Macro Exam 1

The law of supply states that as prices _____, the quantity _____. A) rise; demanded falls B) fall; demanded rises C) rise; supplied rises D) fall; supplied rises

C. rise; supplied rises

There is a(n) _____ relationship between price and quantity demanded. A) negative B) indeterminate C) indeterminate, positive, and negative D) positive

A. negative

The resource known as "labor" includes: A) physical and mental skills and talents. B) the work of legal workers. C) physical labor only. D) people willing to do physical and difficult work.

A. physical and mental skills and talents

Wheat is the main input in the production of flour. If the price of wheat increases, all else equal, we would expect the: A) supply of flour to decrease. B) supply of flour to increase. C) demand for flour to decrease. D) supply of flour to be unaffected.

A. supply of flour to decrease

Assume that a student attends a four-year college with tuition costs of $20,000 per year, room and board costs of $5,000 per year, and books/entertainment costs of $1,000 per year. If the student did not go to college, she would work at a job that pays $25,000 per year but still face the same room and board and entertainment expenses. The opportunity cost of attending college for this student for four years is: A) $80,000 B) $124,000 C) $180,000 D) $100,000

D. 100,000

_____ advantage exists when one country can produce more of a good than another country. A) Home country B) Unfair C) Comparative D) Absolute

D. Absolute

The two basic determinants of economic growth are _____ and _____. A) tariffs; trading with weaker countries B) income taxes; human capital C) government spending; labor productivity D) expanding resources; improving technologies

D. expanding resources; improving technologies

A market demand curve: A) reflects society's changing tastes and preferences. B) reflects a positive relationship between price and quantity. C) is of no use to economists, who are concerned only with individual preferences. D) is the horizontal summation of individual demands.

D. is the horizontal summation of individual demands

The opportunity costs of attending college do NOT include: A) the costs of textbooks or eBooks. B) required student activity fees. C) the expenditures for food. D) the forgone wages that could have been earned working.

c. the expenditures for foof

Which factor would NOT change the demand for sea kayak tours? A) a decrease in the price of a sea kayak tour B) an increase in the price of bicycle tours, a substitute activity C) the onset of sunny, summer beach weather D) news reports of whales in the harbor

A. a decrease in the price of a sea kayak tour

Scarcity refers to the fact that: A) a person must make choices given the resource limitations he or she faces. B) there is no long-term benefit to studying economics. C) something is scarce. D) some goods are scarce.

A. a person must make choices given the resource limitations he or she faces

Which of these is NOT an example of market failure? A) Competition leads firms to provide products at the lowest possible price. B) Water is polluted by a paper company located by a river. C) Consumers must buy water from one local water utility. D) Air is polluted by a manufacturing firm.

A. competition leads firms to provide products at the lowest possible price

An increase in the price of ice cream causes the demand for sprinkles to decrease. In this case, ice cream and sprinkles are _____ goods. A) complementary B) substitute C) inferior D) independent

A. complementary

When the supply of surfboards increases and the demand for surfboards falls simultaneously, the price of surfboards will: A) fall. B) either rise or fall. C) fall initially and then rise as demand increases to meet the increased supply. D) rise.

A. fall

Over the last 10 years, laptop computer prices have moved down while their quantity has increased. This indicates that: A) supply has increased more than demand. B) increased demand has created a market incentive to reduce the price. C) demand has increased more than supply. D) demand and supply have increased proportionately.

A. supply has increased more than demand

If a market is NOT at equilibrium: A) the price will change and, in response, market participants will move along the existing supply and demand curves until the market reaches equilibrium. B) supply will shift until the market reaches equilibrium. C) demand will shift until the market reaches equilibrium. D) both supply and demand will shift until the market reaches equilibrium.

