econ exam

Which of the following is a source of comparative advantage? a. abundant inputs b. global supply chains c. low trade costs d. low tariff rates

a. abundant inputs

The working-age population includes people who are: a. age 16 or older who are not in the military or institutionalized. b. not in the military or institutionalized. c. age 16 or older. d. not retired.

a. age 16 or older who are not in the military or institutionalized.

When a manager uses comparative advantage to assign tasks in a workplace, then each a. task is assigned to the worker with the lowest opportunity cost for performing the task. b. worker learns how to do all tasks to increase flexibility in assignments. c. worker is assigned to the tasks for which he or she has the highest aptitude and efficiency. d. task is assigned to the worker who is best at doing the task.

a. task is assigned to the worker with the lowest opportunity cost for performing the task.

Government social insurance programs are funded by a. taxes and fees that are assessed on workers and employers specifically for each program. b. progressive taxes on income. c. a pay-back system where beneficiaries repay benefits over a 10-year period. d. a premium paid by those who choose to participate in the insurance programs.

a. taxes and fees that are assessed on workers and employers specifically for each program.

Hand-to-mouth consumers: a. spend more on luxuries than on necessities. b. engage in a significant amount of spending. c. live paycheck to paycheck. d. have very high levels of consumption.

c. live paycheck to paycheck.

The cost-benefit principle states that a decision should be pursued only if the a. costs are greater than the benefits. b. benefits are positive. c. costs are negative. d.benefits are greater than the costs.

d. benefits are greater than the costs

A mutual fund is a fund that: a. consists of only international assets. b. is owned by the government. c. buys a variety of assets, including land and precious metals, for companies. d. buys a portfolio of stocks and bonds on your behalf.

d. buys a portfolio of stocks and bonds on your behalf.

A production function is: a. a method through which inputs can be turned into outputs, given the available resources. b. a method by which outputs can be recycled to produce inputs. c. the sum of total production possibilities, if resources were unlimited. d. the amount of money generated from selling outputs.

a. a method through which inputs can be turned into outputs, given the available resources.

The aggregate production function is represented as: a. L = f(Y, H, K). b. H = f(L, Y, K). c. Y = f(L, H, K). d. K = f(L, H, Y).

c. Y = f(L, H, K).

The movement from point M to point N represents ON SAME LINE: a. a decrease in quantity demanded. b. an increase in quantity demanded. c. a decrease in demand. d. an increase in demand.

b. an increase in quantity demanded.

Which of the following items is an inferior good? a. Car rentals b. Luxury SUVs c. Discount stores d. Airline tickets

c. Discount stores

Due to a decline in demand and popularity, Ford Motor Company is planning to phase out traditional sedans such as 'Fusion' and 'Taurus' to focus on SUVs and trucks. Ford's sedans and trucks/SUVs are a. products that do not follow the law of supply. b. inputs in production. c. complements-in-production. d. substitutes-in-production.

d. substitutes-in-production.

The table provides data on how long it takes Marla and Jason to cook lasagna or chicken curry. HOURS TO COOK Lasagna Curry Marla 4 3 Jason 3 1 Which statement explains who has a comparative advantage in cooking lasagna? a. Marla because she has a lower opportunity cost than Jason. b. Marla because she can cook lasagna faster than Jason. c. Jason because he has a lower opportunity cost than Marla. d. Jason because he can cook lasagna faster than Marla.

a. Marla because she has a lower opportunity cost than Jason.

Comparative advantage explains why people a. lack focus in their production decisions. b. try to gain a wide range of skills. c. specialize and trade. d. work at the job they love the most.

c. specialize and trade

Human capital refers to: a. money earned by workers in businesses. b. work done by machinery. c. worker skills and knowledge. d. machines that have artificial intelligence.

c. worker skills and knowledge.

A trade cost is: a. the difference in price between a good that is bought or sold abroad rather than domestically. b. the price of a good that is bought or sold abroad. c. the cost associated with producing a good that is bought or sold abroad. d. an extra cost incurred as a result of buying or selling a good abroad rather than domestically.

d. an extra cost incurred as a result of buying or selling a good abroad rather than domestically.

