Macro Chapter 1
D
Allocative efficiency is achieved when A) goods and services are fairly distributed among consumers in an economy. B) firms produce goods and services at the lowest cost. C) there are no shortages or surpluses in the market. D) firms produce the goods and services that consumers value most.
A
Cassie's Quilts alters, reconstructs and restores heirloom quilts. Cassie has just spent $800 purchasing, cleaning and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively, she can sell the quilt "as is" now for $900. What is her marginal benefit if she sells the quilt "as is" now? A) $900 B) $100 C) She makes a marginal loss of $600, not a marginal benefit. D) The marginal benefit cannot be determined.
A
Competition forces firms to produce and sell products as long as the ________ to consumers exceeds the ________ of production. A) marginal benefit; marginal cost B) marginal cost; marginal benefit C) marginal benefit; marginal benefit D) marginal cost; marginal cost
A
Economics promotes which of the following as the way to make the best decision? A) Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost. B) Continue an enjoyable activity until you cannot afford to pursue it. C) Continue an enjoyable activity until it is no longer enjoyable. D) Continue an enjoyable activity as long as you do not have to pay for it.
C
Human capital refers to A) the wealth people have. B) the machines workers have to work with. C) the accumulated skills and training workers have. D) the money people have.
negative one half
If a straight line passes through the point x = 12 and y = 4 and also through the point x = 4 and y = 8, the slope of this line is
24%
In 2010, Smileytown consumed 50,000 tubes of toothpaste. In 2011, toothpaste consumption rose to 62,000 tubes. Calculate the percentage change in toothpaste consumption.
consumers and producers
In a market economy, who decides what goods and services will be produced?
A
Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, "Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we're on the right track. We are producing the optimal number of t-shirts." Refer to Scenario 1-1. Had the firm not produced and sold the last 400 t-shirts, would its profit be higher or lower, and if so by how much? A) Its profit will be $800 higher. B) Its profit will be $4,800 higher. C) Its profit will be $4,000 lower. D) Its profit will be $800 lower.
microeconomics
The branch of economics which studies how households and firms make choices, interact in markets and how government attempts to influence their choices is called
macroeconomics
The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called
technology
The processes used to produce goods and services describes
D
There is often a trade-off between A) productive efficiency and allocative efficiency. B) voluntary and involuntary exchanges. C) limited and unlimited resources. D) economic efficiency and economic equity.
D
Voluntary exchange increases economic efficiency A) because it is free and consequently does not cost anything. B) because it allows wealthy individuals to act altruistically and give to the poor. C) because voluntary exchange only takes place with government permission. D) because neither the buyer nor the seller would agree to a trade unless they both benefit.
allocative efficiency
When every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it, ________ occurs.
productive efficiency
When goods and services are produced at the lowest possible cost, ________ occurs.
A
Which of the following is motivated by an equity concern? A) Some U.S. colleges have cut back on merit scholarships since these programs siphon money from need-based programs, thus harming lower-income students with greater financial need. B) In November 2003, the Federal Communications Commission implemented the "local number portability" rule which gives cell phone customers the option of keeping their number when they switch carriers within the same geographic region. C) The United States protects intellectual property rights, allowing inventors to prevent others from using their inventions without payment. D) Following the removal of subsidies in urban water use, household demand for water decreased quite significantly in Bogor, Indonesia.
market
a group of buyers and sellers of a product and the arrangement by which they come together to trade
economic model
a simplified version of some aspect of economic life used to analyze an economic issue
marginal
an additional or extra
productive efficiency
competition among sellers generates:
choices; scarce
economics is the study of the _________ people make to attain their goals, given their _____________ resources
optimal decisions are made at the margin
economists assume that ______________________________________________________________
respond to economic incentives
economists assume that rational people
scarcity
unlimited wants exceed limited resources
assumption
which of the following is part of an economic model?
A
Cassie's Quilts alters, reconstructs and restores heirloom quilts. Cassie has just spent $800 purchasing, cleaning and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively, she can sell the quilt "as is" now for $900. What is the marginal cost of completing the task? A) $200 B) $500 C) $1,000 D) $1,000 plus the value of her time
B
Cassie's Quilts alters, reconstructs and restores heirloom quilts. Cassie has just spent $800 purchasing, cleaning and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively, she can sell the quilt "as is" now for $900. What should she do? A) She should not do anymore work on the quilt because she has already spent too much time on it and has not been paid for that time. B) She should purchase the period fabric, complete the task and then sell the quilt. C) She should cut her losses and sell the quilt now. D) It does not matter what she does; she is going to take a loss on her project.
