Macroeconomic #1 Assessment
market economy
Economic decisions are made by individuals or the open market.
The primary factors underlining economic growth are
Expanding resources and improving technology
An economic model is a complex version of reality used to analyze real world economic situations
False
All command economies (centrally planned economies)
Have been political dictatorships
Which of the following results in higher standard of living
Higher levels of education
Which of the following is a positive economic statement
If the price of iPhones falls, a larger quantity of iPhones will be purchased.
A change from an inefficient mix to an efficient mix of output would best be represented with a production possibilities frontier as a
Movement from inside the PPF onto the PPF
The slope of the budget constraint is
Negative, since to purchase more of one good means giving up some of the other good
Increasing opportunity cost occur along the PPF because
Not all resources are equally well-suited to produce all goods
Which of the following statement about the economic decisions consumers, firms, and the government have to make is false
Only individuals face scarcity; firms and the government do not
All the following are part of economic model except
Opinions
The government of Spain decides to spend less on the military and more on healthcare, the forgone spending on military items represents the
Opportunity cost of the extra healthcare
Production possibility frontier will have a curved or bowed out shape if
Opportunity costs are increasing
Which of the following is a normative economic statement
Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable.
Full employment on a PPF is shown by
Points along the front of the PPF
Economic models do all of the following except
Portray reality and all its minute details
Which of the following is a problem inherent in command economies
Production managers are more concerned with satisfying governments orders and then with satisfying customers wants
Economics does not correct or incorrect behaviors but rather it assumes that economic agents _____, meaning they make the best decisions given their knowledge of the cost and benefits
Rationally
Which of the following would not be an investment in human capital
Researching automated production techniques
When an economy is operating efficiently, the production of one more unit of a good result in the production of less of another good because
Resources are limited and efficiency implies that all resources are already in use
In economics, choices must be made because we live in a world of...
Scarcity
Which of the following is a positive economic statement
Scarcity necessitates that people make trade-offs.
Which of the following statements about scarcity is true?
Scarcity refers to the situation in which unlimited wants exceed limited resources.
When income decreases the budget constraint
Shift inward
Economic Growth is shown as a
Shift the right of the PPF
Economic growth is shown as a
Shift to the right of the PPF
The lesson of _____ is to forget about the money that's irretrievable gone and instead focus on the marginal cost and benefits of future options
Sunk costs
Households _____ factors of production and ______ good and services
Supply ; demand
Which of the following is not an opportunity cost you incur if you see a Yankees baseball game
The $50 ticket that were given to you by friend who could not go to the game
Which of the following is a micro economic question
What factors determine the price of carrots?
Allocative efficiency best describes ______, and productive efficiency best explains ______
Why some thing will be produced; what will be produced
Which of the following is a micro economic question
Will the merger of American Airlines and US airlines increase or decrease airfares
sunk cost
a cost that has already been paid and cannot be recovered
economic model
a simplified version of reality
Voluntary exchange between buyers and sellers generates ______ in a market economy
allocative efficiency
When production reflects consumer preferences, _____ occurs
allocative efficiency
Economics assume that individuals
are rational and respond to incentives
Which of the following is part of an economic model
assumptions
Production levels to the left of the PPF are
attainable but inefficient
Markets promote
competition and voluntary exchange
Which of the following is part of an economic model
data
In economics, the term equity means
economic benefits are distributed fairly.
Economists assume that rational behavior is useful in explaining choices people make
even though people may not behave rationally all the time.
A free lunch
getting something without giving up something else
capital goods
goods that are used in producing other goods, rather than being bought by consumers.
The basic economic problem of scarcity
has always existed and will continue to exist
Micro economics is the study of
how individual households and firms make decisions.
Which of the following is part of an economic model
hypotheses
The opportunity cost of an action
is a subjective valuation that can be determined only by the individual who chooses the action.
Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.
marginal analysis
Economists reason that the optimal decision is to continue any activity up to the point where
marginal benefit equals marginal cost
Recession
period of reduced economic activity
In a modern mixed economy, who decides what goods and services will be produced?
producers, consumers, government
Every society faces economic trade-offs. This means
producing more of one good means less of another good can be produced.
_______ is a situation in which a good or service is produced at the lowest possible cost
productive efficiency
consumer goods
products and services that satisfy human wants directly
An increase in the quantity and/or quality of labor available could be due to each of the following except
strict immigration policy enforcement.
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
The concept of opportunity cost is that
the economic cost of using a factor of production is the alternative use of that factor that is given up.
Macro economics is the study of
the economy as a whole
opportunity cost is defined as
the total value of all alternatives that must be given up to engage in an activity.
The derivation of the production possibilities frontier assumes
there is a fixed quantity of resources and technology available.
Who receives the most of what is produced in a market economy?
those who are willing and able to buy them
Scarcity exist because of
unlimited wants and limited resources
Which of the following is a result of a market economy
voluntary exchange
allocative efficiency
when the mix of goods being produced represents the mix that society most desires
Which is fine would be most likely to cause the production possibilities frontier to shift to the left
A decrease in size of the labor force
A countries production inside the PPF frontier. This could happen because of
A recession
A country's output is inside the frontier of the PPF. this could happen because of
A recession
command economy
An economic system in which the government controls a country's economy.
All the following are part of economic model
Assumptions, hypothesis, and data
Who in a market economy, decides what goods and services will be produced with the scarce resources available in the economy
Consumers and producers
Which of the following can lead to a decrease (leftward shift) in the PPF
Banning technology due to it's adverse environmental effects
Which of the following factor(s) are easiest to influence the government policies
Capital and labor
Suppose that the government could stimulate spending in one of the following expenditure categories. In which of these categories would the spending increase contribute most of an expansion of production possibilities
Capital goods
Which of the following generates production efficiency
Competition among sellers
Which of the following statements about competition in a market is true
Competition forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production.
The decision about what goods and services will be produced in a market company is made by
Consumers and firms choosing which goods and services to buy or produce
A country operating outside of the production possibilities frontier is
Impossible. A country cannot operate outside the production possibilities frontier
What are two key factors that must be known to be able to drive a budget constraint
Income and prices
If an Economy produces computers and pizzas and a technological innovation makes the production of computers cheaper, we would expect economies production of pizzas to
Increase
A production possibilities frontier with a bowed outward shape indicates
Increasing opportunity cost as more and more of a good is produced
What is an economic model?
It is a simplified version of some aspect of economic life used to analyze an economic issue.
The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called
Macroeconomics
In economics, the term _____ means "additional" or "extra"
Marginal
Which of the following contributes to the efficiency of markets?
Markets are able to bring about an equitable distribution of goods and services
The branch of economics which studies how household and firms make choices, interact in markets, and how government attempts to influence their choices is called
Microeconomics
Fredo decides to spend an hour playing baseball rather than studying. His opportunity cost is
The benefit of his grades from studying for an hour
Opportunity cost is a measure of
The goods in individual or economy must for go to produce or consume more of some other good
Who, in command economy (centrally planned economy), decides what goods and services will be produced with the scarce resources available in that economy?
The government
How are fundamental economic decisions determined in North Korea?
The government decides because North Korea is a command economy (centrally planned economy)
What's the following is a normative economic statement
The price of gasoline is too high
If societies PPF shift to the right
The society standard of living may increase
A country can use it's given resources to produce capital goods or consumer goods this implies that
There is a trade-off between the current and the future standard of living
Which of the following statements about positive economic analysis is false
There is much more disagreement among economists over positive economic analysis than over normative economic analysis.
Which of the following is a problem inherent in command economies (centrally planned economies)?
There is too little productive of low cost, high-quality goods and services
Which of the following is a macro economic question
What determines minimum wage
Which of the following is a macro economic question
What determines the growth rate of gross domestic product
Which of the following is a macro economic question
What determines the inflation rate
