macro economics test 1 (chapters 1-6)

The result of free trade between nations is that

goods can be produced in the location where their opportunity cost is the lowest

Which one of the following statements is not true of a market economy

A central planning authority makes decisions about production and consumption.

Which of the following statements best describes the effects of trade

All countries benefit when each country specializes according to its own comparative advantage

Economists typically depict the PPF as a bowed-out curve rather than as a straight line in order to show that

the opportunity cost of producing a good rises as more is produced

Which of the following is not a predictable result of a price ceiling

. exorbitant profits for producers of the good

Overall output

typically declines during recessions

an opportunity cost arises

whenever any choice is made

Economic theory asserts that people will behave in ways that

will enhance their own overall well-being

If a price floor is imposed above the equilibrium price in a market, what is the effect

A surplus results

Which of the following statements is TRUE

Deflation can worsen a recession by giving people an incentive to hold cash rather than to make productive investments

Macroeconomics is the branch of economics studying

Fluctuations in the overall level of business

Suppose you hear an economist make an assertion that, between the two countries, France has a comparative advantage in the production of chocolate and that Italy has a comparative advantage in the production of wine. Which of the following statements is another way of stating the same idea expressed in the assertion

France can produce chocolate at a lower opportunity cost than Italy can.

Which of the following statements is TRUE

Macroeconomists study variables such as the overall levels of prices and output

Which of the following statements is TRUE

Over the business cycle, the economy's level of output and its unemployment rate move in opposite directions

Which of the following statements regarding price floors is TRUE

Price floors are intended to help certain people, but they have side effects that may harm others in predictable ways

If an economist argues that all countries gain from trade, what reasoning is most likely underlying her argument

Production according to the principle of comparative advantage lowers overall costs and therefore allows both countries to have a higher standard of living

Economist would most likely disagree with which of the following statements

Resources and inputs used in production are unlimited

. If air travel to Hawaii becomes less expensive, what is likely to happen in the market for hotel rooms in Hawaii

The demand curve for hotel rooms will shift to the right

Which of the following would cause a surplus of newsprint

The demand for newsprint decreases, and the price does not change

What is the result of a binding quota restriction on quantity

The market-clearing price will be higher than the equilibrium price

Why do minimum wage laws in Italy and Spain result in a greater prevalence of workers being hired in unreported jobs "off the books" than do minimum wage laws in the United States

The minimum wages in these countries are so far above the equilibrium wage that they have generated significant unemployment.

What is the effect of the quota imposed on sugar imports into the United States

The price of sugar within the United States is roughly twice the level of the world price

. How would an increase in the price of cotton affect the market for cotton T-shirts at your university bookstore

The supply curve for cotton T-shirts will shift to the left

Consider the market for kayaks. What happens when the process of manufacturing kayaks becomes less costly through the use of new technology

The supply curve for kayaks will shift to the right

What best describes the competitive market

There are many buyers and sellers of the same good

If a price ceiling is imposed above the equilibrium price, what is the effect

There is no visible effect on the market outcome

Which of the following statements is TRUE

There's no simple relationship between the success of an economy and whether it runs trade surpluses or deficits.

Which of the following is not a likely result of a quantity control in the form of a binding quota

a surplus of the good or service

The MOST important effect of a recession is its effect on the:

ability of workers to find jobs

In which of the following areas does the United States limit imports

agriculture

the purpose of an economic system is to

allocate scarce resources

The long-run effect of macroeconomic growth is to

allow for a higher standard of living

If the demand curve shifts to the left, and the supply curve does NOT change, then the equilibrium price

and quantity both will decrease

Economists generally agree that people are most likely to change their behavior when they

are given incentives to do so

Exchanges taking place in a market system

are voluntary

Why did Venezuela experience a shortage of basic food in 2006

because the price of basic food was legally prevented from rising to its equilibrium level

