ECON 2030 Exam 1

The movement from Point A to Point B on this graph shows a(n):

recession

In the circular-flow diagram, an organization that produces goods and services for sale is a:

firm

An example of investment spending is:

the purchase of a freezer by an ice-cream parlor.

The basic concern of microeconomics is to:

study the choices people make, given unlimited wants.

The General Theory of Employment, Interest, and Money, written by _____ and published in _____, transformed the way economists thought about macroeconomics.

John Maynard Keynes; 1936

In the market for fresh coffee, a normal good, which of the following will shift the demand curve to the right?

Incomes rises

In the circular-flow diagram, the factor market is where:

businesses buy factors of production.

Which statement is among the four principles that underlie individual choice?

"How much" is a decision at the margin.

(Table: Furniture Production Schedule) Use Table: Furniture Production Schedule. What is the total value added of all stages of production of furniture in this production schedule?

$1,200

(Figure: The Demand and Supply of Quinoa) Use Figure: The Demand and Supply of Quinoa. If there is an increase in demand of 2,000 bushels per period at each price, the equilibrium price and quantity will be _____ and _____ bushels per period, respectively.

$7; 7,000

(Table: Production Possibilities Schedule II) Use Table: Production Possibilities Schedule II. If an economy is producing at alternative B, the opportunity cost of producing at C is _____ cell phones per period.

4 (18-14)

(Figure: Wheat and Trains) Use Figure: Wheat and Trains. Suppose the economy is operating at point B. The opportunity cost of producing the third train would be _____ tons of wheat.

45

Figure: Savannah's Production Possibilities) Use Figure: Savannah's Production Possibilities. Which point or points represent(s) a combination of bananas and pineapples that is efficient in production?

A and B

_____ illustrates an inverse relationship between price and quantity.

A demand curve

For the past several months, per capita output has grown more and more slowly, and unemployment has fallen, but both trends appear to have leveled off. Where in the business cycle is the economy

at a peak

The onset of the Great Depression:

came as a shock to most economists and opened the door for critiques of mainstream thought by economists like John Maynard Keynes.

If the value of a country's exports is GREATER than the value of its imports, it:

is running a trade surplus.

Marginal analysis:

is used primarily when deciding how much of an activity to undertake.

Which of the following is sold in the factor market?

labor

(Table: Comparative Advantage I) Use Table: Comparative Advantage I. Japan has an absolute advantage in producing:

tuna only

Which statement BEST exemplifies the law of demand?

As the price of computers rises, fewer computers are purchased.

(Figure: Demand and Supply of Sugar) Use Figure: Demand and Supply of Sugar. A factor that may have shifted the supply from S1 to S2 is:

better technology in the production of sugar.

Goods that are sold in 2020 but produced in 2018:

are included in investment in 2018.

In the circular-flow diagram, households:

supply resources

While buying refreshments for an upcoming party, you notice that a six-pack of Bud Lite Beer costs $6 and that a six-pack of Miller Lite Beer costs $8. You buy the six-pack of Miller Lite Beer, although you wonder if maybe two six-packs of Bud Lite Beer would have been a better choice. The opportunity cost of the Miller Lite Beer is:

two six-packs of Bud Lite Beer.

GDP calculated via factor payments includes:

wages, interest payments, rent, and profits.

Economic models are:

potentially useful in informing economic policy.

One role of government policy, suggested by macroeconomic analysis, is to:

manage short-run economic fluctuations.

(Figure: An Expanded Circular-Flow Diagram) Figure: An Expanded Circular-Flow Diagram. The flow of funds into and out of the rest of the world is:

$160

(Figure: An Expanded Circular-Flow Diagram) Figure: An Expanded Circular-Flow Diagram. The flow of funds into and out of financial markets is:

$300 (170+130)

(Table: Matcha Tea and Coho Salmon Production Possibilities) Use Table: Matcha Tea and Coho Salmon Production Possibilities. The table shows the maximum amounts of matcha tea and Coho salmon that Colombia and Washington can produce if each produces just one good. The opportunity cost of producing 1 unit of Coho salmon for Washington is _____ matcha tea(s).

1

(Figure: Apple Cider and Soybeans) Use Figure: Apple Cider and Soybeans. The opportunity cost of moving from producing ONLY soybeans to producing ONLY apple cider is _____ tons of soybeans.

15

(Figure: Supply of Bananas) Use Figure: Supply of Bananas. A rise in the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport bananas could be represented in the figure as a movement from:

C to A

Which statement is TRUE?

It is possible to have no absolute advantage but a comparative advantage in the production of some good.

Tara had a DVD rental shop, but the store went out of business because no one rents DVDs from stores anymore. Which economic principle does this statement BEST represent?

One person's spending is another person's income.

The simple circular-flow diagram ignores a number of real-world complications in the interest of simplicity. Which of the following is NOT one of the factors ignored?

The role of the market for goods and services in the circular flow.

You decide to join the football team, but this means you can't join the basketball team, as the practices for the two teams occur at the same time. Which economic principle does this statement BEST represent?

