ecn mid term review

If a family spends its entire budget in a given time frame, the family can afford either 90 cans of soup or 60 frozen dinners. Assuming the family spends its entire budget on just these two goods, what is the opportunity cost of one extra can of soup in the time frame? (Round your answer to two decimal places.)

$0.67\ \text{frozen dinners}$ Opportunity cost can be calculated as the ratio of amounts of each good that could be consumed if the entire budget were spent only on that good. Therefore, the opportunity cost of an extra can of soup is 60 frozen dinners90 cans of soup≈0.67 frozen dinners.

Select all of the following descriptions that are true about market economies.

A market economy is based on private enterprise A person's income is based on his or her ability to convert resources (especially labor) into something society values.

In marginal analysis, when comparing costs and benefits, an optimal choice is found when ______. Select two correct answers.

Correct answer: MB>MC MB=MC

In a circular flow diagram, who pays wages?

FIRMS

True or false? The export/GDP ratio has generally declined worldwide in recent decades.

False In recent decades, the export/GDP ratio has generally risen, both worldwide and for the U.S. economy.

Marginal analysis compares total benefits and total costs to determine the optimal outcome or choice rather than how costs and benefits change from one option to another.

False Marginal analysis involves comparing marginal benefits and marginal costs to determine the optimal outcome.

True or false? A micro economist would focus their studies on levels of exports and imports.

False Levels of exports and imports is a topic that falls under the study of macroeconomics, not microeconomics. Microeconomics focuses on the actions of individual agents within the economy, like households, workers, and businesses. Macroeconomics looks at the economy as a whole. It focuses on broad issues such as growth of production, the number of unemployed people, the inflationary increase in prices, government deficits, and levels of exports and imports.

GDP is the current value of all final goods and services produced in a nation in a year. What are final goods?

Final goods are goods at the furthest stage of production at the end of a year. Government statisticians count just the value of final goods and services in the chain of production that are sold for consumption, investment, government, and trade purposes.

Which of the following is the best definition of the term economies of scale?

For many goods, as the level of production increases, the average cost of producing each individual unit declines; Specialization allows businesses to take advantage of economies of scale. As workers can focus on production areas where they have an advantage, production can increase with average costs decreasing.

There are no free exchanges between firms and households.

In a two-sector economy there are firms and households. Firms provide households with goods and services. Households provide firms with labor, land, capital, and entrepreneurship. Households do not receive free goods or services from firms, and households do not provide firms with free labor. Everything has a cost.

What term is best described as the additional satisfaction gained from purchasing a good given the price of the product?

Marginal utility per dollar Marginal utility per dollar is defined as the additional satisfaction gained from purchasing a good given the price of the product.

________________ may analyze how a mother of three children spends her money each month. _________________ may analyze various influences on the unemployment rate.

Microeconomists; Macroeconomists; Microeconomics focuses on individuals and firms. A microeconomist may analyze how an individual mother spends her money. Macroeconomics focuses on the economy as a whole. A macroeconomist may search for stimuli that impact the unemployment rate.

Which two explanations represent models in the study of economics?

Models simplify real world interactions for the purposes of illustration. Economic models are used to test theories. EXPLANATION- Sometimes economists use the term model instead of theory. Strictly speaking, a theory is a more abstract representation, while a model is a more applied or empirical representation. Economic models are not perfect; rather, they simplify real-world interactions for the purposes of illustration and are used to test theories.

Angelo wants to buy coffee and doughnuts for his co-workers. He has to pay cash, and doesn't know if he can afford it. How can he determine whether his coffee and doughnut order is within his budget constraint?

Multiply the price of coffee by the number of cups of coffee he wants to buy, then add it to the price of doughnuts multiplied by the number of donuts he wants to buy. Compare it to the amount of money he has to spend. To find a budget constraint, use the equation: B=P1×Q1+P2×Q2, where P and Q

Which measure of national productivity would include the loss in value to an automobile after an additional year of use?

Net national product (NNP) is calculated by taking GNP and then subtracting the value of how much physical capital is worn out, or reduced in value because of aging, over the course of a year. Thus, net national product is the measure of national productivity that would include the loss in value to an automobile after an additional year of use.

Economists call a simplified description of how two or more variables interact with each other a _______.

THEORY; In economics, a theory is defined as a simplified description of how two or more variables interact with each other. Economic theories strive to solve real-world problems that are based on particular assumptions about human behavior. (Sometimes economists use the term model instead of theory)

True or false? In market economies, economic decisions are determined by market forces.

TRUE; In market economies, economic decisions are determined by market forces. In a market economy, decision-making is decentralized. Market economies are based on private enterprise: the private individuals or groups of private individuals own and operate the means of production (resources and businesses). Businesses supply goods and services based on demand. (In a command economy, by contrast, the government owns resources and businesses.)

Why might Belgium, France, Italy, and Sweden have a higher export to GDP ratio than the United States?

The U.S. contains more of the division of labor inside its borders, while the other countries need to trade across borders in order to take advantage of division of labor, specialization, and economies of scale.

The budget constraint is a straight line.

The budget constraint is represented as a two-dimensional downward-sloping straight line on a graph. The slope of the budget constraint is determined by the relative prices of the goods and services in the consumer's bundle. Since prices are fixed for all units of the goods and services the consumer buys, the relative prices will also be constant.

Jack buys only shoes and socks. If Jack spends his entire budget on shoes, he can buy 9 pairs of shoes. If Jack spends his entire budget on socks, he can buy 72 pairs of socks. What is the opportunity cost of 6 pairs of shoes?

To obtain the opportunity cost of 6 pairs of shoes, multiply 8×6=48. Therefore, the opportunity cost of 6 pairs of shoes is 48 pairs of socks.

The U.S. economy is less affected by globalization than most other countries relative to its GDP.

True While the US has large levels of exports and imports in a nominal sense, they are often smaller than those of other countries when considered as proportion of GDP. The vast array of geographic conditions and natural resources available within the US allow it to be self-sufficient to a greater extent than many of the smaller countries of the world.

Which of the following describe benefits of international trade?

Worldwide production increases. The worldwide economy improves. Worldwide standards of living are higher. All of the above.--- CORRECT International trade and specialization increase worldwide production, improve the world economy, and improve standards of living all over the globe.

Businesses typically support globalization because globalization _________________________.

allows access to more markets Globalization implies that firms get unrestricted or less restricted access to global markets, allowing greater ability to buy and sell.

Microeconomics and macroeconomics are ______________________ on the overall subject of the economy.

complementary perspectives; Microeconomics and macroeconomics are not separate subjects, but rather complementary perspectives on the overall subject of the economy.

When goods are produced, the process can be broken down into a number of specific tasks. This is called ____________________.

division of labor: When the tasks involved with producing a good or service are divided and subdivided, workers and businesses can produce a greater quantity of output.

Microeconomics concentrates on which of the following?

firms household debt management plans household budgets all of the above---- CORRECT

The law of diminishing marginal utility describes the general pattern that continuous consumption of a commodity leads to an eventual decline in _________ from the consumption of that commodity.

marginal utility The law of diminishing marginal utility is the general pattern that consumption of the first few units of any good or service tends to bring a higher level of utility than consumption of later units.

economies of scale,

means that for many goods, as the level of production increases, the average cost of producing each individual unit declines

The purpose of a theory, in general, is to ________________________________.

take a complex, real-world issue and simplify it down to its essentials

A student of macroeconomics would study which of the following concepts?

the number of unemployed people in an economy an inflationary increase in prices government deficits ALL OF THE ABOVE! --CORRECT