Sunk costs are costs that a. are incurred in the past and cannot be reversed. b. are part of the opportunity costs of a decision. c. should be considered in any decision. d. are potential costs associated with a particular decision.

a. are incurred in the past and cannot be reversed.

A "final" good or service is one that is: a. finished and ready for the final user. b. not for sale. c. intermediate and ready to be used as an input. d. not being produced for the market.

a. finished and ready for the final user.

Which principle tells you that the true cost of something is the next best alternative you have to give up to get it? a. The opportunity cost principle. b. The cost-benefit principle. c. The interdependence principle. d. The marginal principle.

a. The opportunity cost principle.

Discretionary spending is spending that: a. includes all federal government spending. b. is appropriated by Congress annually. c. supports programs that do not get determined annually but instead are set in law. d. includes all state and local government spending.

b. is appropriated by Congress annually.

Menu costs are the: a. variety of costs that cause producers to change their prices. b. marginal costs of adjusting prices. c. costs of producing restaurant meals. d. total costs of producing goods and services.

b. marginal costs of adjusting prices.

What is the Federal Reserve's mandate? a. to encourage inflation and raise unemployment b. to ensure maximum employment while maintaining stable prices c. to print as many dollars as possible without causing inflation d. to ensure that interest rates remain low all the time

b. to ensure maximum employment while maintaining stable prices

When quantity demanded exceeds quantity supplied, _____ exists. a. equilibrium b. a surplus c. a shortage d. fixed demand

c. a shortage

The concept of diminishing marginal utility means that an additional dollar of income will yield _____ marginal benefit compared to the previous dollar of extra income. a. more b. an unpredictable amount of c. less d. the same

c. less

The slope of the consumption function is the: a. average level of consumption over time. b. marginal propensity to import. c. marginal propensity to consume. d. marginal propensity to invest.

c. marginal propensity to consume.

GDP is defined as the: a. value of all intermediate goods produced within a country in a given year. b. value of all output produced by businesses within a country in a given year. c. market value of all final goods and services produced within a country in a given year. d. market value of all consumer goods purchased within an economy.

c. market value of all final goods and services produced within a country in a given year.

The labor force participation rate is the: a. percentage of the labor force that is unemployed. b. number of unemployed divided by the number of employed. c. percentage of the working age population that is either employed or unemployed. d. sum of the employed and the unemployed.

c. percentage of the working age population that is either employed or unemployed.

A market's deadweight loss is calculated as: a. the price at equilibrium minus the price at actual quantity. b. the loss to consumers when a product malfunctions or fails to meet expectations. c. the economic surplus at the efficient quantity minus the economic surplus at the actual quantity. d. the economic loss that a firm has when it is not producing its profit-maximizing output.

c. the economic surplus at the efficient quantity minus the economic surplus at the actual quantity.

In your current job, you earn $55,000. You take the standard deduction of $12,200. You have an offer of a new job working for a different employer. Your salary would go up by $5,000. How much extra will you owe in federal income taxes if you take the new job? ON PAPER a. $500 b. $600 c. $2,200 d. $1,100

d. $1,100

Analysis based on value judgments is called _____ analysis. a. valuative b. positive c. subjectivity-based d. normative

d. normative

An excise tax is a tax on: a. a specific product. b. imports. c. purchases that is typically a percentage of the purchase price of goods and services. d. luxury goods and services.

a. a specific product.

In a market graph, consumer surplus is the area: a. above the price and below the demand curve. b. above the price. c. below the demand curve. d. between the demand curve and the supply curve.

a. above the price and below the demand curve.

Credit constraints limit the: a. amount of money that people can borrow. b. interest rates that banks can charge. c. amount of saving that people can make. d. amount of money that banks can accept as deposits

a. amount of money that people can borrow.

