national Unlike income, personal income includes retained earnings, corporate income taxes and social insurance contributions, and excludes interest and transfer payments received by households from government. excludes retained earnings, corporate income taxes, social insurance contributions, and interest and transfer payments received by households from government. excludes retained earnings, corporate income taxes and social insurance contributions, and includes interest and transfer payments received by households from government. includes retained earnings, corporate income taxes, social insurance contributions, and interest and transfer payments received by households from Which of the following statements is correct?
Private goods are rival in consumption and excludable. Public goods are rival in consumption but nonexcludab Collecting tolls on all roads is a practical solution to tra Governments serve their citizens best when they refrain failures. Which of the following statements is not correct? Government policies may improve the market's allocation of resources when negative externalities are present. Government policies may improve the market's allocation of resources when positive externalities are present. A positive externality is an example of a market failure. Without government intervention, the market will tend to undersupply products that produce negative externalities.
Moving to another question will save this response.
New home construction is included in the consumption component of GDP. True False An increase in nominal U.S. GDP necessarily implies that the United States is producing a larger output of goods and services. True Fals
e
Which of the following statements is not correct? A patent is a way for the government to encourage the production of a good with technology spillovers. A tax is a way for the government to reduce the production of a good with a negative externality. A tax that accurately reflects social costs produces the socially optimal outcome. Government policies cannot improve upon private market outcomes. Which of the following represents a transfer payment? You transfer $1,000 from your bank account to a mutual fund. The government sends your grandfather his Social Security check. The bank transfers $10 in quarterly interest to your savings account. Your employer automatically transfers $100 each month from your wages to a nontaxable medical spending account. Which of the following would not be considered a negative externality? Smelter, Inc. creates steel and pollution. Your friend buys a new puppy that barks every night. You have an adverse reaction to a medication your doctor prescribed for you. Your neighbor plays loud music that you dislike through stereo speakers set up on his deck. The steps involved in calculating the consumer price index, in order, are as follows:
Choose a base year, fix the basket, compute the inflation and compute the index. Choose a base year, find the prices, fix the basket, comp compute the index. Fix the basket, find the prices, compute the basket's cos compute the index. Fix the basket, find the prices, compute the inflation rat compute the index. If GDP is higher in one country than in another, we can be sure that the standard of living is higher in the country with the higher GDP.
True Fals e Which of the following statements about GDP is correct?
Ken, Danita, and C.J. all enjoy watching the holiday lights displayed in their neighborhood. The homes association is considering displaying lights around the sign at the entrance to the neighborhood. Ken values the lights at $50, Danita at $40, and C.J. at $20. The lights cost $100. What should the homes association do? Install the lights because people like them. Install the lights because the benefits outweigh the costs. Do not install the lights because the costs outweigh the benefits.
Do not install the lights in order to prevent the Tragedy of the Commons problem of overuse.
The social cost of pollution includes the private costs of the producers plus the costs to those bystanders adversely affected by the pollution. True Fals e When negative externalities are present in a market private costs will be greater than social costs. social costs will be greater than private costs. only government regulation will solve the problem. the market will not be able to reach any equilibrium.
Mavis Corporation has an agreement with its workers to index completely the wage of its employees to the CPI. Mavis currently pays its production line workers $7.50 an hour and is scheduled to index their wages today. If the CPI is currently about 130 and was 120 a year ago, Mavis should increase the hourly wages of its workers by about $0.075. $0.10.
$0.58. $0.63.
The price index in the first year is 150; in the second year it is 160; and in the third year it is 175. The inflation rate is about 1.07 percent between the first and second years, and 1.09 percent between the second and third years. 5.4 percent between the first and second years, and 9.4 percent between the second and third years. 6.7 percent between the first and second years, and 9.4 percent between the second and third years. 10 percent between the first and second years, and 1.09 percent between the second and third years. Between October 2001 and October 2002, the CPI in Canada rose from 116.5 to 119.8. In Mexico it rose from 97.2 to 102.3. What were the inflation rates for Canada and Mexico over this one-year period? 3.3 percent for Canada and 6.7 percent for Mexico 3.3 percent for Canada and 5.2 percent for Mexico 2.8 percent for Canada and 6.7 percent for Mexico 2.8 percent for Canada and 5.2 percent for Mexico In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 195 for 2005. President Hoover's 1931 salary was equivalent to a 2005 salary of about $1,455,995. $1,254,262. $1,125,008. $962,171.
