218 Test 1

20. (Table) If Germany decided to produce skirts, what is Germany's opportunity cost? Sweaters Skirts Germany 6 12 Greece 4 20 a. 2 sweaters b. 0.5 sweater c. 1 sweater d. 0.25 sweater

.5 sweaters

3. Although the United States hardly produces any coffee, it is able to acquire various types of coffee from other countries to satisfy the desires of every American coffee drinker. This example best represents efficiency. a. production b. allocative c. Pareto d. marginal

Allocative

5. Opportunity costs .... a. are generally the same from individual to individual. b. involve monetary rather than nonmonetary costs. c. decrease as individuals become wealthier. d. influence all economic decisions.

Influence all economic decisions

___ occur(s) when goods are produced at the lowest possible cost, and ____ occurs when individuals who desire a product the most receive those goods and services. a. Production efficiency; allocative efficiency b. Production possibilities; allocative possibiliti c. Allocative efficiency; production efficiency d. Allocative possibilities; production possibilities

Production efficiency; allocative efficiency

44. When a recession gets under way a. firms start to lay off workers to reduce costs. b. consumer confidence rises because people expect an eventual recovery. c. inflation always rises because the government prints more money. d. inflation falls because the government reduces its budget deficit.

a. firms start to lay off workers to reduce costs.

52. A sheep ranch produces $30 worth of wool. A suit manufacturer produces S60 worth of suits. A retail outlet sells a suit to a customer for SI80. The change in GDP would be a. $30. b. $180. C. $270 d. Zero

b. $180.

26. Which circumstance will cause a decrease in demai a. an increase in the price of the product b. an increase in the price of a complementary good c. an increase in the price of a substitute good d. a decrease in income for an inferior good

b. an increase in the price of a complementary good

41. Which phase of the business cycle occurs immediately before a trough? a. peak b. recession c. boom d. recovery

b. recession

45. Which organization determines the beginning and end dates of a recession? a. Council of Economic Advisers b. National Bureau of Economic Research c. U.S. Treasury Department

b. National Bureau of Economic Research

6. Assume that a student attends a four-year college with tuition costs of S20,000 per year; room and board costs of $5,000 per year: and books/entertainment costs of S1,000 per year. If the student did not go to college. she would work at a job thatl pays $25,000 per year but still face the same room and board, as well as entertainment expenses. The opportunity cost of attending college for this student for four years is a. $80.000. b. S100.000. C. S124,000

100,000

4. Which would best represent a normative question? a. Are there well-paying jobs in economics upon graduation? b. Should the minimum age to collect Social Security benefits be raised? c. By how much did the Fed raise interest rates in the past vear? d. What is the profit-maximizing quantity to produce?

Should the minimum age to collect social security benefits be raised?

1. Economic problems are analyzed using stylized models that are a. as detailed as possible. b. based on recent case studies. c. very complex and mathematical, d. simplified by using assumptions.

Simplified by using assumptions

17, An increase in technology a shifts the production possibilities frontier curve outward. b, shifts the production possibilities frontier curve inward. c. creates unemployment. d. decreases inflation,

a shifts the production possibilities frontier curve outward.

31. A decrease in the supply of a good causes a(n) a, increase in the equilibrium price and a decrease in equilibrium quantity. b. increase in equilibrium quantity and a decrease in the equilibrium price. c. increase in the equilibrium price and quantity. d. decrease in the equilibrium price and quantity.

a, increase in the equilibrium price and a decrease in equilibrium quantity.

8. Suppose that a store sells candy bars for $0.89 for one and $1.50 for two. The marginal cost of the second candy bar i a. $0.61. b. $0.75. c. $0.89 d. $1.50,

a. $0.61.

49. Gross domestic product is a measure of a. an economy's total output. b. household production. c. the total weight of all goods produced. d. production by owners of labor and capital only.

a. an economy's total output.

21. Prices typically contain useful information a. for both buyers and sellers. b. more for buyers than for sellers. c. more for sellers than for buyers. d. for neither buyers nor sellers.

a. for both buyers and sellers.

