University of Notre Dame Microeconomics Final

Macroeconomics is concerned with issues such as a) which job to take b) unemployment c) what price to charge d) what orange juice to buy

b) unemployment

Positive or normative: social welfare spending in Sweden occupies too large a portion of the national budget

Normative

On black friday, there are huge sales at stores. David must decide between a camera at one store or a TV at another. Buying one means losing the other

Opportunity Cost

Because of scarcity...

People face tradeoffs in nearly every choice they make

Positive or Normative: A decrease in the supply of coconut will increase the price of German chocolate cake, a good which requires coconut shavings as a key ingredient

Positive

Positive or Normative: As minimum wage increases, the prices of all goods and services also tends to increase.

Positive

Classify each statement based on whether or not it is a primary goal of macroeconomic policy. 1. Low unemployment 2. Low inflation 3. Growth in the standard of living 4. Eliminating political conflict 5. help set the optimal price for a pound of peaches at the local store 6. calculate how much urban residents are willing to pay to protect biodiversity

Primary economic policy goal: 1,2,3 Not a primary goal: 4,5,6

When goods are produced at the lowest possible cost, an economy is said to have achieved

Production Efficiency

Ava must make choices about how to use her limited time

Resource Scarcity

People have limited resources

Scarcity

A company compares how much adding another worker will improve the product to the additional cost

marginal decisions

The economics of uranium mining would be studied in...

microeconomics

A theory composed of a number of assumptions and facts boiled down to their basic relevant elements is called a:

model

An effective model to determine how the change in the price of grapes effects the market quantity of wine must assume...

no other changes take place

When the government chooses to use resources to build tourist centers, the selected resources are no longer available to build highways. This illustrates the concept of...

opportunity cost

x-axis: good one. y-axis: good two. Slope =

Opportunity Cost

At your local family fun center, miniature golf is $12 per person for unlimited rounds in a day, while each go-kart session is $8. Given this information, calculate: 1) Total cost of 0 rounds of golf 2) Total cost of 1 rounds of golf 3) Total cost of 2 rounds of golf 4) Total cost of 3 rounds of golf 5) Total cost of 0 go-kart sessions 6) Total cost of 1 go-kart sessions 7) Total cost of 2 go-kart sessions 8) Total cost of 3 go-kart sessions

1) $0 2) $12 3) $12 4) $12 5) $0 6) $8 7) $16 8) $24

At your local family fun center, miniature golf is $12 per person for unlimited rounds in a day, while each go-kart session is $8. Cost of playing 2 rounds of mini golf is A and the total cost of playing three rounds of mini golf is B. The marginal cost for the third round of gold is C. The total cost of 2 go-kart sessions is D and the total cost of 3 go-kart sessions is E. The marginal cost for the third go-kart session is F

A) $12 B) $12 C) $0 D) $16 E) $24 F) $8

An outward parallel shift of the PPF signals

An expansion in the productive capacity of the economy

Positive or Normative: The richest 1% should pay more taxes than the rest of the 99%.

Normative

Positive Economics

Concerned with the objective, "what is", factual

Normative Economics

Concerned with the subjective, "what should be", opinion

In which field to researches focus on investigating economic growth in our society?

Economics

Suppose the school sells all its vaccines at the market price of $20. What has it managed to maximize?

Efficiency

During the summer, a bumper crop of oranges in FL causes a surplus in the supply of oranges nationwide. As a result, prices fall to compensate for the surplus and consumers enjoy the fruits of the farmers' labor

Equilibrium

Suppose now that the school wishes to make sure no students with preexisting conditions go without a flu vaccine because they cannot afford it. Because it does not know the budget of each student, the health center decides to offer vaccines free to students who can provide a doctor's not stating they have a condition. The school is now seeking a greater degree of:

Fairness

The local river has so much pollution that three-eyed fish are forming. The government responds by regulating the amount of chemicals that can be dumped into the river

Government Intervention

What does teh term Ceteris Paribus mean?

Holding all else equal (unchanged)

What is a key idea in economic thinking?

Incentives Matter

three points, on inside the line, one on the line, one outside the line. The point inside the line represents a production situation that is:

Inefficient

Micro or Macro: As a result of a severe recession, the total output, or GDP of a nation falls by 4%

Macroeconomics

Micro or Macro: Increased consumer spending causes teh national unemployment rate to fall.

Macroeconomics

Micro or Macro: Increased consumer spending causes the rate of inflation to rise.

Macroeconomics

People use _____ to determine how many hours to work, and businesses use _____ to determine how much of their product they are willing to supply to the market.