The true cost of something is its opportunity cost.

Which item is NOT included in calculations of GDP?

a monthly Social Security payment

Saying that an unemployment rate of 8% is too high is:

a normative statement

Which factor would cause a DECREASE in the supply of a good?

a rise in input prices

Given that people usually exploit opportunities to make themselves better off, which of the following policies is MOST likely to reduce road congestion in Los Angeles (the worst traffic city in America)?

a toll road that requires each car to pay a congestion fee to enter the city center

John Maynard Keynes believed that the government should:

actively try to mitigate the effects of recessions through fiscal and monetary policies.

Investment spending refers to the:

addition to the economy's supply of productive physical capital.

(Figure: Dreamliners and Small Jets) Use Figure: Dreamliners and Small Jets. The combination of dreamliners and small jets at point H:

cannot be attained, given the level of technology and the factors of production available.

If France gives up three high speed trains for each ton of cheese it produces, while Canada gives up seven high speed trains for each ton of cheese it produces, then France has a comparative advantage in _____ production and should specialize in _____.

cheese; cheese

If a demand curve is downward sloping, a decrease in supply with no change in demand will lead to a(n) _____ in the equilibrium quantity and a(n) _____ in the equilibrium price.

decrease; increase

Suppose that apples and pomegranates are substitutes in consumption. The _____ pomegranates will increase when apple prices rise.

demand for

In a business cycle, a trough is immediately followed by a(n):

expansion

Domestically produced goods and services sold to people in other countries are known as:

exports

When the Dairy Farmers of America (an agricultural coop) restricts the supply of milk to increase the profits of dairy farmers, the milk market:

fails because there is no longer an efficient allocation of resources.

During a recession, one will often observe:

falling aggregate output.

In the factor markets:

firms buy resources

Fiscal policy refers to changes in _____ to affect overall spending in the economy.

government spending and taxation

An economy is said to have a comparative advantage if it:

has the lowest opportunity cost of producing a particular good compared with other economies.

An individual with an absolute advantage in the production of all goods will:

have a comparative advantage in the production of some goods but not others.

Tessa is paid $14.25 an hour to work at a retail store. In the circular-flow diagram, this is an example of a:

household selling a resource in the factor market.

In the markets for goods and services:

households buy goods and services.

The paradox of thrift implies that:

increased saving by individuals increases their chances of becoming unemployed.

In moving along a production possibility frontier, the opportunity cost to society of getting more of one good:

is measured by the amount of the other good that must be given up.

The promotion of employment and growth in the economy as a whole is a focus of:

macroeconomics

Some football fans leave the game at the two-minute warning (especially when the outcome is pretty assured) to avoid the postgame traffic. These fans are:

making a marginal decision by comparing the cost of leaving early to the benefit of leaving early.

Consider the local market for fast food hamburgers, an inferior good. If more fast food restaurants open, while consumers' incomes increase, the effect on price will be _____, and the effect on quantity will be _____.

negative; indeterminate

Which of the following is NOT a government transfer?

payments by the Defense Department for a new weapons system

Investment spending is spending on:

productive physical capital.

Economists report that employment has fallen over the last several quarters and forecast more of the same for the next few months. The economy is in the _____ stage of the business cycle.

recession

Suppose you take the train to work every day. Because you drive to the train station from your house, you must allow for time to park. However, since the train station has free parking for commuters, you often have difficulty finding a spot to take the train at the time you wish. To solve this problem, all commuters should be:

required to pay for parking.

The national income and product accounts keep track of:

sales and investment spending by businesses.

The circular-flow diagram illustrates how firms _____ goods and services and _____ factors of production.

sell; buy

An example of an intermediate good is:

steel purchased by aircraft manufacturers.

You notice that the price of computers has risen and that the quantity of computers sold has decreased. These observations suggest that the _____ curve for computers has shifted to the _____.

supply; left

Which of the following is NOT included in investment spending in the national income accounts?

the purchase of stocks and bonds by a business

A household is a person or group of people _____.

that share an income

Macroeconomics focuses on:

the economy as a whole

In contrast to the conclusion of microeconomic analysis that competitive markets (assuming no market imperfections and perfect information) will lead to full employment, many economists argue, based on macroeconomic analysis, that:

the economy can suffer from prolonged unemployment as a result of an overall deficiency of demand.

The business cycle is:

the short-run alternation between expansion and contraction.

Yoghurt is an important ingredient in the production of frozen yoghurt. If the price of yoghurt increases, then one would expect, holding all other things constant:

the supply curve for frozen yoghurt to shift leftward.

Aminah has a calculus exam tomorrow. However, a free lecture by one of her favorite authors is taking place this evening. Aminah decides to attend the lecture instead of studying for her exam. Aminah's opportunity cost of attending the lecture is:

the transportation and time cost of getting to the lecture itself plus the reduction in her physics exam grade as a result of not studying tonight.

GDP does NOT exclude:

the value of owner-occupied housing.

The demand for a good will increase if:

there is an increase in the number of consumers in this market.

