Question 1

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

Accepted Answer

Microeconomic analysis can help with internal corporate decision making such as forecasting demand, production decisions, and pricing strategies. However, it cannot accurately predict external factors such as the effect of Toyota's hiring patterns on the U.S. unemployment rate, which is determined by macroeconomic factors.

Question 2

The nominal price of a 1990 laptop was $3,500 and the CPI that year was 130.7. The nominal price of a laptop in 2010 was $600 and the CPI that year was 218.1. What is the real price of a 2010 laptop in terms of 1990 dollars? By what percent has the real price of laptops changed?

Accepted Answer

The answer of The nominal price of a 1990 laptop...

Question 3

We can approximate the real return on an investment by subtracting the inflation rate from the nominal return on the investment. For example, an investment that returns 10% per year while inflation is 4% per year has a real (inflation adjusted) return of approximately 6%. Which of the following outcomes is NOT possible?

Accepted Answer

The answer of We can approximate the real return on...

Question 4

When Toyota introduced the new Prius in the United States, which of the following occurred?

Accepted Answer

The answer can be inferred from the information given, which states that "Toyota confronted the risk of making large investments and the uncertainty over future oil prices" when introducing the new Prius in the United States. There is no evidence to support options A or C, and option D includes incorrect statements.

Question 5

Suppose we expect consumer prices to increase by about 30 percent between 2010 and 2020, and the minimum wage was $7.25 per hour in 2010. What should be the minimum wage in 2020 if it is set to maintain the same purchasing power as in 2010?

Accepted Answer

The answer of Suppose we expect consumer prices to increase...

Question 6

The first column of the following table describes the price movement of AOL Corporation stock over a five-year period. The second column gives the period's consumer price index. Calculate the real value of the stock for each time period using year 5 as the base year. If you purchased $1,000 worth of AOL Corporation in year 1, what has happened to the purchasing power of your original $1,000 investment when you sell the stock in year 5?

Accepted Answer

The answer of The first column of the following table...

Question 7

The price to attend a NBA basketball game in Chicago is $55 while the CPI in Chicago is 153. The CPI in Charlotte is 108 while the price to attend a NBA basketball game is $52. Which city offers a smaller real cost of attending a NBA basketball game?

Accepted Answer

The answer of The price to attend a NBA basketball...

Question 8

Which considerations regarding regulatory policies were related to the production of the Toyota Prius in the United States?

Accepted Answer

Toyota had to comply with health and safety regulations while producing the Prius in the United States, but it did not have exemptions from federal emissions standards because it was a hybrid. The fact that Toyota is a Japanese producer also does not exempt it from compliance with US regulatory policies.

Question 9

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 10

Which of the following is NOT an example of a way in which microeconomic analysis can help in designing environmental policy?

Accepted Answer

Lobbying consumers and firms to reduce consumption of energy is not an example of microeconomic analysis, as it involves more of a marketing and persuasion approach rather than an economic analysis. The other options all involve economic analysis and decision-making to design effective environmental policies.

Question 11

The following is a list of housing costs in five different countries along with their CPI. For which country is the real cost of housing declining? Use year 2 as the base year in your answer.

Accepted Answer

The answer of The following is a list of housing...

Question 12

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 13

To evaluate the potential impact of introducing the hybrid Prius auto into the U.S. market, Toyota Motor Corporation would use:

Accepted Answer

Positive economic analysis involves the use of data and facts to evaluate the potential impact of a decision. Toyota would likely use this approach to analyze the potential impact of introducing the hybrid Prius auto into the U.S. market, including factors such as consumer demand, sales projections, and economic benefits.

Question 14

For each city across the U.S., economists construct a price index for a similar basket of goods. In Los Angeles the index is 127.3 and the index for Dallas is 94.8. If you have been offered $137,000 for a job in Los Angeles and $117,000 for a similar job in Dallas, which job affords you the highest purchasing power of the bundle of goods in the price index? Use the Los Angeles value as the base.

Accepted Answer

The answer of For each city across the U.S., economists...

Question 15

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 2010 dollars if the CPI was 218.1 in 2010?

Accepted Answer

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

Question 16

Which of the following administrations passed the Energy Independence and Security Act, which required auto makers to boost fleet wide gas mileage to 35 mpg by 2020?

Accepted Answer

The Energy Independence and Security Act was signed into law by President George W. Bush in 2007, aiming to increase fuel efficiency and reduce dependency on oil.

Question 17

The "core" inflation rate is typically defined as the change in consumer prices for all goods included in the CPI basket except energy and food products. Suppose the overall inflation rate based on the CPI was 4 percent for the past year, and energy and food prices did not change during the year. Is the core inflation rate for the past year higher or lower than 4 percent?

Accepted Answer

Since energy and food prices did not change, they did not contribute to the overall inflation rate. Therefore, the inflation for the remaining items in the CPI basket must have been higher than 4 percent to achieve an overall inflation rate of 4 percent, making the core inflation rate higher.

Question 18

In real terms, which of the following has been declining over the last decade or so?

Accepted Answer

The real value of the minimum wage has been declining over the last decade or so when adjusted for inflation, meaning that the purchasing power of the minimum wage has decreased even if the nominal value might have increased.

Quiz 1: Preliminaries