macro econ test 1

Based on the following statistics, how much are net exports?

-$0.575 trillion

Consider the data shown in the table. Assume that the economy produces only textbooks. What is the growth rate of real GDP between the two years using last year as the base year?

5%

The demand curve for meals at a local Chick-fil-A will shift to the left if:

Chick-fil-A offers a free sandwich to people who sign up for their new rewards app.

Which statement BEST illustrates the law of demand?

Consumers buy more iPhones because prices have fallen.

Which of these scenarios depicts a rational buyer?

Damien buys a sandwich for $5 when the marginal benefit of the sandwich to him is $7.

For Elandra, home-brewed coffee is an inferior good, and lattes from the coffee shop are a normal good. Recently, Elandra cut back on lattes and began brewing her own coffee at home. What may have caused this change?

Elandra's income fell.

Which of these graphs shows what will happen in the market for bread if the price of organic wheat used in bread production rises?

Graph C

What is the difference between spending from a microeconomic standpoint versus spending from a macroeconomic standpoint?

In microeconomics, spending refers to spending by you, or your family, or your company, whereas in macroeconomics, spending refers to the spending by all consumers, all businesses, and the government in the economy.

HelloFresh is a service that provides subscribers with recipes and all the necessary ingredients to prepare meals at home, delivered to their door once per week. Holding other things constant, what would happen if the company found a more efficient way to keep food fresh and safe during shipment?

There would be a movement down the market demand curve.

(Figure: Shifts in Demand and Supply II) Diane is an avid gardener. Which graph of the potting soil market illustrates her most probable response if the cost of flowerpots falls?

a

Antonio has a cell phone, and his service provider is AT&T. When he calls his wife, Erika, who is also an AT&T customer, he does not have to pay for those minutes. The more AT&T customers there are in the market, the greater the benefit Antonio receives. This is:

a network effect.

Dental services are:

a normal good.

In a typical week, Cheyenne buys four lattes at Starbucks. If the price of lattes doubles, what is the MOST likely number of lattes she will buy?

two

For normal goods, an increase in income will result in:

an increase in the equilibrium price and equilibrium quantity.

Shifts in the market demand curve occur:

because of all the factors that shift individual demand curves, along with changes in the types and number of buyers.

If the price of paint rises, we can expect the:

demand for paintbrushes to decrease.

Over the past several years, sushi has become increasingly popular among consumers. This means that the _____ has _____.

demand for sushi; increased

The Rational Rule for Sellers says that a seller should sell one more unit of an item if the price is:

greater than or equal to the marginal cost.

When there is a shortage of highly skilled workers in a particular region:

highly skilled workers can negotiate higher salaries.

(Figure: Graph 2) In the graph, the movement from point L to point K is caused by a(n):

increase in the price of the item.

Refer to the diagram of the circular flow of income. Based on the diagram, the arrow going FROM box 2 to box 1 must be:

output bought by households.

The interdependence principle states that your best choice today depends on all of these EXCEPT:

past decisions you have made.

The law of supply refers to the:

positive relationship between price and quantity supplied.

When plotting a supply curve, you measure:

quantity supplied on the horizontal axis.

A central and fundamental theme in economics is that:

resources are limited and cannot satisfy all the ways a society wants to use them.

At Trader Joe's, the price of chocolate chip cookies falls. As a result, you would expect to see a(n):

rise in the quantity demanded of chocolate chip cookies.

Diminishing marginal product leads to:

rising marginal costs for a seller.

Henderson Lumber is a lumber mill that produces both boards used in construction and sawdust, a byproduct of the board production, used in agriculture. When the housing market collapses, causing house prices along with the prices of boards used to build houses to fall, Henderson Lumber's _____ will likely _____.

supply of sawdust; decrease

(Figure: The Demand and Supply of Quinoa) Use Figure: The Demand and Supply of Quinoa. If the price of quinoa is $10 per bushel, a _____ of _____ bushels per period will result.

surplus; 8,000

The marginal cost of an additional worker is:

the additional cost of hiring one more worker.

We expect that price will fall when:

the quantity supplied is greater than the quantity demanded.

Rose's parents have booked and paid for a family trip to Aspen, Colorado, during her spring break. Rose's friends recently decided to drive to Destin, Florida, for spring break. Rose needs to decide whether to join her parents in Aspen or drive to the beach with her friends. The opportunity costs of joining her friends on the trip to Destin include each of these EXCEPT:

the ski lift ticket her parents have already purchased for her.