If a market is in disequilibrium:

there will be opportunities for people to make themselves better off.

If an economy moves from producing 10 units of milk and 4 units of cheese to producing 7 units of milk and 5 units of cheese, the opportunity cost of the fifth unit of cheese is:

three units of milk.

The point in the business cycle when GDP stops falling and begins rising is a(n):

trough

The national accounts do NOT keep track of:

exchange rates

(Table: The Market for Salt and Vinegar Chips) Use Table: The Market for Salt and Vinegar Chips. There is an excess demand of 210 bags of salt and vinegar chips per month if the price is _____ per bag.

0.30

(Table: Matcha Tea and Coho Salmon Production Possibilities) Use Table: Matcha Tea and Coho Salmon Production Possibilities. The table shows the maximum amounts of matcha tea and Coho salmon that Colombia and Washington can produce if each produces just one good. The opportunity cost of producing 1 unit of matcha tea for Colombia is _____ Coho salmon.

0.5

(Figure: Shifts in Demand and Supply) Use Figure: Shifts in Demand and Supply. The figure shows how supply and demand might shift in response to specific events. Suppose scientists discover that eating more broccoli helps prevent aging. Which panel BEST illustrates how this finding will affect the market for broccoli?

C (right shift of demand line)

(Figure: Shifts in Demand and Supply II) Use Figure: Shifts in Demand and Supply II. The graph shows how supply and demand might shift in response to specific events. Suppose a heat wave destroys one-quarter on the nation's potato crop. Which panel BEST illustrates how this event will affect the market for french fries?

C (supply line goes to the left)

(Figure: Four Markets for Apple TV Rentals) Use Figure: Four Markets for Apple TV Rentals. Assume that D1 or S1 is the original curve and that D2 or S2 is the new curve. Which graph shows what would occur if the cost of buying content for Apple TV distributors (i.e., the price that Apple pays for online content to sell to consumers) decreased?

D (Shift to the right for supply line)

(Figure: Supply and Demand in the Peach Market) Use Figure: Supply and Demand in the Peach Market. The market is in equilibrium at point C. Suppose most people drink peach juice in the afternoon with champagne. What will be the new equilibrium point in the peach juice market if a law banning alcohol passes?

D (demand shifts to left)

Consider the market for iPads. What happens if a fantastic new alternative tablet is developed by Samsung and, at the same time, a factory that makes iPads catches fire, destroying 3 million iPads?

Price increases, and the change in quantity is indeterminate.

Purchases of imported products are:

not a part of the GDP calculation.

Spending on inputs is _____ of GDP, and investment spending is _____ of GDP.

not a part; part

The emergence of new technologies and the expansion of resource availability concern which economic principle?

Increases in the economy's potential lead to economic growth over time.

(Figure: The Market for Chocolate) Use Figure: The Market for Chocolate. A surplus of the good will exist at a price of:

P3

The view that the government should take an active role in managing the economy dates from:

The Great Depression

If two countries each specialize in the goods to which they are most suited and then trade, which of the following will occur?

The average well-being of people in both countries will increase.

Which statement is TRUE?

Untalented people have a high opportunity cost in something they do.

A movement along the demand curve for a good generally results from:

a change in the price of the good.

Steak is a normal good. If students' incomes at your college decrease, the effect on steak consumption will be:

a decrease in demand.

It would be impossible to do an experiment that involved raising the minimum wage across the country and seeing what happens. Instead, economists will observe the effects of a smaller economy that is raising its minimum wage (like New York City in 2019) and then extrapolate those results to the larger U.S. economy. This preceding statement embodies the ideology inherent in:

an economic model.

Which of the following will NOT cause the production possibility frontier to shift outward?

an increase in the unemployment rate

French fries and pastrami sandwiches are complements in consumption. Suppose the cost of the ingredients used to make pastrami sandwiches rises, so that the price of pastrami sandwiches rises. The equilibrium price of French fries will then _____, and the equilibrium quantity will _____.

fall; decrease

Among the tools available to macroeconomic policy makers is:

fiscal policy, to influence overall spending.

Long-run economic growth is best measured by:

growth in the production of goods and services.

The effect of an earthquake in California can be shown by a(n) _____ the production possibility frontier of California.

inward shift of

(Scenario: The United States and Germany) Use Scenario: The United States and Germany. Given this information, the country that has the absolute advantage in barley is _____, and the country that has the absolute advantage in aluminum is _____.

the United States; Germany

Many parking lots have specially located spaces for individuals with disabilities. Further, the provision of special parking passes for those with disabilities often requires that there be more spaces available than can be used at any given time. As a result, many of these parking spaces, which take space that could be used for regular parking, are often vacant. This scenario illustrates the:

trade-off between efficiency and equity.

King Taco charges the same price for everything on its menu: $5 will buy a taco, a burrito, or nachos. You buy the burrito and think that if you had not purchased the burrito, you would have purchased the taco. The opportunity cost of the burrito is:

your forgone enjoyment of the taco.

Which item would NOT be included in GDP for 2019?

your purchase of your neighbor's 2015 Toyota