Marginal Analysis, Marginal Analysis

The owner of a snow cone trailer realizes that the demand for snow cones is low during the winter, and thus, closes shop until the temperature warms back up near summertime

Market Efficiency

Micro or Macro: A tax on tires increases the price of tires paid by car owners

Microeconomics

Micro or Macro: Optimism about future car sales leads General Motors to hire automotive workers

Microeconomics

Micro or Macro: Robotic technology reduces the demand for auto workers

Microeconomics

Classify the items according to whether they are an application of microeconomics or macroeconomics. 1. How does Ultravision choose to market their game? 2. Have the millions of dollars that people have spent on video games worldwide affected the GDP in their respective countries? 3. How much will Ultravision charge for their game? 4. How much will ultravision pay the developers of the game? 5. Has the country's unemployment rate changed as ultravision hired a huge team of workers to develop the game? 6. Is ultravision able to sell all the games it produces or do they need to produce more or less? 7. How much less economic output occurs countrywide because workers call in sick to stay home and play their game?

Microeconomics = 1,3,4,6 Macroeconomics 2,5,7

At a high-end restaurant, the owner has one chef at a meat station, one at a vegetable station, and one plating the food. The result is increased service speed and more customers served

Specialization

Who will receive the vaccines if the University Health Center sells them for the $20 market price?

The students who are willing and able to pay for them

If an economy moves from a point on the production possibilities curve to a point to the right of that production PPF, what event might have occurred?

There has been a discovery of new technology that expands production possibilities

Which statement is TRUE about specialization and exchange between two individuals?

They generally benefit the poorer individual as well as the richer individual

Everything you do requires giving up something (time, money, etc)

Tradeoffs

Dave owns a home business where he makes paintings and sells them on the internet. Each week the first painting he makes sells for $100, the second $80, the third $60, and the fourth $40. If each painting costs him $75 in time and supplies, how many should he paint?

Two

Can a PPF ever shrink inwards?

Yes, if new regulations restrict a country's capacity to produce goods.

The table shows the marginal benefit and cost for each slice of pie John eats. Slices of Pie - Marginal Benefit - Marginal Cost 1-3.00-1.50 2-2.00-1.50 3-1.00-1.50 4-0.00-1.50 Using marginal analysis, how many slices of pie will John eat? a) one b) two c) three d) four

b) two

What is the main problem addressed with scarcity? a) Determining how to address unlimited wants with limited resources b) Ensuring that an adequate standard of living is achieved c) Making sure that critical resources such as oil and forests are not depleted d) Trying to satisfy the basic needs of everyone to eliminate poverty

a) Determining how to address unlimited wants with limited resources

You see a large group of stranded passengers standing next to a disabled bus, and you have only three seats in your car. You have to decide which three passengers to rescue because of: a) scarcity b) macroeconomics c) Trade d) Efficiency

a) Scarcity

Suppose you have a choice between studying one more hour for your history exam or studying one more hour for your psychology exam. Your decision on what to study should be based on: a) The additional (marginal) benefits of studying for each class b) which class you like the most c) how much time you have already studied for each class d) your current average scores in each class

a) The additional (marginal) benefits of studying for each class

When four roommates agree to specialize in chores they are most efficient, this can lead to: a) a situation in which less time is spent on chores by every roommate b) some roommates doing many more chores than others c) one roommate who is most efficient doing all the chores d) no chores getting done at all

a) a situation in which less time is spent on chores by every roommate

Paying a salesperson more for increased sales is an example of:

an incentive

Which of the following is a decision that follows the net marginal benefit principle? a) Choosing among different roller coasters based on their distance from the theme park entrance b) Deciding whether to spend one more hour studying for the exam c) Deciding to order a dessert at a non-buffet restaurant more often than you have a dessert at a buffet d) Choosing to give up eating meat due to concerns regarding the treatment of animals

b) Deciding whether to spend one more hour studying for the exam

The opportunity costs of attending college do not include: a) the foregone wages that could have been earned working b) food expenditures c) required student activity fees d) the costs of textbooks

b) food expenditures

Anna can learn piano or learn rock climbing. She chooses rock climbing, identify which activity exhibits a potential trade-off with learning rock climbing a) learning rock climbing skills b) learning to read piano sheet music c) overcoming her fear of heights d) none

b) learning to read piano sheet music

Marginal analysis is the method of analyzing "how much" type questions by comparing the additional (marginal) cost of doing one more with what? a) the total cost b) the marginal benefit c) the total benefit d) the average benefit

b) the marginal benefit

The price of gasoline is $2.50 per gallon at the closest gas station, but is only $2.30 per gallon at a gas station two miles away. By driving to the farther gas station, the opportunity cost is: a) the cost of filling one's tank at the original price of $2.50 per gallon b) the value of one's time and expenses to go to the further gas station c) non-existent because gas is cheaper at the further station d) $0.20 per gallon, the difference in price between the two gas stations

b) the value of one's time and expenses to go to the further gas station

Which of the following explains why modern Americans ejoy a higher standard of living than Americans 100 years ago? a) Market failures are nonexistent b) there has been economic growth in our society c) americans have prospered and earned more money due to a complete lack of recessions d) the invisible hand has guided all nations around the world to prosperity