It is a rainy day, and you are considering taking an Uber one mile to meet some friends. You have decided you are willing to pay $20 to avoid getting wet from the rain. The trip would normally cost you $8, but due to the weather the surcharge is triple the regular cost. You should _____ because the benefit to you of taking the Uber is _____ than the cost.

walk; less

An equilibrium in a market occurs:

when the quantity supplied equals the quantity demanded.

A doctor has worked as a general practitioner for several years, earning an annual salary of $150,000. They are now deciding whether they want to open their own private practice or continue as a team member in the existing office. One-time start-up costs for the practice would be $100,000. If they open their own practice, they will receive a salary of $50,000 from the business annually until the practice is well-established. They anticipate the practice will take two years to become fully established. They paid $200,000 for medical school. They should open their own practice if the future benefits exceed:

$300,000.

In 2010, Canada's GDP was approximately $1,357 billion, and its population was about 34.12 million. What was Canada's approximate GDP per person in 2010?

$39,770

As the manager of a farm-to-table restaurant, Carlos sets the prices of entrees each day. Today, his restaurant sold out of avocado toast during brunch service, so he had to recommend to some avocado toast aficionados the goat cheese radish tartine with micro greens. Which price did he MOST likely set for avocado toast? PriceQuantity DemandedQuantity Supplied$15.00440$13.00832$11.001224$9.001616$7.00208

$7.00

You are a small business owner preparing to launch your first ad campaign to attract new customers, and must decide whether to learn about advertising yourself or hire a professional to launch the campaign. The campaign will last three months. If you hire a professional, you'll have to pay them a lump sum of $1,000 for the entire campaign. But if you decide to do it yourself, you'll take a course that costs $200 to introduce you to the skill. You'll also pay an employee $340 per month to work some of the hours you normally work while you manage the campaign. Would it be better to hire a professional rather than doing the campaign yourself?

Yes, because your economic surplus is $220.

In employing the marginal principle, a seller may:

decide whether to supply one more unit of a good or service.

(Figure: Leo's marginal benefit) The graph depicts Leo's marginal benefit curve for ride-shares per week. If the price is $4, how many rides will he order this week?

three rides

(Figure: Four sample demands) A hotel in Cape Cod, Massachusetts, is completely booked during August. However, in September, tourism drops significantly, and some hotel rooms remain empty. Which of the graphs depicts this scenario?

Graph A

How is the economic surplus generated by a decision calculated?

It is the total benefits minus total costs arising from the decision.

Which of the following is an example of transfer payments?

unemployment benefits

A friend comes up to you and offers you a free ticket to a Dodgers game that night, and you decide to attend the game. The game takes five hours and costs you $25 for transportation. If you had not attended the game, you would have worked at your part-time job for $12 an hour. What is the cost to you of attending the game?

$85

Consider the data in the table. The price of gasoline is $3.99 per gallon. If Rexhall Fuel Supplies is a rational seller, how many gallons of gasoline should it be willing to sell? Marginal cost per gallonMillions of gallons of gasoline per week$1.9910$2.9914$3.9920$4.9930$5.9942

20 million gallons per week

Metformin, a diabetes drug, is produced as a generic by Glumetza. The marginal cost of producing a bottle of Metformin is indicated in the table below in 1,000 unit increments per day. Quantity of Metformin (bottles)Marginal cost per bottle1,000$9.002,000$10.503,000$11.604,000$12.305,000$13.506,000$14.25 If the market price of Metformin is $11.65, how many bottles of Metformin should Glumetza produce per day to maximize its profits?

3,000

Consider the following graphs, which are discussed in the textbook. Focus on the graph that looks at the relationship between GDP per person and infant deaths per 1,000 live births. What can explain this relationship?

As real GDP per person rises, maternal and fetal health increase due to better health care, education, sanitation, and nutrition.

Suppose you manage a convenience store. If macaroni and cheese is an inferior good, what do you suppose would happen to the price and quantity sold of macaroni and cheese as incomes fall during a recession?

Both the price and quantity would increase.

(Figure: Gasoline Supply Curves) Three gas stations make up the market for gasoline in your town. The number of gallons of gasoline that each gas station is willing to supply per week at various prices is indicated in the accompanying table. Price per gallonShellArcoChevron$2.5003,0000$3.0003,5003,000$3.503,0004,0003,500$4.003,5004,5004,000$4.504,0005,0004,500 Which curve in the following diagram represents the market supply curve?

