Macroeconomics Quizzes
Which of the following is an example of a resource market?
a job market
Suppose an economy consists of two industries: textiles and steel. Migration of workers from the textile industry to the steel industry will cause:
a movement on the existing production possibility frontier away from the textile industry toward the steel industry.
A summer in Miami turned out to be warmer than usual, causing people to consume more cola. This can be represented by:
a rightward shift of the demand curve for cola.
As personal income increases, consumers are willing and able to buy more of a good at each price. This causes:
a rightward shift of the demand curve.
Suppose there is an increase in the incidence of polio in a country. This will most likely result in:
a rightward shift of the market demand curve for polio vaccinations.
Suppose the market for pretzels is in equilibrium. It is discovered that high consumption of pretzels increases the risk of heart diseases. As a result of this, _____.
both the equilibrium price and quantity of pretzels will decrease
A pest attack destroys half of the California navel orange crop. Simultaneously, the price of kiwifruit, a substitute for navel oranges, falls. As a result, _____.
both supply and demand would decrease, resulting in a decrease in equilibrium quantity and an indeterminate change in price
A company is likely to _____ before launching a new product in a market.
conduct a marginal analysis
The government regulates a natural monopoly because:
it charges a higher price for products than would be optimal.
A _____ is an economic system characterized by the private ownership of resources.
pure capitalist system
The form of trade protection that restricts the quantity of a particular good that can be imported or exported is called a:
quota
The Sanders visited a number of car showrooms in their city and read a lot of reviews in journals and online before deciding on a car. This shows that:
rational individuals may invest a lot of time and collect information before making a decision.
The economic concept of _____ is the attempt made by people to minimize the expected cost of achieving a given benefit.
rational-self interest
Rational-self interest
results in the maximization of individual satisfaction.
A yearly performance appraisal rewarded an employee with a 25 percent hike in the salary. This can:
shift the demand curve rightward.
An increase in the proportion of teenagers in the total population of a country is likely to:
shift the market demand curve for pizza rightward.
The following image shows the market for pretzels. At a price of $4 per pretzel, there is a _____.
shortage of 27,000 pretzels per week
Suppose the government in Candora sets a minimum wage for unskilled labor. As a result, _____.
the overall economic welfare in Candora will decrease
The law of supply states that:
the price and quantity supplied of a product are positively related.
The following image shows the market for cupcakes. The initial demand and supply curves are D and S, respectively. The market for cupcakes will most likely clear at an equilibrium price of $8 per cupcake if:
the price of cookies, a substitute for cupcakes, increases and, at the same time, the price of flour used to make cupcakes decreases.
Division of labor refers to:
the process of breaking down the production of a good into separate tasks.
When a market is in equilibrium, _____.
the quantity demanded is equal to the quantity supplied
Demand is the relationship between the price of a good and:
the quantity of the good consumers are willing and able to buy.
Amanda can choose between two alternatives after high school. She can either attend a university or work at her father's grocery store. Amanda will have to pay $9,000 for tuition and fees to enroll in the university. However, if she decides to work at the grocery store, she will earn $500 per week. If Amanda decides to go to college, the opportunity cost of her decision will be:
the weekly wage of $500 she could have earned if she had decided to work at the grocery store.
The production possibilities frontier rotates outward along one of the axes when:
there is a technological change that enhances the production of only one of the goods.
If the prices of all goods changed by the same percentage, _____.
there would be no substitution effect of the price changes of goods on the quantity demanded
In terms of opportunity cost, _____ is the ultimate constraint.
time
Which of the following is an advantage of corporations?
Corporations can survive even if ownership changes hands.
Refer to Table 2.1, which shows the quantity of guns and food that a country can produce in an hour, given the available resources. Which of the following statements is true?
Country A will specialize in the production and export of guns to Country B.
Which of the following is an example of entrepreneurship?
A person's ability to organize the factors of production and manage a business enterprise.
Which of the following is true of a pure command system?
A pure command economy is difficult to run; hence, resources are used inefficiently at times.
Which of the following statements is true of a sole proprietorship?
A sole proprietorship has a single owner who enjoys the firm's profit and bears unlimited liability.
Which of the following will cause an outward shift in an economy's PPF?
A stable political environment and reliable property rights.
Which is the most important form of business organization in terms of total sales?
Corporation
The following image shows the market for pretzels. The equilibrium price and quantity in the market are _____, respectively.
$7 and 25,000 pretzels
A firm can produce 10 units of product A or 16 units of product B by utilizing all the available resources. Suppose the firm chooses to utilize its resources to produce one unit of product B. The opportunity cost faced by the firm, in this case, will be _____.
