Micro Exam 1

_____ illustrates an inverse relationship between price and quantity.

A demand curve

_____ illustrates an inverse relationship between price and quantity. A demand curve A supply curve A demand schedule A supply schedule

A demand curve

During a recession, one will often observe: rising aggregate output. falling aggregate output. rising employment. zero unemployment.

falling aggregate output.

In the circular-flow diagram, an organization that produces goods and services for sale is a: government. factor. household. firm.

firm

In the circular-flow diagram, households: supply goods. supply services. supply resources. buy resources.

supply resources

You notice that the price of computers has risen and that the quantity of computers sold has decreased. These observations suggest that the _____ curve for computers has shifted to the _____.

supply; left

A household is a person or group of people _____. a) that share an income b) that work in the same organization c) who are related d) that must buy resources and produce goods

that share an income

Which of the following is NOT included in investment spending in the national income accounts? a) new residential construction b) the purchase of machinery and other productive physical capital c) the purchase of stocks and bonds by a business d) spending on inventories

the purchase of stocks and bonds by a business

King Taco charges the same price for everything on its menu: $5 will buy a taco, a burrito, or nachos. You buy the burrito and think that if you had not purchased the burrito, you would have purchased the taco. The opportunity cost of the burrito is:

your forgone enjoyment of the taco.

The basic concern of microeconomics is to: a) ensure that the government pursues the public good during pandemics. b) make sure small businesses thrive. c) study the choices people make, given unlimited wants. d) determine how unlimited resources can best be used to satisfy limited wants.

study the choices people make, given unlimited wants

The business cycle is:

the short-run alternation between expansion and contraction.

The national income and product accounts keep track of:

sales and investment spending by businesses.

The circular-flow diagram illustrates how firms _____ goods and services and _____ factors of production.

sell; buy

When the Dairy Farmers of America (an agricultural coop) restricts the supply of milk to increase the profits of dairy farmers, the milk market:

achieves an efficient outcome because profits increase.

If two countries each specialize in the goods to which they are most suited and then trade, which of the following will occur?

The average well-being of people in both countries will increase.

Consider the market for iPads. What happens if a fantastic new alternative tablet is developed by Samsung and, at the same time, a factory that makes iPads catches fire, destroying 3 million iPads? a) Price decreases, and quantity increases. b) Price increases, and quantity increases. c) The change in price is indeterminate, and quantity decreases. d) Price increases, and the change in quantity is indeterminate.

The change in price is indeterminate, and quantity decreases.

The simple circular-flow diagram ignores a number of real-world complications in the interest of simplicity. Which of the following is NOT one of the factors ignored?

The role of the market for goods and services in the circular flow.

It would be impossible to do an experiment that involved raising the minimum wage across the country and seeing what happens. Instead, economists will observe the effects of a smaller economy that is raising its minimum wage (like New York City in 2019) and then extrapolate those results to the larger U.S. economy. This preceding statement embodies the ideology inherent in:

an economic model.

Goods that are sold in 2020 but produced in 2018: a) count as consumption in 2020. b) are included in investment in 2018. c) are treated like exports. d) are classified as purely financial transactions.

are included in investment in 2018.

Which statement BEST exemplifies the law of demand? a) As income rises, more cars are purchased, assuming cars are a normal good. b) As the price of corn rises, more corn is sold. c) As the price of computers rises, fewer computers are purchased. d) As the population rises, more electricity is consumed.

As the price of computers rises, fewer computers are purchased.

Tara had a DVD rental shop, but the store went out of business because no one rents DVDs from stores anymore. Which economic principle does this statement BEST represent?

One person's spending is another person's income.

A movement along the demand curve for a good generally results from:

a change in the price of the good

Steak is a normal good. If students' incomes at your college decrease, the effect on steak consumption will be: an increase in demand. an increase in the quantity demanded. a decrease in demand. no change in demand.

a decrease in demand

Which factor would cause a DECREASE in the supply of a good? a) a rise in input prices b) a fall in the price of the good c) an increase in the number of sellers d) expectations of a future price decline

a rise in input prices

The onset of the Great Depression:

came as a shock to most economists and opened the door for critiques of mainstream thought by economists like John Maynard Keynes.