C

Paper producers can manufacture both printing paper and drawing paper. What effect would rising prices for printing paper have on the supply of drawing paper?

The supply of drawing paper will decrease.

You're the manager of an independent coffee bar with a loyal customer base, and you have accurate information about your current customers' demand curves. You lower the price on your lattes, but the new total quantity demanded for your lattes far exceeds your estimate. What is the MOST likely explanation?

You neglected to factor in new customers entering your market due to the lower price.

In which scenario are you NOT part of a market transaction?

You take a photo of flowers in bloom in a city park.

Juan is willing to pay $900 for a new iPad. He offers to pay $800 for an iPad at the Apple store. It costs Apple $700 to produce this iPad. A voluntary economic transaction between Juan and Apple _____ occur because _____ would be better off due to the transaction.

will; both Juan and Apple

Consider the data shown in the table. Assume that the economy produces only frozen fish. What is the real GDP for last year using this year as the base year?

$185,000

Below is U.S. economic data for 2018. What was total spending?

$20.58 trillion

Consider the data shown in the table. Assume that the economy produces only textbooks. What is the nominal GDP for last year?

$250,000

Based on the following statistics, how much is consumption?

$6.49 trillion

In 2017, the total population of Africa was estimated to be about 1,250,000,000 people. This number, in billions, is:

1.25.

(Figure: Four Supply Curves) If companies frequently start using drones to deliver products, which graph shows the effect this will have on the market for drones?

Graph A

What is the difference between microeconomics and macroeconomics?

Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole.

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?

The change in price is indeterminate, and quantity decreases.

Why might you underestimate the increase in market quantity demanded when you lower your price?

You may not take into account potential new customers attracted by the lower price.

You just moved into your new apartment, which has washer and dryer hookups, but your apartment complex doesn't provide washers and dryers. You don't want to go to a laundromat. You can rent a washer and dryer set from an appliance rental company for $30 per month. Alternatively, you could buy a set for $1,100, which you could sell after one year for $700, or $600 after two years. You plan to stay in this apartment for two years, since it's near your job. Should you buy or rent the set?

You should buy the set because buying earns $220 worth of economic surplus.

The cost-benefit principle evaluates _____ costs and benefits, and willingness-to-pay considerations quantify _____ costs and benefits.

both monetary and nonmonetary; only nonmonetary

Figure: Multi-Family Apartment Supply Changes) The building contractor Wise Choice Construction is initially at point E in the multi-family apartment building market. When prices of single-family homes rise, Wise Choice starts to build more single-family homes and fewer multi-family apartment buildings. Which point represents a plausible supply choice for the company in the multi-family apartment building market?

c

(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 of the nation's potato crop. Which panel BEST illustrates how this event will affect the market for French fries?

c.

A farmer finds that when he produces more pumpkins, he also has more pumpkins he can sell as decorations. To the farmer, pumpkins and decorative pumpkins are:

complements in production.

As an equity analyst with an investment management company, you monitor market conditions in the dairy sector. Which of these would shift the market supply curve you've modeled for milk?

expectations of a future decline in the price of milk

The difference between a centralized economy and a market economy is that:

governments make production decisions in a centralized economy, and individuals make production decisions in a market economy.

Following the Rational Rule, the maximum economic surplus occurs when:

marginal benefits equal marginal costs.

The _____ is the increase in output that is produced when a business hires an additional worker.

marginal product

Figure: Graph) Refer to the graph to answer the question. A decrease in the price of an item will cause the movement from:

point Q to point P.

The study of economics arises because of the necessity of choice, and the necessity of choice arises because of the fundamental problem of:

scarcity.

Which of these items is a normal good?

steak

Recent research suggests that certain refillable plastic water bottles may leech cancer-causing particles into the containers with repeated usage. As a result of this research being made public, one would expect:

the demand for such containers to decrease.

In your media studies class, you learn that Westerns were once a staple of network television but are now less common. If the production costs per episode of Westerns are comparable to those of other scripted shows, the most likely explanation for their disappearance is that, over time:

the market demand curve for Westerns shifted to the left.

If drivers for ridesharing services like Uber and Lyft successfully negotiate for higher pay, and parking lot operators in the city raise parking rates, what can you conclude about the new equilibrium in the ridesharing market?

