Econ Test Review
During a year, a firm's depreciation is $600 and gross investment is $3,000. What is the firm's net investment?
2,400
Refer to this graph, which represents Alice's Production Possibilities Frontier. At which levels of production is Alice producing inefficiently?v
200 units of lemonade and 50 units of pizza
Explain why a relative price is an opportunity cost. The money price of a pound of bananas is $0.20 and the money price of a pack of microwave popcorn is $0.60. The opportunity cost of a pack of microwave popcorn is _______.
3 pounds of bananas, which is the relative price of a pack of popcorn
At one point along a PPF, 10 pizzas and 7 sandwiches can be produced. At another point along the same PPF, 9 pizzas and 10 sandwiches can be produced. The opportunity cost of a pizza between these points is ________ per pizza.
3 sandwiches
Because of the biases in calculating the CPI, actual inflation is
less than the measured inflation rate.
Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following statements is correct?
Homer has an absolute advantage in both catching fish and picking fruit.
So ______ has a comparative advantage in producing ______.
Jim; tuna
The opportunity cost to produce 1 pretzel for Mark is 2 cookies. For Jessica, the opportunity cost to produce 1 pretzel is 3 cookies. From this information, we know that
Mark has a comparative advantage in pretzel production.
Martha can produce 90 quilts or 180 batches of chocolate chip cookies in a month. Jane can produce 6 quilts or 18 batches of chocolate chip cookies in a month. Distinguish between comparative advantage and absolute advantage.
Martha has an absolute advantage in both goods. Martha has a comparative advantage in quilts. Jane has a comparative advantage in chocolate chip cookies.
Consider gardening books. What will happen to the market for these books as gardening becomes more popular and simultaneously printing costs increase?
The price of gardening books definitely increases.
Consider the market for broccoli. If the price of a pound of broccoli increases, what happens to the supply of broccoli?
There will be no change in the supply of broccoli, but instead is an increase in the quantity supplied of broccoli.
The effect of the United States returning millions of workers to their countries of origin is _____ the U.S. PF and _____ in potential GDP.
a movement down along; a decrease
According to classical growth theory, the growth of real GDP per person stops when _______.
a population explosion eventually occurs and real GDP per person returns to the subsistence level
Which of the following always raises the equilibrium price?
an increase in demand combined with a decrease in supply
An increase in the demand for computers and a decrease in the number of sellers of computers will ________.
an increase in the price of a computer
John has two hours of free time this evening. He ranked his alternatives, first go to a concert, second go to a movie, third study for an economics exam, and fourth answer his mail. What is the opportunity cost of attending the concert for John?
attending a movie
graduates from college and his income increases by $30,000 a year. Nothing else changes. Stephen decreases the quantity of donuts and potato chips that he buys and increases the quantity of bottled water that he buys. For Stephen, _______.
bottled water is a normal good
If demand and supply change in the same direction, we _____ the direction of change of the equilibrium quantity and we _____ the direction of change of the equilibrium price.
can predict; cannot predict
The consumer price index (CPI)
compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period
By specialization and trade, two individuals can
consume at a point beyond their individual production possibilities frontiers.
Ski trips and ski jackets are complements. If the price of a ski trip increases, how does the demand for ski jackets change?
decrease, and the demand curve for ski jackets will shift leftward
If shoes rise in price, the demand curve for shoes ________ and the quantity of shoes demanded ________.
does not shift; decreases
The income earned by the people who sell the services of the factor of production _______ is called _______.
entrepreneurship; profit
When the unemployment rate ______ the natural unemployment rate, real GDP ______ potential GDP.
equals;equals
The table shows the marginal benefit and marginal cost schedules for frozen fish. If Antarctica produces 95 frozen fish, the marginal benefit from frozen fish ______ the marginal cost of frozen fish. To achieve allocative efficiency, Antarctica must ______ the quantity of frozen fish produced.
exceeds; increase
According to the figure, the opportunity cost of producing another computer is
higher at B
By itself, an increase in exports
increases GDP
A discouraged worker ________ counted as officially unemployed and ________ counted as in the labor force.
is not; is not
A supply curve that illustrates the law of supply _______.
is upward sloping
Suppose you always study 5 evenings for an exam, but this week you decide to study for one more evening. The _____ of one more evening of studying is _____.
marginal cost; an evening not spent with your friends, if that is your best alternative use of time
In calculating GDP, household production is
not included because there is no market transaction.
Full employment occurs
only if the unemployment rate is equal to the natural unemployment rate.
According to new growth theory, the growth of real GDP per person _______.
persists indefinitely
If the demand curve for bikes shifts leftward and the supply curve for bikes shifts rightward, the equilibrium
price of bikes definitely decreases.
Harry produces 2 balloon rides and 4 boat rides an hour. Harry could produce more balloon rides without producing fewer boat rides. Harry is ______ his production possibilities frontier.
producing inside
Aggregate expenditures include all of the following EXCEPT
purchases of intermediate goods.
PPP is _______.
purchasing power parity
In the post World War II period, considerable growth in total production took place in the U.S. But at the same time, businesses were dumping their waste into the Great Lakes with minimal cost to themselves, significantly polluting the bodies of water as a result. This occurrence is an example where
real GDP gives an overly positive view of economic welfare.
Which of the following statements are positive? 1. China is the largest trading partner of the United States 2. People who buy weekly lottery tickets win a prize at least once a year 3. Drunk drivers should have their licenses suspended for the remainder of their lives 4.
statements 1 and 2 are positive
If new capital increases labor productivity, the supply of labor ________ and the demand for labor ________.
stays the same; increases
Real GDP is calculated by _______.
summing together the value of the year's production using the prices of the reference base year
According to neoclassical growth theory, the growth of real GDP per person stops when _______.
technology stops advancing
The marginal benefit that Anne receives from the second bowl of soup is _______.
the maximum amount she is willing to pay for a second bowl of soup
Using the figure, suppose that roses are a normal good. If incomes decrease while simultaneously there is an increase in the price of the resources used to produce roses, then
the quantity will definitely decrease below 10 dozen roses.
The relative price of a pack of microwave popcorn is an opportunity cost because ______.
the relative price tells us how many pounds of bananas we must give up to get a pack of microwave popcorn
At the full employment equilibrium in the labor market,
there is neither a shortage nor a surplus of labor.
Which of the following measurements of inflation tracks the rate at which infrequently changed prices are changing?
the sticky-price CPI
When we use PPP we can make valid international comparisons of real GDP because ______.
we calculate the value of goods and services produced in two countries using the same prices
The law of supply states that other things remaining the same, the _______ the price of a good, the _______.
higher; greater is the quantity supplied
Question Facts In an hour, Jim can catch 10 pounds of tuna or pick 10 pounds of peaches. In an hour, David can catch 10 pounds of tuna or pick 20 pounds of peaches The opportunity cost of catching a pound of tuna is ______ for Jim. than for David, and the opportunity cost of picking a pound of peaches is ______ for Jim than for David.
lower; higher
Flights to Paris are a normal good and people's incomes rise. At the same time, the price of jet fuel rises. The equilibrium price of a flight to Paris ________ and the equilibrium quantity of flights to Paris ________.
rises; might increase, decrease, or not change
An advance in technology increases the productivity of labor. As a result, the nation's production function shifts ________ and the ________ labor curve shifts rightward.
upward; demand for