If France gives up three high speed trains for each ton of cheese it produces, while Canada gives up seven high speed trains for each ton of cheese it produces, then France has a comparative advantage in _____ production and should specialize in _____.

cheese; cheese

Long-run economic growth is best measured by: growth in the production of goods and services. growth of the money supply. trade surpluses in the long run. the rate of private saving.

growth in the production of goods and services.

An economy is said to have a comparative advantage if it:

has the lowest opportunity cost of producing a particular good compared with other economies.

In the markets for goods and services: households sell goods and services. households buy goods and services. firms buy resources. firms supply resources.

households buy goods and services

In the markets for goods and services:

households buy goods and services.

The paradox of thrift implies that: a) firms that are pessimistic about the future lay off the most saving-conscientious workers. b) when families and businesses feel pessimistic about the future, they spend more. c) increased saving by individuals increases their chances of becoming unemployed. d) risky behavior during economic tough times has large negative consequences for society.

increased saving by individuals increases their chances of becoming unemployed.

The effect of an earthquake in California can be shown by a(n) _____ the production possibility frontier of California: point inside of outward shift of movement from one point to another along inward shift of

inward shift of

GDP does NOT exclude: the value of leisure. damage to the environment. the value of housework. the value of owner-occupied housing.

the value of owner-occupied housing.

The General Theory of Employment, Interest, and Money, written by _____ and published in _____, transformed the way economists thought about macroeconomics. Milton Friedman; 1946 Paul Samuelson; 1940 John Maynard Keynes; 1936 Paul Lucas; 1966

John Maynard Keynes; 1936

In the market for fresh coffee, a normal good, which of the following will shift the demand curve to the right? More coffee is planted in Columbia. The price of coffee falls. Incomes rise. Consumers switch from coffee to tea.

Incomes rise.

Purchases of imported products are:

not a part of the GDP calculation.

Which of the following is NOT a government transfer?

payments by the Defense Department for a new weapons system

Which statement is TRUE?

Untalented people have a high opportunity cost in something they do.

John Maynard Keynes believed that the government should:

actively try to mitigate the effects of recessions through fiscal and monetary policies.

Investment spending refers to the: a) accumulation of financial stock by an individual firm. b) addition to the economy's supply of productive physical capital. c) total net value of assets sold to foreigners. d) total spending by households.

addition to the economy's supply of productive physical capital.

Which of the following will NOT cause the production possibility frontier to shift outward? a) growth of the labor force b) an increase in infrastructure spending c) better technology that improves worker productivity d) an increase in the unemployment rate

an increase in the unemployment rate

For the past several months, per capita output has grown more and more slowly, and unemployment has fallen, but both trends appear to have leveled off. Where in the business cycle is the economy? at a peak in a recession at a trough in an expansion

at a peak

In the circular-flow diagram, the factor market is where: households buy factors of production. households buy goods and services. businesses buy goods and services. businesses buy factors of production.

businesses buy factors of production

If a demand curve is downward sloping, a decrease in supply with no change in demand will lead to a(n) _____ in the equilibrium quantity and a(n) _____ in the equilibrium price.

decrease; increase

One role of government policy, suggested by macroeconomic analysis, is to: a) ensure businesses against all damages caused by economic fluctuations. b) manage short-run economic fluctuations. c) act as an "invisible hand," ensuring that goods and services are efficiently allocated to their best uses across the economy. d) prevent interference in the workings of free markets.

ensure businesses against all damages caused by economic fluctuations.

In soccer, when one coach decides to send in a substitute, the other manager often adjusts her lineup in response to that change. This sometimes causes the first manager to send in a different player. Once both managers decide that no more player substitutions will benefit their team, the situation has reached: efficiency. equilibrium. equity. the market.

equilibrium

The national accounts do NOT keep track of: the spending of consumers and the government. the sales of producers. business investment. exchange rates.

exchange rates

In a business cycle, a trough is immediately followed by a(n): peak. recession. depression. expansion.

expansion

Domestically produced goods and services sold to people in other countries are known as: imports. investments. exports. transfer payments.

exports.

