Micro Econ MidTerm

The United States produced approximately ________ worth of goods and services in 2011.

$15 trillion

The table above shows a production possibilities frontier for an economy. Which of the following combinations is unattainable?

200 loaves of bread and 800 books

In the United States, the poorest 20 percent of households earn roughly ________ percent of total income.

3

In the United States, the poorest 20 percent of households receive about ________ percent of total income.

3

In the United States, the richest 20 percent of households receive about ________ percent of total income.

50

The richest 20 percent of individuals in the United States receive about ________ of the nation's total income.

51 percent

Which of the following is a positive statement?

A 10 percent increase in income leads to a 4 percent increase in the consumption of beef.

Which of the following is a positive statement?

A recession leads to higher enrollments at universities.

What would be an example of capital good?

Antonio, the manager of the local Taco Hut, purchases a new deep fryer.

A bowed out production possibilities frontier shows

Both answers B and C are correct.

What is the opportunity cost of economic growth?

Current period consumption goods

Which of the following is a normative statement?

Flood victims should pay for their own rebuilding.

What is the reason that all economic issues and problems occur?

Human wants exceed the resources available to satisfy them.

Which of the following BEST describes macroeconomics?

It analyzes the aggregate effects on the national economy of the choices made by individuals, firms, and governments.

________ earned the highest amount of income among the factors of production in the United States.

Labor

Which of the following is NOT a normative economic statement?

Teenagers are responsible for most driving fatalities.

The functional distribution of income measures which of the following?

The distribution of earnings by the factors of production.

The personal distribution of income measures which of the following?

The distribution of income among households.

Which of the following is a topic studied in macroeconomics?

The effect on economic growth if the government raises taxes

Which of the following is the best definition of economic growth?

The sustained expansion of production possibilities.

An item that is purchased to increase businesses' productive resources is

a capital good.

A statement that "All children should receive free health care" is an example of what kind of statement?

a normative statement

Production efficiency is represented by ________ a production possibilities frontier.

all points on

In a production possibilities frontier graph, the cost of producing more units of a good is measured by the

amount of the other good or service that must be forgone.

Point D in the above PPF figure is

an unattainable production combination.

The important characteristic of normative statements is that they

are based on somebody's values and cannot be tested.

Economists measure opportunity cost

as the best thing given up.

The figure above shows the production possibilities frontier for a country. A combination of 3 million gallons of milk and 3 million gallons of ice cream is

attainable and production efficient.

The figure above shows the production possibilities frontier for a country. A combination of 2 million gallons of milk and 2 million gallons of ice cream is

attainable and production inefficient.

The production possibilities frontier is the boundary between the

attainable and unattainable combinations of goods and services.

The production possibilities frontier is the

boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced, given the available factors of production and the state of technology.

The difference between consumption and capital goods is that

capital goods are used to produce additional goods while consumption goods are not.

Items bought by businesses to help produce other goods and services are called

capital goods.

Microeconomics includes the study of the

choices made by individuals and businesses.

Scarcity forces people to

choose among available alternatives.

Decision making on the margin involves

comparing the marginal cost and marginal benefits when making a decision.

Items that are purchased by individuals for their own enjoyment are called

consumption goods and services.

The largest share of total production in the United States is

consumption goods and services.

When the total U.S. production of goods and services is divided into consumption goods and services, capital goods, government goods and services, and export goods and services, the largest component is

consumption goods and services.

The figure above shows the production possibilities frontier for a country. In order for it to produce at point E, the

country would need to acquire more resources and/or more advanced technology.

A normative statement

depends on someone's values.

The sustained expansion of production possibilities is called

economic growth.

If there is unemployment in an economy, then the

economy is producing at a point inside the production possibilities frontier.

Human capital can be increased through

education, on-the-job training, and work experience.

The productive resource that organizes labor, land, and capital is

entrepreneurship.

Goods produced in the United States and sold in other countries are called

exports.

The United States possesses a large amount of human capital. As a result of this fact, in the United States there is a

highly skilled and educated labor force.

Economics is the social science that studies

how people make choices to cope with scarcity.

The concept of human capital describes

human skills, that is, the quality of labor.

