Answers To "Test Your Understanding" - Economics - Theory and Practice, 10th Edition PDF

6/25/2020 Answers to “Test Your Understanding” - Economics: Theory and Practice, 10th Edition
 Economics: Theory and Practice, 10th Edition
PREV NEXT
⏮ ⏭
Glossary Index
  🔎
Answers to “Test Your Understanding”
C H A PT E R 1
The economy's production possibilities curve is shown by the solid line in the
figure accompanying these answers.
1. Twelve million units of capital goods (capital goods decreased from

32 to 20 million units); 10 million units of consumer goods
(consumer goods decreased from 10 million units to zero).
2. Point A is slightly to the left of the production possibilities curve,
and point B is further to the left than point A.
3. The location of point C depends on how one views the relative
importance of capital goods and consumer goods. Point C will be
closer to the horizontal axis if capital goods are considered to be
relatively more important, and closer to the vertical axis if
consumer goods are considered to be relatively more important.
Students put point C on the curve based on their opinions about the
relative importance of capital goods and consumer goods.
4. If only consumer goods were produced, no machinery or equipment
would be produced to replace what is currently being used, and
future production would be adversely affected. If only capital goods
were produced, there would be nothing to sustain people currently.
5. The production possibilities curve would shift to the right as
illustrated by the lighter line in the accompanying figure.
⬆
Find answers on the fly, or master something new. Subscribe today. See
pricing options.
https://learning.oreilly.com/library/view/economics-theory-and/9781118233597/29_both01.html#answer 1/9
C H A PT E R 2
1. 1. pure market
2. pure planned
3. mixed
4. pure market
5. pure planned
6. mixed
2. 1. Flow of money from households to businesses and flow of

goods and services from businesses to households; saving
more and spending less reduces the money flow and the
goods and services flow.
2. Flow of factors of production from households to businesses
and flow of income from businesses to households; reducing
the flows on the bottom half reduces the flows on the top half.
3. Saving more and spending less decreases the production of
goods and services which, in turn, decreases employment of
resources and income.
C H A PT E R 3
1. d; supply curve shifts to the left; increase; decrease

2. a; decrease demand curve shifts to the right; increase; increase
3. d; supply curve shifts to the left; increase; decrease
4. e; no shifts; none; none (changes price, not a nonprice factor)
5. b; demand curve shifts to the left; decrease; decrease
6. a; demand curve shifts to the right; increase; increase
7. c; supply curve shifts to the right; decrease; increase
9. a; demand curve shifts to the right; increase; increase
⬆
12. c; supply curve shifts to the right; decrease; increase
Find answers on 14.
the fly, curve
c; supply or master something
shifts to the right; new. Subscribe today. See
decrease; increase
C H A PT E R 4
pricing options.
1. Price Index Price Index
80.0 64.0
100.0 80.0
110.0 88.0
125.0 100.0
130.0 104.0
150.0 120.0
2.
3. Real GDP 2006: $1,000; 2007: $1,000; 2008: $1,200; 2009:
$1,250; 2010: $1,250; 2011: $1,200; 2012: $1,250
1. The economy's output did not grow from 2006 to 2007, grew
from 2007 through 2009, did not grow in 2010, decreased in
2011, and grew again in 2012.
2. Unlike the impression given by money GDP, the economy's
real GDP, or output, did not grow every year, and in 2011 it
actually declined. Also, the overall growth rate in output from
2006 through 2012 was not nearly as great as money GDP
would lead one to believe.
C H A PT E R 5
From each action taken alone, output and employment would change as follows:
1. increase
2. decrease
3. increase
4. increase
5. decrease
6. no change (demand-pull inflation would result)
7. decrease
8. increase
9. increase
11. decrease
12. decrease
⬆
14. increase
15. decrease
From each of these actions, total output and income would change as
follows:
pricing options.
16. increase by $200 million
17. decrease by $87.5 billion
18. increase by $400 million

19. decrease by $12 billion
20. decrease by $12.5 million ($20 million export injection − $25
million import leakage ÷ 40.40 = −$12.5 million)
21. increase by $400 million (80 percent of $100 million transfer
payment = $80 million in spending; $80 million ÷ 0.20 = $400
million)
C H A PT E R 6
1. output and employment increase

2. output and employment will decrease (some portion of the Social
Security will be saved and not spent while all of the government
purchases amount will be a decrease in spending)
3. price levels increase
5. output and employment decrease
C H A PT E R 7
1. $18,871,340
2. $38,014,440
3. $11,956,741
4. $14,840,000
C H A PT E R 8
1. required reserves = $1,350,000; actual reserves = $6,000,000;

excess reserves = $4,650,000
2. new loans = $9,700,000
3. new borrowing = $50,000
4. money multiplier = 12.5;
money supply increase = $625,000,000
5. decrease in excess reserves = $335,000

6. new excess reserves = $2,000,000
7. new excess reserves by Carolina Coast = $0;
new excess reserves by Inland Bank = $4,000,000
8. money supply increase = $280,000,000
C H A PT E R 9
⬆
1. Draw a vertical supply curve (S) at full employment output and a
downward sloping demand curve (D). a. Label their intersection as
Find answers on the
P Wfly, or master
. b. Draw
0 something
a demand curve
0 new.
(D1) that has shifted to theSubscribe
right. c. today. See
Label the intersection of D1 and S as P W . d. The economy arrived
pricing options.
1 1
at this new position because prices and wages are flexible

downward. See the following graph.
2. Total Output Economic Condition
$0 Expansion
$200 Expansion
$400 Expansion
$600 Equilibrium
$800 Contraction
$1,000 Contraction
pricing options.
3.
1. In the short run, a decrease in demand would bring a slight

decrease in prices and a decrease in output. In the long run, a
decrease in demand brings a decrease in prices but no change
in output.
C H A PT E R 1 0
1. increase in supply causing equilibrium price to fall