French fries and pastrami sandwiches are complements in consumption. Suppose the cost of the ingredients used to make pastrami sandwiches rises, so that the price of pastrami sandwiches rises. The equilibrium price of French fries will then _____, and the equilibrium quantity will _____.

fall; decrease

In the factor markets: households sell goods and services. households buy goods and services. firms buy resources. firms sell resources.

firms buy resources.

Among the tools available to macroeconomic policy makers is: a)fiscal policy, to influence overall spending. b) antitrust policy, to prevent concentrations of market power. c) environmental policy, to maintain clean air, water, and so on. d) food standards, to prevent disease outbreaks.

fiscal policy, to influence overall spending.

In moving along a production possibility frontier, the opportunity cost to society of getting more of one good:

is measured by the amount of the other good that must be given up.

In moving along a production possibility frontier, the opportunity cost to society of getting more of one good: a) is always constant when there are only two goods. b) is measured by the price of the good. c) is measured by the amount of the other good that must be given up. d) usually decreases, but we are not sure; it depends on where we are on the production possibility frontier.

is measured by the amount of the other good that must be given up.

If the value of a country's exports is GREATER than the value of its imports, it: is running a trade surplus. is running a trade deficit. is in an economic contraction. has high investment spending relative to savings.

is running a trade surplus.

Marginal analysis:

is used primarily when deciding how much of an activity to undertake.

The promotion of employment and growth in the economy as a whole is a focus of:

macroeconomics

Some football fans leave the game at the two-minute warning (especially when the outcome is pretty assured) to avoid the postgame traffic. These fans are:

making a marginal decision by comparing the cost of leaving early to the benefit of leaving early.

Consider the local market for fast food hamburgers, an inferior good. If more fast food restaurants open, while consumers' incomes increase, the effect on price will be _____, and the effect on quantity will be _____.

negative; indeterminate

Economic models are: a) set up and used to precisely mirror reality. b) useless if they are simple. c) generally made of wood, plastic, and/or metal. d) potentially useful in informing economic policy.

potentially useful in forming economic policy.

A household is a person or group of people _____. that share an income that work in the same organization who are related that must buy resources and produce goods

that share an income

Macroeconomics focuses on: the economy as a whole. individual decisions. wages. the allocation of scarce resources.

the economy as a whole.

Yoghurt is an important ingredient in the production of frozen yoghurt. If the price of yoghurt increases, then one would expect, holding all other things constant:

the supply curve for frozen yoghurt to shift leftward.

Aminah has a calculus exam tomorrow. However, a free lecture by one of her favorite authors is taking place this evening. Aminah decides to attend the lecture instead of studying for her exam. Aminah's opportunity cost of attending the lecture is:

the transportation and time cost of getting to the lecture itself plus the reduction in her physics exam grade as a result of not studying tonight.

If an economy moves from producing 10 units of milk and 4 units of cheese to producing 7 units of milk and 5 units of cheese, the opportunity cost of the fifth unit of cheese is:

three units of milk.

Many parking lots have specially located spaces for individuals with disabilities. Further, the provision of special parking passes for those with disabilities often requires that there be more spaces available than can be used at any given time. As a result, many of these parking spaces, which take space that could be used for regular parking, are often vacant. This scenario illustrates the:

trade-off between efficiency and equity.

The point in the business cycle when GDP stops falling and begins rising is a(n): peak. expansion. trough. recession.

trough

While buying refreshments for an upcoming party, you notice that a six-pack of Bud Lite Beer costs $6 and that a six-pack of Miller Lite Beer costs $8. You buy the six-pack of Miller Lite Beer, although you wonder if maybe two six-packs of Bud Lite Beer would have been a better choice. The opportunity cost of the Miller Lite Beer is: $8. a six-pack of Bud Lite Beer. two six-packs of Bud Lite Beer. $8 and the six-pack of Bud Lite Beer.

two six-packs of Bud Lite Beer.

Which item would NOT be included in GDP for 2019? a) the production of a television show b) the purchase of a new work truck c) the hiring of a new police officer d) your purchase of your neighbor's 2015 Toyota

your purchase of your neighbor's 2015 Toyota