A positive statement i. makes a statement about how the world operates. ii. is a true statement. iii. can be tested against the facts.

i and iii

Economic growth depends upon which of the following? i. Improving the quality of labor ii. Technological advancement iii. Increasing the amount of capital

i, ii, and iii

Normative statements i. describe how the world is. ii. describe how the world ought to be. iii. depend on people's values and cannot be tested.

ii and iii

Which of the following is an assumption used when drawing a production possibilities frontier? i. Human wants and desires are limited to what is available. ii. Only two goods are considered. iii. The level of technology is fixed and unchanging.

ii and iii

Which factor of production does human capital enhance? i. land ii. labor iii. capital

ii only

A normative statement i. can be tested as to whether it is true or false. ii. is considered negative. iii. depends on a person's values.

iii only

An export good is a good produced

in the United States and sold in other countries.

The table above shows a production possibilities frontier for an economy. If the economy tried to produce a combination of 250 loaves of bread and 800 books,

it cannot produce this combination because it lacks enough resources or technology.

As an economy grows,

its PPF shifts outward.

Capital is a factor of production. Which of the following is an example of capital? i. $1,000 in money ii. 100 shares of Microsoft stock iii. $10,000 in bonds issued by General Motors iv. A drill press in your local machine shop

iv only

According to the functional distribution of income, in the United States

labor earns most of the income.

Dividing the nation's income among the factors of production, the largest percentage is paid to

labor.

In the United States, the productive factor that, as a group, receives the largest fraction of the nation's total income was

labor.

The data show that more than 60 percent of the total income earned in the United States goes to

labor.

Wages are paid to ________ and interest is paid to ________.

labor; capital

Which of the following correctly lists the categories of factors of production?

land, labor, capital, and entrepreneurship

Goods and services are produced by using four factors of production:

land, labor, capital, and entrepreneurship.

The productive resource that includes all the "gifts of nature" is called

land.

Capital is a factor of production. An example of capital as a factor of production is

machines.

Scarcity means we must

make choices.

The production possibilities frontier illustrates the

maximum combinations of goods and services that can be produced.

A positive statement

might be right or wrong.

When a nation is producing on its production possibilities frontier, if more resources are used to produce one good, then the production of other goods

must decrease.

Macroeconomics is the study of

national or global economies.

If a society moves from a period of time with significant unemployment to a time with full employment, its production possibilities frontier will

not shift because the society moves from a point inside the frontier to a point on the frontier.

Which point in the figure above is an attainable combination that would have unemployed resources?

point C

The above figure shows the production possibility frontier for an economy. The point or points that are not attainable are

point E.

The above figure shows the production possibility frontier for an economy. The point or points that are attainable are

points A, B, C, and D.

The above figure shows the production possibility frontier for an economy. The point or points that are attainable and production efficient are

points A, B, and C.

If an economy cannot produce more of one good without producing less of another good, this implies that which of the following has been achieved?

production efficiency

Factors of production are the

productive resources used to produce goods and services.

The income earned by entrepreneurs is

profit or loss.

Payments to the factors of production are

rent, wages, interest, and profit or loss.

If the production possibilities frontier between two goods is a straight line, then the

resources are equally productive in both goods.

The figure above shows the production possibilities frontier for a country. If the country is producing at point D, then the

resources are not being used efficiently and/or are unemployed.

A reason the production possibilities frontier exists is

scarcity of resources.

Which of the following is not considered one of the factors of production?

technology

When drawing a production possibilities frontier, which of the following is held constant?

the available factors of production and the state of technology

An opportunity cost is

the benefits of the highest-valued alternative forgone.

Economics is best defined as the social science that studies

the choices that societies, and the people and institutions that make up societies, make in dealing with the issue of scarcity.

The opportunity cost of economic growth is

the decrease in the current production of consumption goods.

Entrepreneurship, as a factor of production, refers to

the human resource that organizes labor, land, and capital.

The opportunity cost of a decision is measured in terms of

the next best thing given up.

In a production possibilities frontier diagram, the attainable production points are shown as

the points inside and the points on the production possibilities frontier.

The personal distribution of income in the United States shows that

the richest 20 percent of individuals receive approximately 50 percent of total income.

Capital, as a factor of production, refers to

the tools and instruments used to produce other goods and services.

A production possibilities frontier shows

the various combinations of output a nation can produce a certain time, given its available resources and technology.

One of the productive resources is capital. Capital includes

tools, buildings, and machine tools.

The figure above shows the production possibilities frontier for a country. A combination of 4 million gallons of milk and 4 million gallons of ice cream is

unattainable.

The majority of the income earned in the United States is paid in

wages.