist then:

 

Social costs:

 

Social costs are:

 

Private costs are identified as:

 

External costs arise when:

 

External costs are equal to the difference between:

 

Whenever there is a divergence between social costs and market costs, the result is:

 

When there are external costs, then the maximum social welfare occurs where marginal revenue equals:

 

In order to maximize society's welfare, a firm should produce where:

 

The market overproduces goods that have external costs because producers:

 

The costs of lead contamination have been estimated to be $1 billion for medical care of those sickened by lead, plumbing repairs, and reduced earnings of those affected by lead. This $1 billion can best be classified as:

 

An emission charge is a:

 

An emission charge can be used to:

 

A completely successful emission fee:

 

A firm that incurs an emissions charge for polluting will install more pollution control equipment only if the:

 

If a system of emission charges forces firms to internalize all external costs:

 

The use of emission charges to control pollution can impact all of the following except a firm's:

 

In order to reduce pollution, the government can use all of the following except:

 

When firms have the ability to change the market price of a good or service, the market failure involved is:

 

Which of the following leads to market failure?

 

Which of the following is not considered to be a source of market power for a firm?

 

In order to reduce pollution, the government can use all of the following except:

 

Which of the following is not considered to be a source of market power for a firm?

 

Market power is considered to be a market failure because firms with market power:

 

Market power is a form of market failure because:

 

Which of the following is a form of government intervention designed to correct market failures?

 

The federal government's role in antitrust enforcement is justified by considerations of:

 

The first antitrust act to prohibit "conspiracies in restraint of trade" was:

 

Which of the following prohibits price discrimination?

 

Which of the following created an agency to identify anticompetitive practices?

 

By breaking up AT&T the Justice Department expected that the telecommunications market would change from:

 

According to the text, what type of market failure provided the justification for the antitrust case against Microsoft?

 

Government antitrust activity led to the breakup of AT&T in the 1980s because, among other things, it felt that AT&T had too much control over the telecommunications market. What type of market failure was most likely involved?

 

After the government filed its antitrust case, Microsoft:

 

The federal government's role in providing aid to the poor and the aged is justified because of concerns about:

 

Which of the following is not an income transfer?

 

Which of the following is not a goal of macro intervention?

 

When the economy experiences high unemployment, there is:

 

All of the following are macro failures that justify government intervention except for:

 

Government intervention in the economy:

 

According to the public confidence survey presented in the text, the public:

 

This table contains data on the social costs and benefits incurred in improving water quality in a lake.

 

Table 9.1—Costs of reducing water pollution

 

In Table 9.1, what is the marginal social benefit (in dollars per PPM) of reducing pollution rates from 35 to 25 PPM?

 

In Table 9.1, what is the marginal social benefit (in dollars per PPM) of reducing pollution rates from 25 to 10 PPM?

 

In Table 9.1, what is the marginal social benefit (in dollars per PPM) of reducing pollution rates from 10 to 0 PPM?

 

In Table 9.1, what is the marginal social cost (in dollars per PPM) of reducing pollution rates from 35 to 25 PPM?

 

In Table 9.1, what is the marginal social cost (in dollars per PPM) of reducing pollution rates from 25 to 10 PPM?

 

According to the schedule presented in Table 9.1, which rate of pollution is optimal?

 

In Table 9.1, which of the following explains why the lake should not be made entirely free of pollution?

 

In Table 9.2, which firm has the lowest absolute level of costs borne directly by the producer?

 

In Table 9.2, which firm has the greatest difference between social costs and private costs?

 

Using Figure 9.1, assume point D represents the optimal mix of output. The market mechanism is likely to produce the mix of output represented by point:

 

Using Figure 9.1, assume point D represents the optimal mix of output. If market forces cause society to produce at point C then:

 

Based on Figure 9.2:

 

In Figure 9.2, at price p1:

 

In Figure 9.2, the market demand curve is above the social demand curve because:

 

In Figure 9.3, if pollution costs are external, the rate of output will be:

 

In Figure 9.3, if the firm chooses a production method that results in zero external costs, the rate of output will be:

 

In Figure 9.3, if the rate of output is 320 units:

 

In Figure 9.3, if the rate of output is 200 units:

 

The HEADLINE article in the text titled "Secondhand Smoke Debate Over" says that heart disease and cancer are two health issues related to secondhand smoke. Secondhand smoke is an example of:

 

One HEADLINE article in the text links secondhand smoke to cancer and other health issues. Which type of market failure does the article illustrate?

 

One HEADLINE article in the text links secondhand smoke to cancer, heart attacks and strokes. This implies that:

 

One HEADLINE article in the text carries the headline "Forced Recycling Is a Waste." If the city forces people to recycle, which type of market failure is it attempting to correct?

