Understanding Macroeconomics 2nd Edition Philip Mohr, Cecilia Van Zyl, Anmar Pretorius - Solutions

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Suppose the market for roses is currently in equilibrium.If the supply of roses falls, while at the same time the demand for roses rises, what can you say about the price and quantity of roses in the market?(A) Price and quantity both rise.(B) Price rises, but the change in quantity is
Nancy has the choice to spend one hour studying for an exam, mowing the lawn for one hour at a wage of $6, or babysitting her niece for one hour at a wage of $8. If we know that Nancy has chosen to study for the exam, which of the following is true?(A) The benefit received from studying is greater
At the birthday party of your best friend, you see Skylar help himself to a second piece of cake. For this individual, it must be the case that(A) the marginal benefit of the second piece of cake is less than the marginal cost.(B) the total benefit received from eating cake is falling.(C) the ratio
Which of the following tax systems is designed to redistribute income from the wealthy to the poor?(A) A progressive tax system(B) A regressive tax system(C) A proportional tax system(D) An excise tax system(E) A tariff system
A negative externality from the production of a good exists when(A) the market overallocates resources to the production of this good.(B) spillover benefits are received by society.(C) the marginal social benefit equals the marginal social cost.(D) total welfare is maximized.(E) the marginal
Which of the following is the best example of a public good?(A) A visit to the orthodontist(B) A session at the tanning salon(C) A large pizza(D) A cup of coffee(E) The Hubble Space Telescope
If the above firm were a monopsonist, the wage would be _________ and employment would be _________ the competitive outcome.(A) greater than; less than(B) less than; greater than(C) greater than; greater than(D) less than; less than(E) less than; the same as
If a firm is hiring labor in the perfectly competitive labor market, the wage and employment will be(A) $4 and zero.(B) $5 and 10.(C) $6 and 20.(D) $7 and 30.(E) $8 and 40.
Which of the following statements is true about the demand for labor?(A) It rises if the price of a substitute resource falls and the output effect is greater than the substitution effect.(B) It falls if the price of the output produced rises.(C) It falls if the price of a complementary resource
Which of the following is most likely to decrease the demand for kindergarten teachers?(A) An increase in K–12 funding.(B) Increased immigration of foreign citizens and their families.(C) A decrease in the average number of children per household.(D) Subsidies given to college students who major
If the government wishes to regulate a natural monopoly so that it produces an allocatively efficient level of output, it would be(A) where price is equal to average total cost.(B) where marginal revenue equals marginal cost.(C) where normal profits are made.(D) where price is equal to average
The market structures of perfect competition and monopolistic competition share which of the following characteristics?(A) Ease of entry and exit in the long run(B) Homogenous products(C) Perfectly elastic demand for the firm’s product(D) Long-run positive profits(E) Rigid or “sticky” prices
Which of the following is necessarily a characteristic of oligopoly?(A) Free entry into and exit from the market(B) A few large producers(C) One producer of a good with no close substitutes(D) A homogenous product(E) No opportunities for collusion between firms
Which of the following statements describes a profit-maximizing monopolist?I. Output is set where marginal revenue equals marginal cost, creating an efficient allocation of economic resources.II. Deadweight loss is eliminated in the long run.III. Price is set above marginal cost, creating
If the perfectly competitive price is currently below minimum average total cost, we can expect which of the following events in the long run?(A) The price will rise and each firm’s output will fall as firms exit the industry.(B) Market equilibrium quantity will increase as firms exit the
If the market price of the output increases from P1 to P3, the profit-maximizing firm will(A) increase output from q1 to q4 and earn positive economic profits.(B) increase output from q1 to q4 and earn a normal profit.(C) increase output from q1 to q3 and earn positive economic profits.(D) increase
The shutdown point is seen at:(A) P0, q0(B) P1, q1(C) P2, q2(D) P3, q3(E) P3, q4
Monopolistic competition is often characterized by(A) strong barriers to entry.(B) a long-run price that exceeds average total cost.(C) a price that exceeds average variable cost, causing excess capacity.(D) a homogenous product.(E) many resources devoted to advertising.
