Quiz 1 - Macro

Trade between countries tends to

increase both competition and specialization.

Which of the following do economists not generally regard as a legitimate reason for the government to intervene in a market?

To protect an industry from foreign competition

Which of the following is an example of a capital input? a)A computer b)A share of stock c)The finances necessary for firms to produce their products d)The money households use to purchase firms' output

a) A computer

Equality means distributing society's resources in the most efficient manner.

False

Government policies that improve equality usually increase efficiency at the same time.

False

In the circular-flow diagram, one loop represents the flow of goods and services, and the other loop represents the flow of factors of production.

False

With careful planning, we can usually get something that we like without having to give up something else that we like.

False

If China decides to trade with France, we know that

France and China can both benefit.

In the circular-flow diagram, firms produce goods and services using the factors of production.

True

In the circular-flow diagram, households and firms are the decision makers.

True

Market failure refers to a situation in which the market does not allocate resources efficiently.

True

Positive statements are descriptive, while normative statements are prescriptive.

True

Positive statements can be evaluated using data alone, but normative statements cannot.

True

The classic tradeoff between "guns and butter" states that when a society spends more on national defense, it has less to spend on consumer goods to raise the standard of living.

True

The opportunity cost of working out for one hour is the value of the next-best activity that you could have done in that hour.​

True

The production possibilities frontier shows the opportunity cost of one good as measured in terms of the other good.

True

Trade with any nation can be mutually beneficial.

True

Your professor loves her work, teaching math. She has been offered other positions in the corporate world that would increase her income by 15 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal a)cost of teaching increased. b)benefit of teaching increased. c)cost of a corporate job increased. d)benefit of a corporate job decreased.

a)cost of teaching increased.

If the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price, then we would expect, relative to the market outcome,

an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide.

Rami Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.2 million. If the company builds a 25th house, its total cost will increase to $4.375 million. Which of the following statements is correct? a)For the first 24 houses, the average cost per house was $170,000. b)The marginal cost of the 25th house, if it is built, will equal $175,000. c)If the company can sell the 25th house for at least $167,000, then it should build it. d)The company should never build the 25 th house because this increases its total cost.

b)The marginal cost of the 25th house, if it is built, will equal $175,000.

Suppose the cost of operating a 75-room hotel for a night is $6,000 and there are five empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay a)more than $40; because the average benefit will exceed the marginal cost. b)more than $40; because the marginal benefit will exceed the marginal cost. c)more than $80; because the average benefit will exceed the marginal cost. d)more than $80; because the marginal benefit will exceed the marginal cost.

b)more than $40; because the marginal benefit will exceed the marginal cost.

In the circular-flow diagram, in the markets for a)goods and services, households and firms are both sellers. b)the factors of production, households are sellers and firms are buyers. c)goods and services, households are sellers and firms are buyers. d)the factors of production, households and firms are both sellers.

b)the factors of production, households are sellers and firms are buyers.

Microeconomics is the study of

how individual households and firms make decisions.

An economy's production of two goods is efficient if

it is impossible to produce more of one good without producing less of the other.

Market power refers to the

power of a single person or small group to influence market prices.