Depreciation refers to the: a. decline in capital due to wear and tear, obsolescence, accidental damage, and aging. b. decline in the quality of output produced by a business. c. fall in the price of output that the business produces. d. spending by a business on new capital assets.

a. decline in capital due to wear and tear, obsolescence, accidental damage, and aging.

The concept of equity focuses on: a. fairness. b. the level of economic surplus. c. efficiency. d. profit.

a. fairness.

Shifts in demand a. lead to price and quantity to move in the same direction. b. always lead to increases in equilibrium price. c. lead to price and quantity to move in opposite directions. d. always lead to increases in equilibrium quantity.

a. lead to price and quantity to move in the same direction

An equilibrium price is a price where the a. quantity supplied equals the quantity demanded. b. amount that buyers are willing to buy is equal to the amount that buyers are able to buy. c. demand curve is identical to the supply curve. d. quantity demanded no longer changes.

a. quantity supplied equals the quantity demanded.

Investment refers to: a. spending on physical capital. b. saving money in banks. c. spending on financial assets such as stocks. d. depreciation of capital stocks.

a. spending on physical capital.

The three major pillars of the financial sector are the: a. stock market, the bond market, and the banks. b. banks, the goods market, and the labor market. c. foreign exchange market, the bond market, and the government. d. stock market, the labor market, and the bond market.

a. stock market, the bond market, and the banks.

Intergenerational mobility is the extent to which: a. the economic status of children is independent of the economic status of their parents. b. the income of children in a given family varies across the children. c. children own more personal transportation vehicles (such as cars and motorcycles) than their parents did. d. the geographic dispersion of families occurs as children pursue economic opportunities.

a. the economic status of children is independent of the economic status of their parents.

The law of demand refers to a. the inverse relationship between price and quantity demanded. b. the positive relationship between price and quantity supplied. c. the inverse relationship between price and quantity supplied. d. the positive relationship between price and quantity demanded.

a. the inverse relationship between price and quantity demanded.

The law of diminishing returns states that: a. when one input is held constant, while other inputs are increased, eventually output will increase by smaller and smaller amounts. b. the lower the level of human capital in an economy, the lower the economic growth rate. c. when all inputs are held constant, there is an upper limit to the amount of output that can be produced. d. the level of capital accumulation is directly related to the level of human capital in an economy.

a. when one input is held constant, while other inputs are increased, eventually output will increase by smaller and smaller amounts.

What is social insurance? a. It is the government assignment of jobs to individuals based on household need and employee education and skills. b. It is government-provided financial funding to households to compensate for bad outcomes such as unemployment, illness, disability, or outliving their savings. c. It is the cash-assistance, goods, and services provided by the government to better the lives of those at the bottom of the income distribution. d. It is a system where those with more income tend to pay a higher share of their income in taxes than those with lower incomes.

b. It is government-provided financial funding to households to compensate for bad outcomes such as unemployment, illness, disability, or outliving their savings.

What is the difference between microeconomics and macroeconomics? a. Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of government policies. b. Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole. c. Microeconomics is the study of the economy as a whole, whereas macroeconomics is the study of individual decisions in specific markets. d. Microeconomics focuses only on the forces of individual demand and individual supply, whereas macroeconomics focuses only on policy making for the economy.

b. Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole.

What happens to the equilibrium price and quantity when demand increases and simultaneously supply decreases, and the relative size of the shifts is not known? a. The equilibrium quantity rises, and the change in the equilibrium price is ambiguous. b. The equilibrium price rises, and the change in the equilibrium quantity is ambiguous. c. The equilibrium quantity falls, and the change in the equilibrium price is ambiguous. d. The equilibrium price falls, and the change in the equilibrium quantity is ambiguous.

b. The equilibrium price rises, and the change in the equilibrium quantity is ambiguous.

Future value is the: a. total amount of interest paid on a loan by a future date. b. amount that your money will grow into by a future date as a result of earning interest. c. sum of all present values for a portfolio of savings instruments. d. equivalent of present value divided by the real interest rate.

b. amount that your money will grow into by a future date as a result of earning interest.

