econ Midterm John carroll

The term market failure refers to a situation in which the market on its own fails to allocate resources efficiently. an unsuccessful advertising campaign which reduces demand for a product. a situation in which competition among firms becomes ruthless. a firm that is forced out of business because of losses.

a situation in which the market on its own fails to allocate resources efficiently.

When society gets the most it can from its scarce resources, then the outcome is called

efficient

Which of the following combinations of corn and rye is not currently attainable but would be attainable if there was an improvement in overall production technology? 2,000 bushels of corn and 500 bushels of rye 1,500 bushels of corn and 800 bushels of rye 1,250 bushels of corn and 1,700 bushels of rye 500 bushels of corn and 1,700 bushels of rye

1,250 bushels of corn and 1,700 bushels of rye

If the production possibilities frontier is bowed outward, then which of the following could be the maximum number of tennis balls produced when 300 tennis rackets are produced? 4,000. 4,200. 3,600. 2,400.

2,400

The opportunity cost of this economy moving from point D to point C is 60 dryers. 20 dryers. 20 washers and 20 dryers. 20 washers.

20 washers

It is not possible for this economy to produce at point C. D. A. B.

A

For which of the following individuals would the opportunity cost of going to college be highest? A promising young mathematician who will command a high salary once she earns her college degree A student with average grades who has never held a job A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree A student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball

A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree

Which of the following is an example of a capital input? A computer A share of stock The finances necessary for firms to produce their products The money households use to purchase firms' output

a computer

Suppose an economist develops a theory that lower electronics prices arise from lower gas prices. According to the scientific method, which of the following is the economist's next step? Collect and analyze data Go to a laboratory and generate data to test the theory Publish the theory without testing it Conduct a natural experiment to confirm the theory

Collect and analyze data

A survey of professional economists revealed that more than three-fourths of them agreed with fourteen economic propositions. Which of the following is not one of those propositions? The United States should eliminate agricultural subsidies. Federal, state, and local governments should prevent companies from outsourcing work. Minimum wage increases unemployment among young and unskilled workers. Fiscal policy has a significant stimulative impact on a less than fully employed economy.

Federal, state, and local governments should prevent companies from outsourcing work.

In the circular-flow diagram, which of the following items flows from firms to households through the markets for goods and services? Dollars paid to land, labor, and capital Dollars spent on goods and services Goods and services Wages, rent, and profit

Goods and services

Which of the following claims is consistent with the views of mainstream economists? If we increase the rate of inflation from 4 percent to 6 percent, then the rate of unemployment will temporarily fall. If we increase the rate of inflation from 4 percent to 6 percent, then the rate of unemployment will temporarily rise. If we increase the rate of inflation from 4 percent to 6 percent, then the rate of unemployment will permanently fall. If we increase the rate of inflation from 4 percent to 6 percent, then the rate of unemployment will permanently rise.

If we increase the rate of inflation from 4 percent to 6 percent, then the rate of unemployment will temporarily fall.

Which of the following is the most correct statement about the relationship between inflation and unemployment? In the short run, falling inflation is associated with falling unemployment. In the short run, falling inflation is associated with rising unemployment. In the long run, falling inflation is associated with falling unemployment. In the long run, falling inflation is associated with rising unemployment.

In the short run, falling inflation is associated with rising unemployment.

A donut shop sells fresh-baked donuts from 6 a.m. until 5 p.m. every day. The shop does not sell day-old donuts, so all unsold donuts are thrown away at 5 p.m. each day. The cost of making and selling a dozen donuts is $1; there are no costs associated with throwing donuts away. If the manager has seven dozen donuts left at 4 p.m. on a particular day, which of the following alternatives is most attractive? Lower the price of the remaining donuts, even if the price falls below $1 per dozen. Lower the price of the remaining donuts, but under no circumstances should the price fall below $1 per dozen. Throw the donuts away and produce seven fewer dozen donuts tomorrow. Starting tomorrow, lower the price on all donuts so they will all be sold earlier in the day.

Lower the price of the remaining donuts, even if the price falls below $1 per dozen.

