macro(1-85 quiz 1)

Today, which of the following countries has a centrally planned economy?

North Korea

It is important for Tesla Motors to address the issue of long-distance travel because

People are less likely to buy a car that does not allow them the freedom to take longer trips

productive efficiency means that

a good or service is produced at the lowest possible cost

If a firm is productively and allocatively efficient, it earn __________; if it is not, it __________.

a profit, suffers a loss

Economists assume that the only reason people take the actions they do is in response to economic incentives.

false

Tesla Motors, like any other firm, faces many strategic decisions and trade-offs. If Tesla Motors expends resources to expand its supercharger network, then an opportunity cost would be

fewer resources that could be devoted to car production.

In the United States, to receive a dedicate license, a doctor must complete a residency program at a hospital. Hospitals are not free to expand their residency programs in a particular medical specialty without approval from a Residency Review Committee (RRC), which is made up of physicians in that specialty. A hospital that does not abide by the rulings of the RRC runs the risk of losing its accreditation from the Accreditation Council for Graduate Medical Education(ACGME). The ACGME and the RRCs argue that this system makes it possible to ensure that residency programs do not expand to the point where they are not providing residents with high-quality training. This system may help protect consumers by ensuring that

future doctors receive high-quality training

The price of coffee at Starbucks is too high. This represents

normative analysis

In arriving at a useful economic model, what five steps are followed

1. decide on the assumptions to be used; 2. formulate a testable hypothesis 3. use economic data to test the hypothesis 4. revise the model if it fails to explain the economic data 5. retain the revised model to gel answer similar economic questions.

How can a country gain from specialization and trade?

A country can specialize in producing that for which it has a comparative advantage and then trade for other needed goods and services.

Which of the following statements about a hypothesis is correct?

A hypothesis is a statement that could i principle turn out to be incorrect.

The making the Connection explains that there are both positive and normative elements to the debate over whether medical schools should charge tuition and whether hospitals should continue to pay residents who pursue primary care but not residents who specialize. Which of the following economic statistics would be the most useful in evaluating the positive elements in this debate?

A. Med school tuition rates, applications, and enrollments. B. poverty rates by geographic region. C. Physician incomes by specialty and geographic region. D. Age distribution characteristics of the population by geographic region

What is the actual cost and also the opportunity cost of distributing the tickets this way?

A. The activities that cannot be done ( such as earning money at work ) when one is standing in line. B. The cost of people blocking traffic in and around City Hall C. The cost of travel to City Hall.

Which of the following events would create economic growth, that is, shift the production possibilities frontier outward?

A. an increase in the available labor B. An increase in the available natural resources. C. An increase in technology that affects the production of both goods.

Which of the following is NOT a step that economists use in developing a useful economic model A. make a value judgement about the merits of the hypothesis B. use economic data to test the hypothesis. C. formulate a testable hypothesis. D. revise the model if it does not explain the data well E. decide on the assumptions to be used in developing the model.

A. make a value judgement about the merits of the hypothesis

in recent years, many doctors have decided to give up running their practices as small businesses and have become salaried employees of hospitals. Which of the following constitutes an important difference between doctors' private practices and other small businesses, such as restaurants and hardware stores?

A. payments are rarely received directly from the immediate customers. B. Costly paperwork is necessary to secure payment for services rendered. C. Prices (or rates) are set externally

When does allocative efficiency occur?

Allocative efficiency occurs when production is in accordance with costumer preferences

The grading system used by a teacher can affect the incentives of students to learn the course material by

Altering the payoffs to achieving success on the various components of the course.

Which of the following statements about an economic variable is correct?

An economic variable is something measurable that can have different values.

from an economics perspective, to determine whether to serve breakfast all day, McDonald's should

Compare the marginal revenue from serving breakfast all day with the marginal cost of serving breakfast all day.

If teachers put too much weight in the grading scale on a certain part of the course, like readings outside the textbook, students might respond by ____________ other parts of the course.