A. the price will change and in response, market participants will move along the existing supply and demand curves until the market reaches equilibrium

Heather has one employee in her sweater shop who can sew six sweaters a day. When she hires a second person, the two employees can make ten sweaters together. Thinking at the margin, the extra benefit received from hiring a second worker is _____ sweaters. A) 10 B) 4 C) 6 D) 16

B. 4

Consider the following statements. Which, if any, are positive statements? I. Main Street needs more coffee shops. II. A new parking garage on campus will reduce parking congestion. III. Last winter, the state should have spent more money on snow removal. A) I and II B) II only C) I, II, and III D) I

B. II

Which circumstance would increase the supply of pork sausage? A) an increase in the number of pork sausage buyers B) a decrease in the price of ingredients used to produce sausage C) a news release that provides details about the ingredients in pork sausage D) an increase in the number of chicken sausage buyers

B. a decrease in the price of ingredients used to produce sausage

In economics, the term "land" includes: A) resources found on the Earth's surface. B) all natural resources. C) mostly agricultural land. D) natural resources excluding water resources.

B. all natural resources

Paying a salesperson more for increased sales is an example of: A) equity. B) an incentive. C) an opportunity cost. D) efficiency.

B. an incentive

Butter is a substitute for margarine. If the price of margarine drops, we would expect to see: A) the price of butter fall and the quantity of butter rise. B) both the price of butter and quantity of butter fall. C) the price of butter rise and the quantity of butter fall. D) both the price of butter and the quantity of butter rise.

B. both the price of butter and quantity of butter fall

Capital, which includes all manufactured products that are used to produce other goods and services, earns: A) wages. B) interest. C) rent. D) profit.

B. interest

An institution that enables buyers and sellers to interact and transact with one another is known as a(n): A) stock exchange. B) market. C) economy. D) bank.

B. market

_____ occur(s) when goods are produced at the lowest possible cost, and _____ occur(s) when individuals who desire a product the most receive those goods and services. A) Allocative possibilities; production possibilities B) Production efficiency; allocative efficiency C) Allocative efficiency; production efficiency D) Production possibilities; allocative possibilities

B. production efficiency; allocative efficiency

When an economy is operating efficiently, the production of one more unit of a good will result in some loss of production of another good because: A) the production possibilities frontier (PPF) shifts inward as more of only one good is produced. B) resources are limited and efficiency implies that all resources are already in use. C) consumers will not want more of both goods. D) technology can only improve the production of one good.

B. resources are limited and efficiency implies that all resources are already in use

Because of scarcity: A) choices are unlimited. B) we face tradeoffs in nearly every choice we make. C) wants are limited. D) resources are limitless.

B. we face tradeoffs in nearly every choice we make

Which statement illustrates the law of demand? A) Marcus offers to sell more sticks of chewing gum at $1 than at $2. B) Lindsay offers to buy more sticks of chewing gum at $2 than at $1. C) Lindsay offers to buy more sticks of chewing gum at $1 than at $2. D) Marcus offers to sell more sticks of chewing gum at $2 than at $1.

C. Lindsay offers to buy more sticks of chewing gum at $1 than at $2

When the _____ outweigh(s) the _____ of the information, people will attempt to obtain the information. A) equity; efficiency B) efficiency; equity C) benefits; costs D) costs; benefits

C. benefits; costs

Ceteris paribus, a decrease in the number of businesses selling pizza will cause a(n): A) increase in the quantity of pizza demanded. B) increase in pizza demand. C) increase in the equilibrium price of pizza. D) decrease in the equilibrium price of pizza.

C. increase in the equilibrium price of pizza

Suppose there is unseasonable summer weather in a resort town. We can expect demand to shift _____ and the equilibrium price for hotels to _____. A) right; rise B) right; fall C) left; fall D) left; rise

C. left; fall

If the demand for iPhones rises as incomes increase, then the iPhone is a(n) _____ good. A) supply B) inferior C) normal D) abnormal

C. normal good

The payment to entrepreneurship is called: A) interest. B) rent. C) profit. D) wages.

