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Exam 2

by: Shannon Grasse

Exam 2 COM 160

Shannon Grasse
GPA 3.7
Introductory Macroeconomics
Dr. Goel

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Exam 2 study guide
Introductory Macroeconomics
Dr. Goel
Study Guide
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This 8 page Study Guide was uploaded by Shannon Grasse on Tuesday October 13, 2015. The Study Guide belongs to COM 160 at Illinois State University taught by Dr. Goel in Fall 2015. Since its upload, it has received 89 views. For similar materials see Introductory Macroeconomics in Economcs at Illinois State University.


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Date Created: 10/13/15
FCS 103 Exam 2 Study Guide Chapters 58 There are more questions listed here to review than will be on exam Exam is 50 MC questions 2 pts each Chapter 5 Notes 1 What aspects of life were the oldest consumer protection rules focused on Market Place Regulation 2 What decades was the greatest number of consumer protection laws passed The 60 s 3 What was Sherman Antitrust Act passed to prevent is it still in force today Prevent Business monopolies 4 What 1960 s individual led the consumer protection movement with his attack on auto safety Ralph Nader 5 What does quotcaveat emptor mean Let the Buyer Beware 6 What are the 4 Kennedy quotrights of consumersquot Right to safety right to be informed right to choose and right to be heard 7 What did Reagan administration do to consumer protection issues Shifted to less regulations Gave businesses more a free hand budget reduction to agencies involved and addressed growing concerns of government intrusions Consolidated smaller units into larger units and got rid of laws 8 What are the 3 FTC bureaus and what do they do Bureau of consumer protection Cease and Desist Order discussed earlier nes Bureau of competition Antitrust laws Bureau of economics Generally studies regulations consumers and economy 9 What state government position is the highest level of consumer protection Lisa Managan State attorney general 10 What court would landlordtenant issues likely be rst utilized Small claims court 11 What is a class action suit Large Group Law Suit 12 Identify who is a plaintiff defendant or litigant in a situation provided several questions Plaintiff person who les the complaint Defendant person complained against and Litigant the two parties above involved in a court process 13 What is Consumer Report magazine about Independent Testing organization 14 What is a full warranty how does it differ from a limited warranty Limited warrantv not complete to federal standards must specify what is different 15When was CPSC consumer product safety commission and when was it begun 1972 Chapter 6 Notes 16Be able to recognize examples of Psychic job satisfaction Rewards the satisfaction derived from work or occupation Some include helping other making a difference in you community where you get to live and working conditions 17What were the statistics presented for women in the workplace 1960 and current 1960 female work forced doubled and today over 3 out of 4 women have jobs 18What is de nition for in ation A Sustained rise in the weighted average of all prices The US bureau of labor tracks quottypical market basketquot to see what happening to prices 19How many items are tracked to measure in ation 400 items 20How often is in ation measured Measure once a month 21What is CPI and how does it work FCS 103 Exam 2 Study Guide Chapters 58 There are more questions listed here to review than will be on exam Exam is 50 MC questions 2 pts each Consumer Price Index a price index based on a representative market based of 400 products ranging from food clothing and etc Determines what part of income is typical spent each time and how often items are purchased 22Understand what quotrealquot price means versus money price Relative prices to regular prices comparing to 20 yrs ago 23Why are some critical about the use of CPI comparisons from many years ago versus today Some products are not available when the CPI began making living comparisons dif cult 24Besides price what does CPI factor into their gures Factor in how often you buy things 25What government unit tracks in ation and earnings statistics Real Value 26Be able to match the workplace protection law to the appropriate category several questions including what some of the organizations like OSHA etc are about Discrimination civil rights age pregnancy Health and Safetv OSHA Labor Relations Social Security disability HMO FMLA Hours and Wag Fair Labor Standards Equal Pay Age Discrimination Consumer credit Termination Social Security Health Insurance portability COBRA Unemployment Unions Labor Relations whistleblowing military leave Othercredit reports employing minors veteran rights 27What are examples of barter income and social income Barter income trade lawn mowing for vacation pet care share children s quothand me downs scoop snow for dinner etc Social income public amenities available perhaps because of where you live parks libraries recreation schools re police 28What are some of the common quotfringe benefitsquot offered to employees Health insurance paid vacation hotel stays cars and ights 29What education levelexperience level would be most likely to earn the most based on data presented Bachelor degree and Masters Chapter 7 Notes 