22. Suppose that an artist has priced his painting at S150, but it remains unsold. We can conclude that the price of $150 is to0 a. high for this painting and it should be lowered. b. high for this painting but it should not be lowered. c. low for this painting and it should be raised. d. low for this painting but it should not be raised.

a. high for this painting and it should be lowered.

12. Every point on a production possibilities frontier (PPF) represents efficiency. a. production b. allocative c. production and allocative d. X

a. production

29. If there is a surplus in a given market, then a. the price will decrease. b. the price will increase. C. supply will inerease.

a. the price will decrease.

18. The law of comparative advantage suggests that a. cach country should strive to produce roughly equal amounts of all goods. b, nations can benefit if they trade with each other. c. free trade among nations is generally harmful to an economy. d. each country should strive to be self-sufficient.

b, nations can benefit if they trade with each other.

34. Suppose that a customer's willingness-to-pay for a product is S$79, and the seller's willingness-to-sell is $64. If the negotiated price is $68, how much is consumer surplus? a. 4 b. 11 C. 15

b. 11

43. Which statement is TRUE about business cycles? a. They all have the same approximate length. b. Every cycle is unique. c. Each recession causes the same amount of unemployment. d. The intensity tends to be constant from recession to recession, but the duration differs.

b. Every cycle is unique.

19. Suppose that if the United States 16 million barrels; and if it produced only microchips, it could only microchips, it could produce 20 million chips. Suppose that if Mexico produced only oil, it could produce produced only oil, it could produce 25 million barrels; and if it produced produce 8 million chips. Which statement is then correct? a. Mexico has a comparative advantage in producing both goods. b. The United States has an absolute advantage over Mexico in producing both goods. c. Mexico has an absolute advantage over the United States in producing both goods. d. The United States has a comparative advantage in producing both goods.

b. The United States has an absolute advantage over Mexico in producing both goods.

46, How do trends in bond interest rates belp predict changes in the business cycle? a. When long-term rates are higher than short-term rates, a recession is likely. b. When long-term rates are lower than short-term rates, a recession is likely. c. When long-term rates are higher than short-term rates, a trough is present. d. When long-term rates are lower than short-term rates, an expansion is likely,

b. When long-term rates are lower than short-term rates, a recession is likely.

50. Which one of these would be included in GDP calculations? a. a windshield purchased by General Motors b. a hamburger purchased by a hungry restaurant patron c. petroleum purchased by a refiner from the company that drilled it d. nails purchased by a building contractor

b. a hamburger purchased by a hungry restaurant patron

40. If a person gets a meningitis vaccination shot, there's a reduced chance that others around he meningitis. This is an example of a(n) a. external cost. b. external benefit. c. common resource. d. public good.

b. external benefit.

33. Consumer surplus is the difference between the is willing to pay and the market price. a. minimum price the buyer b. maximum price the buyer c. minimum price the seller d. maximum price the seller

b. maximum price the buyer

10. The shows the combination of two goods that are possible for a society to produce at full employment. a. full employment line b. production possibilities frontier c. goods and services frontier d. maximal productivity curve

b. production possibilities frontier

48. GDP can be found by adding up either all of the or all of the in the economy. a. spending; taxes b. spending; income c. investment; income d. net interest payments; taxes

b. spending; income

47. Which is NOT a main use of the national income and product accounts? a, comparing U.S. economic performance with that of other countries b. supporting the macroeconomic theory of the political party in power c. tracking the success of macroeconomic policy d. gauging the economy's position in the business cycle

b. supporting the macroeconomic theory of the political party in power

38. A price floor usually results in a misallocation of resources. a. shortage and a b. surplus and a C. shortage and no d. surplus and no

b. surplus and a

23, The law of demand states that during a given period. a. the lower a product's price, the less of that product consumers will purchase b. the lower a product's price, the more of that product consumers will purchase c. higher prices will lead producers to offer fewer of their products for sale d. higher prices will lead producers to offer more of their products for sale

b. the lower a product's price, the more of that product consumers will purchase

37. Markets are efficient when a. consumer surplus is maximized. b. total surplus is maximized. c. they deviate from equilibrium. d. consumer surplus is equal to producer surplus.

b. total surplus is maximized.