 

The market mechanism always leads the economy to the optimal mix of output.

 

Even if society is producing a combination of goods and services on the production possibilities curve, it may not be producing the optimal mix of output.

 

Market failure occurs when the government intervenes in the marketplace.

 

Market failure implies that the forces of supply and demand have not led society to the optimal mix of output.

 

Sources of microeconomic market failure include public goods, externalities, and market power.

 

Goods produced by the federal, state and local governments are known as public goods.

 

A distinguishing characteristic about public goods is that they can be jointly consumed.

 

The consumption of a private good by one person does not preclude consumption of the same good by another person.

 

The free-rider dilemma refers to a situation in which an individual can consume a good or service without having to pay for it.

 

The market tends to overproduce public goods and under produce private goods.

 

Externalities are always harmful to third parties.

 

The market will under produce goods that yield external benefits and overproduce goods that yield external costs.

 

If most people are inoculated against chicken pox and even though you are not inoculated your chances of getting the disease are reduced, this is an example of a negative externality.

 

If you play your music too loud and your neighbor cannot study, this is an example of a negative externality.

 

External costs exist when the market demand is less than the social demand.

 

If a firm implements a more expensive but less-polluting production process, both the MC and ATC curves will shift upward.

 

Firms that are able to push part of their costs onto society by polluting will produce more output than society desires.

 

Even if external costs or benefits exist, a private firm will allocate its resources and operate its plant in such a way as to maximize social welfare.

 

An emission charge increases private marginal cost and encourages lower output.

 

If a firm has market power, it can produce and sell as much output as it desires since no competition exists.

 

Patents and copyrights contribute to market power for a firm.

 

Ceteris paribus, monopolies take advantage of their market power by charging higher prices than competitive firms charge.

 

Antitrust legislation was created to address the issue of externalities.

 

Income transfers are a government response to the market's failure to provide an equitable distribution of goods.

 

The government uses taxes and transfers to redistribute income more fairly.

 

Income transfers are designed to address the issue of market power.

 

Social Security benefits are not an income transfer since individuals contribute to the fund during their working years.

 

Macro instability refers to the underproduction of public goods.

 

Goals of macro intervention include full employment, economic growth, and price stability.

 

The study of aggregate economic behavior is referred to as:

 

A basic purpose of macroeconomic theory is to:

 

A basic purpose of macroeconomics is to explain:

 

Alternating periods of growth and contraction in real GDP define:

 

Which of the following is not a basic measure of macroeconomic performance?

 

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

 

Which of the following is not one of the three basic measures of macroeconomic performance?

 

The alternative combinations of goods and services that can be produced in a given time period with available resources and technology is referred to as:

 

For a particular economy, the production possibilities curve shows the:

 

The production possibilities will definitely shift outward if:

 

Business cycles in the United States:

 

Which of the following is characteristic of a downturn in the business cycle?

 

Which of the following is characteristic of a downturn in the business cycle?

 

Which of the following is true during the expansionary phase of the business cycle?

 

As the economy falls from the peak to the trough of the business cycle:

 

The total value of goods and services produced within a nation's borders, measured in constant prices refers to:

 

Real GDP measures changes in:

 

Nominal GDP is defined as the:

 

When calculating nominal GDP, the volume of output is measured using:

 

In 2009 nominal GDP increased from 14.498 trillion to:

 

Over time, U.S. real GDP has increased:

 

A decline in an economy's level of output can lead to:

 

An extremely deep and long period of negative economic growth is most accurately called:

 

A decline in real GDP for at least two consecutive quarters is referred to as:

 

The Great Depression in the United States:

 

Since World War II, the United States has experienced:

 

Immediately following the years 1929-1933, the U.S. economy:

 

The impact of World War II on the U.S. economy was:

 

Which of the following is likely if an economy is in a recession or headed for one?

 

All persons over age 16 who are either working for pay or actively seeking paid employment refers to:

 

Which of the following individuals is part of the labor force?

 

The labor force is smaller than the total population because the labor force does not include:

 

People are unemployed if they are over 16 and not working due to:

 

The unemployment rate is calculated by dividing:

 

To be officially counted as unemployed, one must be:

 

Who among the following would be counted as unemployed?

 

If the population of a country is 1,000,000 people, its labor force consists of 600,000, and 60,000 people are unemployed, the unemployment rate is:

 

If the population of a country is 1,000,000 people, its labor force consists of 500,000, and 40,000 people are unemployed, the unemployment rate is:

 

If the population of a country is 220 million people, its labor force consists of 115 million, and 99 million people are employed, the unemployment rate is:

 

Suppose that in a population of 100 million people, 50 million are in the labor force and 47 million are employed. The unemployment rate is:

 

Table 10.1—Population and labor force data.

