Macroeconomics Test 1 Chapters 1,2,3
1. Prices: A) allow sellers to determine what goods to sell. B) help buyers find possible substitute goods. C) contain information useful for all people involved in a transaction. D) allow sellers to determine what goods to sell, help buyers find possible substitute goods, and contain information useful for all people involved in a transaction.
d
8. The branch of economics that studies the aggregate decisions of all households and all firms is called: a. positive economics. b. normative economics. c. microeconomics. d. macroeconomics. e. environmental economics.
d
9. Which of the following statements most likely lies within the realm of microeconomics? a. Unemployment rises during a recession and falls during an expansion. b. A rapid acceleration of the supply of money may create inflation. c. An increase in government spending will increase the aggregate demand for goods and services in the economy. d. An increase in labor costs will increase the additional cost of producing another airplane. e. A decrease in federal income tax rates will stimulate increased consumer spending.
d
9. Which of the following would not be a market transaction? A) payment for purchase of shares at a stock exchange B) payment for a used book purchased on eBay C) payment for a soft drink at a vending machine D) payment made to a disaster victim
d
25. Which of the following is an example of a pure market economy? a. Russia b. United States c. Switzerland d. Singapore e. No nation has a pure market economy
e
32. Which of the following is not a resource exchanged in the factor markets? a. land b. capital c. labor d. entrepreneurship e. All of the above are traded in the factor market.
e
1. The main concern of economics is to study how well the stock markets are performing. T/F
f
2. Microeconomics is the branch of economics in which you study inflation and unemployment in the economy. T/F
f
4. In a market economy, government officials make most production decisions in a centralized manner. T/F
f
5. In a market economy, prices help determine the distribution of goods and services but not the allocation of resources. T/F
f
7. Capital-intensive production techniques tend to be utilized most commonly in countries where labor is relatively cheap. T/F
f
8. When considering whether or not to consume a second slice of cake, an individual is following marginal thinking if she compares the total cost of consuming both the first and second slices with their total benefit before making a decision. T/F
f
3. To an economist, individuals are acting "rationally" if they are striving to do their best to achieve their goals. T/F
t
6. There are four factors of production: land, labor, capital, and entrepreneurship. T/F
t
10. Most people consider economics a(n): a. social science. b. physical science. c. accounting science. d. earth science. e. anthropological science.
a
12. An economy's resources: a. consist of land, labor, capital, and entrepreneurial skills. b. are unlimited in a country like the United States. c. are always efficiently utilized in wealthy nations. d. consist of land, labor, and entrepreneurial skills but not capital.
a
14. (Table) Price Angel's Sally's Nadia's quantity quantity quantity demanded demanded demanded $5 9 7 10 $10 6 6 6 $15 4 4 3 $20 1 3 1 $25 1 2 0 The table shows the demand of three individuals in a market. Assuming these are the only buyers, what is total market demand if price is $20? A) 5 units B) 1 unit C) 20 units D) The answer cannot be determined from the information given.
a
16. (Figure 3.4) If the price of shoes is $60/pair, the _____ will be 10 pairs of shoes. A) quantity demanded B) quantity supplied C) market demand D) market supply see worksheet
a
17. Money is not considered to be an economic resource because: a. money is not directly used to produce goods and services. b. money loses its value too easily due to inflation. c. money is an intangible good. d. goods can still be produced and traded using a barter system.
a
18. When economists refer to a "Market Demand" curve, we know that it represents: A) the horizontal summation of individual demand curves. B) the vertical summation of individual demand curves. C) the quantity demanded by any individual consumer, multiplied by the number of consumers. D) None of the answers is correct.
a
23. A market economy depends on market mechanisms to: a. determine the most efficient way of using resources. b. determine how large the government's budget deficit should be. c. decide how much government regulation there should be. d. provide everyone with a minimum level of income. e. do all of the above.
a
24. An item whose demand rises as people's incomes fall is known as a(n) ________ good. A) inferior B) complementary C) superior D) substitute
a
25. Ben likes carrots less today than he did yesterday. A) Ben is now willing to pay less than before for carrots. B) Ben must have received a decrease in income. C) Ben must now consider carrots a normal good. D) The supply of carrots must have decreased.