GDP does not make adjustments for leisure time and environmental quality. True Fals
e How is Net National Product (NNP) calculated? Saving is subtracted from the total income of a nation's citizens. Saving is subtracted from the total income of a nation's permanent residents. Depreciation losses are subtracted from the total income of a nation's citizens. Depreciation losses are subtracted from the total income of a nation's permanent residents.
An overcrowded beach is an example of a positive externality. a Tragedy of the Commons. an environmentally inefficient allocation of resources. an economically unfair allocation of resources.
Which of the following transactions adds to U.S. GDP for 2006? In 2006, Ashley sells a car that she bought in 2002 to William for $5,000. An American management consultant works in Mexico during the summer of 2006 and earns the equivalent of $30,000 during that time. When John and Jennifer were both single, they lived in separate apartments and each paid $750 in rent. John and Jennifer got married in 2006 and they bought a house that, according to reliable estimates, could be rented for $1,600 per month. None of the above transactions adds to GDP for 2006. If nominal GDP is $10 trillion and real GDP is $8 trillion, the GDP deflator is
80, and this indicates that the price level has decreased year. 80, and this indicates that the price level has increased year. 125, and this indicates that the price level has increased year. 125, and this indicates that the price level has increased year. By not taking into account the possibility of consumer substitution, the CPI understates the cost of living.
overstates the cost of living. may overstate or understate the cost of living, depending on how much prices rise. may overstate or understate the cost of living, regardless of the extent to which prices rise.
Which is the most accurate statement about the GDP deflator and the consumer price index? The GDP deflator compares the price of a fixed basket of goods and services to the price of the basket in the base year, whereas the consumer price index compares the price of currently produced goods and services to the price of the same goods and services in the base year. The consumer price index compares the price of a fixed basket of goods and services to the price of the basket in the base year, whereas the GDP deflator compares the price of currently produced goods and services to the price of the same goods and services in the base year. Both the GDP deflator and the consumer price index compare the of price a fixed basket of goods and services to the price of the basket in the base year. Both the GDP deflator and the consumer price index compare the price of currently produced goods and services to the price of the same goods and services in the base year.
Highway engineers have proposed improving a dangerous stretch of highway at a cost of $2 million. They expect that it will reduce the risk of someone dying in an accident over the life of the highway from 22.1 percent to 5.7 percent. The project would be worth doing as long as a human life is worth at least $114,000. $328,000. $442,000. $10 million.
Suppose that meat producers create a negative externality. What is the relationship between the equilibrium quantity and the socially optimal quantity of meat to be produced? They are equal.
The equilibrium quantity is greater than the socially optimal quantity. The equilibrium quantity is less than the socially optimal quantity. There is not enough information to answer the question. Which of the following statements is not correct? Environmental degradation is an example of the Tragedy of the Commons. Cost-benefit analysis is an important tool that economists use to evaluate the benefits of providing a public good. Some goods, such as lighthouses, may be either private or public goods. The free-rider problem prevents governments from supplying public goods. GDP is defined as the market value of all final goods and services produced
by the citizens of a country, regardless of where they live definition focuses on GDP as a measure of total income. by the citizens of a country, regardless of where they live definition focuses on GDP as a measure of total expendi within a country in a given period of time; this definition of total income. within a country in a given period of time; this definition of total expenditure. In the case of a technology spillover, the government can encourage firms to internalize a positive externality by taxing production, which would decrease supply. taxing production, which would increase supply. subsidizing production, which would decrease supply. subsidizing production, which would increase supply. Refer to Table 23-1. NNP for this economy is $100. $96. $90. $88. In an imaginary economy, consumers buy only hot dogs and hamburgers. The fixed basket consists of 10 hot dogs and 6 hamburgers. A hot dog cost $3 in 2006 and $5.40 in 2007. A hamburger cost $5 in 2006 and $6 in 2007. Which of the following statements is correct?