At a quantity of 4, what is the total cost of production?(A) $7.50(B) $2.50(C) $15(D) $30(E) $14.50
The first unit of output to exhibit diminishing marginal productivity is the _____ unit.(A) 1st(B) 2nd(C) 3rd(D) 4th(E) 5th
The total fixed cost of producing a quantity of 4 is(A) $5.(B) $7.50.(C) $7.(D) $2.50.(E) $10.
In the short run, a firm employs labor and capital to produce gadgets. If the annual price of capital increases, what will happen to the shortrun cost curves?(A) The marginal cost and average variable cost curves will shift upward.(B) The average fixed cost and average total cost curves will shift
If a consumer is not required to pay a monetary price for each cookie she consumes, the consumer will stop eating cookies when(A) the total utility from eating cookies is equal to zero.(B) the substitution effect outweighs the income effect from eating cookies.(C) the ratio of marginal utility
Which of the following describes the theory behind the demand curve?(A) Decreasing marginal utility as consumption rises.(B) Increasing marginal cost as consumption rises.(C) Decreasing marginal cost as consumption rises.(D) Increasing total utility at an increasing rate as consumption rises.(E)
If the price of firm A’s cell phone service rises by 5 percent and the quantity demanded for firm B’s cell phone service increases by 10 percent, we can say that(A) demand for firm B is price elastic.(B) supply for firm B is price elastic.(C) firms A and B are substitutes because the
Suppose the price of beef rises by 10 percent and the quantity demanded of beef falls by 20 percent.We can conclude that(A) demand for beef is price elastic and consumer spending on beef is falling.(B) demand for beef is price elastic and consumer spending on beef is rising.(C) demand for beef is
In Figure D.2, identify the area of consumer surplus.(A) 0ACB(B) 0FCB(C) AFC(D)ACE(E) FCE
If the demand for grapes increases simultaneously with an increase in the supply of grapes, we can say that(A) equilibrium quantity rises, but the price change is ambiguous.(B) equilibrium quantity falls, but the price change is ambiguous.(C) equilibrium quantity rises, and the price rises.(D)
The competitive market for gasoline is currently in a state of equilibrium. Which of the following would most likely increase the price of gasoline?(A) Household income falls.(B) Technology used to produce gasoline improves.(C) The price of subway tickets and other public transportation falls.(D)
Which of the following is true of equilibrium in a purely (or perfectly) competitive market for good X?(A) A shortage of good X exists.(B) The quantity demanded equals the quantity supplied of good X.(C) A surplus of good X exists.(D) The government regulates the quantity of good X produced at the
The graph in Figure D.1 shows a nation’s production possibility frontier (PPF) for the production of bread and butter. Which of the following is true?(A) The opportunity cost of producing more butter is a decreasing amount of bread.(B) Point X represents unemployed economic resources.(C) The
Which of the following statements describes a capitalist market economy?I. Economic resources are allocated based upon relative prices.II. Private property is fundamental to innovation, growth, and trade.III. A central government plans the production and distribution of goods.(A) I only(B) II
Scarcity is best defined as(A) the difference between limited wants and limited economic resources.(B) the difference between the total benefit of an action and the total cost of that action.(C) the difference between unlimited wants and limited economic resources.(D) the opportunity cost of
You learn that one nation has a Gini ratio of .25 and another nation has a Gini ratio of .85. Based on this you might conclude(A) the nation with the higher Gini ratio has a more equal distribution of wealth and income.(B) the nation with the higher Gini ratio has a more unequal distribution of
Jason earns $1,000 a week and pays a total of$200 in taxes. Jennifer earns $2,000 a week and pays a total of $300 in taxes. We can conclude from this information that their income is taxed with a(n)(A) progressive tax(B) proportional tax(C) regressive tax(D) tax bracket(E) egalitarian tax
Production of energy (i.e., electricity, natural gas, heating oil) creates a negative externality in the form of air pollution blown to communities downwind from the source of the pollution.Of the choices below, which is the most appropriate policy to remedy this negative externality?(A) a per unit
Which of the following is the best example of a public good?(A) A lighthouse on a rocky coastline(B) Tickets to the Super Bowl(C) A granola bar(D) A cup of coffee(E) A magazine subscription
Which of the following scenarios best describes a negative externality?(A) A roommate subscribes to a monthly CD club, and you share the same taste in music.(B) Your neighbor has a swimming pool, and you have an open invitation to come on over for a pool party.(C) Your neighbor has a swimming pool,
In the figure below, X represents(A) spillover benefits.(B) a potential producer subsidy to eliminate an externality.(C) a potential consumer subsidy to eliminate an externality.(D) both A and C.(E) A, B, and C.
