Questions and Answers of Introduction To Economics

Suppose the demand and supply of labor in your town is given in the accompanying graph.a. What is the equilibrium wage per hour and quantity of workers hired per month? b. What is the value of
Would you be likely to leave school if the minimum wage were increased to $15.00 per hour? Why or why not? What types of students would be most likely to leave school as a result of a minimum wage
Those that win when the minimum wage is increased include a. Buyers of goods produced using minimum wage workers. b. Workers who lose their jobs.c. Employers. d. Workers who keep their jobs.
When the government sets out to help low-income people by establishing a minimum wage a. Increased unemployment may occur. b. A shortage of labor may occur because there will not be enough workers
An increase in the minimum wage a. Makes all poor people better off by increasing their incomes.b. Does not make anyone better off because employers won't hire people if they have to pay them
When the demand for labor is very elastic, a given increase in the minimum wage will generate__________ relative to when the demand for labor is very inelastic.a. A larger decrease in the quantity of
Suppose the elasticity of demand for low-skill labor is -1.0. Currently, the minimum wage keeps the price of low-skill labor 20 percent above the equilibrium wage. If the minimum wage is removed, how
The accompanying table shows the daily production possibilities for two individuals, Tommy Trout from Alaska and Coleen Coffee from Columbia. Use the table to answer the following questions.a. What
If the demand for labor is inelastic then a. Any unemployment caused by raising the minimum wage is less than if demand were elastic. b. Any unemployment caused by raising the minimum wage is the
If an individual suggests that any decision regarding an increase in the minimum wage should only be made after objectively comparing the costs and benefits of the increase,a. That individual must
Determining the comparative advantage of a country requires that you look at the economic notion of a. Opportunity cost.b. Ceteris paribus.c. Accounting and economic profit.d. External costs.
It takes country A 2 units of labor to produce 1 computer and 2 units of labor to produce 1 TV. It takes country B 3 units of labor to produce 1 computer and 4 units of labor to produce 1 TV.a. Which
It takes country X 1 unit of labor to produce either a computer or a TV and it takes country Y 2 units of labor to produce a computer and I unit of labor to produce a TV. Based on this information,
What are some of the costs of protectionism? In your opinion, is it worth it to restrict trade to protect jobs?
In 1 year, the U.S. can produce 10 units of computer software or 5 units of computer hardware. In 1 year, China can produce 3 units of software and 3 units of hardware. Based on this information,a.
If new international trade markets for tractors are opened up and U.S. workers have comparative advantage in producing tractors, U.S. workers are likely to bea. Worse off because demand for tractors
U.S. and Indian workers are substitutes. What effect would an increase in the wages of Indian workers have on the demand for U.S. workers, ceteris paribus? a. No effect on demand, because price
A tariff implemented to reduce international imports to the U.S. will typicallya. Raise the price received by U.S. sellers.b. Raise the price paid by U.S. consumers.c. Lower the price received by
Those that "lose" from international trade includea. All workers.b. Workers who have comparative advantage in production.c. Exporting firms.d. Import-competing firms.
What are some of the costs and benefits of recycling as a means of environmental preservation?
The accompanying table describes an electric power industry made up of three firms. The numbers in the table show the marginal cost of reducing each ton of methane for each of the three firms. If the
Suppose that Mercury Thermometers, Inc. is currently producing at a point where its private marginal cost of production is $15.00. At this level of production, social marginal cost is $25.00. At the
One method of environmental preservation is the use of moral suasion. Moral suasion occurs when people are put under pressure to act in a "morally responsible" way in order to reach a particular
The table describes an electric power industry made up of three firms. The numbers in the table show the marginal cost of reducing each ton of methane for each of the three firms. The total cost of
The table describes an electric power industry made up of three firms. The numbers in the table show the marginal cost of reducing each ton of methane for each of the three firms. If the EPA requires
The accompanying graph shows the market for education, where MC represents marginal costs of education, MBprivate is the private marginal benefits of education, and MBsocial, is the social demand
Suppose that the accompanying graph illustrates the marginal benefits and costs of cell phone use. S(MCprivate) reflects the private marginal costs of cell phone use and S(MCsocial) represents the
Would a purely private market for education be socially efficient? Why or why not?
Suppose that the graph illustrates the marginal benefits and costs of cell phone use. S(MCprivate) reflects the private marginal costs of cell phone use and S(MCsocial) represents the social marginal
Will we improve K-12 education if we increase spending on K-12 education? Why or why not?
The economic argument that it is in society's best economic interest for taxpayers (even those without children) to pay for the education of other people's children isa. The positive marginal benefit
From an economics perspective,a. There should be no government intervention in the education market.b. Government involvement in education is often justified because education is associated with
Why is obtaining a private college education more expensive on average than obtaining a public college education?