2. increase in demand and a possible decrease in supply causing
equilibrium price to rise
3. decrease in demand and a possible increase in supply causing
equilibrium price to fall
4. decrease in demand and increase in supply causing equilibrium
price to fall
5. increase in supply causing equilibrium price to fall
6. decrease in demand and increase in supply causing equilibrium
price to fall
7. increase in demand causing equilibrium price to rise
C H A PT E R 1 1
According to Table 1, Pete should charge $98 and complete 4 drawings to

maximize his profit from the drawings. In going for volume, as suggested by his
roommate, his total profit would be $128 less than that received from producing
and selling 4 drawings.
As for the lithographs, Pete should charge $100 each and sell 8, earning a total
profit of $495. This is indicated in Table 2.
TABLE 1 Custom-Drawn Houses
TABLE 2 Lithographs ⬆
pricing options.
C H A PT E R 1 2
1. 92%, fall, lower, 85.5%
fall, lower, 83.7%
rise, higher, 86%
2.
3. $2,025; $3,042; $6,183; $2.25; $1.90; $2.29
4.
C H A PT E R 1 3
1. The total revenue values in the table are: $0, $2, $4, $2,000,
$2,002, $2,004, $20,000, $20,002, $20,004. All marginal revenue
values are $2.00.
⬆
1. Draw a perfectly horizontal line at $2.00 and mark it D = MR
2. 7,000 bushels
3. $2.50; loss $0.50; loss $3,500
4. Draw a perfectly horizontal line at $3.50 and mark it D = MR
pricing options.
5. 9,000 bushels
6. $2.50; profit $1.00; profit $9,000
2. 5,000 units; $9.00; $5.00; profit $4.00; profit $20,000
C H A PT E R 1 4
1. social regulation—Environmental Protection Agency

2. no government intervention
3. social regulation—Consumer Product Safety Commission
4. antitrust enforcement—Sherman Act Section 1 price fixing violation
5. no government intervention—the sellers are pure competitors
responding to the price rather than fixing it
6. industry regulation
7. antitrust enforcement—Celler-Kefauver Act
8. no government intervention
9. industry regulation
10. antitrust enforcement—Sherman Act Section 2 monopolization
violation
C H A PT E R 1 5
In Table 1, marginal product is 500, 500, 500, 400, 300.
1. the fourth worker
In Table 3, total revenue is $0, $25, $45, $60, $66.50, $67.50. Marginal
revenue product is $25, $20, $15, $6.50, $1.00.
2. $25 per hour

3. $15 per hour
4. no, the MRP of the fifth worker is just $1
In Table 4, the quantity of workers demanded with each wage rate is 1—$25; 2—
$20; 3—$15; 4—$6.50; 5—$1.00. These numbers are used to plot the demand
curve in the figure.
C H A PT E R 1 6
1. 1. 1/2, 2, Canada
2. 2, 1/2, Brazil
3. 12, 12
4. 16 of wheat, 16 of soybeans
5. 8, 8
2. 1. 1/5, 4, Mexico
2. 5, 1/4, Venezuela
3. 525, 200
4. 1,000 lamps, 200 gallons of gasoline
5. 50, 200
C H A PT E R 1 7
1. decrease, decrease, decrease, increase

2. increase, decrease, increase, increase
3. increase, increase, increase, decrease
4. decrease, increase, decrease, decrease
⬆
5. increase, increase, increase, decrease
6. decrease, increase, decrease, decrease or increase depending on
Find answers on the fly,theoreffect
whether master something
of the change new.orSubscribe
in demand was greater less than today. See
pricing options.
the effect of the change in supply, increase
Settings / Support / Sign Out

© 2020 O'Reilly Media, Inc. Terms of Service / Privacy Policy
PREV NEXT
⏮ ⏭
Glossary Index
pricing options.

Answers To "Test Your Understanding" - Economics - Theory and Practice, 10th Edition PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Answers To "Test Your Understanding" - Economics - Theory and Practice, 10th Edition PDF

Uploaded by

Copyright:

Available Formats

6/25/2020 Answers to “Test Your Understanding” - Economics: Theory and Practice, 10th Edition

 Economics: Theory and Practice, 10th Edition

Answers to “Test Your Understanding”

1. Twelve million units of capital goods (capital goods decreased from

2. 1. Flow of money from households to businesses and flow of

1. d; supply curve shifts to the left; increase; decrease

1. Price Index Price Index

18. increase by $400 million

1. output and employment increase

1. required reserves = $1,350,000; actual reserves = $6,000,000;

money supply increase = $625,000,000

5. decrease in excess reserves = $335,000

new excess reserves by Inland Bank = $4,000,000

8. money supply increase = $280,000,000

at this new position because prices and wages are flexible

2. Total Output Economic Condition

1. In the short run, a decrease in demand would bring a slight

1. increase in supply causing equilibrium price to fall

According to Table 1, Pete should charge $98 and complete 4 drawings to

TABLE 1 Custom-Drawn Houses

1. 92%, fall, lower, 85.5%

fall, lower, 83.7%

rise, higher, 86%

2. 5,000 units; $9.00; $5.00; profit $4.00; profit $20,000

1. social regulation—Environmental Protection Agency

In Table 1, marginal product is 500, 500, 500, 400, 300.

1. the fourth worker

2. $25 per hour

1. decrease, decrease, decrease, increase

Settings / Support / Sign Out

You might also like