Which of the following is an example of a positive, as opposed to normative, statement? If welfare payments increase, the world will be a better place. The income tax rate should be increased to offset the budget deficit. Prices rise when the government prints too much money. Antitrust laws should be used to prevent further concentration in the wireless telephone service market.

Prices rise when the government prints too much money.

The slow growth of U.S. incomes during the 1970s and 1980s can best be explained by

a decline in the rate of increase in U.S. productivity.

Which of the following statements exemplifies a principle of individual decision making? Trade can make everyone better off. Governments can sometimes improve market outcomes. The cost of something is what you give up to get it. Prices rise when the government prints too much money.

The cost of something is what you give up to get it.

Which of the following statements is correct? The opportunity cost of an additional 100 toys is constant at 100 glasses. The opportunity cost of an additional 100 toys is constant at 600 glasses. Supertown's production possibilities frontier is a straight, downward-sloping line. The opportunity cost of an additional 100 toys increases as more glasses are produced.

The opportunity cost of an additional 100 toys increases as more glasses are produced.

When constructing a production possibilities frontier, which of the following assumptions is not made? A country produces only two goods or types of goods. The amount of available resources does not change. Technology does not change. The quantities of the factors of production that are available are increasing over the relevant time period.

The quantities of the factors of production that are available are increasing over the relevant time period.

Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 1,000 units of food and 47 machines. This year it experienced a technological advance in its machine-making industry. As a result, this year the society wants to produce 1,050 units of food and 47 machines. Which of the following statements is correct? Because the technological advance occurred in the machine-making industry, it will not be possible to increase food production without reducing machine production below 47. Because the technological advance occurred in the machine-making industry, increases in output can only occur in the machine industry. In order to increase food production in these circumstances without reducing machine production, the economy must reduce inefficiencies. The technological advance reduced the amount of resources needed to produce 47 machines, so these resources could be used to produce more food.

The technological advance reduced the amount of resources needed to produce 47 machines, so these resources could be used to produce more food.

When the government prevents prices from adjusting naturally to supply and demand, it equates the amount buyers want to buy with the amount sellers want to sell. adversely affects the allocation of resources. improves equality and efficiency. improves efficiency but reduces equality.

adversely affects the allocation of resources

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as productivity. an externality. market power. property rights.

an externality

A shift of the economy's production possibilities frontier from Graph (a) to Graph (b) could be caused by unemployment. an improvement in tractor production technology. an improvement in truck production technology. an improvement in both tractor and truck production technology.

an improvement in tractor production technology.

If the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price, then we would expect, relative to the market outcome, an increase in the number of visits people want to make and an increase in the number of visits health care providers want to an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide. a decrease in the number of visits people want to make and an increase in the number of visits health care providers want to provide. a decrease in the number of visits people want to make and a decrease in the number of visits health care providers want to provide.

an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide.

Your professor loves her work, teaching math. She has been offered other positions in the corporate world that would increase her income by 15 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal cost of teaching increased. benefit of teaching increased. cost of a corporate job increased. benefit of a corporate job decreased.

cost of teaching increased.

The art in scientific thinking—whether in physics, economics, or engineering—is the design and implementation of laboratory experiments. the ability to make an abstract subject easy to understand. deciding which assumptions to make. not something in which scientists have to be skilled.

deciding which assumptions to make.

When two variables move in opposite directions, the curve relating them is upward sloping, and we say the variables are positively related. upward sloping, and we say the variables are negatively related. downward sloping, and we say the variables are positively related. downward sloping, and we say the variables are negatively related.

downward sloping, and we say the variables are negatively related.

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. However, redistributing income from rich to poor reduces the reward for working hard. Therefore, society faces a tradeoff between guns and butter. efficiency and equality. inflation and unemployment. work and leisure.

efficiency and equality.

The "invisible hands" ability to coordinate the decisions of the firms and households in the economy can be hindered by government actions that distort prices. increased competition in markets. enforcement of property rights. too much attention paid to efficiency.

government actions that distort prices.

Central planning refers to markets guiding economic activity. Today many countries that had this system have abandoned it. markets guiding economic activity. Today many countries that did not have this system have implemented it. government guiding economic activity. Today many countries that had this system have abandoned it. government guiding economic activity. Today many countries that did not have this system have implemented it.

government guiding economic activity. Today many countries that had this system have abandoned it.

