Ch. 1-4 Macroeconomics

If the economy is currently producing at point Y​, what is the gain in production if the economy moves to point X​?

5 million tons of steel

Your consumption point before trade is illustrated by point ____.

A

Which of the following may have caused the shift you have​ drawn? ​(Check all that​ apply.) A. Advances in technology. B. An increase in the capital stock. C. The achievement of full employment. D. A larger labor force. E. Balanced production between ships and food.

A, B and D

Assume​ Dina's Diner only produces sliders and hot wings. A combination of 40 sliders and 50 hot wings would appear

Along Dina's production possibilities frontier

The ___________ production points on a production possibilities frontier are the points along and inside the production possibilities frontier.

Attainable

Which of the following covers the study of topics such as inflation or​ unemployment? A. Microeconomics B. Macroeconomics C. Both microeconomics and macroeconomics give equal emphasis to these problems. D. None of the above.

B

A hypothesis in an economic model is A. a statement that may be either correct or incorrect about an economic variable. B. tested before it can be accepted​ (or not​ rejected). C. usually about a causal relationship. D. all of the above.

D

Economics is a social science because A. it applies the scientific method to the study of the interactions among individuals. B. It considers human behavior—particularly ​decision-making behavior. C. it is based on studying the actions of individuals. D. all of the above.

D

The diagram to the right represents a demand curve for apples. The original demand curve is D1. If a factor other than price which affects demand​ changes, causing demand to decrease​, the resultant demand curve is represented by _____.

D3

If teachers put too much weight in the grading scale on a certain part of the course, like reading outside the textbook, students might respond by __________ other parts of the course.

Deemphasizing

In 18th century​ Europe, governments gave guilds legal authority to limit production of goods. This authority obstructed the market mechanism because the​ guild's actions prevented the forces of​ ________ from coordinating the self−interested decisions of producers and consumers.

Demand and supply

______________is the study of the choices people make to attain their​ goals, given their scarce resources.

Economics

What do economists mean by​ scarcity? Which of the following is not scarce according to the economic​ definition? A. Workers B. Time C. Gas D. Healthcare services E. None of the above

Economists mean that unlimited wants exceed limited resources. None of the above

Consider a production possibilities frontier ​that shows the​ trade-off between the production of cotton​ (on the​ y-axis) and the production of soybeans​ (on the​ x-axis). What effect would a prolonged drought have on the initial production possibilities​ frontier? If there is a prolonged drought​, then the PPF will _______. This will indicate that less _____________ can be produced.

Shift in along both axes Of both goods

What is the​ circular-flow diagram and what does it​ illustrate?

The​ circular-flow diagram shows how households and firms are linked through product and factor markets

T/F: If Abigail can make more candles in one day than​ Pierre, then Abigail has an absolute advantage in making candles.

True

Which of the following shows a negative nonlinear ​relationship?

Y = 83/x

The primary difference between absolute and comparative advantage is

absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.

Alberto Chong of Georgia State University and several colleagues conducted an experiment to test the efficiency of government postal services around the world. They mailed letters to nonexistent businesses in 159 countries and kept track of how many of the letters were returned. Was this test most relevant to evaluating the productive efficiency or the allocative efficiency of these postal​ services? ​ Source: Alberto​ Chong, Rafael La​ Porta, Florencio​ Lopez-de-Silanes, and Andrei​ Shleifer, "Letter Grading Government​ Efficiency," Journal of the European Economic Association​, Vol.​ 12, No.​ 2, April​ 2014, pp.​ 277-299. This test that Albert Chong and his colleagues carried out was most relevant for evaluating the

allocative efficiency of these postal services because the test was designed to measure how often and how quickly the letters sent were returned.

The diagram to the right is an example of

a​ time-series graph.

The basis for trade is __________ advantage

comparative

A(n) ____________ is someone who operates a​ business, bringing together the factors of production—​labor, ​capital, and natural resources—to produce goods and services.

entrepreneurs

If country ABC can produce a unit of good 1 by sacrificing fewer units of good 2 than can country​ XYZ, it is correct to say that country ABC

has a comparative advantage in producing good 1.

In the diagram to the​ right, point F indicates an

inefficient result

Equity is

the fair distribution of economic benefits

Opportunity cost is

the highest valued alternative that must be given up to engage in an activity.

A free market exists

when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed.

The diagram to the right shows a hypothetical demand curve for apples. The slope of this curve is

-1.75

______________________ decide(s) what goods and services will be produced.

Consumers, firms, and government

What is an​ entrepreneur? Why do entrepreneurs play a key role in a market​ system?