 

In Table 10.1, what is the unemployment rate in Year 1?

 

In Table 10.1, what is the unemployment rate in Year 10?

 

In Table 10.1, what is the number of unemployed in Year 1?

 

In Table 10.1, what is the number of unemployed in Year 10?

 

Table 10.2—Labor force data

 

In Table 10.2, what is the unemployment rate in Year 1?

 

In Table 10.2, what is the unemployment rate in Year 10?

 

In Table 10.2, what is the number of unemployed in Year 1?

 

In Table 10.2, what is the number of unemployed in Year 10?

 

When construction workers seek work because the ground is covered in snow and ice, the unemployment rate goes up. This situation is an example of:

 

Which of the following types of unemployment would best characterize a swimming instructor's unemployment during the winter months?

 

Which of the following types of unemployment would best characterize a tax accountant's unemployment after tax returns are due?

 

After quitting one job, some people with marketable skills find that it takes several months to find a new job. This is an example of which type of unemployment?

 

Samantha quit her job in the city to look for a job in the country. While she is looking, Samantha experiences _______ unemployment.

 

After graduating from college, it takes Kim several months to find a professional job. This is an example of which type of unemployment?

 

A plumber quits his job in Dallas and moves to San Francisco where additional plumbers are needed, but it takes a couple of months for him to find a job. He is said to be:

 

Frictional unemployment goes up when:

 

An office worker who loses her job because she does not have the necessary computer skills is, ceteris paribus:

 

Structural unemployment occurs:

 

Automobile workers in Detroit are unemployed because robots are now being used on assembly lines but, at the same time, job vacancies exist for computer programmers. In this case, the automobile workers are an example of:

 

A teenager without a high school diploma is unable to find work because all of the available jobs require a certain minimum reading level. Which of the following best characterizes the teenager's circumstances?

 

Which of the following is likely to reduce the level of structural unemployment?

 

Which of the following is an example of structural unemployment?

 

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

 

A stock person who is laid off by a department store because retail sales across the country have decreased is _______ unemployed.

 

Which of the following types of unemployment is most directly related to real GDP growth?

 

Which of the following is an example of cyclical unemployment?

 

Which of the following government policies or programs is most likely to reduce cyclical unemployment?

 

According to macroeconomists, a goal for the economy is a:

 

One reason our full employment goal is not zero percent is because:

 

Inflation is defined as:

 

When the unemployment rate falls to the full-employment level:

 

If an increase in the price of some goods outweighs other prices that remain constant or decrease then there is:

 

During a period of inflation:

 

A decrease in the average level of prices of goods and services is known as:

 

Deflation occurs when the:

 

When there is no deflation or inflation in an economy:

 

The price of one good compared to the price of other goods refers to:

 

Which of the following will definitely cause a change in the relative prices of two goods?

 

If the price of computers falls during a period when the average price level remains constant, which of the following has occurred?

 

Which of the following is an essential part of the market mechanism?

 

If the inflation rate is zero, changes in relative prices signal a change in the _____ for the economy.

 

During a period of inflation:

 

Inflation acts like a tax because:

 

Nominal income:

 

Real income:

 

If the number of dollars you receive every year is the same, but prices are rising, then your nominal income:

 

Nominal income must have fallen if real income:

 

When a person's nominal income falls in a period of inflation then the person's real income:

 

Suppose a recent college graduate has an annual nominal income of $42,000 for the first year she works. If the annual inflation rate is 5 percent, what salary would she need in the second year to maintain the same real income?

 

Patricia's nominal annual income in 2009 was $60,000. If the rate of inflation is constant at 10 percent, in order to keep Patricia's real income constant, her nominal income in the year 2010 should be:

 

Ben's nominal annual income in 2009 was $40,000. If the rate of inflation is constant at 10 percent, in order to keep Ben's real income constant, his nominal income in the year 2010 should be:

 

Suppose that at the start of this year you got a salary increase of 10 percent from your employer. The prices of the goods and services you typically purchase increase 10 percent during the year. At the end of the year you have experienced on balance:

 

Which of the following is an example of the price effect during a period of inflation?

 

Suppose the cost of medical care rose 200 percent from 1990 to 2010, and average prices for the economy rose 150 percent. Relative to others, people who purchased medical care experienced a:

 

Suppose the cost of milk rose 100 percent from 1990 to 2010, and average prices for the economy rose 133 percent. Relative to others, people who purchased milk experienced a:

 

Which of the following is an example of the income effect during a period of inflation?