De-emphasizing

Which of the following is not scarce according to the economic definition? A. Coal B. Houses C. Capital D. Time E. None of the above

E. None of the above

consider the following statement: "The problem with economics is that it assumes that consumers and firms always make the correct decisions. But we know that everyone makes mistakes." What is the most correct response to this statement?

Economics assumes that consumers and firms are rational, not that they always make the right decisions.

Which of the following statements about economics as a social science is correct?

Economics studies the actions of individuals

Why might studying economics be particularly good preparation for being the top manager of a corporation or a leader in government.

Economics teaches us how to look at the tradeoffs involved in every decision.

What do economists mean by scarcity?

Economist mean that unlimited wants exceed limited resources.

What do economists mean by the word "marginal"?

Extra or additional

In a market system, what determines how goods and services will be produced?

Firms determine how goods and services will be produced

Which of the following statements about microeconomics and macroeconomics is correct?

Microeconomics involves the study of how households and firms make choices.

Teachers often wish that students came to class prepared having read the upcoming material. A teacher could design the grading system to motivate students to come to class prepared by __________ the grade weight assigned to being prepared.

Increasing

what does increasing marginal opportunity costs mean?

Increasing the production of a good requires larger and larger decreases in the production of another good.

Which of the following statements about microeconomics and macroeconomics is correct?

Macroeconomics is the study of the economy as a whole.

The reasons for low rates of profit in the airline industry. This is a ____________ issue.

Microeconomics

Which of the following areas of economics studies issues such as ways to reduce teenage smoking?

Microeconomics

A primary difference between macroeconomics and microeconomics is

Microeconomics examines individual markets while macroeconomics examines the economy as a whole.

A firm operating in a market economy has a strong incentive to be productively efficient and allocatively efficient because the former enables is to _____________ while the latter ensures it of _________.

Minimize production costs, ample revenues

Dr. Strangelove's theory is that the price of mushrooms is determined by the activity of subatomic particles that exist in another universe parallel to ours. When the subatomic particles are emitted in profusion, the price of mushrooms is high. When subatomic particle emissions are low, the price of mushrooms also is low. Is it possible to test this theory?

No

Productive efficiency occurs when a good or service (such as the distribution of tickets) is produced at the lowest possible cost. Is this an efficient way to distribute the tickets?

No

Assuming that these statistics are available or could be gathered, are they likely to resolve the normative issues in this debate?

No, because normative issue involve value judgments that incorporate an individual's full range of experiences, emotions

would McDonald's decision have to be all or nothing-either serve breakfast only up to 10:30 AM or serve breakfast all day?

No. McDonald's could evaluate serving items from the breakfast menu that could be cooked in better coordination with the dinner menu for a period after 10:30 AM

What type of economic analysis is concerned with the way things ought to be?

Normative Analysis

The federal government should spend more on AIDS research. This represents

Normative analysis

Which of the following statements about normative analysis is correct?

Normative analysis is concerned with what ought to be

Under the Affordable Care Act, low-income people receive subsidies to help them pay for health insurance. These subsidies decline as income increases, which may result in some low-income workers supplying fewer hours to keep their income from increasing and their subsidies from declining. This outcome is an example of which key economic idea?

People respond to economic incentives

What points are efficient?

Points that are on the curve because this is where maximum output is produced with available resources.

A 50-cent-per-pack tax on cigarettes will reduce smoking by teenagers by 12 percent. This represents

Positive analysis

Rising paper prices will increase textbook prices. This represents

Positive analysis

A production possibilities frontier:

Shows the maximum attainable combinations of two goods that may be produced with available resources.

It would be more moral to reduce pollution,

Taking the cost into account because money spent on pollution reduction is not available for other worthy activities

What are the implications of this idea for the shape of the production possibilities frontier?

The production possibilities frontier will be bowed outward.

What is comparative advantage?

The ability to produce a good or service at a lower opportunity cost than other producers

What is absolute advantage?