0.6 units of product A
A firm can produce 10 units of product A or 16 units of product B by utilizing all the available resources. Suppose the firm decides to utilize its resources to produce one unit of product A. The opportunity cost of the firm's choice to produce that unit will be:
1.6 units of product B.
The government of Almenia imposes a ceiling on the price of bread. Which of the following is most likely to be true?
A ceiling on the price of bread will cause an excess demand for bread in the market.
Which of the following is an example of physical capital?
A computer used by a company to record its inventory, sales, and payroll.
Which of the following would cause a downward movement along the demand curve for a normal good, leading to an increase in the quantity demanded?
A decline in the price of the good.
_____ is the ability to make something using fewer resources than other producers use.
Absolute advantage
Which of the following is true of absolute advantage?
Absolute advantage focuses on the use of fewer resources.
Which of the following comes under the purview of microeconomics?
An increase in the price of a good due to a sudden increase in its quantity demanded.
Which of the following statements is true?
An increase in the price of an unrelated good reduces a consumer's real income and can reduce the demand for other goods.
Which of the following would most likely cause a consumer to increase the demand for veggie burgers?
An increase in the price of tofu burgers, which are perceived as substitutes for veggie burgers.
Suppose there are only three consumers—John, James, and Erin—in the market for strawberries. At a price of $3 per box of strawberries, the market demand is 72 boxes of strawberries per day. At this price, John has a demand for 17 boxes of strawberries per day and Erin has a demand for 23 boxes of strawberries per day. Which of the following is true?
At a price of $3, James has a demand of 32 boxes of strawberries per day.
The following image shows the market for pretzels. At a price of $9, which of the following is most likely?
Competition among producers will force the price per pretzel to decrease to $7.
Suppose two things happen simultaneously that impact the equilibrium in the computer software market. First, technological innovation lowers the cost of producing computer software. Second, the price of computer hardware, a complement to computer software, declines. Which of the following is likely to be true in this case?
Both the supply of software and the demand for software would increase, resulting in an increase in equilibrium quantity and an indeterminate change in price.
Charles and Madeline run an event management business in which they have two major tasks: getting new clients and preparing food for the events. Charles takes 6 hours to prepare food for an event and 3 hours to get a new client. Madeline takes 12 hours to prepare food and 3 hours to get a new client. Which of the following is true?
Charles has an absolute and a comparative advantage in preparing food.
Which of the following ideas is NOT demonstrated by the PPF?
Diminishing returns to scale.
Which of the following is true of an economic choice?
Economic choice is based on a comparison of the expected marginal benefit and the expected marginal cost of the action under consideration.
_____ exists in production when there is no way resources can be reallocated to increase the production of one good without decreasing the production of another.
Efficiency
Which of the following is true of resource markets?
Factors of production are bought and sold in these markets.
Which of the following is a drawback of a pure command economy?
In a command economy, nobody in particular owns resources, therefore each person has less incentive to employ them in their highest-valued use, so some resources are wasted.
_____ is a payment to resource owners for the use of their capital.
Interest
Which of the following is an advantage of specialization of laborers?
It allows workers to develop more experience at a particular task.
Which of the following is true of the market demand curve for a good?
It is the sum of the individual demand curves of all consumers in the market.
Robert and Jackson both work at an accountant's office. Their major tasks involve responding to client queries through emails and preparing financial statements. Robert can respond to 20 emails in an hour or prepare 2 financial statements, whereas Jackson can respond to 35 emails in an hour or prepare 1 financial statement. Which of the following is true?
Jackson has a lower opportunity cost of replying to client queries than Robert has.
Suppose both John and Bill can do two tasks in a day. If John can do each of the two tasks faster than Bill, then:
John should specialize in performing the task for which he has a comparative advantage.
_____ is the study of the economic behavior of entire economies.
Macroeconomics
_____ refers to incremental, additional, or small changes in economic conditions relative to the status quo.
Marginal Analysis
_____ can be useful in analyzing how a choice affects a particular market and shapes the economic system as a whole.
Marginal analysis
_____ focuses on individual economic choices and market coordination of these choices.
Microeconomics
Which of the following is true about opportunity cost?
Opportunity cost may vary with circumstances.
Which of the following is an assumption of the study of an economy's production possibilities?
Output is limited to just two broad classes of products: consumer goods and capital goods.
Which of the following is true of a partnership?
Partners find it easier than sole proprietors to raise funds for the business.
_____ due to the scarcity of resources.
People cannot satisfy all their wants
Refer to Figure 2.1. Point _____ represents the amount produced if all the resources in the economy are used to produce consumer goods.
Point A
Refer to Figure 2.1. Point _____ represents an output combination that is unattainable.
Point C
Refer to Figure 2.1. Which of the following points in the graph represents an output combination that is inefficient?
Point D
Refer to Figure 2.1. Which of the following statements is true?