If a firm hires labor in a monopsony labor market, the wage and employment are(A) $3 and zero.(B) $4 and 10.(C) $5 and 20.(D) $6 and 30.(E) $7 and 40.
If a firm is hiring labor in the perfectly competitive labor market, the wage and employment are(A) $3 and zero.(B) $4 and 10.(C) $5 and 20.(D) $6 and 30.(E) $7 and 40.
A competitive labor market is currently in equilibrium.Which of the following most likely increases the market wage?(A) More students graduate with the necessary skills for this labor market.(B) Demand for the good produced by this labor is stronger.(C) The price of a complementary resource
The price of labor is $2, and the price of capital is $1. The marginal product of labor is 200, and the marginal product of capital is 50. What should the firm do?(A) Increase capital and decrease labor so that the marginal product of capital falls and the marginal product of labor rises.(B)
Your aunt runs a small firm from her home making apple pies. She hires some friends to help her. Which of the following situations would most likely increase her demand for labor?(A) The price of apple peelers/corers rises.(B) Your aunt’s friends gossip all day, slowing their dough-making
Deadweight loss occurs in(A) monopolistic competition as P > MC.(B) monopoly markets because P > MC.(C) oligopoly markets because P > MC.(D) All of the above.(E) None of the above.
If these firms do not collude, the outcome will be that(A) both firms maintain the status quo.(B) both firms advertise.(C) Firm X advertises and Firm Y maintains the status quo.(D) Firm Y advertises and Firm X maintains the status quo.(E) Firm X advertises and Firm Y alternates between the status
Which of these situations is not an example of price discrimination?(A) Brent works nights, so he chooses to buy bread at 7 a.m. rather than at 7 p.m.(B) Bob and Nancy each receive a “$1 off”coupon in the mail, but Bob redeems it while Nancy does not.(C) Katie buys 12 Cokes for $3, and Josh
If the perfectly competitive price is currently above minimum ATC, we can expect which of the following events in the long run?(A) Price rises as firms enter the industry.(B) Market equilibrium quantity rises as firms exit the industry.(C) Nothing. The industry is currently in longrun
Which characteristic is likely a part of a mono poly market but not of monopolistic competition?(A) Differentiated products(B) Patents and copyrights(C) Possibility of profit in the short run(D)Deadweight loss exists(E) None of the above
For a competitive firm, what is the most important thing to consider in deciding whether to shut down in the short run?(A) Compare AVC to MR.(B) Compare TR to TC.(C) Do not produce if the TFC is not covered by revenue.(D) Produce the highest quantity demanded regardless of price.(E) Compare P to
At the q3 level of output,(A) AFC = $d2 – $d1.(B) MC = $d2.(C) TVC = $d2.(D)ATC = $d3.(E) AFC = $d3 – $d2.