The ability to produce more of a good or service than competitors using the same amount of resources.

what happens if a country produces a combination of goods that efficiently uses all of he resources available in the economy?

The country is operating on its production possibilities frontier.

Which of the following statements about the idea that people are rational is correct?

The idea assumes that consumers and firms use all available information as they act to achieve their goals.

Suppose we can divide all the goods produced by an economy into two types: consumption goods and capital goods. Capital goods, such as machinery, equipment, and computers, are goods used to produce other goods.

The production possibilities frontier would likely be bowed out because not all resources are equally well suited to produce both consumption and capital goods.

Suppose the president is attempting to decide whether the federal government should spend more on research to find a cure for heart disease. What is the opportunity cost of spending more money to find a cure for heart disease?

The reduction in funding for research to cure other diseases.

A market system prevents people from getting as many goods and services as they want due to which of the following?

Their income

When it comes to assessing how this system affects the financial interests of doctors and the well being of consumers, it may be that the former gain more simply because

There are far fewer of them, hence each stands to gain much from supply restrictions.

suppose economists develop an economic model and find that "it works great in theory, but it fails in practice." which of the following should the economist do next?

They should revise the model in light of its failure to explain or predict real word events.

which of the following best describes scarcity?

Unlimited wants exceed the limited resources available.

The three economic questions that every society must answer are

What goods will be produced, how will they be produced, and who will receive the goods?

Why are models based on assumptions?

because models have to be simplified to be useful

At what point is the country's future growth rate likely to be the highest?

Where the most resources are used to produce capital goods.

How should policymakers determine the amount of money that should be allocated for research curing heart disease? They should base their decision on

Whether the last dollar devoted to research on heart diseases results in more benefit than the last dollar spent on research for curing other diseases.

In a market system, how does society decide who will receive that goods and services produced?

Who receives the goods and services produced depends largely on how income is distributed

Suppose you win free tickets to a movie plus all you can eat at the snack bar for free. Would there be a cost to you to attend this movie.

Yes, because the movies opportunity cost is equal to the highest-valued alternative that must be given up to attend the movie.

Firms that provide workers with health insurance may pay a lower wage to obese workers than to workers than to workers who are not obese because the former tend to be less healthy and consequently.

a. experience higher rates of absenteeism and early retirement. b. more costly to insure and therefore employ due to their higher claim submission rate. c. less productive at work

positive analysis

analysis concerned with what is.

Normative analysis

analysis concerned with what ought to be

Suppose that your local police department recovers 100 tickets to a big NASCAR race in a drug raid. It decides to distribute these to residents and announces that tickets will be given away at 10 AM monday morning at City Hall. The group of people that are most likely to get the tickets will be those for whom the expected marginal ________ of going to City Hall on Monday morning are greater than the expected marginal ___________.

benefits, cost

Relative to a market economy, a centrally-planned economy would be expected to be

better at neither productive efficiency nor allocative efficiency because the absence of market-imposed competition negates the need of firms to satisfy consumer wants or produce using the lowest-cost methods.

How are economic resources allocated in a market economy?

by the decisions of households and firms interacting in markets

what is the basis for trade?

comparative advantage

In a market system, how does society decide what goods and services will be produced?

consumers, firms, and the government determine what goods and services will be produced by choices they make.

Any attempt to determine whether or not this is a good system must focus on its ____________.

costs and benefits

Allocative efficiency means that

every good or service is produced up to the point where marginal benefit is equal to marginal cost.

In market economies are more economically efficient than centrally planned economies, there still might be a reason to prefer having a centrally planned economy if it is more ____________.

equitable

Scarcity is central to the study of economics because it implies that

every choice involves an opportunity cost.

Centrally planned economies allocate resources based on decisions by________, while market economies answer these questions through decisions made by __________.

government, Households and firms

According to an article in the new york times, hospitals sometimes complain that doctors do not work as hard when they become hospital employees as they do when they operate a private practice. When a doctor closes a private practice and becomes an employee of a hospital working for a fixed salary, the incentives a doctor faces to work hard change because the doctor.

has a steady income from a hospital salary that does not depend on the number of patients.

