Macroeconomics - Exam 1

Google has started a project to scan all books and make those that are not copyrighted available to people free of charge. Why is it important that only books without a copyright are available?

If all books were scanned and available free of charge, copyright holders would face a negative incentive to continue writing and publishing books.

Nicole asked her neighbor to rake the leaves on his lawn because they were blowing into her yard. It takes an hour to rake the yard, regardless of who performs the task. He responded that it wouldn't be rational for him to do so, but he would be willing to hire someone else to rake. Why would this be the case?

My neighbor is a lawyer who values his time at $200 an hour and knows that he can hire a high school kid to rake leaves for $20 an hour.

Instead of deciding to finish high school, Cecily could have decided to work full-time. How would an economist explain her decision to receive her high school degree?

The benefit of going to high school was greater than the benefit of working full-time. (not correct)

If the United States creates a trade agreement with Vietnam, we know that

Vietnam will benefit, but trade with a less developed, third world country will not help the united states.

Some public transit systems use an "honor system" whereby patrons have to show that they have paid their fare only when asked for it by an enforcement officer. With what population would such a system be successful?

a population that places a high opportunity cost on taking time to purchase a ticket (not correct)

The basic goal of economics is to

address the scarcity problem created because the population's desire for goods exceeds the ability to produce them.

When trade is voluntary, who benefits?

both the buyer and seller

The two highest paid midcareer jobs with only a bachelor's degree are

business management and accounting (not correct)

Decision makers engage in marginal thinking by

comparing the average cost and benefits of all units produced(not correct)

Which of the following is NOT a type of incentive?

complementary

Trade-offs occur in all of the following scenarios EXCEPT

consumers are often forced to make a compromise between quality and price (not correct)

________ avoids the double coincidence of wants.

demand (not correct)

Comparative advantage emerges because of the presence of

differing opportunity costs

If Alexander doesn't like changing the oil in his car and pays his father to do it for him, he has provided his father with a(n) ________ incentive.

direct

Without scarcity, the study of ________ would be unnecessary

economics

Think of the production possibilities frontier (PPF) model. When society is producing the largest possible output from its resources, it is operating

efficiently

Variables that are controlled for in a model are called

endogenous factors

One reason that economists make assumptions when designing models is to

ensure that all possible factors are included (not correct)

Variables that are NOT accounted for in a model are called

exogenous factors

Why do incentives matter to economists?

explain how people make decisions. and are key to understanding economics

A society that is producing its maximum combination of goods and using all available resources for production

has maximized its opportunity cost (not correct)

Saudi Arabia has a comparative advantage in producing oil because it

has specialized in the production of oil given its natural resources.

Trade makes costs of goods and services

higher but reduces the variety of goods and services in the market (not correct)

Opportunity cost is the ________ alternative forfeited when a choice is made.

highest-valued

Economics is the study of

how to allocate resources to satisfy wants and needs

If the government wanted to give people a negative direct incentive not to save money, what would be the appropriate policy?

imposing a tax on individuals for saving their money

Although generous disability insurance can help those who have been permanently injured, it can also increase the likelihood that individuals will falsely claim to be disabled. This likelihood is a(n)

indirect incentive

Which is NOT one of the five foundations of economics?

innovation

An opportunity cost

is equal to the value of what is given up to make a purchase

Laura leaves her job as an accountant, where she earns $80,000 per year, to start her own business. After the first year, her business earns a profit of $60,000. How would an economist describe the profitability of Laura's career change?

laura had a loss of $20,000

________ is the process of breaking down decisions into smaller parts.

marginal analysis

The government has been considering doing away with minting pennies because they are rarely used for purchases (with most people collecting them or throwing them away). How would an economist best explain this consumer behavior?

more people are using credit and debit cards, so they are not in the habit of using monetary change (not correct)

A new tax on gasoline causes a reduction in the purchase of new vehicles with poor fuel economy. This is an example of what type of incentive?

negative indirect

At full employment, a society produces

on its PPF

An economist would argue that the true cost of a college education exceeds the cost of tuition, housing, and books because of

opportunity costs

Actions and activities are encouraged with which type of incentive?

positive

Economists believe that individuals compare the benefits and costs of various options when making decisions and in so doing act

rationally

Corporate leadership sometimes waits until after presidential elections in order to make major business decisions. An economist would maintain that this is in anticipation of future

taxes (not correct)

What is NOT a possible opportunity cost of attending a four-year college following high school graduation?

the cost of tuition at a four-year college

If specialization and outsourcing can harm domestic workers, why do countries still engage in trade?

the gains from trade far outweigh the costs, and economy benefits overall

Which of the following is a positive statement?

the government must provide unlimited health acre to citizens (not correct)

The opportunity cost of working rather than going to school is

the higher wages that come with additional education

The opportunity cost for Jeremiah of going to a water park is

the highest valued alternative activity Jeremiah could have done instead.

What is the opportunity cost of taking an exam?

the highest valued alternative that you gave up to prepare for and attend the exam

Macroeconomics is the study of

the operation of the economy as a whole

Entrepreneurs are willing to take risks because

the patent and copyright guarantees.. (not correct)

A nation will engage in voluntary trade if

the terms are mutually beneficial for both parties

Many professors have a policy that punishes individuals if they don't come to class. Instead of punishing students who don't attend class, what could the professor do to provide a positive incentive to come to class?

those who come to class are given extra points

Which of the following is a normative statement?

we should strive to push the ppf outward

What is the indirect incentive in the unemployment insurance program?

workers have a reduced incentives to find a new job until the insurance runs out.