Exam 1

For which of the following individuals would the opportunity cost of going to college be highest?

A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree

Which of the following includes everyone in the adult population that the Bureau of Labor Statistics counts as "unemployed"?

Anyone who is not employed, is available for work, has looked for work in the past four weeks, and anyone who is waiting to be recalled from a job from which they have been laid off

Refer to Figure 4-6. The shift from S' to S is called

a decrease in supply

Gross domestic product includes all

legal final goods and services, but it excludes illegal final goods and services.

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,

market prices

The law of supply states that, other things equal, when the price of a good

rises, the quantity supplied of the good rises

Fossil fuels are considered to be nonrenewable energy sources. Which of the following statements is correct?

scarce resource

Efficiency means that

society is getting the most it can from its scarce resources

A baker recently has come to expect higher prices for bread in the near future. We would expect

the baker to supply less bread now than she was supplying previously.

Refer to Table 24-1. The cost of the basket in Year 2 was

$146

Refer to Figure 4-7. Equilibrium price and quantity are, respectively,

$25 and 400 units

Refer to Table 3-2. Assume that England and France each has 40 labor hours available. If each country devotes 20 to production of bread and 20 to production of lemonade, then total production is

24 units of bread and 15 units of lemonade.

Consider Miray's decision to go to college. If she goes to college, she will spend $24,000 on tuition, $12,000 on room and board, and $1,900 on books. If she does not go to college, she will earn $16,000 working in a store and spend $8,000 on room and board. Miray's cost of going to college is

45,900

Refer to Table 2-2. What is the opportunity cost to Supertown of increasing the production of toys from 200 to 300?

500 glasses

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

Both Dale and Terrence are made better off by trade

Refer to Figure 2-3. Efficient production is represented by which point(s)?

C, D

Trade between countries

allows each country to consume at a point outside its production possibilities frontier

A likely example of complementary goods for most people would be

Coffee and sugar

Which of the following statements about comparative advantage is not true?

Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources.

Micheal, a U.S. citizen, travels to Jamaica and buys a newly manufactured motorcycle made there. His purchase is included in

Jamaica's GDP, but it is not included in U.S. GDP.

Maria is looking for work as a electrical engineer. Her prospects are good but so far she has not taken a job. Julie is looking for work in a paper mill. Every time Julie shows up for an interview, there are more people looking for work than there are openings. She realizes that it has been that way for a long time.

Maria is frictionally unemployed, and Julie is structurally unemployed.

Joe and Bob purchase oranges at a grocery store, but Bob also grows oranges in his backyard. Regarding these two practices, which of the following statements is correct?

Only Joe's and Bob's grocery store purchases are included in GDP.

The adage, "There ain't no such thing as a free lunch," means

People face tradeoffs

What basket of goods and services is used to construct the CPI?

The goods and services that are typically bought by consumers as determined by government surveys

Which of the following events would cause a movement upward and to the left along the demand curve for olives?

The price of olives rises

Which of the following is included in the calculation of GDP?

The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country.

Which of the following is the correct formula for calculating the consumer price index?

[(price of basket of goods and services in current year/price of basket in base year)]× 100

Refer to Figure 2-5. Which of the following events would explain the shift of the production possibilities frontier from A to B?

a general technological advance

If the demand for a good falls when income falls, then the good is called

a normal good

Refer to Figure 4-1. The movement from point A to point B on the graph shows

an increase in quantity demanded

Refer to Figure 4-4. The movement from point A to point B on the graph is caused by

an increase in the price of the good

Currently you purchase ten frozen pizzas per month. You will graduate from college in December, and you will start a new job in January. You have no plans to purchase frozen pizzas in January. For you, frozen pizzas are

an inferior good

The natural rate of unemployment includes

both frictional and structural unemployment

Refer to Figure 4-1. The movement from point A to point B on the graph is caused by

decrease in price

At the equilibrium price, the quantity of the good that buyers are willing and able to buy

exactly equals the quantity that sellers are willing and able to sell

The law of demand states that, other things equal, when the price of a good

falls, the quantity demanded of the good rises

Government purchases include spending on goods and services by

federal, state, and local gov't

In the markets for goods and services in the circular-flow diagram,

firms provide households with output

Soup is an inferior good if the demand

for soup falls when income rises.

Sandy has graduated from college and is devoting her time to searching for a job. She has seen plenty of openings but has not yet been offered one that best suits her tastes and skills. Sandy is

frictionally unemployed. Frictional unemployment can exist even in the long run.

The real interest rate tells you

how fast the purchasing power of your bank account rises over time

An increase in the price of a good will

increase quantity supplied

When the quality of a good improves while its price remains the same, the purchasing power of the dollar

increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.

The percentage change in the price level from one period to another is called the

inflation rate

Absolute advantage is found by comparing different producers'

input requirement per unit of output

A farmer produces lemons and sells them to Fresh Juice, which makes lemon juice. The lemons produced by the farmer are called

intermediate goods

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that

people face tradeoffs

A supply schedule is a table that shows the relationship between

price and quantity supplied

Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the

quantity demanded of physicals increases, and the quantity supplied of physicals decreases

If a nonbinding price floor is imposed on a market, then the

quantity sold in the market will stay the same

A recession has traditionally been defined as a period during which

real GDP declines for two consecutive quarters

Alana decides to spend 2 hours working overtime rather than going shopping with her friends. She earns $11 per hour for overtime work. Her opportunity cost of working is

the enjoyment she would have received had she gone shopping

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that

the nation is not using all available resources or is using inferior technology or both

Which of the following would not increase in response to a decrease in the price of ironing boards?

the quantity of irons supplied at each possible price of irons

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

the real interest rate is the nominal interest rate minus the rate of inflation

The marginal benefit Joseph gets from purchasing a fourth pair of shoes is

the total benefit he gets from purchasing four pairs of shoes minus the total benefit he gets from purchasing three pairs of shoes.

Economics is the study of how society manages its

unlimited wants and limited resources