ECON 104 MIDTERM 1
A friend of mine came to Penn State in the 1970s and told me that sticky buns at the College Diner cost $.75 (75 cents) in December of 1976. The CPI in December of 1976 was 58.4 and in December of 2017, the CPI was 247.91. Use this CPI data and assuming that the price of sticky buns rose in exact proportion to the CPI, what would the price of sticky buns have to be in December of 2017 so that the 'real price' of sticky buns remained constant?
$3.18 (cross-multiply proportions)
Which of the following is a normative economic statement? A. The price of gasoline is too high B. When the price of gasoline rises, transportation costs rise C. The current high price of gasoline is the result of strong worldwide demand D. When the price of gasoline rises, the quantity of gasoline purchased falls
A. The price of gasoline is too high. (normative = opinion)
Which of the following is a positive economic statement? A. Foreign workers should not be allowed to work for lower wages than the citizens of a country B. People should not buy SUVs C. Scarcity necessitates that people make trade-offs D. The government should mandate electric automobiles
C. Scarcity necessitates that people make trade-offs
Economics promote which of the following as the way to make the best decision?
Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost
An increase in the labor force shifts the production possibility frontier inwards over time.
FALSE
Any output combination outside a production possibility frontier is associated with unused or underutilized resources.
FALSE
If Ethel sold her 2003 Ford Focus for $2,250 in 2017, the sale of her car contributed $2,250 to 2017 GDP.
FALSE
If Sanjaya can shuck more oysters in one hour than Tatiana, then Sanjaya has a comparative advantage in shucking oysters.
FALSE
In a two-good, two country world, if one country has an absolute advantage in the production of both goods, it cannot benefit by trading with the other country.
FALSE
One desirable outcome of a market economy is that it leads to a more equitable distribution of income.
FALSE
T/F: When voluntary exchange takes place, only one party gains from the exchange.
FALSE
The decisions Apple makes in determining production levels for its iPhone is an example of a macroeconomics topic.
FALSE
The full-employment rate of unemployment is zero.
FALSE
In general, economists rely more heavily on the establishment survey rather than the household survey to evaluate the state of the labor market.
TRUE
It is possible to have a comparative advantage in producing a good or service without having an absolute advantage.
TRUE
Jen makes $12 per hour and Sammie makes $24 per hour. Both Jen and Sammie like to eat hamburgers that cost $6 each. Select the correct answer below
Jen's real wage is equal to 2 hamburgers
The basis for trade is comparative advantage, not absolute advantage.
TRUE
A college must decide if it wants to offer more Internet-based classes. This decision involves answering the economic question of "what to produce."
TRUE
An economic model is a simplified version of reality used to analyze real-world economic situations.
TRUE
An increase in the unemployment rate may be represented as a movement from a point on the production possibilities frontier to a point inside the frontier.
TRUE
Economic resources are also called factors of production.
TRUE
For a person to have a comparative advantage in producing a product, she must be able to produce that product at a lower opportunity cost than her competitors.
TRUE
If a country is producing efficiently and is on the production possibilities frontier, the only way to produce more of one good is to produce less of the other.
TRUE
If a country produces only two goods, then it is not possible to have a comparative advantage in the production of both those goods.
TRUE
If an increase in residential burglaries results in households spending more money on security systems, GDP will rise.
TRUE
Which of the following best describes an assumption economists make about human behavior?
They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time
According to the cruise ship example what are the real objectives (goals) of macroeconomic policymakers?
both full employment and economic growth equal to the potential growth rate of the economy
Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness?
marginally attached workers underemployment discouraged workers
According to the cruise ship example what are the nominal objectives (goals) of macroeconomic policymakers?
price stability
During the 1973-1975 recession, GDP growth was about -3% and the percent change in prices was about 13%. This combination of GDP growth and percent change in prices is referred to as:
stagflation
By definition, economics is the study of
the choices people make to attain their goals, given their scarce resources