Econ Exam 1

The following table contains some production possibilities for an economy for a given month. Sweaters Gloves 4 300. 6. ? 8 100 If the production possibilities frontier is a straight line, then "?" must be - 200. -300. -100. -250. - 150.

200

Identify the macroeconomic issue among the following statements. - The average cost of producing electricity nationally is rising. - Our family business costs will rise due to higher electric rates. - The electric bill is higher this month.

The average cost of producing electricity nationally is rising.

Imagine that a high school junior sold her old car at the end of the summer and now has the funds from the sale in her bank. She decides to purchase a much needed new automobile instead of saving that money to pay for her senior trip coming up next year. From an economist's perspective, which of the following statements about this decision is likely to be true? - The decision must have been made haphazardly and is therefore irrational. - The decision is irrational because anyone can see that choosing a new automobile over a once in a lifetime senior trip is an improper use of scarce resources. - The decision is rational in the sense that it reflects the junior's preference for a new automobile over a senior trip.

The decision is rational in the sense that it reflects the junior's preference for a new automobile over a senior trip.

When tasks involved with producing a good or service are divided, workers and businesses - miss out on an opportunity to specialize in their business or trade. - produce less output than if each person or group were to complete the project alone. -can produce a greater quantity of those goods or services.

can produce a greater quantity of those goods or services.

Natural resources, or land, can include the fertility of the land, minerals below it, and what other aspects? - human capital resources - climate - human resources

climate

Making rational decisions "at the margin" means that people -evaluate how easily a decision can be reversed if problems arise. -always calculate the marginal dollar costs for each decision. -compare the marginal costs and marginal benefits of each decision. -always calculate the marginal utility for each decision. -make those decisions that do not impose a marginal cost.

compare the marginal costs and marginal benefits of each decision.

Total output in an economy increases when each person specializes because -each person spends more time producing that product in which he or she has an absolute advantage. -a wider variety of products will be produced within each country due to specialization. -there is less competition for the same resources. -each person spends more time producing that product in which he or she has a comparative advantage. -government necessarily plays a larger role in the economy due to specialization.

each person spends more time producing that product in which he or she has a comparative advantage.

Economists are particularly adept at understanding that people respond to -incentives. -punishments more than rewards. -sunk costs. -rewards more than punishments. laws.

incentives

A bill was introduced into Congress last year suggesting changes to the income tax code. Congress now passed this new tax reform act in the last session and over the next few years the new laws will begin to impact the nation. This is an example of what type of policy? -macroeconomic monetary policy -macroeconomic fiscal policy -microeconomic monetary policy

macroeconomic fiscal policy

Economic capital is productive, so it does NOT include -money. -tools. -buildings & equipment.

money

What is NOT included in economic capital? -tools -money -buildings and equipment

money

If trade between nations is prohibited, - nations will more easily achieve specialization in production and end up consuming more. -nations will be unable to specialize in what they are good at and therefore end up consuming less. -nations can refine their ability to allocate resources and therefore raise consumption.

nations will be unable to specialize in what they are good at and therefore end up consuming less.

If Kendrick decides to watch t.v. instead of go to the gym, the ________ is a missed workout. -output cost -societal cost -opportunity cost

opportunity cost

What must be given up to obtain an item is called -comparative worth. -the price. -opportunity cost. -out-of-pocket cost. -absolute value.

opportunity cost.

The adage, "There is no such thing as a free lunch," means -the cost of living is always increasing. -inflation makes eating more expensive over time. -people face tradeoffs. -even people on welfare have to pay for food. -all costs are included in the price of a product.

people face tradeoffs.

If Mikael decides to go out with his friends instead of study for his biology test, what is the opportunity cost? - better relationships with his friends - the missed opportunity to go to the gym - preparation for his biology test

preparation for his biology test

The overriding reason as to why households and societies face many decisions is that -incomes fluctuate with business cycles. -people, by nature, tend to disagree. -goods and services are not scarce. -wants are scarce. -resources are scarce.

resources are scarce.

Society gains advantages through trade because of its ability to - align output to reflect society's preferences. - specialize resources to the uses where opportunity cost is minimized. - attain absolute advantage in our trade with other nations.

specialize resources to the uses where opportunity cost is minimized.

College athletes who drop out of college to become very successful professional athletes -are not making a rational decision since the total benefits of continuing is college outweigh the total costs of continuing in college. -are making a poor decision based on liftime earnings. -understand that the opportunity cost of continuing in college is very low for them. -are not making a rational decision since the marginal benefits of continuing in college outweigh the marginal costs of continuing in college. -understand that the opportunity cost of continuing is college is very high for them.

understand that the opportunity cost of continuing is college is very high for them.

A nation that bans trade with other nations -will be unable to specialize in what they are good at and therefore end up consuming less. - can refine their ability to allocate resources and therefore raise consumption. - will more easily achieve specialization in production and end up consuming more.

will be unable to specialize in what they are good at and therefore end up consuming less.