Macro 1&2 Test

Which of the following statements most likely lies within the realm of microeconomics?

A decrease in federal income tax rates will stimulate increased consumer spending.

Which of the following is not a resource exchanged in the factor markets?

All of the above are traded in the factor market.

An economy may be operating at a point inside the production possibilities curve if:

An economy always operates on the production possibilities curve

(T/F) In a market economy, prices help determine the distribution of goods and services but not the allocation of resources.

False

(T/F) Microeconomics is the branch of economics in which you study inflation and unemployment in the economy.

False

(T/F) The main concern of economics is to study how well the stock markets are performing.

False

Which of the following is most likely a topic of discussion in macroeconomics?

the entry of new firms into the software industry

Refer to Table 2-1. A student has only a few hours to prepare for two different exams this afternoon. The above table shows alternative possible exam scores with three alternative uses of the student's time. The opportunity cost of scoring a 94 on the economics exam rather than a 77 is:

15 points on the history exam.

Refer to Figure 3-14. Which move to the new production possibilities curve will result in more housing and food?

A to C

In the circular flow diagram model:

Both (a) and (b) are correct

Which of the following best characterizes the circular flow of income?

Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

Refer to Figure 3-2. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from:

C to F.

(T/F) In a market economy, government officials make most production decisions in a centralized manner.

False

A devastating earthquake destroys ten percent of the population in California. As a result:

California's production possibility curve shifts inward.

- a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines.

Economies of scale

(T/F) Capital-intensive production techniques tend to be utilized most commonly in countries where labor is relatively cheap.

False

(T/F) When considering whether or not to consume a second slice of cake, an individual is following marginal thinking if she compares the total cost of consuming both the first and second slices with their total benefit before making a decision.

False

Which of the following is an example of a pure market economy?

No nation has a pure market economy

Refer to Figure 3-2. Currently, it is not possible to produce at:

Point E.

Refer to Figure 3-2. The most inefficient point depicted is:

Point G.

Refer to Figure 3-14. Assuming that the production possibilities curve extends out further due to technological change, which of the following observations is correct?

There is a technological advance in food production but not in housing production.

(T/F) There are four factors of production: land, labor, capital, and entrepreneurship.

True

(T/F) To an economist, individuals are acting "rationally" if they are striving to do their best to achieve their goals.

True

Three economic questions must be determined in all societies. What are they?

What goods will be produced? How will goods be produced? Who will get the goods produced?

An example of a capital resource is:

a dump truck.

Refer to Figure 3-13. Which of the following is a possible explanation for the shift of the production possibilities curve illustrated?

a technological advance that affects both pizza and bicycle production

Which of the following will shift a production possibilities curve outward?

an improvement in technology

In a command economy, decisions about how to allocate resources are made:

by a central planning board.

In order for a student to acquire an education, many resources are required. Which of the following might be categorized as capital resources?

chalkboards, overhead projectors, and the expertise of professors

Economic models like the are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories.

circular flow diagram

An economy's resources:

consist of land, labor, capital, and entrepreneurial skills.

A market economy depends on market mechanisms to:

determine the most efficient way of using resources.

Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected ____ doesn't change

economy

The branch of economics that studies the aggregate decisions of all households and all firms is called:

environmental economics.

The problem of scarcity:

exists because resources are limited relative to wants.

Economic resources are also known as:

factors of production.

Refer to Figure 3-1. In the circular flow diagram, payments for goods and services:

flow in a clockwise direction

Refer to Figure 3-1. In the circular flow diagram, goods and services:

flow in a counterclockwise direction.

The circular flow of economic activity is a model of the:

flow of goods, services, and payments between households and firms.

Economics is a social science that primarily explores how:

high employment and low inflation levels can be maintained.

In the simple circular flow model:

households are demanders of products and suppliers of resources.

A production possibilities curve that is "bowed out" or concave to the origin:

illustrates a tradeoff in which the opportunity cost of a good increases with the level of its production.

Additions to human capital can be made through:

improved education and on-the-job training.

Capital, entrepreneurship, land, and labor are needed to produce goods and services. The respective payments for each of these factors of production are:

interest, profits, rent, and wages and salaries.

Refer to Figure 3-2. A movement from Point G to Point F:

involves no sacrifice of output, as both more wine and bread can be produced if available resources are used more efficiently.

Refer to Figure 3-2. A movement from Point B to Point C:

involves sacrificing wine in order to produce a greater quantity of bread.

The use of large amounts of labor relative to capital in an economy indicates:

labor-intensive production

Which of the following is not a factor of production?

legal institutions

The central question in economics is how to:

make the best use of scarce resources to satisfy our unlimited wants.

Economics can be divided into two main branches of study:

microeconomics and macroeconomics.

The basic difference between macroeconomics and microeconomics is:

microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

Money is not considered to be an economic resource because:

money is not directly used to produce goods and services.

Most of economic analysis assumes that people's actions are:

motivated by self-interest

A market system:

produces answers to a society's "what," "how," and "for whom" questions.

Most people consider economics a(n):

social science.

Economics is most importantly concerned with:

studying how we allocate scarce resources to satisfy unlimited wants.

Which of the following is not a payment made to households in exchange for the use of factors of production?

taxes

Human capital is:

the skill or knowledge of individuals.