Macroeconomics Test 1

decisions entail comparisons of marginal costs and marginal benefits.

(Consider This) At fast-food restaurants:

may or may not be free to individuals but are never free to society.

(Consider This) Free products offered by firms:

is one of the few remaining command economies.

(Consider This) North Korea's command economy:

Reliance on the use of capital goods to expand total output

A characteristic of the market system is:

communism.

Command systems are also known as:

Which output will be produced?

Consumer sovereignty and "dollar votes" guide the market system in dealing with which fundamental economic question?

property rights.

Copyrights and trademarks are examples of:

Very limited government role in the economy

Laissez-faire capitalism is characterized by:

allocates resources efficiently and allows economic freedom.

Two major virtues of the market system are that it:

Society is producing a different combination of outputs

A movement from one point to another along the production possibilities curve would imply that:

Improving labor productivity

A nation can increase its production possibilities by:

Not attainable because the nation does not have sufficient resources

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities: Refer to the above table. According to the production possibilities schedule, a combination of 4 tanks and 650 autos is:

350 units of autos

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities: Refer to the above table. The total opportunity cost of three units of tanks is:

is based on value judgments.

A normative statement is one that:

benefit exceeds its marginal cost.

A person should consume more of something when its marginal:

Attainable; unattainable

A point inside the production possibilities curve is ____ while a point outside the curve is ____.

False

A reduction in the unemployment rate will cause the nation's production possibilities curve to shift outwards.

Who owns the factors of production and the methods used to coordinate economic activity.

Economic systems differ according to which two main characteristics?

Who make decisions regarding what to produce and how it is produced

Economic systems differ from one another based on who own the factors of production and:

A nation's consumption is strictly limited by its production possibilities, even with international trade.

False

Entrepreneurship

"Creative destruction" in a market system is brought about by:

positive but incorrect.

"Macroeconomics is the part of economics concerned with individual units such as a person, a household, a firm, or an industry." This statement is:

the opportunity cost of attending college is extraordinarily high.

(Consider This) An exception to the advice "go to college, stay in college, and earn a degree" occurs when:

is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.

An economic system:

sellers in the resource and product markets respectively

Households and businesses are:

Markets and prices

In a capitalist system, the decisions and actions of millions of consumers and firms are highly coordinated by:

The government makes production and allocation decisions

In a command system:

A. influence consumers in their purchases of goods and services. B. influence businesses in their purchases of economic resources. C. influence workers in making occupational choices.

In a competitive economy, prices:

Sell products and buy resources

In the circular flow model of the market system, business firms:

Buy products and sell resources

In the circular flow model of the market system, households:

Resource markets

In the circular flow model, households earn their incomes in the:

Central planning conducted by the government

One major element of the command system is:

From point F to point H

Refer to the above graph. Which of the following movements would indicate a reduction in unemployment?

D

Refer to the above graph. Which point in the graph would allow a simultaneous increase in the production of both investment and consumer goods?

4 units of C and 6 units of D.

Refer to the budget line shown in the diagram. If the consumer's money income is $20, which of the following combinations of goods is unattainable?

shift the production possibilities curve from PP1 to PP2.

Refer to the diagram. An improvement in technology will:

False

Refer to the diagram. Given production possibilities curve a, the combination of civilian and war goods indicated by point X is unattainable to this economy.

will cost 1 unit of computers.

Refer to the diagram. If society is currently producing the combination of bicycles and computers shown by point D, the production of 2 more units of bicycles:

A

Refer to the diagram. Other things equal, which of the following positions relative to PP1 would be the most likely to result in a future production possibilities curve of PP3 rather than PP2

unattainable given currently available resources and technology.

Refer to the diagram. The combination of computers and bicycles shown by point G is:

At the individual, regional, and even international levels

Specialization is beneficial:

A. allowing workers to take advantage of existing differences in their abilities and skills. B. avoiding the time loss involved in shifting from one production task to another. C. allowing workers to develop skills by working on one, or a limited number, of tasks.

Specialization—the division of labor—enhances productivity and efficiency by:

incentive problem under communist central planning.

Suppose that an individual sees a tremendous opportunity to produce and sell a new product but dismisses the idea because there is no way to exploit this opportunity for personal gain. This situation best identifies the:

The interdependence of businesses and consumers

The circular flow model illustrates:brought about by:

Illustrates the interdependence of businesses and consumers

The circular flow model:

encourages innovation because successful innovators are rewarded with economic profits.

The competitive market system:

The "invisible hand"

The idea that firms and resource suppliers in seeking to further their own self-interests in a competitive market economy also simultaneously promotes the public or social interest is a description of:

Capitalism

The market system is also known as:

Gives private individuals the right to own resources used in production

The market system is an economic system that:

there is an active role for government, even in a market system.

The presence of market failures implies that:

government should not interfere with the operation of the economy.

The term "laissez-faire" suggests that:

Consumers "vote" for certain products to be produced by how they spend their incomes

The term dollar votes in a market system means:

D. What goods and services should be produced by government?

Which is not one of the Five Fundamental Questions? A. How will the goods and services be produced? B. How should the system accommodate change? C. Who is to receive the output of the system? D. What goods and services should be produced by government?

Self-interest in a market system will automatically promote the public interest as well

Which of the following best describes the "invisible hand" concept?

What prices will be charged for goods and services?

Which of the following is NOT one of the five fundamental questions?

C. the determination of product and resource prices is not explained.

Which of the following is a limitation of the simple circular flow model? A. product markets are ignored. B. resource markets are ignored. C. the determination of product and resource prices is not explained. D. households are included, but not businesses.

What goods and services will be produced?

Which of the following is one of the Five Fundamental Questions?

Freedom of choice and enterprise are essential elements of the market system

Which of the following statements is correct?

The production and allocation of goods and services is determined primarily through government

Which statement best describes a command economy?

A country can achieve some combination of goods outside its production possibilities curve by:

specializing and engaging in international trade.