Question 1

The Clean Air Act is designed to restrict automobile emissions and reduce the external costs of air pollution.The economic analysis used to develop the Clean Air Act was:
A)normative.
B)positive.
C)macroeconomic.
D)none of the above

Accepted Answer

The Clean Air Act was designed to reduce external costs of air pollution, meaning it was normative in nature as it attempted to prescribe a desired outcome to address a market failure.

Question 2

The nominal price of milk was $2.25 in 1998 while the CPI was 163.0 that year.Also,the CPI in 1970 was 38.8.What was the real value of 1998 milk in terms of 1970 dollars?

Accepted Answer

The answer of The nominal price of milk was $2.25...

Question 3

Suppose the minimum wage was $0.25 per hour in 1938 and the CPI in that year was 11.5.If the CPI in 1990 was 130.7,what is the real value of the 1938 minimum wage in terms of 1990 dollars? The real value of the 1990 minimum wage in terms of 1990 dollars is $4.25.Has the real value of the minimum wage declined since 1938?

Accepted Answer

The answer of Suppose the minimum wage was $0.25 per...

Question 4

Over the past year price inflation has been 10%,but the price of a used Ford Escort has fallen from $6,000 to $5,000.The real price of a Ford Escort has fallen by:
A)12%.
B)17%
C)20%.
D)24%
E)32%.

Accepted Answer

The real price change accounts for inflation, so the adjusted initial price is $6,000 * 1.10 = $6,600. The price fell to $5,000, so the real price change is ($5,000 - $6,600) / $6,600 = -24%.

Question 5

Which of the following goods is NOT a likely component of the Consumer Price Index?
A)Hamburger
B)87 octane gasoline
C)Structural steel beams
D)Movie tickets

Accepted Answer

The Consumer Price Index (CPI) measures the price level of goods and services typically consumed by households, such as food, housing, transportation, and entertainment. While a hamburger, 87 octane gasoline, and movie tickets are commonly purchased by individuals and are therefore likely components of the CPI, structural steel beams are not typically consumed by households and are thus not included in the index.

Question 6

Which of the following is NOT an examples of ways in which microeconomic analysis can help in designing environmental policy?
A)Determining the optimal level of vehicle tailpipe emissions standards
B)Designing laws to provide incentives for firms to implement clean technologies in new vehicles
C)Lobbying consumers and firms to reduce consumption of energy
D)Examining the tradeoffs between ecological benefits of environmental legislation and its impacts on consumers' standard of living

Accepted Answer

Lobbying consumers and firms to reduce consumption of energy is not an example of microeconomic analysis helping in designing environmental policy. Microeconomic analysis typically focuses on analyzing the costs and benefits of different policy options to determine the most efficient approach. Lobbying is a form of advocacy or persuasion, which is not a direct application of microeconomics. The other options listed involve analyzing specific policies or incentives to achieve environmental goals while minimizing costs or negative impacts.

Question 7

When 1983 is the CPI base year,the CPI value is 82.4 for 1980 and 172.2 for 2000.Suppose we want to convert this CPI series to have a base year of 2000 (that is,CPI₂₀₀₀ = 100).What is the value of the revised CPI for 1980? A)172.2 B)100 C)47.9 D)209.0

Accepted Answer

To convert the CPI series to 2000 base year, we need to divide all the CPI values by the CPI value for 2000, which is 172.2. So, the revised CPI for 1980 would be (82.4/172.2)*100 = 47.9.

Question 8

To evaluate the potential impact of changes to its SUV business,Ford Motor Company would use:
A)normative economic analysis.
B)positive economic analysis.
C)negative economic analysis.
D)arbitrage analysis.

Accepted Answer

Positive economic analysis is the study of what is, rather than what ought to be. It involves analyzing data, making observations, and forming conclusions about the potential impact of changes based on factual evidence. Therefore, using this approach, Ford can evaluate the potential impact of changes to its SUV business by examining quantifiable data such as sales figures, profitability, consumer demand, and market trends.

Question 9

The nominal price of industrial red paint was $12 per gallon in 1993.To convert this value to the real price of paint in 2008 dollars,we should use the:
A)Consumer Price Index.
B)Producer Price Index
C)Fed funds rate.
D)30-day T-bill rate.

Accepted Answer

The Producer Price Index (PPI) is used to adjust prices for inflation in the context of industrial goods, such as industrial red paint, to reflect their real value over time.

Question 10

What does it mean when the CPI is higher this year than last?
A)The rate of inflation has increased.
B)There has been inflation since last year.
C)Real prices have increased.
D)Real prices have decreased.

Accepted Answer

When the Consumer Price Index (CPI) is higher this year compared to last, it indicates that there has been inflation since last year, meaning the general level of prices for goods and services has risen.