You go to Starbucks and see that the price of your favorite tall vanilla latte has gone up by 25 cents. All sizes of the vanilla lattes are now more expensive. As a result of this price increase, you would expect to see a a. rise in the quantity demanded of vanilla lattes. b. fall in the quantity demanded of vanilla lattes. c. fall in the demand for vanilla lattes. d. rise in the demand for vanilla lattes.

b. fall in the quantity demanded of vanilla lattes.

Holding all else constant, if people eat out more at expensive restaurants when they earn more, then expensive restaurant meals are a. goods with a network-effect. b. normal goods. c. goods with a congestion-effect. d. inferior goods.

b. normal goods.

The Producer Price Index is an index that tracks the a. average price that consumers pay over time for a representative basket of goods and services. b. price that businesses pay over time for the inputs used in the production process. c. price of all goods and services produced domestically. d. highest prices consumers pay over time for imported goods and services.

b. price that businesses pay over time for the inputs used in the production process.

Forward guidance occurs when the Federal Reserve: a. provides information about current monetary policy in order to influence expectations about future interest rates. b. provides information about the future course of monetary policy in order to influence expectations about future interest rates. c. carries out open market operations to influence future interest rates. d. follows the same future course of monetary policy that it has been following in the past.

b. provides information about the future course of monetary policy in order to influence expectations about future interest rates.

Suppose that a CPI basket includes avocadoes, pineapples and oranges. Avocadoes become very expensive, and consumers substitute away from avocadoes and buy hummus instead. If the CPI basket does not change to reflect the move away from avocados, the result is: a. the failure to capture real variables versus nominal variables. b. substitution bias. c. understated inflation. d. quality bias.

b. substitution bias.

What is quantity supplied? a. It is a graph that plots the quantities of an item that a seller plans to sell at different prices. b. It is a graph that plots how much a seller produces at different points in time. c. It is the amount of an item that a seller is willing to sell at a particular price. d. It is the amount of an item that a buyer is willing to buy at a particular price.

c. It is the amount of an item that a seller is willing to sell at a particular price.

What is a social safety net? a. It is the government assignment of jobs to individuals based on household need and employee education and skills. b. It is a system where those with more income tend to pay a higher share of their income in taxes than those with lower incomes. c. It is the cash-assistance, goods, and services provided by the government to better the lives of those at the bottom of the income distribution. d. It is government-provided financial funding to people to compensate for bad outcomes such as unemployment, illness, disability, or outliving their savings.

c. It is the cash-assistance, goods, and services provided by the government to better the lives of those at the bottom of the income distribution.

How is monetary policy different from fiscal policy? a. Monetary policy focuses on correcting inflation, whereas fiscal policy focuses on unemployment. b. Monetary policy is determined by the president, whereas fiscal policy is determined by the chair of the Federal Reserve. c. Monetary policy adjusts interest rates, whereas fiscal policy adjusts government spending and taxes. d. There is no difference between the two policies.

c. Monetary policy adjusts interest rates, whereas fiscal policy adjusts government spending and taxes.

Market failure occurs when market forces lead to: a. high quantity. b. high price. c. an inefficient outcome. d. a marginal benefit that is equal to marginal cost.

c. an inefficient outcome.

The "market value" of a good or service refers to the: a. total market demand for that good or service. b. units of that good or service that are purchased by consumers. c. current dollar value of that good or service. d. units of that good or service that are produced in the current period.

c. current dollar value of that good or service.

Frictional unemployment is unemployment: a. that occurs because of seasonal changes. b. that occurs because wages don't fall to bring labor demand and labor supply into equilibrium. c. due to the time it takes for employers to search for workers and for workers to search for jobs. d. due to a temporary downturn in the economy.

c. due to the time it takes for employers to search for workers and for workers to search for jobs.

To maximize production, people should a. focus on improving their weakest skills. b. learn all the skills so that they can perform any task needed. c. focus on the task in which they have a comparative advantage. d. focus on the task in which they have an absolute advantage.

c. focus on the task in which they have a comparative advantage.