30What percent of Americans earn less than 25000 50000 What percent earn gt 100000 Less then 25000 18 and more than 50000 416 31Understand what the 20000 difference between mean and median American income signify So many people that are so wealthy they throw off the mean so use median 32What are the mean and median incomes for Americans in 2009 Mean 78538 Median60088 33Why do we call it a quotlivingquot budget Because it focuses on necessaries not luxuries 34What is a breadwinner The spouse that brings in the most money 35What are examples of budget issues that could cause a quotcorrectionquot during a month Car breaks down kid gets sick 36What percent of a family 50000 expenses spend on housing 344 Food 13 Transportation 156 37As income goes up we generally see food cost percentages down and housing shift to luxury item Because one doesn t changed their food intake so that percentage shrinks while housing increase 38Be able to recognize exible and xed expense items Fixed expenses that occur at speci c times and can39t be altered Examples leased space utilities and housing Flexible expenses that can be changed in short run Examples vacation clothes entertainment and savings 39What percent of income do Food clothing transportation insurance and housing add up to 80 of your earnings 40Who should assist in deciding a spending plan for a family household Children 41Sometimes a family council helps to get all members to cooperate not counselor 42Besides income what also is a major force in deciding a budget for a family The Values 43What is a luxury good A good that is not a necessity and may be more expensive then necessary 44An expense than can be easily altered is a exible expense and if it cannot it is a xed expense Chapter 8 Notes 45What are the income related taxes Income tax Social Security 124 Medicare 29 Corporate Income tax paid by business pro t workers compensation for injuries and unemployment 46What are examples of licensefee taxes Driver License Fishinghuntingboating Building permits Marriage license Licenses plates and Dog tags 47What are examples of User Taxes Sales cigarettes Hotelmotel Cable TV cellphone fuel utilities luxury Toll roads excise pole tax telephone Satellite Dish and liquor 48What are wealth and Property Taxes Capital gains Estate Inheritance Property personal Real estate 49What is an quotoptionalquot tax Lottery 50What is Tax Freedom day and when was it in 2015 What does it mean The day we are suppose to have all our taxes paid by April 242015 IL April 30 FCS 103 Exam 2 Study Guide Chapters 58 There are more questions listed here to review than will be on exam Exam is 50 MC questions 2 pts each 51Why were there 2 dates to consider in 2015 April 24 and May 8What is the difference May 8 is the day it should be to make up for our debt but the real date is April 25 52What percent of Americans pay no income taxes at all Why is that 47 in 2009 and 43 in 2013 and 29 households This is because they don t make enough income to take taxes from 53The top ten percent of taxpayers gt366000 pay about 73 of all income taxes 54Which tax is closest to a proportional tax Social security and medical tax 55Recognize the following terms in data providedTaxable income Deductions Tax credit Exemption 0 Taxable Income Portion of earned income that is subiect to tax and Various exemptions and deductions taken out of gross income before tax is calculated 56How many marginal tax rate brackets does federal income tax have 7 57What are the highest and lowest marginal tax rates Lowest 10 0 to 9225 and highest 396 for over 413201 58What is a simple de nition of a Progressive tax More closely follows the Abilitv to pav Theory As incomes rise tax percentages grow 59What type of tax is IL income tax Federal income Tax What of income does L charge 10396 60What do we call the part of your annual income that taxes are actually calculated from Flat income tax 61What is an excise tax What are some products that commonly include it Indirectquot Tax that consumers pay hidden in a product cost Examples Gas Airline tickes and liquor 62When is the deadline for paying or at least quotfilingquot income taxes each year Ap 25 63When do most personal income taxes need to be led W2 form 64What is the form called that is sent to IRS and employees stating earnings and withholdings 65Government units commonly borrow money from investors through the use of 66How many years quotbackquot can IRS go if they do an audit of your taxes 67Please review box below to be sure you understand how federal income tax works You may see questions to recognize the tax terminology in bold below if I give you a sample scenario like this Econ 105 Exam 2 Consumer Behavior 0 Preferences consumers likedislikes about good and service independent if of price and income consideration 0 Utility the satisfaction a consumer gets from consuming goods and services Marginal utility extra satisfaction from consuming one more unit of a good or service change in utilitychange in consumption Law of Diminishing Marginal Utilitv as you consume more of a good holding the consumption of everything else the same the addition to satisfaction mu eventually diminish Consumer Equilibrium ln consumer equilibrium the consumer is consuming the set of goods and service that maximize satisfaction Consumer income and prices of the good are assumed to be given Unless prices andor income change a