a
26. The use of large amounts of labor relative to capital in an economy indicates: a. labor-intensive production. b. capital-intensive production. c. that wage rates will be relatively high. d. that hand-made goods are of better quality than machine-made goods.
a
27. The circular flow of economic activity is a model of the: a. flow of goods, services, and payments between households and firms. b. influence of government on business behavior. c. role of unions and government in the economy. d. interaction among taxes, prices, and profits. e. economy's banking system.
a
28. A decrease in the quantity supplied of iPods is caused by a(n): A) drop in the price of iPods. B) increase in labor costs to produce iPods. C) reduction in the number of iPod producers. D) increase in the taxes on the sale of iPods.
a
3. The problem of scarcity: a. exists because resources are limited relative to wants. b. exists because resources are unlimited relative to wants. c. is solved by economists using abstract models. d. can be eliminated through appropriate government intervention into markets. e. does not exist in communist societies.
a
30. Refer to Figure 3-1. In the circular flow diagram, payments for goods and services: a. flow in a clockwise direction. b. flow in a counterclockwise direction. c. are received by firms in the factor market. d. are characterized by both a. and c. e. are characterized by both b. and c.
a
35. According to the law of supply, as price increases, A) quantity supplied will rise. B) supply will rise. C) quantity supplied will fall. D) supply will fall.
a
41. A production possibilities curve that is "bowed out" or concave to the origin: a. illustrates a tradeoff in which the opportunity cost of a good increases with the level of its production. b. illustrates a tradeoff in which the opportunity cost of a good decreases with the level of its production. c. illustrates a tradeoff in which the opportunity cost of a good is constant at all levels of production. d. demonstrates the fallacy of composition.
a
45. Refer to Figure 3-14. Assuming that the production possibilities curve extends out further due to technological change, which of the following observations is correct? a. There is a technological advance in food production but not in housing production. b. There is a technological advance in housing production but not in food production. c. There is a technological advance in both housing and food production.
a
11. "Demand" refers to: A) consumers wanting a product so much that they insist on it. B) the products buyers are willing and able to purchase at various prices in a given period of time. C) the amount consumers wish they could consume. D) the relationship between price and quantity that sellers bring to the market.m
b
16. In order for a student to acquire an education, many resources are required. Which of the following might be categorized as capital resources? a. water, trees, and the acreage a campus rests on b. chalkboards, overhead projectors, and the expertise of professors c. exams, fuel oil (which heats the buildings), and electricity d. the work effort of registrars, clerical assistants, and teaching assistants
b
19. According to the figure, the market quantity demanded at $20 is: A) 1. B) 10. C) 4. D) 7. see worksheet
b
2. The central question in economics is how to: a. regulate the supply of money. b. make the best use of scarce resources to satisfy our unlimited wants. c. reduce the wants of individuals, businesses and government. d. find more resources to satisfy everyone's wants.
b
2. The equation for the demand curve for bags of Doritos is P = 6 + (- 1) ∙ Q. Which of the following is the correct demand curve? see worksheet
b
21. In a market economy, there is a(n) _____ relationship between price and quantity supplied. A) indeterminate B) positive C) negative D) indeterminate, positive, and negative
b
22. (Figure 3.5) A shift to the right of the demand curve could be caused by: A) a decrease in tastes or preferences. B) an increase in income. C) an increase in the price of a complement. D) a decrease in the price of a substitute. see worksheet
b
24. In a command economy, decisions about how to allocate resources are made: a. based upon tradition. b. by a central planning board. c. by individuals and firms interacting in markets coordinated by a price system. d. by a lottery system.
b
29. Refer to Figure 3-1. In the circular flow diagram, goods and services: a. flow in a clockwise direction. b. flow in a counterclockwise direction. c. are sold by businesses in the factor market. d. are characterized by both a. and c. e. are characterized by both b. and c.
b
32. (Figure 3.10) If the price of shoes is $60/pair, the _____ will be 30 pairs of shoes. A) quantity demanded B) quantity supplied C) market demand D) market supply see worksheet
b
34. According to the law of supply, individuals will supply more of a good when: A) their income rises. B) the price rises. C) the relative price falls. D) the price falls.