The accompanying table shows the marginal private benefit, marginal social benefit, and marginal private cost for you to attend a local university.a. Why does the marginal private cost of education
Using the graph above, a. The private optimal level of education is 12 years. b. The private optimal level of education is 13 years. c. The private optimal level of education is 18 years. d. The
Using the concept of positive externalities, explain why most students are required to obtain vaccinations before they are allowed to attend public school.
Which of the following may help to explain why college attendance rates grow during economic downturns?a. The direct costs of attending college decrease during economic downturns.b. The opportunity
Using the graph above, the closing gap between MB private and and MB social as years of education increases implies thata. The negative externality associated with education must grow as more years
From an economics perspective,a. There should be no government intervention in the health care market. b. Government involvement in health care is often justified because health care is associated
Suppose that labor market experience is the only characteristic that influences wages. Suppose also that males and females have different levels of experience and have different "wage functions"
How does having insurance through third parties affect people's incentives to visit the doctor?
Would people obtain the optimal amount of health care if the health care market were purely private and had no government intervention? Explain.
Ceteris paribus, if expanded health insurance coverage increases the demand for health care, we would expect to see the equilibrium price of health ________ and the equilibrium quantity of health
In the accompanying graph showing the market for health care, MC represents marginal costs of health care. MB private is the private marginal benefits of health care, and MB social is the social
The accompanying table shows the marginal private benefit, marginal social benefit, and marginal private cost for you to exercise to improve your health.a. Why does the marginal private cost of
Using the graph in the previous Question, a. The private optimal level of health care is 6 units. b. The private optimal level of health care is 7 units. c. The private optimal level of health
What are the costs and benefits of having employers pay part of the costs of health insurance coverage for employees?
Cameron is a newborn baby whose parents are thinking about vaccinating him against disease. The figure illustrates the marginal benefits and marginal costs of vaccinations for Cameron. Cameron's
What are the costs and benefits of requiring people to obtain health insurance or pay a tax penalty?
Using the graph, the closing gap between MB private and MB social as years of health care increases private implies that a. The negative externality associated with healthcare must grow as more
Cameron is a newborn baby whose parents are thinking about vaccinating him against disease. The accompanying figure illustrates the marginal benefits and marginal costs of vaccinations for Cameron.
Cameron is a newborn baby whose parents are thinking about vaccinating him against disease. The figure illustrates the marginal benefits and marginal costs of vaccinations for Cameron. Cameron's
Ceteris paribus, if the supply of health care providers increases at the same time that there is an increase in the demand for health care, what can we predict about the equilibrium price and
Which of the following is an example of moral hazard? a. Joey cheats on his third-grade spelling test. b. Since her parents pay for her college, Sally does worse in her classes than she would if
If the Fed wants to combat inflation, it could a. Decrease the required reserve ratio. b. Increase the discount rate. c. Buy securities on the open market.d. All of the above
Describe the actions the Federal Reserve could take to increase the money supply.
Describe the functions of money. How well does cash fit these functions? How well does a checking account that earns zero interest fit these functions? How well does an interest-earning savings
How is fractional reserve banking related to banks' ability to create money?
The Fed could combat unemployment bya. Increasing the required reserve ratio. b. Increasing the discount rate. c. Buying securities on the open market. d All of the above
How would the money multiplier change if businesses and consumers only used cash in transactions rather than depositing some of their money in banks?
If the Federal Reserve sets a required reserve ratio of 0.2 and a bank has $100 million in loans and $80 million in deposits, what is the level of required reserves for the bank?a $100 million b.
What interest rate does the Fed charge when it makes loans to banks?a. The prime rateb. The U.S. Treasury Bond rate c. The discount rated. The federal funds rate e. The U.S. Treasury Bill rate
Describe the money multiplier. How does it influence the money supply?
Consider the above balance sheet of a bank. a. If the required reserve ratio on checking deposits is 0.10, how much must the bank maintain in required reserves? b. How much money in excess reserves
Are credit cards part of the money supply? Why, or why not?
The Fed sometimes acts as a lender of last resort. This means that a. Individuals can borrow from the Fed when the president declares a national disaster. b. Individuals can try to borrow money
If the reserve requirement is. 0.2 and demand deposits are $800, the banks must keep _________ as required reserves and can lend out _______a. $800; $800b. $200; $6,000 c. $160; $640d. $640; $160e.
What are some examples of expansionary fiscal policy? What are some examples of contractionary fiscal policy?
If the Federal Reserve wishes to increase the money supply by $30,000 and the reserve requirement ratio is 0.4, how big of a purchase of bonds will the Fed need to make? a. $75,000 b. $12,000c.
