Macro quiz 1

Who wrote The Wealth of Nations, a book that many credit with establishing economics as a discipline?

Adam Smith

is a simplified version of reality used to understand real-world economic conditions.

An economic model:

Labor and capital are the only two factors of production.

False

After eating three slices of pizza, you decide to eat one more piece. Your decision is an example of the economic concept called:

marginal decision making.

Trade can be beneficial to an economy because:

more goods and services can be obtained at lower opportunity cost.

The study of economics arises because of the necessity of choice, and the necessity of choice arises because of the fundamental problem of scarcity of resources.

True

Economists generally believe that a country should specialize in the production of a good or service if the:

country can produce the product while forgoing fewer alternative products than any other country.

"The rate of unemployment is 9%." This statement:

is positive.

If an economy is producing a level of output that is on its production possibility frontier, the economy has:

no idle resources and is using resources efficiently.

A central and fundamental theme in economics is that:

people have unlimited wants but limited means to satisfy them.

When we are forced to make choices, we are facing the concept of:

scarcity.

The circular-flow diagram illustrates how firms _____ goods and services and _____ factors of production.

sell; buy

Gains from trade arise because of:

specialization in production.

A normative statement deals with:

what ought to be.

Khalil is offered a free ticket to the opera, which he cannot resell. His opportunity cost of going to the opera is:

whatever Khalil would have done had he not gone to the opera.

The BEST measure of the opportunity cost of any choice is:

whatever you have given up to make that choice, even if no monetary costs are involved.

You can spend $100 on either a new economics textbook or a new tablet computer. If you choose to buy the new economics textbook, the opportunity cost is:

your enjoyment of the new tablet computer.

A college student is faced with a difficult decision of how to spend one hour tonight. She could babysit her professor's child at an hourly wage of $7; she could work at the college library at a wage of $6; or she could finish her economics homework assignment. If she chooses to complete her homework assignment, she has incurred an opportunity cost equal to:

$7.

The circular-flow diagram illustrates how households _____ goods and services and _____ factors of production

.buy; sell

the opportunity costs of the products are constant.

A production possibility frontier that is a straight line sloping down from left to right suggests that:

Sarah; milkshakes.

If they produce only hamburgers, in a single day Sarah can produce 10 hamburgers, and Abe can produce 5 hamburgers. If they make milkshakes only, in a single day Sarah can produce 10 milkshakes, and Abe can produce 4 milkshakes. Therefore, _____ has an absolute advantage and a comparative advantage in making _____.

In one hour, the United States can produce 25 tons of steel or 250 automobiles. In one hour, Japan can produce 30 tons of steel or 275 automobiles. This information implies that:

Japan has a comparative advantage in the production of automobiles.

Which statement is NOT true?

Most opportunity costs are zero.

the value of the best alternative forgone in making any choice.

Opportunity cost is:

Which statement is normative?

The best way to encourage growth in the economy is through government spending.

Which statement is positive?

The federal government spends half of its budget on national defense.

"Unemployment of 5% is too high" is:

a normative statement.

If resources are scarce, it means that they:

are insufficient to provide enough goods and services to satisfy all human material wants and needs.

An economy is said to have a comparative advantage in the production of a good if it can produce that good:

at a lower opportunity cost than another economy.

Jim is being paid $7.25 an hour to work at a restaurant. In the circular flow, this is an example of a:

business buying a resource in the factor market.

Economists tend to believe that to change people's behavior you must:

change their incentives.

When someone says resources are scarce, this suggests that:

choices must be made to utilize resources in the best manner possible.

Which factor can BEST be considered to be a resource used in the production of computers?

computer engineers

If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has a(n):

constant negative slope.

The importance of an economic model is that it allows us to:

focus on the effects of only one change at a time.

The circular-flow diagram represents the market for _____ and the market for _____.

goods and services; factors of production

Mary spends $5 on food for her cat. This is an example of a:

household buying goods and services in the product market.

If the opportunity cost of manufacturing machinery is lower in the United States than in Britain and the opportunity cost of manufacturing sweaters is higher in the United States than in Britain, then the United States will:

import sweaters from Britain and export machinery to Britain.

Which method of encouraging recycling is likely to be MOST effective given that people usually exploit opportunities to make themselves better off?

imposing a tax per unit of garbage generated

Which method of discouraging speeding is likely to be MOST effective given that people usually exploit opportunities to make themselves better off?

increasing the fine associated with speeding tickets

All points inside the production possibility frontier represent:

inefficient production points.

All points outside the production possibility frontier are:

infeasible.