b
34. Capital, entrepreneurship, land, and labor are needed to produce goods and services. The respective payments for each of these factors of production are: a. profits, rent, wages and salaries, and interest. b. interest, profits, rent, and wages and salaries. c. profits, interest, rent, and wages and salaries. d. interest, profits, wages and salaries, and rent.
b
38. Refer to Figure 3-2. A movement from Point B to Point C: a. involves sacrificing bread in order to produce a greater quantity of wine. b. involves sacrificing wine in order to produce a greater quantity of bread. c. involves no sacrifice, as the opportunity cost of production is zero everywhere along the production possibilities curve. d. will increase the level of unemployment in the economy. e. will decrease the level of unemployment in the economy.
b
40. A technological advance causes: A) the supply curve to shift to the left. B) the supply curve to shift to the right. C) the demand curve to shift to the left. D) the demand curve to shift to the right.
b
41. An increase in the supply of popcorn indicates that the producers of popcorn are willing to sell _____ at all prices, and the supply curve for popcorn shifts _____________. A) less popcorn; rightward B) more popcorn; rightward C) more popcorn; leftward D) less popcorn; leftward
b
46. Refer to Figure 3-14. Which move to the new production possibilities curve will result in more housing and food? a. A to B b. A to C c. C to B d. B to A
b
47. Which of the following best characterizes the circular flow of income? a. Businesses buy resources from the government, and households buy goods and services from businesses. b. Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. c. The government purchases resources from businesses and households and then sells goods and services to businesses and households. d. Households buy factors of production from businesses, and businesses buy goods and services from households.
b
49. Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected ____ doesn't change. a. market b. economy c. production d. firm
b
5. A market exists when: A) an absolute advantage is achieved by one country. B) people exchange money for goods and services. C) the cost of production is equated to price by a government agency. D) a physical location is created to facilitate the exchange of personal information about consumer choices.
b
51. Economic models like the are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories. a. financial capital market b. circular flow diagram c. financial investment market d. Specialization Mode
b
7. The market economy is often called the price system because: A) prices are often not known until after the transaction is completed. B) prices provide information for both buyers and sellers. C) by law, all prices much be publicized. D) prices become less important over time.
b
1. Economics is most importantly concerned with: a. how to profit from trading in the stock market. b. government taxation and spending. c. studying how we allocate scarce resources to satisfy unlimited wants. d. how to reduce inflation. e. how to successfully launch a business.
c
13. The basic proposition of the law of demand is that: A) prices must adhere to all of a nation's laws. B) higher prices elicit more demand. C) as the price of a good rises, less of it is demanded. D) buyers demand lower prices.
c
13. Which of the following is not a factor of production? a. capital b. entrepreneurship c. legal institutions d. labor
c
14. Additions to human capital can be made through: a. increases in the general population of an area. b. monthly deposits into a savings account. c. improved education and on-the-job training. d. the purchase of tools and equipment by workers
c
15. Economic resources are also known as: a. elements. b. financial capital. c. factors of production. d. building blocks.
c
17. (Figure 3.4) If the price of shoes is $40/pair, the quantity demanded will be _____ pairs of shoes. A) 5 B) 10 C) 15 D) 20 see worksheet
c
20. A demand curve represents a(n): A) direct relationship between price and quantity demanded. B) indirect relationship between price and supply. C) indirect relationship between price and quantity demanded. D) direct relationship between price and demand.
c
20. Refer to Table 2-1. A student has only a few hours to prepare for two different exams this afternoon. The above table shows alternative possible exam scores with three alternative uses of the student's time. The opportunity cost of scoring a 94 on the economics exam rather than a 77 is: a. 8 points on the history exam. b. 14 points on the history exam. c. 15 points on the history exam. d. 17 points on the history exam. e. zero.
c
23. When one of the determinants of demand changes, that will result in: A) a change in quantity demanded. B) a change in quantity supplied. C) a shift of the demand curve. D) a shift of the supply curve.
c
26. In citing the ceteris paribus condition for the law of demand, the only two variables that change are: A) income and the product's price. B) the product's price and the prices of related goods. C) the product's price and the quantity demanded for the product. D) income and the quantity demanded for the product.