Which of the following is a normative statement

camera makes a good wedding gift

the condition of scarcity means that

choices must be made in the allocation of productive resources

The downward slope of the demand curve indicates that, all else equal

consumers will buy more of a good when its price decreases

If a country imports a good for which the world price is below its domestic price:

consumers will gain and producers will lose

The tools of monetary policy are

control over the interest rate and the quantity of money

Which group of people would be most likely to support a tariff imposed on cotton imported into the United States

cotton growers in the United States

Which of the following changes would cause a decrease in the demand for DVD rentals

decrease in the price of movie admissions

Autarky is a situation in which a country

does not trade

Suppose that Great Britain and France each specializes according to its own comparative advantage, so that Great Britain produces fish and France produces wine. Then they engage in trade. This means that

each nation can consume more of both goods than they could under conditions of autarky

An economic system is in __________ when no individual would be better off by making a different choice

equilibrium

When the world price of a good exceeds the domestic price, a country is MOST likely to

export the good.

Long-run growth refers to the

growth of the economy over several decades

Adam Smith used the idea of the invisible hand to refer to the ability of market economies to

harness the power of individual self-interest for the good of society as a whole

Compared with autarky, international trade leads to

higher production in exporting industries and lower production in import-competing industries

The United States has a comparative advantage in the production of aircrafts, because this task is intensive in the use of:

human capital.

The effect of a tariff is to

increase both the price paid by consumers and the price received by producers

If the price of a bale of cotton increases from $0.80 to $1.20, and a pound of Kenyan coffee decreases from $12 a pound to $10 a pound, we can expect a(n):

increase in the quantity demanded of Kenyan coffee

. If coffee is a normal good, then an increase in consumer income will

increase the demand for coffee

In the United States, growing international trade has

increased the wages of highly educated workers

the focal point of economic inquiry is

individual choice

If a country specializes according to its own comparative advantage and then trades with other nations

it can consume at a higher level than the domestic production possibility frontier

A binding price ceiling is designed to

keep the price below the equilibrium price

What is traded in factor markets

land, labor, capital, and human capital

Consider gas stations. As a result of an economic recession and a decrease in consumer incomes, there will be a

leftward shift in the station's demand curve and lower gas prices

Which of the following is not one of the standard arguments for restricting imports?

preventing an outflow of gold

A binding price floor is presented graphically as a(n)

price above equilibrium

A binding price ceiling is presented graphically as a(n

price below equilibrium

A binding minimum wage is a type of:

price floor

The upward slope of the supply curve indicates that

producers supply more of a good when its price increases

What is the name given to the wedge that occurs between the supply price and the demand price of the transacted quantity, when a good is subject to quantity restrictions

quota rent

medallion system used to license taxicabs in New York City is an example of a(n)

quota.

A binding price floor is designed to

raise the price above the equilibrium price

Which of the following would enhance the level of efficiency in a market?

removing a binding price floor, allowing the price to return to its equilibrium level

A price above the equilibrium price will

result in quantity supplied being greater than quantity demanded

Which group would be most likely to benefit from a binding price floor imposed on wheat

sellers of wheat that are seeking higher prices

The business cycle is the

short-run alternation between economic recessions and expansions

In his book The Wealth of Nations, Adam Smith used the example of pin-making to illustrate the advantages of

specialization

Which of the following is a macroeconomic variable

the overall level of output

. A shortage is the result of when

the price of a good is held below the equilibrium price

Which of the following is a microeconomic variable

the price of coffee

When economists want to describe how much an economy can produce with a given amount of resources, they use a model known as

the production possibility frontier

The production of aluminum baseball bats is characterized by increasing returns. This means that

the productivity of resources tends to increase as production increases

Most individuals choose careers in which they specialize in producing only one type of good or service, yet as consumers they have access to a wide variety of goods and services. What principle allows for this

trade

Which of the following statements is true

All countries can gain from trade if they all specialize in production according to comparative advantage

Fiscal policy attempts to

stabilize the economy through changes in taxation and government spending

If the supply curve shifts to the left, and the demand curve does not change then the equilibrium price

will increase, and the quantity will decrease