Point E represents an output combination that is efficient.
Which of the following is a feature of a mixed economy?
Private ownership of some resources and public ownership of other resources.
_____ equals the revenue from items sold minus the cost of the resources employed to make those items.
Profit
Ralph and Sue perform two tasks: making soccer balls and sewing cotton shirts. With the given resources, Ralph can make 20 soccer balls or sew 6 shirts and Sue can make 16 balls or sew 10 shirts. Which of the following is true?
Ralph should specialize in the production of soccer balls.
Which of the following is an example of a sunk cost?
Robert's investment in an unsuccessful business venture.
The economic problem of _____ arises because human wants and desires are unlimited and the means to satisfy these wants are limited.
Scarcity
Which of the following is a possible drawback of pure capitalism?
Some producers may try to monopolize markets by eliminating competition.
Which of the following is true of specialization and exchange?
Specialization and exchange create more interdependence in an economy.
Which of the following is the best description of the production possibilities frontier (PPF)?
The PPF is a curve showing alternative combinations of goods that can be produced when available resources are used efficiently.
Which of the following statements is true?
The United States represents a mixed system, with government directly accounting for a little more than one-third of all economic activity.
Which of the following is the best example of transaction costs?
The amount of time a person spends looking for a house.
Which of the following factors determines the exchange rate of a country's currency?
The demand and supply of the currency.
When the equilibrium price of an apple is $0.75, the individual supplies of apples from three apple orchards are 460, 580, and 700 apples respectively. Identify the correct statement from the following.
The market demand at $0.75 is 1,740 apples.
Identify the correct statement about economic choice.
The need for economic choice arises from scarcity of resources.
Suppose the federal government provides wheat farmers with an effective price floor, or a guaranteed minimum price. Which of the following is likely to be true?
The price floor set by the government is higher than the equilibrium price.
Which of the following is a disadvantage of a sole proprietorship?
The proprietor has unlimited liability.
Suppose the market for fresh California navel oranges was in equilibrium before an unanticipated freeze destroyed half of the California navel orange crop. If all other factors affecting supply or demand are assumed to have remained unchanged, which of the following is likely to be true?
The supply of navel oranges will decrease, resulting in a higher market equilibrium price and a lower market equilibrium quantity.
Charles and Madeline run an event management business in which they have two major tasks: getting new clients and preparing food for the events. Charles takes 6 hours to prepare food for an event and 3 hours to get each new client. Madeline takes 12 hours to prepare food and 3 hours to get a new client. Charles and Madeline were initially splitting both tasks for a large number of events. However, they later decide to start reassigning work based on the principle of comparative advantage. Charles takes over food preparation while Madeline uses the free time to get more clients. Which of the following is a possible effect of specialization on the tasks performed by Charles and Madeline?
The total number of events for which food is prepared will remain unchanged, but the number of new clients will increase by 2.
Suppose an economy produces food and clothing, and a technological innovation occurs that enhances the productivity of resources used in producing both goods. Which of the following would be consistent with this situation?
There is a parallel outward shift of the PPF.
Suppose a company trying to increase profits sells its laptops at a price that is higher than the equilibrium price of laptops in the market. Which of the following is likely to happen as a consequence?
There will be an excess supply of this particular brand of laptops in the market.
Which of the following is true of tariffs?
They are taxes on imports
Which of the following are necessary to make a rational choice?
Time and information, which are both scarce and valuable.
Which of the following is a fundamental question that an economic system must answer?
What goods and services are to be produced?
Which of the following are the three fundamental economic questions?
What to produce, how to produce, and for whom to produce?
Suppose, in an hour, you can either make 20 tortillas or word-process 5 pages of text and your roommate can either make 15 tortillas or word-process 15 pages of text. Which of the following is correct?
Your comparative advantage is in making tortillas.
An externality is:
a cost or a benefit that falls on a third party and is ignored by buyers and sellers involved in the market transaction.
The following image shows the market for cupcakes. The initial demand and supply curves are D and S, respectively. A decrease in the price of flour used to make cupcakes will result in:
a fall in the equilibrium price of cupcakes to $6.
Markets:
allow buyers and sellers to interact and help allocate resources.
_____ involves the direct exchange of one good for another without the use of money.
barter
The economic system known as a market system is also referred to as:
capitalism
Price floors and ceilings:
cause market disequilibrium and reduce economic welfare.
The _____ shows the flow of resources, products, income, and revenue among economic decision makers.
circular-flow model
A fall in the price of sodas will result in a(n):
decrease in the quantity supplied.
Other things remaining constant, the substitution effect of a price change implies that a fall in the price of burgers:
decreases the demand for sandwiches.
According to the substitution effect, a drop in the price of a normal good:
decreases the real income of consumers and they tend to buy more of the good.