c
27. Determinants of supply include all of the following except: A) production technology. B) costs of resources. C) income. D) expectations.
c
29. If the price of HDTVs falls: A) the supply of HDTVs declines. B) the quantity supplied of HDTVs rises. C) the quantity supplied of HDTVs declines. D) the supply of HDTVs rises.
c
3. If the local pizzeria has only two buyers, Jake and Sue, for its calzones, what is the market demand for calzones at each of the prices listed? QJ is the quantity demanded at each price below by Jake, and QS is the quantity demanded at each price below by Sue. Price QJ QS 5 4 2 10 3 1 15 2 0 20 1 0 A) 11, 14, 17, 21 B) 4, 3, 2, 1 C) 6, 4, 2, 1 D) 6, 4, 0, 0
c
31. (Figure 3.10) The graph represents: A) ceteris paribus. B) the price system. C) the law of supply. D) the law of demand. see worksheet
c
31. In the simple circular flow model: a. firms are suppliers of resources and demanders of products. b. households are suppliers of products and demanders of resources. c. households are demanders of products and suppliers of resources. d. firms are the suppliers of both resources and products. e. households are the suppliers of both resources and products.
c
35. Refer to Figure 3-2. Currently, it is not possible to produce at: a. Point A. b. Point B. c. Point E. d. Point G. e. either Point E or Point G.
c
36. Refer to Figure 3-2. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from: a. A to B. b. B to E. c. C to F. d. G to F. e. None of the above are correct.
c
37. Refer to Figure 3-2. The most inefficient point depicted is: a. Point A. b. Point C. c. Point D. d. Point F. e. Point G.
c
38. The law of supply says: A) producers have to offer more for sale if the price falls. B) producers are willing to offer more for sale if the price falls. C) producers are willing to offer more for sale if the price increases. D) producers will do anything within the law to make a sale.
c
39. "Supply" refers to the: A) maximum price sellers are willing to accept for a given quantity. B) amount of a product suppliers would sell if they had control over the market. C) amount of a product sellers are willing and able to sell at various prices. D) amount of a product sellers would sell if the market clears.
c
39. Refer to Figure 3-2. A movement from Point G to Point F: a. involves sacrificing bread in order to produce a greater quantity of wine. b. involves sacrificing wine in order to produce a greater quantity of bread. c. involves no sacrifice of output, as both more wine and bread can be produced if available resources are used more efficiently. d. will increase the level of unemployment in the economy.
c
4. Which of the following graphs concerning hamburgers indicates an increase in the quantity demanded of hamburgers? see worksheet
c
42. Refer to Figure 3-13. Which of the following is a possible explanation for the shift of the production possibilities curve illustrated? a. an increase in the number of idle factories b. a technological advance that affects only bicycle production c. a technological advance that affects both pizza and bicycle production d. a decrease in the quantity of labor available due to emigration
c
43. Which of the following will shift a production possibilities curve outward? a. an increase in the unemployment rate b. a decrease in the unemployment rate from 18% to 15% c. an improvement in technology d. a decrease in available labor and capital
c
5. The basic difference between macroeconomics and microeconomics is: a. microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. b. microeconomics concentrates on the behavior of individual consumers while macroeconomics focuses on the behavior of firms. c. microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. d. microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.
c
50. - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines. a. Skill b. Specialization c. Economies of scale d. Division of
c
6. A market will: A) always have some excess demand. B) never move towards equilibrium because prices are constantly increasing. C) always trend towards equilibrium. D) always have some excess supply.
c
8. A(n) _____ is an institution that brings buyers and sellers together so they can interact and transact with each other. A) firm B) bank C) market D) investment bank
c
10. Prices perform which of the following functions? A) signal entrepreneurs to enter or leave a market. B) give buyers an easy means of comparing goods that might substitute for each other. C) signal potential employees to enter or leave the labor market as a supplier for a particular job. D) All answer choices are correct.
d
11. Most of economic analysis assumes that people's actions are: a. motivated by submerged emotional needs. b. driven by magnetic forces generated by planetary movements. c. motivated primarily by concern for the well-being of others. d. motivated by self-interest. e. motivated purely by money.