The equilibrium price will rise, but the impact on quantity is unclear.

Facebook is subject to network effects because:

its value to an individual increases when the number of other people using it increases.

Which of the following is an example of a durable good?

your new car

You run an electronics store that sells, among other items, big screen televisions. As the market price of big screen televisions decreases, the:

quantity of big screen televisions supplied decreases.

If the price of jet fuel rises, the:

quantity of jet fuel supplied will increase.

Consider the data shown in the table. Assume that the economy produces only barrels of oil. What is the real GDP for this year using last year as the base year?

$4,980,000

Dale is a stay-at-home-parent whose typical day consists of getting the kids ready for school, doing the laundry, cooking three meals, and cleaning the house. How are Dale's home activities counted in GDP?

They are not counted.

(Figure: Recliners and Couches) American Signature is a furniture company based in Columbus, Ohio. The graph represents American Signature's production possibility frontier for manufacturing couches and recliners. The sales team at American Signature has reported that sales of couches have increased. The company would like to increase manufacturing from 100,000 couches to 200,000 couches. As the company's economist, what is the opportunity cost of producing the 100,000 additional couches?

300,000 recliners

Refer to the diagram of the circular flow of income. The key lessons from this diagram are that:(i) all flows of resources are matched by flows of money.(ii) the market value of total output must be equal to total spending.(iii) total spending must equal total income.(iv) all inputs are provided by businesses.

(i), (ii), and (iii)

A shortage occurs when:

quantity demanded exceeds quantity supplied.

While attending college, you are also working as a freelance writer, writing product descriptions for catalogues for $40 per piece. You start each morning writing product descriptions when your mind is fresh. However, at a certain point, you recognize that the more product descriptions you write, the less quality time you can devote to your studies, worsening your grades and somewhat dampening your long-term income prospects. You should stop writing product descriptions when:

the perceived opportunity cost of writing another product description in terms of foregone long-term income rises above the $40 you could earn writing another product description.

The opportunity cost of a good is:

the value of the next best alternative given up to acquire the good.

Vincent makes handcrafted dining tables, and he is trying to decide how many tables to produce. He can sell each dining table for $1,000. The cost of the first table is $900, for the second it's $1,100. For each additional table he produces, the marginal cost of each table increases by $200. How many dining tables should Vincent produce, and what is the total cost of his production?

He will produce one table at a cost of $900.

Suppose the New York City housing market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a series of new apartment buildings has just been completed. Given these two changes, and assuming that apartment housing is a normal good, we can predict that the price of apartments will _____, and the quantity of apartments bought and sold will _____.

fall; rise or fall

Charles is a manager at a coffee shop, and he has to decide how many workers to hire. One worker can make 25 drinks that sell for $5 on average in one hour. A second worker can make another 20 drinks in one hour. The marginal benefit of each additional worker decreases by five drinks, with each additional hire. Given that workers are paid $15 per hour and have eight-hour shifts, how many employees should Charles hire for each hour?

five

In the market for organic beef, what would cause a price increase?

a rise in the prices of grass and organic corn

Which of the following is (are) included in investment?(i) military spending(ii) the purchase of an aircraft by a domestic airline(iii) the purchase of $45,000 worth of bonds(iv) the purchase of $32,000 worth of stock(v) social security payments(vi) the construction of a highway by the federal government

(ii) only

You purchase a new car (produced this year) for $38,000. After six months, you sell the car for $31,500. How much does GDP rise because of these two transactions?

GDP rises by $38,000.

You're a management consultant hired by Sunco Lighting, Inc., to estimate the demand for high-efficiency LED light bulbs. The table shows the results of a survey you conducted of four representative consumers in a market of 40,000 consumers overall. You asked the four buyers how many high-efficiency LED light bulbs they would buy in a year at different prices. Price ($)GloriaMicheleAmyAnnie115152018312101714595141076111693080 What market quantity demanded would you project, based on these data, at a price of $7 per bulb?

240,000

(Figure: Netflix subscriptions) The graph represents monthly Netflix subscriptions. If Hulu, another streaming service, raises its price, what is MOST likely to happen to the demand curve for Netflix?

a shift from Old demand to New demand 1

On a hot sweltering day, you feel thirsty and buy an ice-cold soft drink, which you gulp down. Whether you buy a second drink or not will depend on:

whether the marginal benefit of the second soft drink exceeds the price of the drink.