When 2006 is chosen as the base year, the consumer pr When 2006 is chosen as the base year, the inflation rate When 2007 is chosen as the base year, the consumer pr When 2007 is chosen as the base year, the inflation rate Greg, a U.S. citizen, works only in Canada. The value that his labor contributes to U.S. output is included in both U.S. GDP and U.S. GNP. included in U.S. GDP, but it is not included in U.S. GNP. included in U.S. GNP, but it is not included in U.S. GDP. included in neither U.S. GDP nor U.S. GNP. A patent is used to disseminate information. offset the negative effects of taxes. protect inventors for as long as they live. assign property rights. When goods are not excludable the goods will be produced as private goods but not as public goods. the goods will not be produced since no one values them. the free-rider problem prevents the private market from supplying them. the private market will produce the goods but will charge less for them than if they are produced as public goods National defense is a classic example of a public good because there is no market for private security services. it is difficult to exclude people from receiving the benefits from national defense once it is provided. everyone agrees that some level of national defense is important, but only the government knows the optimal amount. there are no private firms willing to supply defense goods such as tanks and weapons. An example of a public good would be cable TV service. a tornado siren. clothing. the environment. Knowledge is an example of a public good.
private good. common resource. natural monopoly good. The difference between social cost and private cost is a measure of the loss in profit to the seller as the result of a negative externality. cost of an externality. cost reduction when the negative externality is eliminated. cost incurred by the government when it intervenes in the market. If you currently make $25,000 a year and the CPI rises from 110 today to 150 in five years, then you need to be making $37,850 to have kept pace with consumer price inflation.
When externalities are present in a market, the well-being of ma
and market bystanders are both directly affected. and market bystanders are both indirectly affected. is directly affected, and market bystanders are indirectl is indirectly affected, and market bystanders are directl
Samantha goes to the grocery store to make her monthly purchase of ginger ale. As she enters the soft drink section, she notices that the price of ginger ale has increased 15 percent, so she decides to buy some peppermint tea instead. To which problem in the construction of the CPI is this situation most relevant? substitution bias introduction of new goods unmeasured quality change income effect
According to the Coase theorem, the private market will need government intervention in order to reach an efficient outcome. True Fals e
One person's use of common resources does not reduce the enjoyment other people receive from the resource. True Fals e
If real GDP doubles and the GDP deflator doubles, then nominal GDP remains constant. doubles. triples. quadruples. A local laundry advertises that the clothes it washes smell "sunshine fresh" because it line dries everything outside. Then a steel factory moves in next door and emits black smoke which stains the clothes drying at the laundry. According to the Coase theorem, granting the
steel factory the right to pollute would be efficient, but g clean air would be equitable. laundry the right to clean air would be efficient, but gran to pollute would be equitable. steel factory the right to pollute has the same effect on e right to clean air. steel factory the right to pollute has the same effect on e the right to clean air. One benefit to the patent system is that it encourages the production of technical knowledge. True Fals e The price index in 2006 is 120, and in 2007 it is 127.2. What is the inflation rate?
5.4 percent 6.0 percent 7.2 percent The inflation rate is impossible to determine without knowing the base year.
When a firm sells a good or a service, the sale contributes to the nation's income
only if the buyer of the good or service is a household. only if the buyer of the good or service is a household o whether the buyer of the good or a service is a househo government. We have to know whether the item being sold is a good the question.
Which of the following is an example of the free-rider problem? Both Fred and Wilma receive low-cost dental care at the local dental school, so neither of them pays the full cost of the care. Elmer receives a free lunch from the local "Meals on Wheels" program because of his low monthly income. Yet his next door neighbor, Dorothy, is not eligible for the free lunch. Max owns Fido, a large dog who barks whenever anyone walks near his house. Sally lives next to Max, and Fido's barking can be heard whenever anyone walks near her house, too. Thus, Sally receives free protection from burglars because of Fido's barking. Both David and Carolyn can enjoy a beautiful sunset from the porches of their adjacent houses, yet neither of them pays to watch the sunset.
Tolls are not effective in altering people's incentives to drive during rush hour. True Fals e
The U.S. patent system makes general knowledge excludable. makes specific, technical knowledge excludable. creates a disincentive to invent. Both a and b are correct.
A country reported nominal GDP of $200 billion in 2006 and $180 billion in 2005; it reported a GDP deflator of 125 in 2006 and 105 in 2005. Between 2005 and 2006, real output and the price level both rose. real output rose and the price level fell. real output fell and the price level rose. real output and the price level both fell.
If real GDP doubles and the GDP deflator doubles, then nominal GDP remains constant. doubles. triples. quadruples.
One person's use of common resources does not reduce the enjoyment other people receive from the resource. True Fals e