The curves labeled W, X, Y, Z refer to which respective cost functions?(A) MC, AVC, ATC, and AFC.(B) MC, TC, TVC, and AFC.(C) MC, ATC, AVC, and AFC.(D) MC, ATC, AVC, and TFC.(E) ATC, AVC, AFC, and MC.
If the per unit price of labor, a variable resource, increases, it causes which of the following?(A) An upward shift in AFC.(B) An upward shift in MPL.(C) A downward shift in ATC.(D) An upward shift in MC.(E) A downward shift in AFC.Use the following figure to respond to questions 5 to 6.
Which of the following cost and production relationships is inaccurately stated?(A) AFC = AVC - ATC(B) MC = DTVC/DQ(C) TVC = TC - TFC(D)APL = TPL/L(E) MC = w/MPL
The Law of Diminishing Marginal Returns is responsible for(A) AVC that first rises, but eventually falls, as output increases.(B) AFC that first rises, but eventually falls, as output increases.(C) MP that first falls, but eventually rises, as output increases.(D) MC that first falls, but
Which of the following is most likely an example of production inputs that can be adjusted in the long run, but not in the short run?(A) Amount of wood used to make a desk.(B) Number of pickles put on a sandwich.(C) The size of a McDonald’s kitchen.(D)Number of teacher’s assistants in local
The competitive market equilibrium is at point C. If a per unit excise tax is imposed on the production of this good, the revenue collected by the government is(A) the area BDE.(B) the area BADH.(C) the area GDH.(D) the area DAC.(E) the area GDAB.
Use the figure below to respond to the next two questions.The competitive market equilibrium is at point C. If a per unit excise tax is imposed on the production of this good, the deadweight loss is(A) the area BDE.(B) the area BADH.(C) the area GDH.(D) the area DAC.(E) the area GDAB.
A consequence of a price floor is(A) a persistent shortage of the good.(B) an increase in total welfare.(C) a persistent surplus of the good.(D) elimination of deadweight loss.(E) an increase in quantity demanded and a decrease in quantity supplied.
Mrs. Johnson spends her entire daily budget on potato chips, at a price of $1 each, and onion dip at a price of $2 each. At her current consumption bundle, the marginal utility of chips is 12 and the marginal utility of dip is 30. Mrs. Johnson should(A) do nothing; she is consuming her utility
A small business estimates price elasticity of demand for the product to be 3. To raise total revenue, owners should(A) decrease price as demand is elastic.(B) decrease price as demand is inelastic.(C) increase price as demand is elastic.(D) increase price as demand is inelastic.(E) do nothing;
If the price of corn rises 5 percent and the quantity demanded for corn falls 1 percent, then(A) Ed = 5 and demand is price elastic.(B) Ed = 1/5 and demand is price elastic.(C) Ed = 5 and demand is price inelastic.(D) Ed = 1/5 and demand is price inelastic.(E) Ed = 5 and corn is a luxury good.
The competitive market provides the best outcome for society because(A) consumer surplus is minimized, while producer surplus is maximized.(B) the total welfare is maximized.(C) producer surplus is minimized, while consumer surplus is maximized.(D) the difference between consumer and producer
The apple market is in equilibrium. Suppose we observe that apple growers are using more pesticides to increase apple production. At the same time, we hear that the price of pears, a substitute for apples, is rising. Which of the following is a reasonable prediction for the new price and quantity
The market for denim jeans is in equilibrium, and the price of polyester pants, a substitute good, rises. In the jean market(A) supply falls, increasing the price and decreasing the quantity.(B) supply falls, increasing the price and increasing the quantity.(C) demand falls, increasing the price
Suppose that aluminum is a key production input in the production of bicycles. If the price of aluminum falls, and all other variables are held constant, we expect(A) the demand for aluminum to rise.(B) the supply of bicycles to rise.(C) the supply of bicycles to fall.(D) the demand for bicycles to
If average household income rises and we observe that the demand for pork chops increases, pork chops must be(A) an inferior good.(B) a normal good.(C) a surplus good.(D) a necessity.(E) a shortage good.
