Macro-Economics Quiz 1-3

Sometimes questions that involve graphs will ask you to consider the effect of a changing factor or factors. Problem statement: the line labeled D1 in the graph to the right shows the number of cups of lemonade that Caroline and Emily can sell at their lemonade stand at various prices. Caroline and Emily have noticed that they sell more lemonade when it's hotter. Click anywhere on the graph to open a window with a control labeled Temperature. If you use the slider to change the temperature, the line will shift. Change the temperature from 80 degrees to 50 degrees. Question: At a price of $0.50, how many more or fewer cups of lemonade do Caroline and Emily sell when the temperature is 50 degrees than when the temperature is 80 degrees?

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Find the slope of the line containing the pair of points (9,0) and (10,7):

7 To Find Slope: y1 - y2 / x1 - x2

What kind of relationship is shown in the graph:

A Direct Relationship

Which of the following statements about production possibilities curves is not true?

A linear production possibility curve illustrates the concept of increasing opportunity costs.

Which of the following will cause an outward (rightward) shift in supply:

A technological improvement

A. The market clearing price occurs at the ___ of the market demand curve and the market supply curve. It is also called the ___ price, the price from which there is no tendency to change unless there is a change in demand or supply B. Whenever the price is ____ the equilibrium price, there is an excess quantity supplied (a surplus): C. Whenever the price is _____ the equilibrium price, there is an excess quantity demanded (a shortage)

A. Intersection; equilibrium B. Greater than C. Less than

Tim goes to design academy to become a toy designer. This is an example of:

An Investment in human capital

Individuals and nations specialize in their areas of ____ advantage in order to reap the gains of specialization.

Comparative

A ____ of labor occurs when different workers are assigned different tasks. Together, the workers produce a desired product

Division

A surplus occurs when quantity supplied is ____ than quantity demanded at a price ___ the market clearing price:

Greater; above

With a given set of resources, specialization results in ____ output. In other words, there are gains to specialization in terms of greater material well-being.

Higher

The rise in pipeline prices has given oil firms:

Incentives to utilize substitute services for moving oil around the nation

On a horizontal number line, the numbers ________, and on a vertical number line, the numbers ________.

Increase from Left to right; increase as we move up the line

Based on the recommendation of a friend, you buy a ticket and attend a movie with high expectations. After seeing the movie, you think that it is the worst film ever made and that it was a complete waste of money. This situation:

Is consistent with rational behavior because you had thought that you were going to like the movie.

Comparative advantages are found by determining which activities have the ____ opportunity cost- that is, which activities yield the highest return for the time and resources used.

Lowest

The law of supply states that there is a ___ relationship between the price and ____:

Positive, the quantity supplied

Any activity that results in the conversion of resources into products that can be used in consumption is called:

Production

Farmer McDonald has 100 acres of land on which he can grow soybeans or corn. An acre of land yields 200 bushels of soybeans or 100 bushels of corn or some combination of both. The accompanying figure refers to farmer McDonald's:

Production Possibles Curve (PPC)

Based on the table above, which of the following is true: 2003 2004 Hospital Room (1 day) $200 $225 Hotel Suite (1 day) $300 $325

The money prices of both goods increased, the relative price of hospital rooms increased, and the relative price of hotel suites decreased

Thus, as the price increases:

The quantity produced by firms increases

11. Student borrowers have anticipated finding jobs that would enable them both to repay their student loans and to buy items such as houses and vehicles.

This behavior is consistent with: the rationality assumption

Julie goes to a cooking academy to become a chef.

This is an example of: an investment in human capital

Which of the following is not one of the three fundamental questions of economics?

Where will items be produced?

Does the richest person in the world face the problem of scarcity:

Yes, because even if you have money you will never be able to satisfy all of your wants and must therefore make choices

According to the law of supply, as the price of the good increases, it causes:

a movement upward along the supply curve.

A politician states "taxes should be raised to provide more spending on school lunch programs." This is:

a normative economic statement

a. ____ economics is value-free and relates to statements that can be refuted, such as "If A, then B. b. ____ economics involves people's values and typically uses the word SHOULD.

a. Positive b. Normative

Consider the following cases: a. If the price of bacon rises, and as a result the demand for sausage increases, this implies that these two goods are ____ . b. If the price of tennis racquets falls, and as a result the demand for tennis balls ____ , this implies that these two goods are complements. c. If the price of coffee rises, and as a result the demand for sugar falls, this implies that these two goods are: d. If the price of automobiles, _____ , and as a result the demand for motorbikes falls, this implies that these two goods are substitutes.

a. Substitutes b. Increase, Complements c. Complements d. Falls

2. Consider the following situations: a. A Rational, self-interested student decides whether to purchase a textbook required for a particular class based on all of the following except: b. Rational, self-interested government officials seeking more funding for mass transit through higher taxes should consider: c. A municipality taxing hotel guests to obtain funding for a new sports stadium should consider all of the following, except:

a. Whether the textbook has an attractive dust jacket. b. the fact that raising taxes is generally unpopular and may result in a potential loss in a future election c. the winning potential of the sports team using the stadium

You can wash, fold, and iron a basket of laundry in two hours and prepare a meal in one hour. Your roommate can wash, fold, and iron a basket of laundry in three hours and prepare a meal in one hour. a. The absolute advantage in laundry is held by ___, and in meal preparation by: b. The comparative advantage in laundry is held by ___ and meal preparation by _____:

a. You: Neither b. You: Your Roommate

The relative price of any commodity is its price in terms of:

another commodity.

The productivity gains achieved by specialization are due to:

comparative advantage

34. According to the text, firms encounter rising costs when they attempt to produce more in the same time period. As a consequence, they must be offered a higher price to be willing to incur these higher costs. The resulting relationship between price and quantity supplied is:

direct (or positive) and is called the law of supply

Traditionally, the comparative advantage for husbands over wives in the working world has been revealed by the fact that most husbands:

earned more than half of couple's combined incomes.

The production possibilities curve will shift outward (upward, and or, to the right) when:

economic growth occurs

When constructing a graph in economics, it is conventional to put quantities on the ________ and dollar values on the ________

horizontal axis; vertical axis

Microeconomics is the part of economic analysis that studies decision making undertaken by ________. Macroeconomics is the part of economic analysis that studies the behavior of ________.

individuals and firms; the economy as a whole

Opportunity cost:

is the value of the next best alternative as a result of choosing some given alternative.

Ceteris Paribus means:

other things constant

A point inside the PPC means that:

resources are not being fully utilized due to unemployment or inefficiency

Other things remaining equal, the law of demand says that higher prices will lead to a

smaller quantity demanded and lower prices to a larger quantity demanded.

Some people claim that the "economic way of thinking" does not apply to issues such as health care. All of the following choices clearly demonstrate how economics applies to this issue, except when:

the individual decides against health care as it may make him better off