Entrepreneurs operate businesses that produce goods and services. They bring together factors of production.

Microeconomics is the study of

how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices

The production possibilities frontiers depicted in the diagram to the right illustrate

technological advances in the tank industry.

One of the great benefits of trade is

that it makes it possible for society to become better off by increasing its consumption.

Comparative advantage means

the ability to produce a good or service at a lower opportunity cost than any other producer.

In colonial​ America, the population was spread thinly over a large​ area, and transportation costs were very high because it was difficult to ship products by road for more than short distances. As a​ result, most of the free population lived on small farms where they not only grew their own food but also usually made their own clothes and very rarely bought or sold anything for money. Why were the incomes of these farmers likely to rise as transportation costs​ fell? As transportation costs​ fell,

the farmers gained access to new markets and customers. Using comparative​ advantage, the farmers​ specialized, producing those goods for which they had lower opportunity cost. As they traded for other​ goods, their incomes and living standards increased.

The diagram to the right illustrates a hypothetical demand curve representing the relationship between price​ (in dollars per​ unit) and quantity ​(in ​1,000s of units per unit of time​). Total revenue is ​_________

$1, 125

The diagram to the right illustrates a hypothetical demand curve representing the relationship between price​ (in dollars per​ unit) and quantity​ (in 1,000s of units per unit of​ time). The area of the triangle shown on the diagram is ​$_______

$512, 000

Refer to the graph on the right What percentage of the marbles are​ blue? What fraction of the marbles are​ yellow? What fraction of the marbles are​ red?

10% 17/10 .13

The table above shows the number of labor hours required to produce a wristwatch and a pound of rice in Japan and Thailand. What is​ Thailand's opportunity cost of producing one​ wristwatch?

20 pounds of rice

Economists often are interested in percentage change from one period to the next. The percentage rate of change of gross domestic product​ (GDP) is an important macroeconomic variable. If in 2010 GDP was​ $11,150 billion​ dollars, and GDP increased to ​$11,685 billion in​ 2011, what is the growth rate of the U.S. economy in​ 2011?

4.8%

The figure above shows the production possibilities frontiers for Greenland and Iceland. Each country produces two​ goods, snow cones and popsicles. What is the opportunity cost of producing 1 snow cone in​ Greenland?

5/6 of a popsicle

The bar graph to the right illustrates hypothetical data for the market share for the United States automobile market. The percentage of the U.S. market that U.S. auto firms control is ____%.

50%

Complete the following​ table: Initial Value: 74, New Value: 120, Percentage Change: ______ Initial Value: 191, New Value: 117, Percentage Change: ______ Initial Value: 197, New Value: _____, Percentage Change: 8.63% Initial Value: 7,944, New Value: 10,731, Percentage Change: ______

62.16%, -38.74%, 214, 35.08%

The pie chart illustrates hypothetical data for the market share for the United States automobile market. The percentage of the U.S. market that U.S. auto firms control is______

65%

In your economics​ class, you scored a 64 on the first​ quiz, a 90 on the second​ quiz, and an 77 on the third quiz. Your average quiz grade is ____ On the fourth​ quiz, you scored an 82. Did the fourth quiz raise your​ average?

77; yes

Which of the following events would create economic​ growth, that​ is, shift the production possibilities frontier​ outward? A. An increase in technology that affects the production of both goods. B. An increase in the available natural resources. C.An increase in the available labor. D. All of the above.

D

Which of the following is not a step that economists use in developing a useful economic​ model? A. Revise the model if it does not explain the data well. B. Use economic data to test the hypothesis. C. Decide on the assumptions to be used in developing the model. D. Make a value judgement about the merits of the hypothesis. E. Formulate a testable hypothesis

D

Which of the following are the two key groups of participants in the circular flow of​ income? A. savers and borrowers B. domestic residents and foreign residents C. government and financial institutions D. households and firms In a simple​ circular-flow model, there are flows of​ _________ and flows of​ _________. A. funds received from the sale of factors of​ production; spending on final goods and services B. factors of​ production; goods and services C. Both​ (a) and​ (b) are correct. D. None of the​ above; there are no flows in the circular flow of income

D C

The table above shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland. Does either Estonia or Finland have an absolute advantage and if​ so, in what​ product?

Finland has an absolute advantage in both products.

Centrally planned economies allocate resources based on decisions by _____________, ​, while market economies answer these questions through decisions made by _____________.

Government; households and firms

Teachers often wish that students came to class prepared having read the upcoming material. A teacher could design the grading system to motivate students to come to class prepared by _____________ the grade weight assigned to being prepared.