Question 11

Which of the following is NOT an example of ways in which microeconomic analysis can help Ford Motor Company its in corporate decision making?
A)Forecasting demand for new automobiles
B)Determining how many automobiles to produce in order to maximize profits
C)Predicting how competitors will react to the firm's pricing strategy
D)Forecasting the effect of Ford's hiring patterns on the U.S.unemployment rate
E)Forecasting the effect of an oil price increase on demand for SUVs

Accepted Answer

This is not an example of microeconomic analysis as it pertains to macroeconomic variables like employment rates, rather than specific actions taken by the firm. The other options (A, B, C, and E) all involve microeconomic analysis that directly impacts Ford's decision making.

Question 12

The CPI in 1970 was 38.8 and in 1998 the CPI was 163.0.If the real value of a 1970 gallon of milk in terms of 1998 dollars is $0.70,what was the nominal price of milk in 1970?

Accepted Answer

The answer of The CPI in 1970 was 38.8 and...

Question 13

Suppose the nominal price of gasoline was $0.90 per gallon in 1987.To convert this value to the real price of 1987 gasoline in 2008 dollars,we should:
A)multiply by the 1987 CPI and divide by the 2008 CPI.
B)multiply by the 2008 CPI and divide by the 1987 CPI.
C)not do anything because this is the real price in 2008 dollars.
D)none of the above

Accepted Answer

To convert the nominal price of gasoline in 1987 dollars to the real price in 2008 dollars, we need to adjust for inflation. We do this by using the ratio of the CPI in 2008 to the CPI in 1987. Therefore, we should multiply the nominal price of gasoline in 1987 dollars by the 2008 CPI and divide by the 1987 CPI. This will give us the real price of gasoline in 2008 dollars.

Question 14

Which price index published by the US federal government represents retail price changes?
A)Consumer Price Index
B)Producer Price Index
C)GDP deflator
D)Dow-Jones Industrial Average

Accepted Answer

The Consumer Price Index (CPI) measures the average change in prices over time that consumers pay for goods and services, and is published by the US federal government. It is used as a gauge of inflation and is often used to adjust wages, taxes, and government benefits. The Producer Price Index (PPI) measures price changes for goods and services sold by producers, while the GDP deflator measures changes in prices for all goods and services produced within a country's borders. The Dow-Jones Industrial Average is a stock market index and does not represent retail price changes.

Question 15

The price of a taco was $0.29 in 1970 and $0.99 in 1993.The CPI was 38.8 in 1970 and 144.0 in 1993.The 1993 price of a taco in 1970 dollars is:
A)$0.08.
B)$0.27.
C)$0.34.
D)$3.67.

Accepted Answer

To find the 1993 price of a taco in 1970 dollars, adjust for inflation using the CPI: (0.99 / 144.0) * 38.8 = $0.27.

Question 16

Since last year,the price of gold has risen from $120 to $420.What annual inflation rate would leave the real price of gold unchanged over the last twelve months?
A)Approximately 29%
B)40%
C)Approximately 71%
D)250%
E)none of the above

Accepted Answer

The answer of Since last year,the price of gold has...

Question 17

Suppose the Social Security Administration would like to guarantee the purchasing power of social security payments to the elderly does not diminish.That is,the real value of the payments does not decrease.The CPI in 1990 was 130.7 and the CPI in 1998 was 163.0.How much does the Social Security Administration need to increase payments from 1990 to 1998 to accomplish this objective?

Accepted Answer

The answer of Suppose the Social Security Administration would like...

Question 18

Use the following statements to answer this question: I.The inflation rate (the rate of change in the general price level)calculated from a price index like CPI is the same regardless of the base year we use to form the price index.
II.Although the CPI may indicate the general price level increased by 5% last year,there are some consumer products that may have experienced more or less inflation in the past year.
A)I and II are true.
B)I is true and II is false.
C)I is false and II is true.
D)I and II are false.

Accepted Answer

The answer of Use the following statements to answer this...

Question 19

The reward for the capture of Jesse James was $500.00 in 1881.Suppose the CPI in 1881 was 0.25.What is the real value of the reward in 1990 dollars if the CPI was 130.7 in 1990?

Accepted Answer

The answer of The reward for the capture of Jesse...

Question 20

Which price index published by the US federal government represents wholesale price changes?
A)Consumer Price Index
B)Producer Price Index
C)GDP deflator
D)Dow-Jones Industrial Average

Accepted Answer

The Producer Price Index, or PPI, published by the U.S. Bureau of Labor Statistics, measures the average changes in prices received by domestic producers for their output. It is also known as the Wholesale Price Index, which makes it the right choice for this question. The Consumer Price Index (A) tracks changes in retail prices, the GDP deflator (C) measures changes in the prices for all goods and services included in the GDP, and the Dow-Jones Industrial Average (D) is a stock market index measuring the stock performance of 30 large companies.

