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American Economy
Study for American Economy final
63
Economics
Undergraduate 3
12/12/2011
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Term
Price and quantity demanded are ____ related. Price and quantity supplied are ____ related.
 Definition
Negatively, Positively
Term
When the deman curve shift to the left, we say that:
 Definition
demand has decreased
Term
When we say "all other things equal" with regard to demand and supply, we mean that:
 Definition
factors other than price that could affect quantity demanded or supplied do not change
Term
A neighborhood group initiates a "neighborhood watch" program. Ella doesn't take part in the program, but she enjoyed the great security the program provides. Ella is a:
 Definition
free rider
Term
The best way of evaluating crime preventing programs from an economic perspective is to look at their:
 Definition
benefits and costs
Term
We generally assume that legalization of drugs would _____ the supply of drugs in the market.
 Definition
increase
Term
We generally assume that legalization of drugs would _____ the demand of drugs in the market
 Definition
increase
Term
If the government were to tax legalized drugs, it would:
 Definition
decrease their supply and increase price
Term
An economic argument against the legalization of drugs is:
 Definition
legalization would increase drug usage, which would have adverse personal health and social problems.
Term
An economic argument for the legalization of drugs is:
 Definition
drugs would no longer be as profitable for organized crime.
Term
The usage of currently illegal drugs would increase by a smaller amount when legalized if the demand is:
 Definition
inelastic
Term
What is the effect of a minimum wage in a low skill labor market?
 Definition
all of the above
Term
Which of the following contributes to higher labor productivity?
 Definition
training, modern technology, modern capital
Term
A situation whereby one country can produce a good with lower opportunity cost than another country defines:
 Definition
comparative advantage (?)
Term
Which of the following does not gain from free trade in imports of handbags?
 Definition
handbag consumers in the country.
Term
Producers of U.S. exported products may suffer when the United States imposes trade restrictions on imports because:
 Definition
Other countries may retaliate with their own trade restrictions. Other countries may purchase fewer U.S. products because their incomes may fall. Exchange rate changes may result in foreigners purchasing fewer U.S. exports.
Term
U.S. trade restrictions on imports result in:
 Definition
A loss of gains from specialization for the US as a whole. A greater opportunity for market power in the US
A Loss to US exporters.
Term
One benefit of trade is the improved ______ achieved by specialization according to comparative advantage.
 Definition
efficiency
Term
“A situation where the prices of a country’s exports decline relative to the prices of its imports” is the definition for:
 Definition
declining terms of trade
Term
The price of one country’s currency in terms of another country’s currency is:
 Definition
the exchange rate
Term
In a two-country world consisting of the U.S. and Canada, an increase in the value of the U.S. dollar means:
 Definition
the U.S. dollar appreciates relative to the Canadian dollar.
Term
A poor growing season will ____________ supply and ___________ the price of a farm product.
 Definition
decrease, increase
Term
If demand is inelastic and the price of the product increases, producers’ incomes will:
 Definition
increase
Term
A reason the government might establish price supports for wheat could be to:
 Definition
increase the incomes of wheat farmers.
Term
The largest share of government payments to farmers have gone to:
 Definition
large farms and agribusiness.
Term
Because there has been extensive technological change in agriculture:
 Definition
over time, supply has increased more than demand.
Term
When we say that price supports interfere with the rationing function of price, we mean that:
 Definition
price supports do not allow the price to fall to the equilibrium
Term
Target prices differ from price supports in that:
 Definition
Target prices indirectly subsidize both domestic and international buyers. No surplus is created. It is easier to calculate the cost of the policy than with price supports.
Term
Which of the following is not a major contributor to world hunger?
 Definition
insufficient food production.
Term
In general, which of the following is not a liberal suggestion for agricultural policy reform?
 Definition
the government should decrease or end farm programs.
Term
What do physicians’ sovereignty and third-party payment have in common?
 Definition
They both increase the demand for health care.
Term
Among the problems associated with U.S. health care is that:
 Definition
significant numbers of uninsured people lack access to the healthcare system.
Term
Defensive medicine:
 Definition
increases the demand for health care.
Term
Which of the following have frequently been suggested as ways to slow down increases in U.S. health care costs?
 Definition
Managed care plans instead of traditional fee-for-service insurance.
Term
The major goal of Medicare is to:
 Definition
provide health care to older, retired Americans.
Term
The U.S. automobile industry is a good example of:
 Definition
an oligopoly.
Term
ompared to competitive markets, monopolies charge:
 Definition
higher prices, produce less output, and make higher profits.
Term
What do patents, economies of scale, and exclusive franchises have in common?
 Definition
They are all barriers to entry.
Term
If, shortly after Kellogg’s Company has announced price increases on its ready-to-eat cereals, the other cereal manufacturers announce identical price increases on their products, this is likely to be:
 Definition
price leadership.
Term
Compared to a firm in a competitive market, a monopoly has:
 Definition
less pressure to reduce costs.
Term
Which of the following serves to limit market power?
 Definition
import competition.
Term
Price discrimination is:
 Definition
a. charging different prices to different customers when the price differences are not based on cost differences.
Term
Economies of scale over a wide range of output:
 Definition
mean that cost per unit of output is higher at low levels of output.
Term
The essence of market power is:
 Definition
the firm’s ability to influence the market price of its product.
Term
When we say that the competitive firm is a price taker, we mean that:
 Definition
the output of the firm is too small to influence the market price of the product.
Term
If the concentration ratio for an industry is 80:
 Definition
the four largest firms account for 80 percent of total output of the product in the U.S. market.
Term
Concentration ratios may:
 Definition
understate the extent of competition because they ignore imported products.
Term
A major difference between social insurance and public assistance programs is that:
 Definition
social insurance covers the entire eligible population, but public assistance covers only the needy.
Term
The long-run problem of Social Security is that:
 Definition
the ratio of workers to recipients is declining.
Term
A tax takes $2,000 from Joe whose total income is $20,000. The tax takes $3,000 from James whose income is $40,000. The tax is:
 Definition
regressive.
Term
The idea that a social insurance program should put a minimum floor of income under the entire population is the
 Definition
principle of social adequacy.
Term
The idea that a taxpayer who pays more Social Security taxes should receive higher retirement benefits is the:
 Definition
principle of individual equity.
Term
If total spending rises from one year to the next, then:
 Definition
either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both.
Term
The inflation rate is the:
 Definition
percentage change in the price level from one period to another.
Term
The consumer price index is used to:
 Definition
monitor changes in the cost of living over time.
Term
The labor force equals the:
 Definition
number of people employed plus the number of people unemployed.
Term
Which of the following is true about the U.S. labor force participation rate since 1964?
 Definition
It has increased overall. It has increased for women. It has increased for men.
Term
Which of the following statements concerning the relative distribution of income is correct?
 Definition
Taxes and transfer payments both decrease the degree of income inequality.
Term
Each of the following contributes to income inequality except:
 Definition
Government transfers.
Term
Which of the following is included in GDP?
 Definition
services such as health care and education.
Term
The effects of stagflation include:
 Definition
Recession, inflation, and unemployment.
Term
Government securities consist of:
 Definition
government bonds and treasury bills.
Term
Which of the following is a regressive tax?
 Definition
Sales tax, property tax, social security tax.
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