Macro Midterm pt2

Which of these will increase the quantity of goods and services that can be produced by a worker in one hour of work?

A technological change

Which of the following will lead to a rightward shift of the supply curve?

A technological improvement.

Which of the following is an example of capital?

An assembly line

Which of the following is consistent with the law of supply?

An increase in the market price of MP3 players causes an increase in the production of MP3 players.

[A graph shows the production possibilities for Quantity of Hybrids Produced per Day on the vertical axis and Quantity of SUVs Produced per Day on the horizontal axis. Points A, B, C, D and E are on the production possibilities curve. Point F is below the production possibilities curve. Point G is above the production possibilities curve.] In the above graph, which of the following combinations is unattainable with the current resources available in this country?

Combination G

Countries gain from specializing in producing goods in which they have a(n) __________ advantage and trading for goods in which other countries have a(n) __________ advantage.

Comparative, comparative

According to the rationality assumption, people

Do not intentionally make decisions that would leave them worse off

Which of the following is not a possible opportunity cost of attending college?

The cost of housing

Which of these is an example of profit?

The income the owners of a small restaurant receive.

Which of the following represents an inferior good?

When consumer income increases, the demand for bologna decreases.

You and your neighbor pick apples and cherries. If you can pick apples at a lower opportunity cost than your neighbor can, which of the following is true?

You have a comparative advantage in picking apples.

If the president of Columbia commented that "we should do something to reduce inflation in Columbia," this would be an example of

a normative statement

The condition that exists when quantity supplied exceeds quantity demanded at the current price is known as __________.

a surplus or excess supply

The pace of globalization has accelerated in recent years largely because of __________.

advances in communication technology

According to the theory of comparative advantage, specialization and free trade will benefit

all trading partners who specialize in goods where they have comparative advantage

Ms. Boulware is the best lawyer and the best secretary in town. She has

an absolute advantage in both jobs

A reward or penalty that encourages or discourages a specific behavior or action is known as __________.

an incentive

When nations specialize in their comparative advantage and engage in trade

both may gain by obtaining greater quantities of goods

Market price is determined by _________.

both supply and demand

When an economy moves from one point to another on the PPF it means the __________.

combination of goods and services produced has changed

The social security time bomb refers to the __________.

future inability of the U.S. government to fully fund SSI

A person can increase their stock of human capital by __________.

getting a college degree

Tangible products like cars and televisions are referred to as __________.

goods

If a country has a comparative advantage in the production of a good, then that country

has a lower opportunity cost in the production of that good

In the United States, of all the services produced the largest category is __________.

health services

When a person makes choices that are best for them they are said to be acting __________.

in their own self-interest

Moving along a PPF that is bowed outward, as more of a good is produced, the opportunity cost of additional units __________.

increases

Income paid for the use of capital is called __________.

interest

Economics

is concerned with how people respond to incentives

One opportunity cost of attending college is the __________.

lost wages while going to school

Suppose the demand for corn increases while at the same time the supply of corn also increases. As a result, the equilibrium price of corn __________ and the equilibrium quantity of corn __________.

might rise, fall, or not change; increases

Macroeconomics is concerned with all of the following except

political party affiliation

Absolute advantage is the ability of an individual, firm, or country to

produce more of a good or service than competitors using the same amount of resources

When an economy cannot produce more of one good or service without reducing the production of another good or service it is said to be __________.

production efficient

At the market equilibrium price

quantity demanded equals quantity supplied.

The marginal benefit you receive from eating a third slice of pizza will be __________ the marginal benefit you receive from eating the first slice of pizza.

smaller than

Choices that are best for society as a whole are considered to be in the

social interest.

All of the following scenarios depict the characteristics of substitutes except

the price of bacon increases and the demand for eggs decreases.

All of the following scenarios depict the characteristics of complements except

the price of coffee increases and the demand for cream increases.

Other things remaining the same, the law of demand says that if the price of a good rises

the quantity demanded decreases and if the price of a good falls, the quantity demanded increases.

When you make choices you are picking from a slate of available options so the choice you make is essentially a __________.

tradeoff

When a student elects to study economics an additional 10 hours per week they are forced to give up 10 hours in leisure or work. This illustrates the concept of __________.

tradeoffs

[The table above indicates the demand schedules for four types of consumers:A, B, C, and D and the number of consumers in each group (top row). The quantity demanded by each type of consumer (QA, QB, QC, and QD) is shown for market prices ranging from $10 down to $4.] What is the combined quantity demanded at a market price of $4?

10,400

In 2015 the United States produced about __________ of the global output.

16 percent

In the United States, consumption goods and services comprise about __________ of total production.