B
How are the fundamental economic decisions determined in Cuba? A) Individuals, firms, and the government interact in a market to make these economic decisions. B) The government decides because Cuba is a centrally planned economy. C) The United Nations decides because Cuba is a developing economy. D) These decisions are made by the country's elders who have had much experience in answering these questions
B
Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, "Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we're on the right track. We are producing the optimal number of t-shirts." Refer to Scenario 1-1. Using marginal analysis terminology, what is another economic term for the incremental cost of producing the last 400 t-shirts? A) explicit cost B) marginal cost C) operating cost D) Any of the above terms are correct.
D
Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, "Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we're on the right track. We are producing the optimal number of t-shirts." Refer to Scenario 1-1. Using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 400 t-shirts? A) gross profit B) gross earnings C) sales revenue D) marginal revenue
A
Which of the following contributes to the efficiency of markets? A) Markets promote competition and voluntary exchange. B) Markets are able to bring about an equitable distribution of goods and services. C) Markets promote equal standards of living. D) Governments play an active role in the day-to-day operations of markets.
C
Which of the following is a macroeconomics question? A) How is the production quantity of digital cameras determined? B) What determines the wages and benefits of flight attendants? C) What determines the unemployment rate? D) What factors determine the price of iPhones?
B
Which of the following is a microeconomics question? A) Why do economies experience periods of recession? B) How will Apple decide on a selling price for the iPad? C) Will government intervention lower the unemployment rate? D) Why has growth in the economy slowed down over the past decade?
D
Which of the following is a normative economic statement? A) Rising global demand for diesel and heating oil has led to increases in the price of crude oil. B) The federal government is considering raising the gasoline tax to promote the use of public transportation. C) With falling home prices and rising mortgage interest rates, the amount of foreclosures has increased. D) Fashion designers should be allowed to copyright designs to promote innovation.
B
Which of the following is a positive economic statement? A) U.S. firms should not be allowed to outsource production of goods and services. B) If the price of gasoline rises, a smaller quantity of it will be bought. C) Everyone should live at the same standard of living. D) The government should close income tax loopholes
B
Which of the following is an example of an activity undertaken by an entrepreneur? A) choosing the color scheme for your renovated kitchen B) starting your own snow cone business C) being promoted to the position of Chief of Police D) being appointed to the U.S. Supreme Court
B
Which of the following is counted as "capital" in economics? A) the wealth people have B) the machines workers have to work with C) the accumulated skills and training workers have D) the money people have
D
Which of the following is motivated by an efficiency concern? A) As part of an economic stimulus package, each taxpayer received a $3,000 tax rebate check. B) Some U.S. colleges have cut back on merit scholarships since these programs siphon money from need-based programs, thus harming lower-income students with greater financial need. C) In 2009, the Obama administration increased unemployment benefits. D) Following a six-month drought, a city banned homeowners from watering their lawns in an effort to conserve water.
D
Which of the following statements is true about revenue? A) Revenue is calculated by dividing the price per unit by the number of units sold. B) A firm's revenue will increase as its costs increase. C) The terms "revenue" and "profit" can be used interchangeably. D) Revenue is the total amount received for selling a good or service.
the government, consumers and producers
Who, in a modern mixed economy, decides what goods and services will be produced with the scarce resources available in that economy?
B
Your roommate, Serafina, a psychology major, said, "The problem with economics is that it assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with her comment? A) Yes, I agree with her. One cannot make predictions about economic behavior because in reality people make incorrect choices in many situations. B) I disagree with her. Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave rationally, meaning they make the best decisions given their knowledge of the costs and benefits. C) I disagree with her. If we cannot assume that decisions are correct, then we will not be able to examine the moral implications of these decisions. D) Yes, I agree with her. Economic theory should allow for irrational behavior so that we can have more reliable predictions.
equity
________ occurs when economic benefits are distributed fairly.