d
12. The concept of demand is: A) the total satisfaction that consuming a good provides people at different prices. B) how desperately someone wants a good. C) the quantities of a good or a service that people will provide at various prices. D) the quantities of a good or a service that people will buy at various prices.
d
15. (Figure 3.4) The graph represents: A) ceteris paribus. B) the price system. C) the law of supply. D) the law of demand. see worksheet
d
18. Human capital is: a. machinery owned by firms, but not by individuals. b. machinery owned by individuals, but not by firms. c. machinery owned by individuals or firms, but not by the government. d. the skill or knowledge of individuals.
d
19 An example of a capital resource is: a. stock in a computer software company. b. the funds in a CD account at a bank. c. a bond issued by a company selling electric generators. d. a dump truck. e. an employee of a moving company. Table 2-1 Possibility A Economics History I 94 76 II 87 84 III 77 91
d
21. Three economic questions must be determined in all societies. What are they? a. How much will be produced? When will it be produced? How much will it cost? b. What will the price of each good be? Who will produce each good? Who will consume each good? c. What is the opportunity cost of production? Does the society have a comparative advantage in production? Will consumers desire the goods being produced? d. What goods will be produced? How will goods be produced? Who will get the goods produced?
d
22. A market system: a. produces answers to a society's "what" and "who" questions, but not the "for whom" question. b. produces answers to a society's "what" and "for whom" questions, but not the "how" question. c. produces answers to a society's "how" and "for whom" questions, but not the "what" question. d. produces answers to a society's "what," "how," and "for whom" questions. e. does none of the above.
d
28. Which of the following best characterizes the circular flow of income? a. Households buy factors of production from businesses, and businesses buy goods and services from households. b. The government purchases resources from businesses and households and then sells goods and services to businesses and households. c. Businesses buy resources from the government, and households buy goods and services from businesses. d. Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.
d
30. In moving along a supply curve, which of the following is not held constant? A) technology B) cost of resources C) expectations. D) market price of the good.
d
33. (Figure 3.10) If the price of shoes is $40/pair, the quantity supplied will be _____ pairs of shoes. A) 5 B) 10 C) 15 D) 20 see worksheet
d
33. Which of the following is not a payment made to households in exchange for the use of factors of production? a. rent b. interest c. wages d. taxes
d
36. An increase in price will lead to an increase in quantity supplied. This statement is: A) untrue always. B) the law of demand. C) a normative statement. D) the law of supply.
d
37. A graphical representation of how much a seller would be willing and able to bring to the market at various prices is known as the: A) maximal quantity curve. B) demand curve. C) price-quantity line. D) supply curve.
d
4. Economics is a social science that primarily explores how: a. businesses market products under competitive conditions. b. stock and bond prices fluctuate when there are changes in demand or supply. c. the government allocates its budget among competing political interests. d. goods and services are produced and distributed in a world with limited resources. e. high employment and low inflation levels can be maintained.
d
40. An economy may be operating at a point inside the production possibilities curve if: a. technological progress enables the economy to produce quantities of output otherwise unattainable. b. a substantial amount of labor is unemployed. c. a substantial amount of machinery is idle. d. either b. or c. occur. e. An economy always operates on the production possibilities curve.
d
44. A devastating earthquake destroys ten percent of the population in California. As a result: a. California's production possibility curve shifts outward. b. California moves in a northwest direction along its production possibilities curve. c. California moves in a southeast direction along its production possibilities curve. d. California's production possibility curve shifts inward. e. California moves from a point on its production possibilities curve to a point inside the production possibilities curve.
d
48. In the circular flow diagram model: a. households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses. b. businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households. c. households receive revenue for selling goods and services to businesses, and use that revenue to buy inputs from businesses. d. Both (a) and (b) are correct.
d
6. Economics can be divided into two main branches of study: a. capitalism and communism. b. capitalism and socialism. c. demand and supply. d. microeconomics and macroeconomics. e. fiscal policy and monetary policy.
d
7. Which of the following is most likely a topic of discussion in macroeconomics? a. an increase in the price of a pizza b. a decrease in the production of VCRs by a consumer electronics company c. an increase in the wage rate paid to automobile workers d. a decrease in the unemployment rate e. the entry of new firms into the software industry
d