macro exam 1 chap 1

Which of the following is an example of an activity undertaken by an entrepreneur?

starting your own cigar manufacturing business

Households ________ factors of production and ________ goods and services

supply; demand

which of the following correctly describes the relationship between economic efficiency and economic equity?

there is often a trade-off between the two

optimal decisions are made at the point where marginal cost equals zero

false

all of the following is counted as "capital" in economics except

money

technology is defined as

the processes used to produce goods and services

If the price of gasoline was $3.25 a gallon and it is now $3.75 a gallon, what is the percentage change in price?

15.4 percent

the coffee nook, a small cafe near campus, sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each. What is the opportunity cost of buying a cappuccino?

2 1/2 russian tea cake

What is the "omitted variable" problem in determining cause and effect?

It is a problem that arises when an economic variable that affects other variables is omitted from an analysis and its omission leads to false conclusions about cause and effect

Define microeconomics.

Microeconomics is the study of how household and firms make choices, how they interact in markets, and how the government attempts to influence their choices.

what is the difference between positive economic analysis and normative economic analysis?

Positive economic analysis is concerned with what is. Positive economic analysis reaches conclusions based on verifiable statements. Normative economic analysis, on the other hand, is concerned with what ought to be. Normative analysis reaches conclusions based on opinions.

Which of the following statements is true about profit?

Profit is the difference between revenue and cost.

________ is a problem that occurs when one concludes that a change in variable X caused a change in variable Y when in actual fact, it is a change in variable Y that caused a change in variable X

Reverse causality

Which of the following are positive economic statements and which are normative economic statements? a. An increase in the price of gasoline will decrease the quantity of gasoline purchased. b. The government should eliminate the minimum wage. c. All states should raise the minimum wage to at least $10 per hour. d. The government should scrap its current income tax structure in favor of a flat tax. e. Unemployment has increased since the onset of the recession. f. The government should not bail out investment banks during a financial crisis.

Statements a and e are positive economic statements. Statements b, c, d, and f are normative economic statements.

List the five main factors of production.

The five main factors of production are labor, capital, human capital, natural resources, and entrepreneurial ability.

Which of the following are primarily macroeconomic topics and which are primarily microeconomic topics? a. gasoline prices b. unemployment c. inflation d. health care costs e. air pollution f. economic growth

b, c, and f are primarily macroeconomic topics. a, d, and e are primarily microeconomic topics.

which of the following generates productive efficiency?

competition among sellers

which statements demonstrates the economic agents respond incentives

consumers buy more MP3 players from an electronics store that sells MP3 players at a lower price than other rival electronics stores in the area + schools take steps to increase security since they believe it is more costly to allow vandalism than to hire additional security guards

what is equity, and how does it differ from efficiency?

equity refers to the fair distribution of economic benefits. in economics, efficiency refers to least cost production (productive efficiency) and producing according to human preferences (allocative efficiency)

Examining the conditions that could lead to unemployment in an economy is an example of microeconomics topic.

false

One desirable outcome of a market economy is that it leads to a more equitable distribution of income.

false

Suppose that to increase sales of hybrid vehicles, auto manufacturers are offering large cash incentives. This is an example of a macroeconomics topic.

false

how are the fundamental economic questions answered in a market economy?

households and firms interact in markets to decide the answers to these questions

In economics, the accumulated skills and training that workers have is known as

human capital

which of the following is a positive economic statement?

if the price of iPhones falls, a larger quantity of iPhones will be purchased

Economists reason that the optimal decision is to continue any activity up to the point where the

marginal benefit equals the marginal cost

If a straight line passes through the point x = 24 and y = 8 and also through the point x = 8 and y = 16, the slope of this line is

negative one half.

what is opportunity cost?

opportunity cost refers to the highest-valued alternative that must be given up to engage in an activity. for example, the opportunity cost of taking this economics class is what you are giving up to take the class, which may be taking another class such as accounting or psychology, working extra hours at your job, or extra sleep (whichever is your highest- valued alternative)

Suppose the U.S. government encouraged new medical school graduates to take over existing practices from doctors wishing to retire by paying both the new and retiring doctors $100,000. These doctors would be exemplifying the economic idea that

people respond to economic incentives

which of the following is a normative economic statement?

pharmaceutical manufacturers should not be allowed to patent their products to prescription drugs would be more affordable

____________ is a situation in which a good or service is produced at the lowest possible cost

productive efficiency

which of the following statements is true about scarcity?

scarcity refers to the situation in which unlimited wants exceed limited resources

allocative efficiency is achieved when firms produce goods and services

that consumers value most

by definition, economics is the study of

the choices people make to attain their goals, given their scarce resources

A firm's technology may depend on which of the following factors?

the skill of its managers, the training of its workers, the speed and efficiency of its equipment

which of the following is a problem inherent in centrally planned economies?

there is too little production of low-cost, high-quality goods and services

"an increase in the price of gasoline will increase the demand for hybrid vehicles" this statement is an example of a positive economic statement

true

The decisions Apple makes in determining production levels for its iPhone is an example of a microeconomics topic.

true

if it costs Danitra $225 to create 4 necklaces and $275 to create 5 necklaces, then $50 is the marginal cost of producing the 5th necklace

true

economists assume that rational people do all of the following except

undertake the activities that benefit others and hurt themselves

allocative efficiency best explains ________, and productive efficiency best explains ________.

what will be produced; how something will be produced

the distribution of income primarily determines which of the fundamental economic questions?

who will receive the goods and services produced?