Microeconomics is the study of

how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices.

scarcity implies that every society and every individual face trade-offs because scarcity means that

human wants are greater than what available resources can produce.

The production possibilities frontier will shift outward

if resources are used to produce capital goods.

"If only one poor person is helped with this method, then all our time and money would have been worth it." If you were a member of the organization, what reply best represents clear economic thinking? This attitude

ignores the fact that the cost of helping that one person has an opportunity cost of what those funds could have been help other people.

Which of the following is a correct statement about a mixed economy?

in a mixed economy, most economic decisions are made in markets but the government plays a significant role in the allocation of resources.

The underlining reason that centrally planned economies have been less efficient seems to be that such planned economies do not give as great ___________ for hard work and innovation as market economies do.

incentives

late in the semester a friend tells you, "I was going to drop my psychology course so I could concentrate on my other courses, but I had already put so much time into the course I decided not to drop it." Is your friend's reasoning correct or incorrect?

incorrect

Te effect of higher income taxes on the total amount of consumer spending. This is a _________ issue.

macroeconomics

The reasons for the economies of East Asian countries growing faster than the economies of sub-Saharan African countries. This is a __________ issue.

macroeconomics

Which of the following areas of economics studies issues such as whether government intervention is capable of reducing the severity of recessions?

macroeconomics

The level of total investment by firms in new machinery and equipment helps to determine how rapidly the economy grows. This is a _____________ issue. However, to understand how much new machinery and equipment firms decide to purchase, one must analyze the incentives individual firms face, which is a _____________ issue.

macroeconomics, microeconomics

The new machinery and equipment would be adopted more rapidly in a _____________.

market economy

Efficiency means that goods are distributed in a way that ________, while equity means that goods are distributed in a way that ______________.

maximizes benefits to society, is fair

The effect of higher cigarette taxes on the quantity of cigarettes sold. This is a ___________ issue.

microeconomics

Which points are inefficient?

points that are inside the production possibilities frontier

what points are unattainable?

points that are outside the production possibilities frontier

which of the following statements about positive analysis is correct?

positive analysis is considered with what is.

When does productive efficiency occur?

productive efficiency occurs when a good or service is produced at the lowest possible cost

regarding the question of wether health insurance provides people with an incentive to become obese, the finding of Bhattachrya and Bundorf seems

relevant since the link between insurance and obesity was established while holding many other variables constant.

The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the __________ the payoff to the devoting additional resources to that activity.

smaller

Macroeconomics is the study of

the economy as a whole, including topics such as inflation, unemployment, and economic growth.

Economists believe that an activity should be continued up to the point where

the margin benefit from the activity is equal to the marginal cost.

Economists assume that people are rational in the sense that

they use all available information as they take actions intended to achieve their goals.

Economists use models

to answer questions and analyze issues.

Economic data is used

to test models

Is knowing how much profits change when the medical practice stays open 1 more hour is exactly the same as knowing the additional revenue and the additional cost. (true or False)

true

Over the years the economic incentives for doctors to operate private practices as opposed to becoming salaried hospital employees have

weakened to the extent that majority of doctors now work for hospitals.

Is it possible for a country to have a comparative advantage in producing a good without also having an absolute advantage? A country without an absolute advantage in producing a good.

will have a comparative advantage if it has a lower opportunity cost of producing that good.

We can show economic inefficiency:

with points inside the production possibilities frontier.

we can show economic efficiency:

with points on the production possibilities frontier.

Is it necessary for all economic systems to limit services such as health care?

yes

When the price of microsoft stock increased more than 27 percent in the first part of 2013, Bill Gates, who owns 436 million shares of Microsoft stock, once again became the world's richest man. Does Bill Gates, the richest person in the world, face scarcity?

yes