If the Federal Reserve buys $1,000 in bonds and the reserve requirement ratio is 0.5, what eventually happens to the money supply?a. The money supply decreases by $2,000.b. The money supply increases
How would an increase in the required reserve ratio affect banks' ability to create money?a. Banks will be able to create more money because of the decrease in excess reserves.b. Banks will be able
If the government simultaneously raises taxes and cuts government spending, it is engaging in a. Expansionary fiscal policy.b. Contractionary fiscal policy.c. Stable fiscal policy.d. Expansionary
Why might the government want to enact contractionary fiscal policy? Why might the government want to enact expansionary fiscal policy?
Some of the costs of government borrowing includea. Impacts on income inequality.b. Negative impacts on the ability of the economy to grow in the future. c. Interest rate costs.d. Crowding out.e.
When you accumulate debt on your credit card, does it add to the federal debt? Why or why not?
When the economy is operating at a relatively low level of GDP, expansionary fiscal policy will cause a. Large increases in output but small increases in the price level. b. Large increases in
What are some of the tradeoffs associated with accumulating federal debt?
If the government increases borrowing at the same time that savers and lenders decrease the supply of loans,a. The interest rate will increase and the quantity of loans made will decrease. b. The
The chapter asserts that spending on Social Security is nondiscretionary government spending. During the 2011 debt crisis, several policymakers suggested altering the eligibility rules for Social
Examples of nondiscretionary fiscal policy include a. Increases in government spending on roads and bridges during a recession. b. Increased government borrowing to finance a budget deficit. c.
During the debt crisis of 2011, many people called for a balanced budget amendment to the federal constitution. What is a balanced budget amendment? What would be the costs and benefits of having a
When government spending is more than government revenues, there is a(n) a. International trade deficit. b. Interest rate deficit. c. Federal budget deficit. d. Federal budget surplus.e. Interest
The time that elapses between a change in economic activity and the time that policymakers see the need to respond is the a. Administrative lag. b. Recognition lag. c. Implementation lag. d.
If the economy is in a recession, discretionary fiscal policy to expand the economy could include a. Raising taxes. b. Lowering government spending. c. Lowering taxes. d. Increasing government
The progressive income tax system is an example of a. Inflationary fiscal policy. b. Discretionary fiscal policy.c. Expansionary fiscal policy d. Nondiscretionary fiscal policy
Crowding out stems from a. The decrease in the demand for loans associated with federal deficits. b. The increase in GDP associated with federal deficits. c. The increase in interest rates
For each of the choices (a-d) below, decide whether the choice is correct or incorrect and explain why. Ceteris paribus, a given decrease in the supply of a good will generate a larger decrease in
A bank wants to get rid of its excess reserves by making loans because a. It will be penalized if it does not get rid of the reserves. b. The reserves do not earn interest. c. It is afraid it will
Ceteris paribus, when the supply of beef increases, beef prices will rise by a greater amounta. When the demand for beef is elastic.b. When the demand for beef is inelastic. c. When the demand for
Describe the relationship between price and total revenue when demand is elastic (when price rises and demand is elastic, what happens to total revenue?) Describe the relationship between price and
Suppose that the adoption fee at the animal shelter is initially $15.00 and the average number of animals adopted per week at that price is 100. In the face of rising costs, there is an increase in
The graph shows the demand and supply of dorm- room-sized fridges sold in Collegetown per semester. Given this information, the maximum amount that consumers are willing to pay for the 800th fridge
The graph shows the demand and supply of dorm- room-sized fridges sold in Collegetown per semester. If the cost of shipping fridges to Collegetown falls, a possible new equilibrium price and quantity
The graph shows the demand and supply of dorm- room-sized fridges sold in College town per semester. At equilibrium, consumer surplus is _______per semester. a. 1/2 × 1600 × $60 = $48,000b. 1/2 ×
Ceteris paribus, the demand for a product will be relatively elastic if a. There are no close-substitute products available. b. Spending on the product constitutes a very small portion of consumer
The accompanying graph shows the demand and supply of dorm-room-sized fridges sold in Collegetown per semester. At equilibrium, producer surplus is________ per semester. a. 1/2* 1600 * $60 =
The graph shows the demand and supply of dorm- room-sized fridges sold in Collegetown per semester. Suppose that the price is initially $50 each. At this price______ fridges would be sold per
Orangeland has a lot of orange groves and a high demand for oranges. Which of the following scenarios would make it difficult to find oranges in local Orangeland stores? a. The government sets a
Cameron is a bright high school senior who is thinking about going to college. The accompanying figure illustrates the marginal benefits and marginal costs of going to college. Cameron's community
Cameron is a bright high school senior who is thinking about going to college. The figure illustrates the marginal benefits and marginal costs of going to college. Cameron's community derives

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