Tao and Miray are economists. Tao thinks that the wealthiest 10 percent of the U.S. population should be taxed a rate higher than the rest of society because they can better afford it. Miray thinks that everyone should be taxed at the same rate because that is the fairest scenario and the wealthy should not be penalized for their success. In this example, Tao and Miray disagree about the validity of a positive theory. have different normative views about tax policy. must both be incorrect because tax policy is never that simple. disagree because they have access to contradicting positive statements.

have different normative views about tax policy.

Economists at the Department of Justice track the behavior of the nation's money supply. advise Congress on economic matters. help enforce the nation's antitrust laws. prepare the federal budget.

help enforce the nation's antitrust laws.

In the simple circular-flow diagram, the participants in the economy are firms and government. households and firms. households and government. households, firms, and government.

households and firms.

Microeconomics is the study of how money affects the economy. how individual households and firms make decisions. how government affects the economy. how the economy as a whole works.

how individual households and firms make decisions.

The "invisible hand" refers to how central planners made economic decisions. how the decisions of households and firms lead to desirable market outcomes. the control that large firms have over the economy. government regulations without which the economy would be less efficient.

how the decisions of households and firms lead to desirable market outcomes

In the circular-flow diagram, transfer payments flow from firms to households. income payments flow from firms to households. goods and services flow from households to firms. inputs and outputs flow in the same direction as the flow of dollars, from households to firms.

income payments flow from firms to households.

The business cycle is the relationship between unemployment and inflation. irregular fluctuations in economic activity. positive relationship between the quantity of money in an economy and inflation. predictable changes in economic activity due to changes in government spending and taxes.

irregular fluctuations in economic activity.

This economy cannot currently produce 70 washers and 80 dryers because it is not using all of its resources. it is not using the most efficient production process. it does not have the resources and technology to produce that level of output. consumers don't want that many washers and dryers.

it does not have the resources and technology to produce that level of output

Chloe's college raises the cost of room and board per semester. This increase raises Chloe's opportunity cost of attending college You Answered even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost reduces Chloe's incentive to attend college. even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost increases Chloe's incentive to attend college. only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost reduces Chloe's incentive to attend college.

only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost reduces Chloe's incentive to attend college.

Another term for goods and services is output. inputs. factors of production. resources.

output

The adage, "There ain't no such thing as a free lunch," means even people on welfare have to pay for food. the cost of living is always increasing. people face tradeoffs. all costs are included in the price of a product.

people face tradeoffs.

Production at point Q is possible and efficient. possible but inefficient. impossible but efficient. impossible and inefficient.

possible but inefficient.

Market power refers to the power of a single person or small group to influence market prices. ability of a person or small group to successfully market new products. power of the government to regulate a market. importance of a certain market in relation to the overall economy.

power of a single person or small group to influence market prices.

Normative statements are descriptive. claims about how the world is. prescriptive. claims about how variables in the economy normally behave.

prescriptive.

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

resources are scarce

Resources are scarce for households but plentiful for economies. plentiful for households but scarce for economies. scarce for households and scarce for economies. plentiful for households and plentiful for economies.

scarce for households and scarce for economies

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to increase the money supply. This is likely because the Federal Reserve is worried about inflation. the Federal Reserve is worried about unemployment. the Federal Reserve is hoping to reduce the demand for goods and services. the Federal Reserve is worried that the economy is growing too quickly.

the Federal Reserve is worried about unemployment.

Prior to the collapse of communism, communist countries worked on the premise that economic well-being could be best attained by a market economy. a strong reliance on prices and individuals' self-interests. a system of large privately owned firms. the actions of government central planners.

the actions of government central planners.

Aiden and Zaria charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, six people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have six or five cars parked on their lawn does not affect their costs. From this information it follows that A.they should leave the price at $10. B.it does not matter if they charge $10 or $15. C.they would do better charging $15 than $10. D.they should raise the price even more.

they would do better charging $15 than $10.

The y-coordinate of an ordered pair specifies the diagonal location of the point. horizontal location of the point. vertical location of the point. quadrant location in which the point is located.

vertical location of the point.