If the price of tofu falls, the quantity of tofu demanded will increase. This will be indicated by a(n):
downward movement along the demand curve for tofu.
We can say that a firm is practicing division of labor if:
each worker in the firm performs a particular task in the production process.
The price of one currency in terms of another is referred to as the:
exchange rate
Private goods are _____.
exclusive and rival in consumption
The circular-flow model shows that households demand _____ from firms through product markets.
goods and services
In a market system, the answer to the "for whom to produce" economic question is that:
goods are allocated to those with the willingness and ability to pay, as expressed through market demand.
The circular-flow model shows that _____ supply labor, capital, natural resources, and entrepreneurial ability to resource markets.
households
Resource allocation in a market economy is determined primarily through interactions between:
households and firms
Economics is a branch of social science that studies:
how people choose to allocate limited resources to satisfy their unlimited wants
If consumers expect the price of gasoline to increase tomorrow, the demand for gasoline is likely to _____ today.
increase
As money income increases, consumers tend to substitute used furniture with new furniture. Used furniture is an example of a(n):
inferior good
A good is said to be scarce when:
it is not freely available and its price exceeds zero.
A price ceiling imposed by the government will have an impact only if:
it is set below the equilibrium price in a market.
A nation's balance of payments is the record of all economic transactions between:
its residents and residents of the rest of the world.
The _____ states that the individual, firm, region, or country with the lower opportunity cost of producing a particular good should specialize in producing that good.
law of comparative advantage
When you specialize in a task that you do best, you are applying the:
law of comparative advantage
An increase in the money income of a consumer will most likely result in a(n) _____ the demand curve for an inferior good.
leftward shift of
Other things remaining constant, a higher price for a good _____ that good.
makes producers more willing to increase the quantity supplied of
The total production of goods and services in the world economy will increase if:
nations trade and specialize in the production of a good in which they have a comparative advantage.
Public goods are _____.
nonexclusive and nonrival in consumption
International trade occurs because the _____ cost of producing specific goods differs across countries.
opportunity
The value of the best alternative activity that is forgone is known as:
opportunity cost
An increase in available resources or a technological advancement that enhances the productivity of one or more type of resources will cause a(n):
outward shift in the production possibility frontier.
One of the main assumptions in economics is that:
people are rational
The production possibilities frontier shows:
possible combinations of two types of goods that can be produced when all available resources are fully and efficiently employed.
A cost that has already been incurred and cannot be recovered is called a(n):
sunk cost
Economic decision makers should ignore _____ while making choices.
sunk costs
Rational decision makers continue to acquire information as long as:
the additional benefit expected from that information exceeds the additional cost of acquiring it.
The more important an item is as a share of a consumer's budget, _____.
the bigger the income effect of a change in the price of that item
Under a pure command system, decisions are made by:
the central government
Olivia has been looking for a new apartment and finds two apartments that fit her requirements and budget. Apartment A is in the city center and is close to her office. Apartment B is in the suburbs and it will take an hour each day for Olivia to commute from Apartment B to her office. Both the apartments cost $25,000. However, apartment A is located in a noisy and polluted neighborhood, whereas apartment B is located in a green and pollution-free locality. The opportunity cost of choosing apartment B is:
the distance from the city center.
The following image shows the market for cupcakes. The initial demand and supply curves are D and S, respectively. Suppose cupcakes are normal goods. As a result of an increase in the income of consumers, _____.
the equilibrium price of cupcakes will rise to $9
Suppose there is a tsunami in Japan, which is a major supplier of external storage devices. As a result, the supply of external storage devices decreases. However, the market demand for external storage devices increases. Thus, _____.
the equilibrium price of external storage devices increases and the change in the equilibrium quantity of external storage devices is indeterminate
Suppose the price of petrol is expected to fall in the future. As a result, the current demand for it decreases and the current supply increases. However, the change in supply is much greater than the change in demand. Thus, _____.
the equilibrium quantity of petrol will increase and the equilibrium price of petrol will decrease
Olivia has been looking for a new apartment and finds two apartments that fit her requirements and budget. Apartment A is in the city center and is close to her office. Apartment B is in the suburbs, and it will take an hour each day for Olivia to commute from Apartment B to her office. Both the apartments cost $25,000. However, apartment A is located in a noisy and polluted neighborhood, whereas apartment B is located in a green and pollution-free locality. The opportunity cost of choosing apartment A over apartment B is:
the green and pollution-free locality.
According to the law of supply, _____.
the higher the price of a product, the greater the quantity supplied
The coordination that occurs through markets takes place not because of some central plan but because of _____.
the invisible hand
A bowed-out production possibilities curve demonstrates:
the law of increasing opportunity cost.
he lower the personal cost of helping others, _____.
the more help we offer