Increasing

XYZ​ firm, the leading producer of leather goods in its country is planning to expand its business. Industry experts identify Asia as a potential target market. They report that substitute​ products, particularly in​ India, are highly priced.​ Darren, the operational​ head, feels that exporting their product to India is a good idea. According to​ him, their price advantage alone will ensure good sales.​ However, his​ colleague, Mark, who is also the head of product​ development, feels that Darren is too​ optimistic, and that this venture may not turn out to be as profitable as Darren expects it to be. Which of the​ following, if​ true, will strengthen​ Darren's point of​ view?

Indian producers do not have access to the technology that XYZ uses for producing leather goods.

Which two arrows in the diagram depict the following​ transaction: Stanley purchases the​ novel, "Night of​ Sorrows" for his summer reading pleasure.

K and G

Trade-offs force society to make​ choices, particularly when answering the following three fundamental​ questions:

One, what goods and services will be​ produced? Two, how will the goods and services be​ produced? Three, who will receive the goods and services​ produced?

What is absolute​ advantage? What is comparative advantage? Is it possible for a country to have a comparative advantage in producing a good without also having an absolute​ advantage? A country without an absolute advantage in producing a good

The ability to produce more of a good or service than competitors using the same amount of resources. The ability to produce a good or service at a lower opportunity cost than other producers. will have a comparative advantage if it has a lower opportunity cost of producing that good.

Suppose the president is attempting to decide whether the federal government should spend more on research to find a cure for heart disease. -What is the opportunity cost of spending more money to find a cure for heart​ disease? -How should policymakers determine the amount of money that should be allocated for research curing heart​ disease? They should base their decision on

The reduction in funding for research to cure other diseases. whether the last dollar devoted to research on heart disease results in more benefit than the last dollar spent on research for curing other diseases.

Suppose economists develop an economic model and find that​ "it works great in​ theory, but it fails in​ practice." Which of the following should the economists do​ next?

They should revise the model in light of its failure to explain or predict real world events.

The three economic questions that every society must answer are ______________.

What goods will be​ produced, how will they be​ produced, and who will receive the​ goods?

Microsoft charges a price of​ $599 for a copy of Windows 7. Is this pricing decision​ rational?

When we assume the managers at Microsoft have used all available information and have weighed all known benefits and​ costs, we are assuming rationality.

In an opinion column in the Wall Street Journal​, economist Richard McKenzie of the University of​ California, Irvine​ wrote: ​"If countries import goods that can be made more cheaply abroad than at​ home, and produce goods that can be made more cheaply at home than​ abroad, then all trading nations will end up with more income and wealth than if they tried to produce everything​ themselves." ​ Source: Richard B.​ McKenzie, "People​ Aren't Rational, and​ That's Why We Need Free​ Trade," Wall Street Journal​, June​ 15, 2018. Briefly explain his reasoning. When countries specialize in producing goods in which they have___________advantage and trade for goods in which other countries have___________advantage, the incomes of all countries increase.

a comparative; a comparative

The production possibilities frontiers depicted in the diagram to the right illustrate

both the labor force and capital stock increasing.

A market is a group of _________________ of a good or service and the institution or arrangement by which they come together to trade.

buyers and sellers

On the diagram to the​ right, movement along the curve from points A to B to C illustrates

increasing marginal opportunity costs

Using the same amount of​ resources, suppose that Nicaragua can produce twice as much wheat as Colombia.​ Nevertheless, Colombia could still have the comparative advantage in producing wheat if

it is even less efficient than Nicaragua in the production of goods other than wheat.

The diagram to the right illustrates a common economic relationship. Economists know this relationship as marginal cost​ (MC). The diagram illustrates the relationship between the change in total cost and quantity produced. There are three lines​ (A, B, and​ C) drawn tangent to the MC curve. At line​ A, the MC curve has a​ _____ slope. Where lines B and C touch the MC​ curve, the slope is​ _____ and​ _____.

negative; positive; increasing

In the diagram to the​ right, the curve labeled​ "S" is apparently​ _____, while the curve labeled​ "D" is apparently​ _____.

nonlinear, linear

_______________ occurs when a good or service is produced at the lowest possible cost. ________________ occurs when production is in accordance with consumer preferences.

productive efficiency and allocative efficiency

When the federal government crafts environmental policies that make it less expensive for firms to follow green​ initiatives,

the policies are consistent with economic incentives.

Property rights are

the rights individuals or firms have to the exclusive use of their​ property, including the right to buy or sell it.

