1015: Econ Section F-K-R Practice Exercise for Exam1 1. Which of the following will not shift an economys PPF outward from the origin? (Fall 2003 exam) a. An increase in the capital stock b. A technological advance c. A reduction in hour worked d. An increase in the size of the labor force 2. In a year, workers in Thailand can produce 500 bushels of wheat or 40 barrels of oil. In a year, workers in Japan can produce 100 bushels of wheat or 80 barrels of oil. a. What is the opportunity cost of producing wheat for Thailand? And Japan?
b. What is the opportunity cost of producing oil for Thailand? And Japan?
c. Who has an absolute advantage in producing wheat? Oil?
d. Who has comparative advantage in producing wheat? Oil?
e. Who should specialize in producing wheat? Oil?
f. If there is a trade, what is the range of an acceptable price for 1 barrel of oil?
3. From previous exam (Prof. Miller) Output per week Lynette Sharyl Research Papers 3 2 Publish documents 4 1
a. Who has the absolute advantage in each of the tasks?
b. What are opportunity costs of researching (and publishing) for Lynette?
c. What are opportunity costs of researching and publishing for Sharyl?
d. Who has the comparative advantage in each of the good?
e. If there is a trade, what is the range of an acceptable price for 1 published paper?
4. nalyze what will happen to the equilibrium price and quantity sold. a. What will happen if the average income increases?
b. What will happen if researchers discover and implement a new and improved technology used to produce the good?
c. Suppose that consumer preferences for a good improve but the prices of inputs used to make the good increase. What will happen?
d. Suppose the price of tomatoes increases, what will happen in the market for spaghetti noodles?
5. The price for labor is the wage rate, what will happen to the supply of labor if wages increase?
6. Which of the following transactions adds to the value of U.S. GDP? a) A $300 Playstation2 produced in Japan and sold in the United States. b) A $300 Playstation2 produced in the United States but not sold at all. c) Both of the above add to the value of U.S. GDP. d) Neither of the above adds to the value of U.S. GDP.
7. Fill in the blanks in the following table of GDP statistics (Baumols Text book) 1992 Nominal GDP Real GDP GDP Deflator 6,244 6,244 6,390 102.6 105.1 1993 1994 6,947
8. Which of the following would be included in the calculation of GDP for 1996 a) The price of a home built in 1991 and sold in 1996 b) The price of 100 shares of Exxon stock purchased in 1996 c) The price of a classic 1960 Thunderbird purchased in 1996 d) The price of a new punch press built and purchased in 1996 to replace a worn out machine e) The price of a used bicycle purchased at a garage sale in 1996 9. Using rule of 70, how fast would real GDP have to grow, per year, in order for it to double in 20 years? a. 14% b. 7% c. 10% d. 20% e. 3.5% 10. What is the formula that will be used in calculating the GDP (Y)? a) Y = C * I * G * NX b) Y + C = I + G - NX c) Y C = I + G + NX d) Y + C + I = G
Use the figure below to answer questions 11-13
Car
A
C
B
Computer
11. What is the difference between a bowed-out PPF (as in above picture) and a linear PPF? a. Bowed-out PPF has lower opportunity cost than a linear PPF b. Bowed-out PPF has higher opportunity cost than a linear PPF c. Bowed-out PPF has constant opportunity cost but linear PPF has increasing opportunity cost d. Bowed-out PPF has increasing opportunity cost but linear PPF has constant opportunity cost 12. Which of the following statements are true? I. Point A and B are attainable II. Point C is not attainable III. Point A, B and C are attainable and efficient a. I is correct b. I and II are correct c. I and III are correct d. III is correct
13. Which of the following is true? a. Opportunity cost of producing computer at point A is higher than opportunity cost of producing computer at point B b. Opportunity cost of producing computer at point A is lower than opportunity cost of producing computer at point B c. Opportunity cost of producing computer at point A is the same as opportunity cost of producing computer at point B d. Opportunity cost of producing car at point A is the same as opportunity cost of producing car at point B 14. If a good is labeled an inferior good, then a. As income falls, the demand for the item increases. b. As income rises, the demand for the item increases. c. As income falls, the quantity demanded for the item decreases. d. As income falls, the supply increases. e. As income falls, the supply decreases. 15. A market that firms are buyers and households are sellers is called a. Product market b. Goods market c. Factor market d. Financial market e. Stock market
