Macroeconomics Midterm Review

Refer to Table 23-5. What was this country's nominal GDP in 2016?

$10,000

Points inside the production possibilities frontier represent feasible levels of production.

True

A farmer produces lemons and sells them to Fresh Juice, which makes lemon juice. The lemons produced by the farmer are called

intermediate goods.

Social Security payments are

excluded from GDP because they do not reflect the economy's production.

Soup is an inferior good if the demand for soup

falls when income rises.

The law of demand states that, other things equal, when the price of a good > falls, the demand for the good rises. > rises, the quantity demanded of the good rises. > rises, the demand for the good falls. > falls, the quantity demanded of the good rises.

falls, the quantity demanded of the good rises.

Refer to Table 23-2. What were country Krugeveaux's imports in 2019? ​

$140

Refer to Figure 4-7. At what price would there be an excess demand of 600 units of the good?

$15

Refer to Table 4-5. If the four suppliers listed are the only suppliers in this market and the market demand schedule is given, The equilibrium price and quantity are

$2.00 and 300 cases.

Refer to Figure 4-7. Equilibrium price and quantity are, respectively,

$25 and 400 units.

Refer to Figure 4-7. Equilibrium price and quantity are, respectively,

$30 and 400 units.

Refer to Figure 6-2. The price ceiling

makes it necessary for sellers to ration the good using a mechanism other than price.

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,

market prices.

Refer to Table 4-3. If the law of supply applies to this good, then Q1 could be

170

Which of the following demonstrates the law of supply? > When leather became more expensive, belt producers decreased their supply of belts. > When car production technology improved, car producers increased their supply of cars. > When sweater producers expected sweater prices to rise in the near future, they decreased their current supply of sweaters. > When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup.

When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup.

Net exports equal

Y − (C + I + G).

Refer to Figure 4-1. The movement from point A to point B on the graph is caused by

a decrease in price.

Refer to Figure 4-6. The shift from S' to S is called

a decrease in supply.

A price floor is

a legal minimum on the price at which a good can be sold.

Government purchases include spending on goods and services by

federal, state, and local governments.

In the markets for goods and services in the circular-flow diagram,

firms provide households with output.

If a surplus exists in a market, then we know that the actual price is

above the equilibrium price, and quantity supplied is greater than quantity demanded.

Trade between countries

allows each country to consume at a point outside its production possibilities frontier.

Refer to Figure 4-1. The movement from point A to point B on the graph shows

an increase in quantity demanded.

Refer to Figure 4-6. The shift from S' to S in the market for chocolate cake could be caused by

an increase in the price of butter.

Refer to Figure 4-4. The movement from point A to point B on the graph is caused by

an increase in the price of the good.

Refer to Figure 4-4. The movement from point A to point B on the graph is called

an increase in the quantity supplied.

Currently you purchase ten frozen pizzas per month. You will graduate from college in December, and you will start a new job in January. You have no plans to purchase frozen pizzas in January. For you, frozen pizzas are

an inferior good

Pizza is a normal good if the demand

for pizza rises when income rises.

A shortage results when a

binding price ceiling is imposed on a market.

Refer to Figure 6-5. A government-imposed price of $12 in this market is an example of a

binding price floor that creates a surplus.

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor, who's made better off by the trade?

both Dale and Terrence are made better off by trade.

Today, producers changed their expectations about the future. This change

can affect today's supply.

A likely example of complementary goods for most people would be > apple juice and orange juice. > tennis balls and basketballs. > coffee and sugar. > butter and margarine.

coffee and sugar.

Making rational decisions at the margin means that people

compare the marginal costs and marginal benefits of each decision.

The line that relates the price of a good and the quantity supplied of that good is called the supply

curve, and it usually slopes upward.

If an economy's GDP falls, then it must be the case that the economy's

income and expenditure both fall.

Consider Miray's decision to go to college. If she goes to college, she will spend $24,000 on tuition, $12,000 on room and board, and $1,900 on books. If she does not go to college, she will earn $16,000 working in a store and spend $8,000 on room and board. Miray's cost of going to college is

$45,900.

Refer to Table 3-2. Assume that England and France each has 40 labor hours available. If each country devotes 20 to production of bread and 20 to production of lemonade, then total production is

24 units of bread and 15 units of lemonade.