The figure to the right shows the production possibilities frontier for​ Vidalia, a nation that produces two​ goods, roses and orchids. What is the opportunity cost of one dozen​ roses?

0.4 dozen orchids

George buys a Tesla Model S. This takes place in the ________ market. The household ________ the good and the firm ________ the good. Tesla increases employment at its Fremont plant. This takes place in the ________ market. The household ________ the good and the firm ________ the good. George works 20 hours per week at​ McDonald's. This takes place in the ________ market. The household ________ the good and the firm ________ the good. George sells land he owns to​ McDonald's so it can build a new restaurant. This takes place in the ________ market. The household ________ the good and the firm ________ the good.

1. Product; demands; supplies 2. Factor; supply; demands 3. Factor; supplies; demands 4. Factor; supplies; demands

Which of the following are represented by the same flow in the circular flow​ model? A. the flow of income earned from the sale of resources and the flow of expenditures on goods and services B. the flow of costs and the flow of revenue C. the flow of income received by households and the flow of tax revenues paid by firms D. the flow of goods and the flow of factors of production

B

Which of the following are examples of intellectual​ property? ​(Check all that​ apply.) A. Pure air and water B. Ideas for new products or new production techniques C. Software D. Books and films E. All​ non-natural resources The government seeks to protect intellectual property rights by granting A. copyrights. B. patents. C. franchises. D. All of the above. E. A and B only.

B, C and D E

Any model is based on making assumptions because A. we cannot analyze an economic issue unless we reduce its complexity. B. models have to be simplified to be useful. C. both a and b. D. neither a nor b.

C

When we graph the relationship between two​ variables, we often want to draw conclusions about whether changes in one variable are causing changes in the other variable. Doing​ so, however, can lead to incorrect conclusions. Reasons for drawing incorrect conclusions about cause and effect include A. reverse causality. B. an omitted variable. C. both a and b. D. none of the above

C

Societies organize their economies in two main ways to answer the three questions of​ what, how, and who. A society can have a ___________ economy in which the government decides how economic resources will be allocated. Or a society can have a ___________ economy in which the decisions of households and firms interacting in markets allocate economic resources.

Centrally planned Market

A _________ economy is an economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.

Mixed

Porsche is developing​ all-electric and hybrid electric​ vehicles, and has announced that by​ 2025, they expect more than 50 percent of their worldwide sales will be​ all-electric or hybrid models. The figure shows changes to​ Porsche's production possibilities frontier at its manufacturing facilities in response to new developments and different strategic production decisions. Suppose worker productivity increases so that the total number of vehicles produced increases as Porsche adds more machinery and​ workers, and changes the layout of the factory. This is best represented by the

Movement from G to H in Graph B

The diagram to the right illustrates a supply curve. As with all supply ​curves, this​ curve's slope is

Positive

____________ is concerned with what is​, and ____________ is concerned with what ought to be. Economics is about __________, which measures the costs and benefits of different courses of action.

Positive analysis, normative analysis, positive analysis

The figure to the right shows various points on three different production possibilities frontiers for a nation. A movement from​ ________ is the result of advancements in plastic production technology.

Y to Z

A production possibilities frontier​ (PPF) is

a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology

To compete in the automobile​ market, Tesla must make many strategic decisions such as whether to introduce a new car model like the Model​ 3, how to sell and service its​ cars, and where to advertise. At​ Tesla's Fremont, California​ plant, managers must decide on the monthly production quantities of their​ S, X, and 3 models. In making this​ decision, the managers

face a​ trade-off, because producing more of one model means producing less of the others.

Two key groups participate in markets. A ___ consists of all the individuals in a home. ___ are suppliers of goods and services. We can use a simple economic model called the _____ to see how participants in markets are linked.

household, firms, circular-flow diagram

In the United​ States, who receives the goods and services produced depends largely on _____________.

how income is distributed

Consider an organization dedicated to helping​ low-income people. The members of the organization are discussing alternative methods of aiding the​ poor, when a proponent of one particular method​ asserts: ​ "If even one poor person is helped with this​ method, then all our time and money would have been worth​ it." If you were a member of the​ organization, what reply best represents clear economic​ thinking? This attitude

ignores the fact that the cost of helping that one person has an opportunity cost of what those funds could have been used for to help other people.

Firms choose how to produce the goods and services they sell. In many​ cases, firms face a​ trade-off between using more workers or using more machines. For​ example,

many times in the past several​ decades, firms may have chosen between a production method in the United States that uses fewer workers and more machines and a production method in China that uses more workers and fewer machines.

