Macro midterm

You decide to take a vacation and the trip costs you $2,000. While you are on vacation, you do not go to work where you could have earned $750. In terms of dollars, the opportunity cost of the vacation is

$2,750.

Economic agents can be optimized by choosing one of the two

1) the best option out of a set of options 2) the optimal quantity

Suppose that you are spending two hours a day studying economics, and your grade is 85 percent. You want a higher grade and decide to study for an extra hour a day. As a result, your grade rises to 90 percent. Your marginal benefit is the

5 point increase in your grade.

In the figure above, suppose that Mac and Izzie specialize and trade to reach point c. Mac sends Izzie

6 computers in exchange for 6 TVs.

Why do we need to make choices

Because we have to because of scarcity. We have unlimited wants and limited resource

Which of the following is NOT true concerning a society's production possibilities frontier (PPF)?

Consumers will receive equal benefits from the two goods illustrated in the PPF.

The kitchen manager at an Italian restaurant is deciding what assignments he should give to his two cooks, John and David. John can make 25 pizzas or 40 servings of pasta per hour and David can make 20 pizzas or 30 servings of pasta. Which of the following should be the manager's choice?

David will make pizza because he has comparative advantage in making pizza.

Economics

Is a philosophy of who to make decisions supported by mathematical intuition.

Auto workers negotiate a wage increase. How does this wage hike affect the supply of cars?

It decreases the supply.

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. Both individuals will be better off if

Jerry trades sandwiches in exchange for eggs.

Growers expect that the price of a bushel of wheat will increase in one month. This belief results in

a decrease in current supply of wheat.

Which of the following creates an incentive to increase the amount of an activity?

a decrease in the marginal cost of the activity and an increase in the marginal benefit of the activity

The price of cereal rises. As a result, people have cereal for breakfast on fewer days and eat eggs instead. This behavior is an example of

a decrease in the quantity demanded of cereal because of the substitution effect.

Economic agents

any group or individuals that makes choices

demand side economic agents

consumers and households

Ham and eggs are complements. If the price of ham rises, the demand for eggs will

decrease and the demand curve for eggs will shift leftward.

The demand curve for a normal good shifts leftward if income ________ or the expected future price ________.

decreases; falls

supply side economic agents

firms and businesses

opertunity cost

highest foregone alternative(the best option)

Opportunity cost means the

highest-valued alternative forgone.

All economic questions are about

how to cope with scarcity

Which of the following explains why supply curves slope upward?

increasing marginal cost

The initial supply and demand curves for a good are illustrated in the above figure. If there are technological advances in the production of the good, then the new equilibrium price for the good

is less than $6.

Economics

is the study of choices made by economic agents and a philosophy on how to make efficient decisions.

Scarcity exists because

our wants exceed the resources available to satisfy them.

Harry produces 2 balloon rides and 4 boat rides an hour. Harry could produce more balloon rides but to do so he must produce fewer boat rides. Harry is ________ his production possibilities frontier.

producing on

An increase in the number of suppliers in a market results in a

rightward shift in the supply curve

The law of demand states that, other things remaining the same, the higher the price of a good, the

smaller is the quantity of the good demanded.

Comparative advantage is

the ability to perform an activity at a lower opportunity cost than anyone else.

The quantity demanded is

the amount of a good that consumers plan to purchase at a particular price.

Which of the following influences people's buying plans and does not shift the demand curve?

the price of the good

A bakery can produce either cakes or cookies. If the price of cookies rises, then

the supply curve of cake shifts rightward.

Optimally

to maximize the difference benefit and cost

A lawn service is deciding whether to add an additional employee to its summer crew. The marginal cost of hiring this worker depends on the

total amount paid to only the new worker.

Optimal choices

we have to make optimal choices to divide up the resources.

If the marginal benefit of a good exceeds its marginal cost

we should produce more to achieve efficient use of resources.