C. profit

The production possibilities model holds _____ and _____ constant. A) labor; capital B) growth; human capital C) resources; technology D) land; labor

C. resources; technology

If consumers believe that an item will not be available in the future, then demand will shift _____ and the equilibrium quantity will _____. A) right; fall B) left; fall C) right; rise D) left; rise

C. right; fall

The theory of comparative advantage says that countries: A) can never benefit from specialization in trade. B) should restrict trade by cutting off all imports. C) should export those goods they can produce at a lower opportunity cost than another country. D) should import those goods they can produce at a lower opportunity cost than another country.

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

A point on a nation's production possibilities frontier indicates: A) levels of production that will cause both unemployment and inflation. B) an undesirable combination of goods and services. C) that resources are fully utilized in producing the given combination of goods and services. D) combinations of output that are unattainable, given the current stock of resources and technology.

C. that resources are fully utilized in producing the given combination of goods and services

In the market for cable television, fewer people are subscribing to cable while the cost of providing cable television has increased. As a result, we can expect a(n): A) unknown change in the equilibrium quantity but a decrease in the equilibrium price of cable television. B) increase in the equilibrium price and quantity of cable television. C) unknown change in the equilibrium price but a decrease in the equilibrium quantity of cable television. D) decrease in the equilibrium price and quantity of cable television.

C. unknown change in the equilibrium price but a decrease in the equilibrium quantity of cable television

Thinking at the margin involves: A) maximizing a firm's or individual's well-being. B) influencing how individuals make decisions. C) weighing the impact of one additional activity. D) making wiser decisions given limited information.

C. weighing the impact of one additional activity

Paolo can walk three dogs or mow two lawns in two hours. Ashanti can walk six dogs or mow three lawns in two hours. One can conclude that: A) Paolo has absolute advantage in lawn-mowing; and Ashanti has comparative advantage in dog-walking. B) Ashanti has absolute advantage in lawn-mowing; and Paolo has comparative advantage in dog-walking. C) Paolo has absolute advantage in dog-walking; and Ashanti has comparative advantage in lawn-mowing. D) Ashanti has absolute advantage in dog-walking; and Paolo has comparative advantage in lawn-mowing.

D. Ashanti has absolute advantage in dog-walking; and Paolo has comparative advantage in lawn-mowing

The main role of a market is to: A) keep prices low. B) guarantee equity. C) make everyone happy. D) allocate resources.

D. allocate resources

If the price of kayaks rises, the: A) supply of kayaks decreases. B) quantity supplied of kayaks decreases. C) supply of kayaks increases. D) quantity supplied of kayaks increases.

D. quantity supplied of kayaks increases

Which scenario does NOT fall under the category of microeconomics? A) Jonathan decided to go to the movies instead of going to work. B) Cooks at McDonalds supply labor in return for wages. C) Pepsi experienced an increase in revenue last quarter. D) The cost of living has risen due to rising housing and food prices.

D. the cost of living has risen due to rising housing and food prices

When specialization is used: A) there is more emphasis on self-reliance. B) society is more productive, while individuals are less productive. C) opportunity costs tend to be constant. D) there are greater gains in material well-being.

D. there are greater gains in material well-being

Which statement about markets is TRUE? A) Markets need to always be controlled by the government. B) Profits are never an effective discipline on the market. C) They always operate efficiently. D) They bring buyers and sellers together.

D. they bring buyers and sellers together

Opportunity costs exist because: A) sellers are unwilling to give up their product without a price. B) there are opportunities to find ways to reduce costs. C) buyers always have an opportunity to go to another seller. D) using resources for one activity means that their use elsewhere must be given up.

D. using resources for one activity means that their use elsewhere must be given up

A surplus exists: A) at the market clearing price. B) when quantity supplied is less than quantity demanded. C) any time the market is out of equilibrium. D) when quantity supplied exceeds the quantity demanded.

D. when quantity supplied exceeds the quantity demanded

John chose to buy a pizza. If he had not bought the pizza, he would have bought either a hot dog or a burger. John's opportunity cost of buying the pizza is: A) both the burger and the hot dog B) the hot dog C) whichever alternative, the hot dog or the burger, has the next highest value to John D) the burger

c. whichever alternative, the hot dog or the burger, has the next highest value to John