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

marginal benefit equals marginal cost

In​ economics, the term capital refers to

physical capital, such as machinery, that is used to produce other goods

The Scottish philosopher Adam Smith argued in 1776 that

prices would do a better job of coordinating the activities of buyers and sellers than guilds could.

The diagram to the right illustrates a very important relationship in economics between two​ variables: the price of a good and the quantity demanded of that good. The two variables in this diagram​ are:

price​ (dollars per​ bushel) on the vertical axis and quantity​ (bushels per​ week) on the horizontal axis.

Absolute advantage is the ability of an​ individual, a​ firm, or a country to ________. If a country has a comparative advantage in the production of a​ good, then that country ______________.

produce more of a good or service than competitors using the same amount of resources. has a lower opportunity cost in the production of that good.

The primary difference between product markets and factor markets is that

product markets are markets for​ goods, while factor markets are markets for factors of production—​labor, ​capital, natural​ resources, and entrepreneurial ability.

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls

scarcity

Two​ neighbors, countries A and​ B, produce books and​ blankets, among other goods and services.​ However, Country A produces more of both goods than country B. A student of​ economics, Maya, also notes that in both​ countries, these industries individually employ 30 percent of the population. She concludes that country A has an absolute advantage in the production of books and blankets over country B. ​ Maya's conclusion is flawed because

she assumes that country​ A's population is no larger than country​ B's.

Macroeconomics is

the study of the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.

Economists assume that people are rational in the sense that

they use all available information as they take actions intended to achieve their goals.

According to an article in the Wall Street Journal in early​ 2019, "United States Steel Corp. said it plans to add 1.6 million tons of steelmaking capacity next year by resuming the construction of a new furnace in Alabama as tariffs on foreign metal raise profits on domestic​ steel." ​ Source: Bob​ Tita, "U.S. Steel to Expand Under​ Tariffs," Wall Street Journal​, February​ 11, 2019. a. How does a tariff on imported steel make a U.S. steel company more​ profitable? b. People who had invested in U.S steel firms are likely to be _____ by a tariff on imported steel. c. Would people in the United States helped by the steel tariffs necessarily support the​ tariffs? Would people who were hurt by the tariffs necessarily oppose the​ tariffs? Which of the following statements is true? A. People who benefitted from the tariff are likely to support them. We​ can't say those people will necessarily support the​ tariffs, though, because their support for free trade unrestricted by tariffs may supersede their monetary gains from this particular tariff. B. Some of the people who lose from the tariffs may not understand that the tariffs have inflicted losses on them. For​ example, a consumer who pays more for a washing machine may not understand that the price of the washing machine has increased because of the steel tariffs. C. Some people who are hurt by the tariffs may still support them​ because, for​ example, they believe it is a good​ idea, on normative​ grounds, to protect jobs in the steel industry. D. All of the above.

A tariff on imported steel will raise the prices of those​ imports, making it likely that some U.S. consumers of steel will shift from buying imported steel to buying​ domestically-produced steel. B. Helped C. D

In a paper written by Bentley College economists Patricia M. Flynn and Michael A.​ Quinn, the authors​ state: ​"We find evidence that Economics LOADING... is a good choice of major for those aspiring to become a CEO​ [chief executive​ officer]. When adjusting for size of the pool of​ graduates, those with undergraduate degrees in Economics are shown to have had a greater likelihood of becoming an​ S&P 500 CEO than any other​ major." A list of famous economics majors published by Marietta College includes business leaders Warren​ Buffet, Donald​ Trump, Ted​ Turner, and Sam​ Walton, as well as former presidents George H.W.​ Bush, Gerald​ Ford, and Ronald Reagan. ​ Why might studying economics be particularly good preparation for being the top manager of a corporation or a leader in​ government?

Economics teaches us how to look at the tradeoffs involved in every decision.

The grading system plays an important role in student learning. In their book Effective​ Grading: A Tool for Learning and Assessment in College​, Barbara Walvoord and Virginia Anderson state that ​"grading infuses everything that happens in the​ classroom." They also argue that grading​ "needs to be acknowledged and managed from the first moment that an instructor begins planning a​ class." ​Source: Barbara E. Walvoord and Virginia Johnson​ Anderson, Effective​ Grading: A Tool for Learning and Assessment in​ College, 2nd​ edition, San​ Francisco: Jossey-Bass,​ 2010, p. 1. The grading system used by a teacher can affect the incentives of students to learn the course material by

altering the payoffs to achieving success on the various components of the course.