Refer to Table 4-1. If the law of demand applies to this good, then Q1 could be

40

Refer to Table 3-4. Assume that Zimbabwe and Portugal each has 180 machine minutes available. If each country divides its time equally between the production of toothbrushes and hairbrushes, then total production is

48 toothbrushes and 24 hairbrushes.

Refer to Table 2-2. What is the opportunity cost to Supertown of increasing the production of toys from 200 to 300?

500 glasses

Refer to Table 3-3. Assume that Aruba and Iceland each has 80 labor hours available. If each country divides its time equally between the production of coolers and radios, then total production is

60 coolers and 18 radios.

Which of the following changes would not shift the supply curve for a good or service? > A change in production technology > A change in the price of the good or service > A change in expectations about the future price of the good or service > A change in input prices

A change in the price of the good or service

Which of the following events would cause both the equilibrium price and equilibrium quantity of number two grade potatoes to increase if number two grade potatoes are an inferior good? > An increase in consumer income > A decrease in consumer income > Greater government restrictions on agricultural chemicals > Fewer government restrictions on agricultural chemicals

A decrease in consumer income

For which of the following individuals would the opportunity cost of going to college be highest? > A promising young mathematician who will command a high salary once she earns her college degree > A student with average grades who has never held a job > A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree > A student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball

A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree

Refer to Figure 2-5. Which of the following events would explain the shift of the production possibilities frontier from A to B?

A general technological advance

Which of the following statements best represents the principle represented by the adage, "There ain't no such thing as a free lunch"?

Benjamin must decide between going to Florida or Brazil for summer vacation.

If consumers often purchase muffins to eat while they drink their coffee at local coffee shops, what would happen to the equilibrium price and quantity of coffee if the price of muffins falls?

Both the equilibrium price and quantity would increase.

Refer to Figure 2-3. Efficient production is represented by which point(s)?

C, D

Which of the following statements about comparative advantage is not true? > Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources. > The principle of comparative advantage applies to countries as well as to individuals. > Economists use the principle of comparative advantage to emphasize the potential benefits of free trade. > A country may have a comparative advantage in producing a good, even though it lacks an absolute advantage in producing that good.

Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources.

Refer to Figure 4-8. All else equal, an increase in the income of buyers who consider turkey to be an inferior good would cause a move from

Da to Db.

Refer to Figure 2-10. It is possible for this economy to produce 45 doghouses and 30 dishwashers.

False

Fossil fuels are considered to be nonrenewable energy sources. Which of the following statements is correct? > Fossil fuels are unlimited resources. > Fossil fuels are scarce resources. > Fossil fuels are nonscarce resources. > Fossil fuels are not resources.

Fossil fuels are scarce resources.

Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?

Gross domestic product

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation? > Consumers have experienced an increase in income, and beef-production technology has improved. > The price of chicken has risen, and the price of steak sauce has fallen. > New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy. > The demand curve for beef must be positively sloped.

New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy.

Joe and Bob purchase oranges at a grocery store, but Bob also grows oranges in his backyard. Regarding these two practices, which of the following statements is correct? > Only Joe's grocery store purchases are included in GDP. > Only Joe's and Bob's grocery store purchases are included in GDP. > Joe's and Bob's grocery store purchases are included in GDP. The oranges from Bob's backyard garden are included at their market value. > Joe's and Bob's grocery store purchases are included in GDP. The oranges from Bob's backyard garden are included at their market value, if Bob provides this information.

Only Joe's and Bob's grocery store purchases are included in GDP.

Refer to Figure 4-9. All else equal, an increase in the price of the pulp used in the paper production process would cause a move from

Sb to Sa.

Refer to Figure 4-9. All else equal, an increase in the use of laptop computers for note-taking would cause a move from

Sb to Sa.

Which of the following events could cause an increase in the supply of ceiling fans?

The number of sellers of ceiling fans increases.

Which of the following events would cause a movement upward and to the left along the demand curve for olives? > The number of people who purchase olives decreases. > Consumer income decreases, and olives are a normal good. > The price of pickles decreases, and pickles are a substitute for olives. > The price of olives rises.

The price of olives rises.

Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption? > Spending on education > The purchase of stocks and bonds > The purchase of a new house > The purchase of durable goods such as stoves and washing machines

The purchase of a new house

Which of the following would not increase in response to a decrease in the price of ironing boards? > The quantity of irons demanded at each possible price of irons > The equilibrium quantity of irons > The equilibrium price of irons > The quantity of irons supplied at each possible price of irons

The quantity of irons supplied at each possible price of irons

If the demand for a good falls when income falls, then the good is called

a normal good.

At the equilibrium price, the quantity of the good that buyers are willing and able to buy

exactly equals the quantity that sellers are willing and able to sell.

If the price of a dress is three times the price of a pair of shoes, then a pair of shoes contributes

exactly one-third as much to GDP as does a dress.

When society gets the most it can from its scarce resources, then the outcome is called

efficient.

According to the circular-flow diagram, GDP can be computed as

either the revenue firms receive from the sales of goods and services or the payments they make to factors of production.

A transfer payment is a payment made by

government, but not in exchange for a currently produced good or service.

Refer to Figure 6-1. A binding price ceiling is shown in

graph (b) only.

A popular celebrity that is paid highly for her time should probably not mow her own lawn because

her opportunity cost of mowing her lawn is higher than the cost of paying someone to mow it for her.

In the GDP accounts production equals

income.

An increase in the price of a good will > increase supply. > decrease supply. > decrease quantity supplied. > increase quantity supplied.

increase quantity supplied.

Two goods are complements when a decrease in the price of one good

increases the demand for the other good.

Absolute advantage is found by comparing different producers'

input requirements per unit of output.

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that

people face tradeoffs.

The adage, "There ain't no such thing as a free lunch," means

people face tradeoffs.

A supply schedule is a table that shows the relationship between

price and quantity supplied.

Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the

quantity demanded of physicals increases, and the quantity supplied of physicals decreases.

If a nonbinding price floor is imposed on a market, then the

quantity sold in the market will stay the same.

The law of supply states that, other things equal, when the price of a good > falls, the supply of the good rises. > rises, the quantity supplied of the good rises. > rises, the supply of the good falls. > falls, the quantity supplied of the good rises.

rises, the quantity supplied of the good rises.

Refer to Figure 4-7. At a price of $15, there would be a

shortage of 400 units.

Efficiency means that

society is getting the most it can from its scarce resources.

A improvement in production technology will shift the

supply curve to the right.

Oakley bakes muffins that he sells at the local farmer's market. If he purchases a new convection oven that reduces the costs of baking muffins, the

supply of Oakley's muffins will increase.

Refer to Table 4-6. If the price were $4, a

surplus of 25 units would exist, and price would tend to fall.

Social Security payments are indexed for inflation using

the CPI.

A baker recently has come to expect higher prices for bread in the near future. We would expect

the baker to supply less bread now than she was supplying previously.

The production possibilities frontier illustrates

the combinations of output that an economy can produce.

Alana decides to spend 2 hours working overtime rather than going shopping with her friends. She earns $11 per hour for overtime work. Her opportunity cost of working is

the enjoyment she would have received had she gone shopping.

If a price floor is not binding, then

the equilibrium price is above the price floor.

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that

the nation is not using all available resources or is using inferior technology or both.

If something happens to alter the quantity supplied at any given price, then

the supply curve shifts.

The marginal benefit Joseph gets from purchasing a fourth pair of shoes is

the total benefit he gets from purchasing four pairs of shoes minus the total benefit he gets from purchasing three pairs of shoes.

Savion's aunt gave him $25 for his birthday with the condition that Savion buys himself something. In deciding how to spend the money, Savion narrows his options down to four choices: Option 1, Option 2, Option 3, and Option 4. Each option costs $25. Finally, he decides on Option 2. The opportunity cost of this decision is

the value to Savion of the option he would have chosen had Option 2 not been available.

If the supply of a product increases, then we would expect equilibrium price > to increase and equilibrium quantity to decrease. > to decrease and equilibrium quantity to increase. > and equilibrium quantity to both increase. > and equilibrium quantity to both decrease.

to decrease and equilibrium quantity to increase.

Economics is the study of how society manages its

unlimited wants and limited resources.

The opportunity cost of an item is

what you give up to get that item.

Refer to Figure 4-8. All else equal, the premature deaths of thousands of turkeys would cause a move from

x to y.