Quiz 1: Preliminaries

The Clean Air Act is designed to restrict automobile emissions and reduce the external costs of air pollution.The economic analysis used to develop the Clean Air Act was:

The nominal price of milk was $2.25 in 1998 while the CPI was 163.0 that year.Also,the CPI in 1970 was 38.8.What was the real value of 1998 milk in terms of 1970 dollars?

Over the past year price inflation has been 10%,but the price of a used Ford Escort has fallen from $6,000 to $5,000.The real price of a Ford Escort has fallen by:

Which of the following goods is NOT a likely component of the Consumer Price Index?

Which of the following is NOT an examples of ways in which microeconomic analysis can help in designing environmental policy?

When 1983 is the CPI base year,the CPI value is 82.4 for 1980 and 172.2 for 2000.Suppose we want to convert this CPI series to have a base year of 2000 (that is,CPI₂₀₀₀ = 100) .What is the value of the revised CPI for 1980?

To evaluate the potential impact of changes to its SUV business,Ford Motor Company would use:

The nominal price of industrial red paint was $12 per gallon in 1993.To convert this value to the real price of paint in 2008 dollars,we should use the:

What does it mean when the CPI is higher this year than last?

Which of the following is NOT an example of ways in which microeconomic analysis can help Ford Motor Company its in corporate decision making?

The CPI in 1970 was 38.8 and in 1998 the CPI was 163.0.If the real value of a 1970 gallon of milk in terms of 1998 dollars is $0.70,what was the nominal price of milk in 1970?

Suppose the nominal price of gasoline was $0.90 per gallon in 1987.To convert this value to the real price of 1987 gasoline in 2008 dollars,we should:

Which price index published by the US federal government represents retail price changes?

The price of a taco was $0.29 in 1970 and $0.99 in 1993.The CPI was 38.8 in 1970 and 144.0 in 1993.The 1993 price of a taco in 1970 dollars is:

Since last year,the price of gold has risen from $120 to $420.What annual inflation rate would leave the real price of gold unchanged over the last twelve months?

The reward for the capture of Jesse James was $500.00 in 1881.Suppose the CPI in 1881 was 0.25.What is the real value of the reward in 1990 dollars if the CPI was 130.7 in 1990?

Which price index published by the US federal government represents wholesale price changes?

Quiz 1: Preliminaries

The Clean Air Act is designed to restrict automobile emissions and reduce the external costs of air pollution.The economic analysis used to develop the Clean Air Act was:

The nominal price of milk was $2.25 in 1998 while the CPI was 163.0 that year.Also,the CPI in 1970 was 38.8.What was the real value of 1998 milk in terms of 1970 dollars?

Over the past year price inflation has been 10%,but the price of a used Ford Escort has fallen from $6,000 to $5,000.The real price of a Ford Escort has fallen by:

Which of the following goods is NOT a likely component of the Consumer Price Index?

Which of the following is NOT an examples of ways in which microeconomic analysis can help in designing environmental policy?

When 1983 is the CPI base year,the CPI value is 82.4 for 1980 and 172.2 for 2000.Suppose we want to convert this CPI series to have a base year of 2000 (that is,CPI2000 = 100) .What is the value of the revised CPI for 1980?

To evaluate the potential impact of changes to its SUV business,Ford Motor Company would use:

The nominal price of industrial red paint was $12 per gallon in 1993.To convert this value to the real price of paint in 2008 dollars,we should use the:

What does it mean when the CPI is higher this year than last?

Which of the following is NOT an example of ways in which microeconomic analysis can help Ford Motor Company its in corporate decision making?

The CPI in 1970 was 38.8 and in 1998 the CPI was 163.0.If the real value of a 1970 gallon of milk in terms of 1998 dollars is $0.70,what was the nominal price of milk in 1970?

Suppose the nominal price of gasoline was $0.90 per gallon in 1987.To convert this value to the real price of 1987 gasoline in 2008 dollars,we should:

Which price index published by the US federal government represents retail price changes?

The price of a taco was $0.29 in 1970 and $0.99 in 1993.The CPI was 38.8 in 1970 and 144.0 in 1993.The 1993 price of a taco in 1970 dollars is:

Since last year,the price of gold has risen from $120 to $420.What annual inflation rate would leave the real price of gold unchanged over the last twelve months?

The reward for the capture of Jesse James was $500.00 in 1881.Suppose the CPI in 1881 was 0.25.What is the real value of the reward in 1990 dollars if the CPI was 130.7 in 1990?

Which price index published by the US federal government represents wholesale price changes?

When 1983 is the CPI base year,the CPI value is 82.4 for 1980 and 172.2 for 2000.Suppose we want to convert this CPI series to have a base year of 2000 (that is,CPI₂₀₀₀ = 100) .What is the value of the revised CPI for 1980?