42. The economy is probably heading into a recession when the National Activity Index equals a. 0. b. 0.62. c. -0.94. d. 0.79.

c. -0.94.

35. Which is an example of producer surplus? a. Shyanne thought she would have to pay at least $200 for a smartphone, but she found one she liked online for $109.99. b. Blake was willing to pay $128 for Dustin's bikeo he was happy to only have to pay $118 for it. c. Dustin was willing to sell his old bicycle $90, so he was overjoyed that Blake was willing to pay $118 for it. d. Brandon was hoping to buy a watch for $150, but the cheapest one he could find was on eBay for $185.

c. Dustin was willing to sell his old bicycle $90, so he was overjoyed that Blake was willing to pay $118 for it.

27. Which event will NOT cause the supply curve for kayaks to shift to the left? a. an increase in the costs of materials to build a kayak b. a decrease in the number of sellers of kayaks c. a decrease in the price of a kayak d. an increase in the taxes on kayaks

c. a decrease in the price of a kayak

7. Marginal analysis would put an emphasis on costs and benefits, a, total monetary b. total opportunity c. additional d. total tangible

c. additional

14. Which of these would be MOST likely to cause the production possibilities frontier to shift to the left? a, increase in population b. advancement in technology c. decrease in the size of the labor force d. decrease in taxes

c. decrease in the size of the labor force

32. If the surgeon general announced that wearing basebal will eliminate dandruff, then, ceteris paribus, the a. baseball cap demand curve would shift to the left. b. baseball cap supply curve would shift to the right. c. equilibrium price of baseball caps would increase. d. equilibrium price of baseball caps would decrease.

c. equilibrium price of baseball caps would increase.

51. GDP includes output produced but it does NOT include output produced a. outside the United States by U.S. citizens; inside the United States by foreign citizens b. outside the United States by U.S. citizens; inside the United States by U.S. citizens c. inside the United States by foreign citizens; outside the United States by U.S. citizens d. The GDP includes only goods and services produced by U.S. citizens within the United States.

c. inside the United States by foreign citizens; outside the United States by U.S. citizens

eight-hour day, Ramona can produce 6 pounds of taffy or 6 pounds of chocolate chip cookies. The opportunity 16, In an eight-hour day, Isabel can produce 15 pounds of taffy or 3 pounds of chocolate chip cookies. In an cost of producing 1 pound of chocolate chip cookies is a. one-fifth ol an hour for Isabel and one hour for Ramona. b. one hour for Isabel and one hour for Ramona. c. live pounds of tally for Isabcl and one pound of taffy for Ramona. d. one-fifth of a pound of tafly for Isabel and one pound of taffy for Ramona.

c. live pounds of tally for Isabcl and one pound of taffy for Ramona.

9. What is NOT an economic factor of production? a. land b. entrepreneurial ability c. money d. labor

c. money

cost of producing one good in terms of the other good does not change, then the PPF a, must be bowed out. b. must be bowed in. c. must be a straight line. d. has an indeterminate shape,

c. must be a straight line.

39. If one person consumes a public good a, others are excluded from enjoying it. b. the amount of the good available to others is diminished. c. he or she must pay for it, d, others cannot be excluded from enjoying it.

d, others cannot be excluded from enjoying it.

24, If the demand for iPhones rises as incomes increase, then the iPhone is a(n) good. a, inferior b, abnormal c. supply d. normal

d. normal

25. If consumers believe that an item will not be available in the future, then demand will shift and the equilibrium quantity will a. left; fall b. left; rise c. right; fall d. right; rise

d. right; rise

28. An increase in the cost of coffee beans that are used to make coffee will cause the for coffee to shift a. demand; right b. supply; right c. demand; left d. supply; left

d. supply; left

11. If an economy is operating at a point that is inside of its production possibilities frontier, then it can be assumed that its resources are a. efficiently allocated, b. overutilized. c. fully utilized. d. underutilized.

d. underutilized.