78 percent

When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of?

A market

Which of these factors would shift the production possibilities frontier outward?

A more educated labor force

Which of the following goods and services would be excluded from personal consumption expenditures in the Bureau of Economic Analysis (BEA) statistics?

A new house

Which letter represents the demand for factors of production in this circular flow model?

C

[A circular flow diagram shows Product Market at the top, Firms on the left, Factor Market at the bottom, and Households on the right. Letter A marks the exchanges between Product Market and Firms. Letter B marks the exchanges between Product Market and Households. Letter C marks the exchanges between Factor Market and Firms. Letter D marks the exchanges between Factor Market and Households.] Which letter represents the demand for factors of production in this circular flow model?

C

__________ goods and services are those bought by businesses to be used to increase efficiency or enhance production.

Capital

In the previous graph, which country has a comparative advantage in the production of shirts?

Country B

[A graph shows the production possibilities for Quantity of Cakes on the vertical axis and Quantity of Pies on the horizontal axis. Choice D represents 6 pies and 2 cakes. Choice E represents 8 pies and 1 cake. At a quantity of 0 pies, 5 cakes can be made. At a quantity of 10 pies, 0 cakes can be made.] In the above graph, which of the following combinations of pies and cakes is unattainable given the existing resources?

Four cakes and seven pies

The decision to raise taxes is an example of which type of economic policy?

Government

In the circular flow model, who supplies factors of production in exchange for income?

Households

Economic decisions are made at every level in society. When we try to decide which production method to use among several alternatives, which of the following key economic questions are we trying to answer?

How do we produce the products?

What is the name given to the accumulated training and skills that workers possess?

Human capital

Assume the cost of aluminum used by soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft drinks? I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases.

II and III

Which of the following is a positive economic statement?

If minimum wage rates rise, then unemployment will rise

[A graph shows Price on the vertical axis and Quantity on the horizontal axis. Curve S1 is upward-sloping from left to right. Curve S2 is upward-sloping from left to right, parallel and to the right of S1. Curve D1 is downward-sloping from left to right. Curve D2 is downward-sloping from left to right, parallel and to the right of D1. The intersection of S1 and D1 is at price P1 and quantity Q1.Consider the previous figure and assume that it is the market for health-care services. When the "baby boomer" generation retires, the number of people who require health care increases by 30%, and, as a result, the number of health-care providers also increases, but by only 25%.] What is the effect on the price of health-care services over time?

It increases because demand increased by more than supply.

Which of the following are not essential components of an economic model?

Normative statements

What is the name given to the highest-valued alternative that must be given up to engage in any activity?

Opportunity cost

Which measure of GDP represents changes in the quantity of goods and services produced in the economy, holding prices constant?

Real GDP

[The market for corn is initially in equilibrium. Suppose that the production of biofuels, which use corn as an input, increase, and at the same time, increases in the price of oil cause farm production costs to rise.] Which of the following explains the effect on equilibrium price and quantity in the corn market?

The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information.

All of the following will decrease the supply of airline flights except

a technological change that makes airplanes safer and more fuel-efficient.

[A graph shows Price on the vertical axis and Quantity on the horizontal axis. Curve D1 is downward-sloping from left to right. Curve D2 is downward-sloping from left to right, parallel and to the right of D1. Point A is on D1. Point B is on D1, to the right of Point A. Point C is on D2, at the same price as Point A and to the right of Point B.] On the diagram shown above, a movement from A to C represents __________.

an increase in demand

The factors of production include land, entrepreneurship, labor and __________.

capital

Economic models often simplify the real world by holding all things equal and changing one variable to determine the impact of the change. The "all things equal" assumption is also known as

ceteris paribus

[A graph shows Price on the vertical axis and Quantity on the horizontal axis. Curve S1 is upward-sloping from left to right, with Point A being to the left of Point B. Curve S2 is upward-sloping from left to right, parallel and to the right of S1, with Point C having the same price as Point B.] On the diagram shown above, a movement from A to B represents a

change in quantity supplied.