b) there has been economic growth in our society

Suppose your first cup of coffee each day gives you $4.00 in total benefit. Your second cup gives you an additional $3.00 in benefit and the third gives $2.00 in additional benefit. By the fourth cup of coffee, the caffeine really gets to you and you get no additional benefit. If the coffee shop you go to charges $2.50 for a cup of coffee, based on marginal analysis, how many cups would you drink? a) one b) two c) three d) four

b) two

Lisa is choosing between three alternatives: a) working on her job that pays her 60 dollars; b) writing a term paper which she values at 40 dollars; or c) going out with a friend, which she values at 80 dollars. The opportunity cost of writing the term paper is: a) $140 b) $0 c) $80 d) $20

c) $80

Which of the following words best describes what economics is about? a) Happiness b) Growth c) Choices d) Money

c) Choices

Which of the following would be most closely related to microeconomics? a) How rising prices causes the standard of living to fall b) the effect of improving consumer confidence on economic growth c) How rising wages affect the choice of working instead of going to school d) The extent to which people leaving the labor force affects unemployment

c) How rising wages affect the choice of working instead of going to school

Which statement describes the equity-efficiency tradeoff? a) the least efficient economic outcome is the fairest outcome b) government intervention can increase efficiency in the market c) actions intended to make economic outcomes fairer may cause efficiency to decrease d) there is always a more equitable outcome that is also more efficient

c) actions intended to make economic outcomes fairer may cause efficiency to decrease

Suppose Dave is at an all you can eat buffet and he has already paid for the price of the meal. The table shows the total benefit he gets from eating various numbers of plates of food. Using marginal analysis, how many plates of food will dave eat? Plates - Benefit 1 - 10 2 - 15 3 - 18 4 - 17 a) one b) two c) three d) four

c) three

Jane is trying to decide how many TV shows she should watch tonight. She gets $10 of value from each TV show she watches. If she watches one show she gives up working on her math homework, which she values at $5. If she watches two, she also gives up her economics homework, which she values at $8. If she watches three then she also has to give up her biology homework, which she values at $12. Using marginal analysis, how many shows does she watch? a) zero b) one c) two d) three

c) two

Because of scarcity a) choices are unlimited b) wants are limited c) we face tradeoffs in nearly every choice we make d) resources are limitless

c) we face tradeoffs in nearly every choice we make

Instead of attending class, one could have worked an extra hour at the cafe for $10 or watched a neighbor's child for $15. The opportunity cost of attending class is: a) $5 b) $25 c) $10 d) $15

d) $15

Which of the following situations represents an economic problem? a) A student trying to decide how to spend his weekly allowance b) A country choosing to sacrifice some privacy in order to gain more security c) Neither d) Both

d) Both

Tyrone has three options on how to spend his Saturday afternoon: to go out with friends, watch a movie, or wash his car. Tyrone's opportunity cost of washing his car would be: a) the value of going out with friends b) the value of watching a movie c) a AND b d) a OR b

d) a OR b

Rational behavior requires thinking at the margin. Which example represents this type of thinking? a) deciding whether the overtime pay is worth working on your day off b) deciding whether a second burger is worth the extra money c) deciding whether to pay a fine for polluting the local harbor or installing antipollution machinery d) all

d) all

The term "marginal" is the same as: a) doing a little more or a little less b) additional c) extra d) all the above

d) all the above

Suppose you and your roommate have the following agreement when it comes to cleaning your apartment: each person washes her or his own dishes after each meal. The principle of trade you just learned tells you that it would be more efficient if: a) both of you wash your own dishes after each meal b) neither of you wash the dishes after eating c) each of you wash half of all the dirty dishes d) one of you wash all the dishes while the other does a different chore

d) one of you wash all the dishes while the other does a different chore

Which demonstrates a scenario with no opportunity cost? a) It's Friday night and you stay up late with your friends b) The chemistry club is giving out free pizza for lunch to all who come to their table to get it c) Naomi is at a bookstore and chooses a fiction book over a math textbook d) Chez Moi and Chez Nous, to great restaurants offer you a full time sous chef job at the same salary. e) all of these have opportunity costs

e) all of these have opportunity cost

Supply and Demand analysis is used...

in both microeconomics and macroeconomics.

In economics, the goals of efficiency and equity are often...

in conflict with one another

Suppose you have a very efficient study system. Then, as you increase the hours that you study for an economics exam, the opportunity cost of studying for the exam...

increases

Scarcity...

is faced by all individuals and societies

Why, if at all, is the ceteris paribus condition important to economic analysis?

it allows the analysis of how a single change affects an economic environment

Economics is best defined as the study of how

people make rational decisions.

When an economic model is used, it tends to

start with very few details in order to simplify the model