consumer in equilibrium has no incentive to change the satisfaction maximizing bundle of good and service Conditions for Consumer equilibrium all income is spent and MUaPb and points along demand curve are consistent With consumer equilibrium demand curves results from consumer s efforts to maximize satisfaction 0 Consumer Surplus consumer surplus is a measure of consumer s well being Consumer surplus is the difference between a consumer willingness to pay for a good and what the consumer actually pays Graphically it s the area of the triangle below the demand cure and above the price Cost and Productivity Explicit cost cost incurred when money changes hands Implicit money doesn t change hands but some alternate sacd ced 0 Economic Cost explicit implicit cost opportunity cost Accounting Cost explicit cost pro ts Economic Pro ts total revenue sales implicit explicit Accountinq Pro ts total revenues explicit cost Normal pro t total revenueexplicit implicit Marginal physical product extra out from one more input change in 0 change in the input negative relationship btwn MPP and MC Law of Diminishing Return as you increase one input in equal increments holding all other inputs the same its MPP will go down Least cost production MPPkPl Average Marginal Relationship When marginal average gt average is rising When marginal averagelt average is falling When marginal average is average is constant Cost Abbreviations Fixed Cost FC Variable Cost VC Total CostTC FCVC Average Fixed Cost FCQ Average variable cost VCQ Average Total CostTCQAFCAVC Marginal Cost MC change in TC Change in Q Change in VCChange in Q TCQATCTCq Fixed Cost are there I the SHORT RUN only all cost are variable in the long run ATC AMC are increasing with marginal cost increases Short run Long Run every long run is a sequence of a short run The rm has all the options in the LR that it did in the SR more The LR ATC will envelope below SR Long Run Cost Economic of scale ATC falls with output increases Diseconomic of scaleATC rises with output increase Constant return to scale ATC stays the same with the output change Minimum ef cient scale minimal output where long run is minimized Features Large number of buyers and sellers perfect information about prices and quality homogenous product no barrier to entry and exit of rms and no buyer or selling is large enough to effect the price Price Takers rms that take the price given gt horizontal demand curvegtPMR Price Searchers non competitive rm negatively sloping demand curvegt PgtMR Pro t Maximizing Rule MC MRapplies to rm Shut Down Rule PgtAVC TRgtVC do not shut down but PltAVC TRltVC shutdown Applies to short run only Short Run maximizes under perfect competition Firms DMR and industries demand downward slope and supplies upwards In the short run a PC rm might shut down make pro ts or make losses Pro t Max Rule MR MC all rms and PMC PC rms only and all PC rms are Price Takers Long Run PC Firms make normal pro t due to freedom of entry and exit of rm break even Firm produce at lowest point on ATC economic ef ciency no wastage Constant cost industry Industry supply curve is horizontal Increasing cost industry industry supply curve is upward sloping Producer Surplus measure of seller s well being The difference btwn what a seller receives for a good and the minimum the seller is willing to receive Monopoly Features one seller and many buyers no close substitution for the product and price searchersmakers Barrier to entry of rivals for monopoly the rm and industry are on and the same Economies of scale patents exclusive ownership of raw materials public franchises and licensing Marginal Revenue Price elasticity of demand When MRO ED1 unit elastic When MRgtO EDgt1 elastic When MRltO EDlt1inelastic unlike PampQ MR can be negative Facts about Monopoly monopolist needs not produce where ATC are minimized ln monopoly PgtMC since PgtMC for price searchers ad MC MR Monopolist produce where demand is elastic Monopolist don t change the highest possible price No supply curve Unlike PC monopolist can continue to earn pro ts in the long run due to entry barriers Price Discrimination charging people the different prices for the same products Comparing Perfect Competition and Monopoly Comparing Monopoly PC there is a classictrade off btwn equity and ef ciency you have one or the other Economic efficiency when society resources can t be reallocated to make everyone better off Economic equity when resources are allocated according to a widely accepted fair Economic Equity when resources are allocated according to widely accepted fair criteria Externalities they are present when the cost andor bene t of a transaction btwn 2 parties are born by third parties parties are no directly innoved in the original transaction Social Cost bene ts private cost bene ts External Cost bene ts Pros and Cons of PC Pros Economic ef ciency and consumer receive lowest price Cons might lead to inequalities in income distribution Might no be ef cient in the presence of externalities Might not be conducive to high rates of technical changes Pros and Cons of Monopoly Pros Might encourage technical change Cons contrived arti cial scarcity monopolist deliberately reduces output to raise the price Monopoly leads to deadweight loss losses in consumer surplus and producer surplus It measures lost gains from trade


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