When two values tend to move together in a predictable manner it is known as __________.

correlation

In measuring changes in the standard of living of a country, economists rely heavily on comparisons over time of real GDP per capita because

despite its well-known flaws, it is the best means we have of comparing the performance of an economy over time

If the production possibilities frontier shifts outward, this shift reflects __________.

economic growth

Understanding economics can help policymakers devise strategies to do all of the following except

eliminate climate change

One of the first steps in deciding whether to complete your education is to

evaluate the marginal cost and marginal benefit of that decision

The flow of funds from __________ into the financial system makes it possible for government and firms to borrow.

households

Goods and services purchased from businesses in other countries are __________.

imports

The resources provided by nature and used to produce goods and services are also known as __________."

land

What factor of production receives rent as a payment?

land

When a significant fraction of the domestic production takes place in foreign-owned facilities, then the country's GDP will be __________ its GNP.

larger than

The stock of computers, factory buildings, and machine tools used to produce goods is known as __________.

physical capital

Because the focus of long-run economic growth is on the standard of living of the average person, we measure the standard of living in terms of

real GDP per person

Economics is the study of choice under conditions of

scarcity

The principle of opportunity cost evolves from the concept of

scarcity

[A graph shows Price on the vertical axis and Quantity on the horizontal axis. Curve S1 is upward-sloping from left to right. Curve S2 is upward-sloping from left to right, parallel and to the left of S1. Curve D is downward-sloping from left to right and intersects S1 and S2.] In the previous diagram, when supply decreases, a __________ develops at the original price. Equilibrium price will __________ and equilibrium quantity will __________ as a new equilibrium is established.

shortage; rise; fall

Economic models are

simplifications of reality that focus only on key relationships and ignore less relevant details

Suppose the demand for new homes is a normal good and people's incomes decrease. At the initial price, there is a _________ and so the equilibrium price will __________ and the equilibrium quantity will __________.

surplus; fall; decrease

In the United States, the largest source of income is __________.

wage income

expenditures as a percentage of the gross domestic product __________.

were at the highest level during World War II

[ Food Clothing Country A 6 3 Country B 1 2] Using information in the previous table, what is country A's opportunity cost of producing 1 unit of clothing?

2 units of food

[There are two graphs. Both graphs measure Aircraft Carriers on the vertical axis and Automobiles on the horizontal axis. The left graph shows that on production possibilities frontier A, 0 automobiles and 400 aircraft carriers can be made, or 400 automobiles and 200 aircraft carriers, or 600 automobiles and 0 aircraft carriers. The left graph also shows that on production possibilities frontier B, 0 automobiles and 500 aircraft carriers can be made, or 450 automobiles and 300 aircraft carriers, or 750 automobiles and 0 aircraft carriers. The right graph shows two production possibilities frontiers, one of which measures 600 automobiles and 400 aircraft carriers, and the other of which measures 800 automobiles and 400 aircraft carriers.] The outward shift of the production possibilities frontier from point A to point B in the above graph would most likely be caused by

a technological advance that affects both the production of automobiles and aircraft carriers

Macroeconomics can be used to understand all of the topics listed below, except

how a consumer decides between the purchase of two different cars

According to World Bank data, the lowest paid 20 percent of the global population receives about __________ of the world's income.

2 percent

[A graph shows the production possibilities for Quantity of Hybrids Produced per Day on the vertical axis and Quantity of SUVs Produced per Day on the horizontal axis. Points A, B, C, D and E are on the production possibilities curve. Point F is below the production possibilities curve. Point G is above the production possibilities curve.] Refer to the previous graph. Which of the following best represents the situation in which BMW must face a trade-off between producing SUVs and producing hybrids?

Moving from point B to point C

[Washington state had a bumper apple crop this year, significantly increasing the supply of apples in the U.S.] Given this information, choose the statement that correctly describes the effect on the U.S. apple market.

The quantity of apples demanded will increase as the price of apples falls.

[A graph shows Price on the vertical axis and Quantity on the horizontal axis. Curve S is upward-sloping from left to right. Curve D is downward-sloping from left to right. The curves intersect at a quantity of 4000 and a price of $600.] The graph above shows the market for laptop computers. Suppose the price of memory chips used in laptop computers decreases. How will this event impact on the equilibrium quantity and the market price?

The supply increases, causing the equilibrium quantity to rise and the market price to fall.

[A graph shows Price ($ per Player) on the vertical axis and Quantity (Millions of Players per Month) on the horizontal axis. A Demand curve and a Supply curve intersect at Point A where quantity is 50 and price is $50. Point B is on the Demand curve where quantity is 30 and price is $65. Point C is on the Supply curve where quantity is 70 and price is $65.] In the previous diagram when the price is $65 per player, there is a _________ of _________ million players per month.

surplus; 40

Given linear demand curves, if demand and supply both increase but demand increases by a greater amount than supply, then

the equilibrium price and quantity both increase.

Given linear demand curves, if demand and supply increase by identical amounts, then

the equilibrium price stays the same and the equilibrium quantity rises.

Given linear demand curves, if demand increases and supply decreases, then __________.

the equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous

All points that plot on the production possibilities frontier represent combinations of goods and services that are __________.

using all available resources and technology