The U.S. Department of Education sponsors the i3 program (Investing in Innovation), which provides grants to educational institutions and schools that have a proven track record of high student achievement. This is an example of a government program designed to build: a. physical factories and plants. b. labor resources. c. human capital. d. physical capital.

c. human capital.

The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle. a. cost-benefit b. marginal c. interdependence d. opportunity cost

c. interdependence

In the field of economics, the observation that the living standard of a household is more stable than its income, because people think in terms of their long-term earnings as they spend, is known as: a. consumption and inequality of living standards. b. intergenerational mobility and inequality of opportunity. c. permanent income versus current income. d. wealth and inequality of purchasing power.

c. permanent income versus current income.

A government can promote the development of human capital by: a. placing caps on salaries for teachers. b. providing savings tax credits. c. subsidizing secondary school education. d. promoting programs that encourage late retirement from work.

c. subsidizing secondary school education.

The standard deduction for a single person is $12,200. Based on this table, if your total income is $47,000, what is the amount of tax you will pay on your taxable income? ON PAPER a. $3,012 b. $4,176 c. $10,340 d. $3,982

d. $3,982

In the graph, the movement from point E to point F represents ON SAME LINE DOWNWARDS a. an increase in supply. b. an increase in quantity supplied. c. a decrease in supply. d. a decrease in quantity supplied.

d. a decrease in quantity supplied.

The liquidity of an asset is defined as the: a. risk that if you need to sell the asset quickly, you may not be able to get a good price for it. b. ability to index the asset's returns to the inflation rate. c. ability to predict the future cash flow of the asset. d. ability to quickly and easily convert the asset to cash, with little or no loss in value.

d. ability to quickly and easily convert the asset to cash, with little or no loss in value.

On a market graph, producer surplus is the area that is: a. above the demand curve. b. above the demand curve and below the supply curve. c. below the demand curve. d. above the supply curve and below the price.

d. above the supply curve and below the price

Refer to the graph to answer the question. In the graph, the movement from point M to point Q represents WHOLE LINE SHIFTS TO RIGHT a. an increase in quantity demanded. b. a decrease in demand. c. a decrease in quantity demanded. d. an increase in demand.

d. an increase in demand.

The consumer price index is an index that tracks the: a. price that businesses pay over time for the inputs used in the production process. b. price of all goods and services produced domestically. c. highest prices consumers pay over time for imported goods and services. d. average price that consumers pay over time for a representative basket of goods and services.

d. average price that consumers pay over time for a representative basket of goods and services.

The loanable funds market is the market for: a. wholesale goods and services. b. retail goods and services. c. machines. d. funds used to buy, rent, or build capital.

d. funds used to buy, rent, or build capital.

Enforceable property rights encourage economic growth by encouraging: a. depreciation. b. the growth of human capital. c. the sale of property rights. d. investment.

d. investment.

Diminishing marginal benefit: a. is not important in determining a consumer's purchase decision. b. is when consumers do not follow the rational rule. c. is when buying an additional item yields a larger marginal benefit than the previous item. d. is when buying an additional item yields a smaller marginal benefit than the previous item.

d. is when buying an additional item yields a smaller marginal benefit than the previous item.

A market is a a. a place where governments decide what is sold. b. set of supply curves for a product. c. set of demand curves for a product. d. setting that brings together potential buyers and sellers.

d. setting that brings together potential buyers and sellers.

Mandatory spending is spending that: a. is appropriated by Congress annually. b. includes all state and local government spending. c. includes all federal government spending. d. supports programs that do not get determined annually but instead are set in law.

d. supports programs that do not get determined annually but instead are set in law.

The law of supply refers to a. the inverse relationship between price and quantity demanded. b. the inverse relationship between price and quantity supplied. c. the positive relationship between price and quantity demanded. d. the positive relationship between price and quantity supplied.

d. the positive relationship between price and quantity supplied.

An underemployed person is one who is: a. cyclically unemployed. b. employed in the underground economy. c. retired or outside of the labor force. d. working but whose skills are not fully utilized.

d. working but whose skills are not fully utilized.