 

Generally speaking, which of the following groups would tend to gain real income from the wealth effects of inflation?

 

Which of the following is an example of the wealth effect during a period of inflation?

 

The value of an original painting, held as an asset, increased in value by 100 percent from 1970 to 2010. Suppose during the same period average prices in the economy rose by 150 percent. The owner of the painting, relative to those who do not own paintings, experienced a:

 

The value of a piece of land, held as an asset, increased in value by 200 percent from 1985 to 2010. Suppose during the same period average prices in the economy rose by 165 percent. The owner of the land, relative to those who do not own land, experienced a:

 

The uncertainty of inflation is likely to affect:

 

The uncertainty that results from inflation causes changes in:

 

The Consumer Price Index is:

 

The Consumer Price Index is used specifically to measure the:

 

To construct the Consumer Price Index, the Bureau of Labor Statistics must:

 

If the Consumer Price Index (CPI) had a value of 128 in 2007, this means that during the period between the base year and 2007:

 

If the CPI is 137 in Year Y, then it costs _______ in Year Y to buy the same market basket that cost _______ in the base period.

 

If the CPI is 112 in Year Z, then it costs _______ in Year Z to buy the same market basket that cost _______ in the base period.

 

If the CPI is 119 in Year X, then it costs _______ in Year X to buy the same market basket that cost _______ in the base period.

 

If a market basket of goods cost $100 in the base year and $125 in a later year, then average prices have increased by:

 

If a market basket of goods cost $100 in the base year and $110 in a later year, then average prices have increased by:

 

If a market basket of goods cost $100 in the base year and $143 in a later year, then average prices have increased by:

 

If a market basket of goods cost $100 in the base year and $108 in a later year, then average prices have increased by:

 

The Full Employment and Balanced Growth Act of 1978 established a goal for inflation of _______ percent.

 

Price stability refers to:

 

The U.S. goal for price stability:

 

The CPI tends to overestimate the rate of inflation because:

 

The HEADLINE article in the text titled "Economy Sharpest decline in 26 years" "Economy Contracts in 3rd Quarter" discusses the reduction in output for the U.S. economy. Which type of unemployment is most likely in this situation?

 

Based on the HEADLINE article titled "Inflation and the Weimar Republic," which of the following is the best illustration of the price effect of inflation?

 

Based on the HEADLINE article titled "Inflation and the Weimar Republic," which of the following is the best illustration of the wealth effect of inflation?

 

Based on the HEADLINE article titled "Inflation and the Weimar Republic," which of the following is the best illustration of a change in relative prices due to hyperinflation?

 

Macroeconomics focuses on individual firms and industries.

 

Macroeconomics is the study of the economy as a whole.

 

A basic purpose of macroeconomics is to explain monopoly behavior.

 

The business cycle is the alternating periods of economic growth and contraction.

 

The basic measures of macroeconomic performance include the national debt, the trade deficit, and interest rates.

 

An important measure of macroeconomic performance is the growth of GDP.

 

Important measures of economic performance include economic growth, employment, and price stability.

 

The U.S. stock market and the U.S. bond market are considered by economists to be the most important measures of the economy.

 

Throughout the business cycle, unemployment and production typically move in opposite directions.

 

The production of goods and services in the U.S. has risen steadily since 1929.

 

Since the Great Depression, the United States has experienced a number of recessions but none as severe as the Great Depression.

 

People who are not working for pay but are actively looking for work are not included in the labor force.

 

If a person who has the required job skills quits one job and takes two months to find another job, he is considered to be structurally unemployed.

 

If a person who works as a snowplow operator during the winter cannot find employment in the summer, this is an example of seasonal unemployment.

 

If a person cannot find a job after searching for one year because there is not enough demand in the economy, this is an example of cyclical unemployment.

 

If the labor force does not have the skills required for the available jobs, cyclical unemployment increases ceteris paribus.

 

"Full employment" means that some people in the labor force are still unemployed.

 

The U.S. "full employment" goal is between zero and two percent unemployment.

 

Inflation is an increase in the average level of prices.

 

If relative prices change, then the inflation rate must change.

 

Everyone is made worse off by inflation.

 

Those with savings accounts typically benefit from periods of inflation.

 

During periods of inflation, all prices will increase or at least remain constant.

 

If all prices and wages in the economy rise by the same percentage during the same time period, inflation does not cause a redistribution of income.

 

The uncertainty of inflation can cause a decrease in consumption but will not impact business spending and production.

 

The CPI is used to measure the change in the average price of consumer goods and services.