16. Use the following data for an economy to answer the questions (Study Guide fro Frank & Bernanke) Consumption expenditures Imports Government purchases of goods and services Construction of new homes apartments and Sales of existing homes and apartments Exports Government payments to retiree Household purchases of durable goods Beginning-of-year inventory of stocks End-of-year inventory of stocks Business fixed investment a. C = ________________________________________ b. I = _________________________________________ c. G = _________________________________________ d. NX = ________________________________________ e. GDP = _______________________________________ 17. Suppose the producers of corn change their beliefs about the future, expecting that the price of corn will go down in the future. What effect will this change have on the market for corn? a. None, producers do not care about future prices. b. The supply curve for todays corn will shift to the left. c. The supply curve for todays corn will shift to the right. d. The demand for corn will decrease. 1,500 500 800 600 500 400 300 400 600 700 400
18. Suppose you expected the price of ice cream to decline in the future. What impact, if any, would occur in the market for ice cream today? a. The equilibrium price would decline as the demand declines in anticipation of the lower price b. The equilibrium price would increases as more people purchase ice cream today. c. Nothing would happen to the equilibrium price. d. The equilibrium quantity would increase as more people purchase ice cream today. 19. Which of the following will increase U.S. GDP? a. Bud Light produced in Missouri and sold in Mexico b. A barrel of wine produced in France and sold in USA c. Bud Light produced by American company in Japan and sold in China d. Asahi produced by Japanese company in China and sold in USA 20. (Example from Frank and Bernanke) Amys card shop receives a shipment of Valentines Day cards in December 2000. Amy pays the wholesale distributor of the cards a total of $500. In February 2001, she sells the cards for a total of $700. What are the contributions of these transactions to GDP in a. The year 2000: ________________________ b. The year 2001: ________________________ 21. Use the data from the following table to answer the questions
Year 2002 2003 Pies Quantity Price 30 1 40 1.5 Chairs Quantity Price 20 10 22 10 Juices Quantity Price 25 2 30 3
a. Nominal GDP in 2002? 2003? b. If 2002 is the base year, real GDP in 2002? 2003? c. If 2002 is the base year, GDP deflator in 2002? 2003?
22. Which of the following transactions are included in the GDP, and by how much does each raise GDP? (Baumols Textbook) a. You buy a new Honda, made in USA, paying $12,000 b. You buy a new Toyota, imported from Japan, paying $17,000 c. You buy a used Chevrolet, paying $3,000 d. The U.S. government pays $1 billion in salaries for government workers. e. The U.S. government pays $1 billion to Social Security recipients. f. Mr. Black and Mr. Blue, each out for a Sunday drive, have a collision in which their cars are destroyed. Black and Blue each hire a lawyer to sue the other, paying the lawyers $3,000 each for services rendered. The judge throws the case out of court. 23. (Parkins textbook) which of the following is a macroeconomic issue? a. How a rise in the price of sugar affects the market for sodas b. How federal government budget deficits affect interest rates c. What determines the amount a firm will produce d. The cause of a decline in the price of peanut butter 24. John gets a new job as a project manager and he receives 20% increase in his wage. Before the promotion, John bought 2 DVDs per month, went to the movie every Friday, and rented 5 movies from Blockbuster (per month). After the promotion, John buys 4 DVDs per month, goes to the movies every Saturday, and rents 3 movies from Blockbuster per month. Thus, for John, DVD is _______________; going to the movie is ______________; and renting movie from Blockbuster is ______________. a. An inferior good; a normal good; a neutral good b. A normal good; an inferior good; a neutral good c. A normal good; a neutral good; an inferior good d. A superior good; an inferior good; a neutral good e. A superior good; a neutral good; an inferior good
25. Which of the following accurately describes an effect of the hurricane Katrina on GDP? a. GDP would decrease reflecting the costs of cleanup b. GDP would increase reflecting the costs of cleanup c. GDP would increase reflecting the decrease in production that occurred during the storm and the productivity capacity lost in the storm. d. GDP would increase well being 26. There is an increase in the price of tickets to football games. What effect will this change have the on equilibrium price and quantity of basketball tickets? a. price will increase and quantity will increase b. price will increase and quantity will decrease c. price will decrease and quantity will increase d. price will decrease and quantity will decrease 27. If a U.S. firm produces car in Mexico, that production should count towards a. U.S. GNP b. Mexicos GNP c. U.S. GDP d. Both U.S. GDP and U.S. GNP
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