ECON 222 Midterm 1 Questions Lindahl

allocative efficiency occurs when

people who want a product the most get it

Total Spending in an economy is the sum of:

personal consumption plus gross private investment plus government spending plus net exports

in economic markets. what signals information between buyers and sellers

prices

When goods are produced at the lowest possible cost, an economy is said to have achieved:

production efficiency

When the supply of coffee decreases and the demand for coffee increases simultaneously, the price of coffee will

rise

the core problem in economics is

scarcity

the demand for iphones rise as income increase, then its a

normal good

absolute advantage is defined as

one country can produce more of a good than another country

The largest component of GDP is

consumption expenditure

Paolo can walk three dogs or mow two lawns in two hours. Ashanti can walk six dogs or mow three lawns in two hours. Ashanti's opportunity cost for each additional dog walked is:

.5 lawns mowed

Consider an economy that only produces two goods; if 10 DVDs are sold at 20$ and 5 DVD Players are sold at 100$ each, then the nominal GDP is:

700$

The Wonderful Widget Company is trying to increase the market price. What is one strategy it can use?

Advertise or change the product to make it more desirable

If bagels and doughnuts are substitute goods, then which of the following is likely to occur if the price of bagels is reduced?

The demand curve for doughnuts will shift to the left

If the nominal GDP grows 8% in one year and inflation is 6% over the same time period, then the real GDP has increased.

True

The US Labor Force Participation rate has been falling in recent years

True

Suppose that if the US produced only oil, it could produce 25 mil barrels and if it produced only microchips it could produce 20 mil chips. Suppose that if Mexico could produce 16 mil barrels or 8 mil chips. Which is correct

US has absolute advantage in both goods

which of the following will not cause the supply curve for kayaks to shift to the left

a decrease in the price of a kayak

which of the following will cause a movement down along a demand curve?

a decrease in the product price

which one would be included in GDP calculations?

a hamburger purchased by a restaurant patron

who is considered the father of capitalism

adam smith

Suppose Mike has three hours of time to spend and he sets the following activities in order of priority: 1. see a movie; 2. attend a ball game; 3. study economics. Assume each activity takes three hours. What is Mike's opportunity cost of seeing the movie?

attending a ball game

in a free market economy, how are goods rationed

by price

Ceteris paribus, the effect of a decrease in income on a normal food is to shift the:

demand curve to the left, reducing both equilibrium price and output

gdp measures the final value of goods and services produce to avoid the problem of:

double counting

Net exports equal:

exports minus imports

A decrease in demand causes the equilibrium price to ___ and the equilibrium quantity to ___

fall; fall

The effective federal funds rate has been high but steady in the US recently

false

The US GDP is equal to the total market value of all:

final goods and services produced by resources in the US

markets work as if they are

guided by an invisible hand according to adam smith

Real GDP is the same as

inflation adjusted GDP

when economists use the word additional they generally mean

marginal

economic growth is shown as a

shift to the right in the PPF

The theory of comparitive advantage says that countires

should export those goods they can produce at a lower opportunity cost than another country.

economics is a

social science

GDP can be found either by adding up all of the ___ or all of the ___ in the economy

spending ; income

An increase in the cost of coffee beans, which is used to make coffee, will cause the _____ for coffee to shift _____.

supply; left

A ___occurs when the price is above market equilibrium

surplus

if a market is not at equilibrium

the price will change and in response market participants will slide along the existing supply, and demand curve until the market reaches equilibrium

true about specialization and exchange between 2 individuals

they generally benefit the poorer individual as well as the richer individual

GDP per capita is found by dividing GDP by population

true

income and gdp per capita tend to move together

true

during a typical recession

unemployment rises