Macroeconomics Exam 1
Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market?
Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
Consider Frank's decision to go to college. If he goes to college, he will spend $21,000 on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to college, he will earn $16,000 working in a store and spend $7,200 on room and board. Frank's cost of going to college is
$42,600
In the short run, which of the following rates of growth in the money supply is likely to lead to the lowest level of unemployment in the economy?
9 percent per year (highest percentage)
A leftward shift of a supply curve is called a
A leftward shift of a supply curve is called a
According to the circular-flow diagram, if Denny is the owner of a landscaping business and he just received $50 for mowing Mrs. Pendleton's lawn,
Denny acts as a firm who interacted in the markets for goods and services with Mrs. Pendleton
DeShawn has spent $600 purchasing and repairing an old fishing boat, which he expects to sell for $900 once the repairs are complete. DeShawn discovers that, in addition to the $600 he has already spent, he needs to make an additional repair, which will cost another $400, in order to make the boat worth $900 to potential buyers. He can sell the boat as it is now for $400. What should he do?
He should keep the boat since it would not be rational to spend $1,000 on repairs and then sell the boat for $900
Indiadesh is a country that produces two goods, textiles and computers. Last year, Indiadesh produced 50,000 textiles and 1300 computers. This year it produced 45,000 textiles and 1100 computers. Given no further information, which of the following events could explain this change?
Indiadesh experienced a reduction in resources
A worker in Vietnam can earn $6 per day making cotton cloth on a hand loom. A worker in the United States can earn $85 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?
Labor is more productive making cotton cloth with a mechanical loom than with a hand loom.
After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring Break destination this year. However, Spring Break is still months away, and you may reverse this decision. Which of the following events would prompt you to reverse this decision?
The marginal cost of going to Ft. Lauderdale decreases.
A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies
a. enhance equality. b. reduce efficiency. c. reduce the reward for working hard.
Which of the following statements is (are) correct?
a. Relative to some other scientists, economists find it more difficult to conduct experiments. b. Theory and observation are important in economics as well as in other sciences. c. To obtain data, economists often rely upon the natural experiments offered by history.
A circular-flow diagram is a model that
a. helps to explain how participants in the economy interact with one another. b. helps to explain how the economy is organized.
Which of the following might cause the supply curve for an inferior good to shift to the right?
an improvement in production technology that makes production of the good more profitable
Suppose that a country that has a high average wage level agrees to trade with a country that has a low average wage level. Which country can benefit?
both
Economic models
can be useful, even if they are not particularly realistic.
In the circular-flow diagram, which of the following items does not flow from firms to households?
capital
A higher price for batteries would result in a
decrease in the demand for flashlights
Economists make assumptions to
focus their thinking on the essence of the problem at hand.
Soup is an inferior good if the demand
for soup falls when income rises
To improve living standards, policymakers should
formulate policies designed to increase productivity
Denny acts as a firm who interacted in the markets for goods and services with Mrs. Pendleton
getting all it can get from the scarce resources it has available.
In the short run, an increase in the money supply is likely to lead to
lower unemployment and higher inflation.
A company that formerly produced music CDs went out of business because too many potential customers bought illegally-produced copies of the CDs instead of buying the product directly from the company. This instance serves as an example of
inadequate enforcement of property rights.
In a particular country in 1998, the average worker needed to work 25 hours to produce 40 units of output. In that same country in 2008, the average worker needed to work 40 hours to produce 68 units of output. In that country, the productivity of the average worker
increased by 6.25 percent between 1998 and 2008.
A decrease in demand is represented by a
leftward shift of a demand curve
An increase in which of the following would shift the supply curve for gasoline to the right?
number of producers of gasoline
The production possibilities frontier provides an illustration of the principle that
people face trade-offs.
Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that
people face tradeoffs.
The adage, "There is no such thing as a free lunch," is used to illustrate the principle that
people face tradeoffs.
Suppose the average income of a citizen of Poland is higher than the average income of a citizen of Romania. You might conclude that
productivity in Poland is higher than in Romania.
In the circular-flow diagram, which of the following items does not flow from households to firms?
profit
In a market economy, economic activity is guided by
self-interest and prices
Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
sellers desire to produce and sell more than buyers wish to purchase.
Suppose there is a decrease in the price of corn. If corn is an input into the production of ethanol, we would expect the supply curve for ethanol to
shift rightward
The "invisible hand" refers to
the free market
A rational decision maker takes an action if and only if
the marginal benefit of the action exceeds the marginal cost.
A university's football stadium is always sold out, and students who wait in line for hours may be turned away. This indicates
the ticket price is below the equilibrium price