When the price of pears increases, we expect the following:(A) Quantity demanded of pears rises.(B) Quantity supplied of pears falls.(C) Quantity demanded of pears falls.(D)Demand for pears falls.(E) Supply of pears rises.
Ray and Dorothy can both cook and can both pull weeds in the garden on a Saturday afternoon.For every hour of cooking, Ray can pull 50 weeds and Dorothy can pull 100 weeds. Based on this information,(A) Ray pulls weeds, since he has absolute advantage in cooking.(B) Dorothy pulls weeds, since she
The shape of this PPF tells us that(A) economic resources are perfectly substitutable from production of tea to production of crumpets.(B) citizens prefer that an equal amount of tea and crumpets be produced.(C) the opportunity cost of producing crumpets rises as more crumpets are produced.(D) the
Economic growth is best represented by a movement from(A) A to B(B) B to C(C) C to D(D) D to E(E) E to A
A student decides that, having already spent three hours studying for an exam, she should spend one more hour studying for the same exam.Which of the following is most likely true?(A) The marginal benefit of the fourth hour is certainly less than the marginal cost of the fourth hour.(B) The
Economics is best described as(A) the study of how scarce material wants are allocated between unlimited resources.(B) the study of how scarce labor can be replaced by unlimited capital.(C) the study of how decision makers choose the best way to satisfy their unlimited material wants with a scarce
Politicians and other observers often stress that the South African economy is not growing fast enough.They then simply state that economic growth"must" be increased. Explain to them what the main constraints on growth are, as well as the key steps that have to be taken to raise the growth rate.
An increase in the quantity and quality of factors of production is necessary, but not sufficient to ensure economic growth. Discuss.
Is it possible to stimulate economic growth from the supply side only? Discuss.
Discuss the supply factors of economic growth.How can the potential output of an economy be increased?
Will an increase in the output of the South African economy necessarily raise the standard of living of all South Africans?
How would you use business cycle indicators to determine whether economic conditions are improving or worsening?
According to the Keynesian view, what would be the appropriate policy to apply when the economy is in a cyclical downswing?
Distinguish between the classical, Keynesian and structuralist approaches to the explanation of the business cycle.
Define the business cycle and discuss the elements of a complete cycle.
Distinguish between real GDP and real GDP per capita.
Define economic growth and explain how it can be measured.
GDP is known to have certain shortcomings. Discuss some of the shortcomings associated with GDP as a measure of welfare.
What types of monetary and fiscal policy can be used to reduce unemployment?
How would you explain the Phillips curve to a family member?
An economist states that there is too much of the wrong type of labour in South Africa. Do you agree?If you do, outline a strategy to tackle this problem.If you do not agree, substantiate your view.
What types of policies may be applied to reduce unemployment from the demand side?
Provide two reasons for the rapid increase in the unemployment rate in South Africa over recent decades.
List and discuss the different types of unemployment.
Discuss some of the costs associated with unemployment, both for the individual and for society as a whole.
Define the informal economy. Why do people engage in informal sector activity?
Distinguish between the strict and expanded definitions of unemployment.
List two key ideas of each of the following schools of thought: supply-side economics, new classical economics and new Keynesian economics.
Discuss the key ideas of the monetarists.
In which circumstances may monetary policy prove to be more effective than fiscal policy? When will fiscal policy tend to be more effective?
Discuss the various lags associated with monetary and fiscal policy.
Explain the basic elements of the SARB's view of the monetary transmission mechanism.
Use the AD-AS model to illustrate and explain how government can use monetary and fiscal policies to stimulate the economy. Comment on the possible side-effects of such policies. Also compare your answer to your answer to question 2 in Chapter 8.

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Understanding Macroeconomics 2nd Edition Philip Mohr, Cecilia Van Zyl, Anmar Pretorius - Solutions

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