MACRO FINAL EXAM

Refer to Tableabove. Given the information above, calculate the rate of increase in the price level from 2017 to 2018.

A) 8.6%

One reason some manufacturing companies began moving production to China in the early 2000s was due to lower wages that could be paid to Chinese workers. Moving manufacturing to China to take advantage of lower wages so goods could be produced at a lower cost than if produced in the United States exemplifies which key economic idea?

B) People respond to economic incentives.

Refer to Table above. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals

C) $1,600.

Refer to Figure above. What area represents the decrease in producer surplus when the market price falls from P2 to P1?

C) A + B

Refer to Figure 4-4. The figure above represents the market for iced tea. Assume that this is a competitive market. Which of the following is true?

C) Both 10,000 and 30,000 are economically inefficient rates of output.

Refer to Figure below. ________ is (are) unattainable with current resources

C) Point C

Refer to Figure above. A technological advancement would be represented by a movement from

C) S1 to S2.

Which of the following describes a characteristic of a perfectly competitive market?

C) There are many buyers and sellers.

Which of the following is a result of imposing a rent ceiling?

C) There is an increase in the quantity of apartments demanded.

Which of the following would cause a decrease in the supply of peanut butter?

C) an increase the price of peanuts

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?

C) consume a combination of goods that lies outside its own production possibilities frontier

The underground economy can be described as

C) economic activity that is hidden from the government to avoid taxes or because the activity is illegal.

If the GDP deflator is less than 100, then for that year, nominal GDP ________ real GDP.

C) is less than

Nominal GDP will increase

D) if either the price level or the quantity of goods and services produced rises.

The purchase by a household in China of a CD produced in the United States is included in U.S.

D) net exports.

If the quantity demanded for a product exceeds the quantity supplied, the market price will rise until

D) quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.

Consumer surplus in a market for a product would be equal to the area under the demand curve if

D) the market price was zero.

Deadweight loss refers to

D) the reduction in economic surplus resulting from not being in competitive equilibrium.

In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the BEA

D) values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up.

An increase in quantity supplied is represented by a rightward shift of the supply curve.

False

As population declines, scarcity eventually disappears.

False

If Gladys sells her 2003 Jeep Cherokee for $3,500 in 2018, the sale of her car contributes $3,500 to 2018 GDP.

False

If the demand for a product decreases and the supply of the same product increases, the equilibrium quantity will increase.

False

In economics, the term "free market" refers to a market where no sales tax is imposed on products sold.

False

In market economies, income distribution is always going to be completely equitable.

False

In the circular flow model, households supply resources such as labor services in the product market.

False

Nominal GDP measures the value of all final goods and services at base-year prices.

False

Peanut butter and jelly are complements. If the price of peanut butter increases, the demand for jelly will increase.

False

Physical capital refers to stocks and bonds.

False

Policies based on normative economic ideas tend to increase economic efficiency and improve equity.

False

Rent control is an example of a price floor.

False

The difference between consumer surplus and producer surplus in a market is equal to the deadweight loss.

False

There is a shortage of every good that is scarce.

False

Transfer payments are subtracted from national income to get to personal income.

False

A surplus is defined as the situation that exists when the quantity of a good supplied is 3eater than the quantity demanded.

True

Consider a country that produces only two goods: pineapples and tractors. Suppose it is possible for this country to increase its production of pineapples without producing fewer tractors. In this case, its current output combination is inefficient.

True

If income is unequally distributed in an economy, increases in GDP may not raise well-being in an economy.

True

In a two-good, two country world, if one country has an absolute advantage in the production of both goods, it can still benefit by trading with the other country.

True

The additional benefit to a consumer from consuming one more unit of a good or service is the marginal benefit.

True

Figure above shows the demand and supply curves for the coffee market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00. Refer to Figure above. What is the value of consumer surplus after the imposition of the price floor?

A) $1,500

Lionel's Lawn Care is a company that maintains residential yards. Lionel's cost for his standard package of mowing, edging, and trimming is $15, and he charges $25 for this service. For a total price of $40, Lionel will also trim shrubs, a service that adds an additional $10 to the total cost of the standard package. What is Lionel's marginal cost of adding the shrub-trimming service to the standard package?

A) $10

Figure above shows the demand and supply curves for the coffee market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00. Refer to Figure above. What is the value of the deadweight loss after the imposition of the price floor?

A) $600

Refer to Table above. The value added by the automobile dealer equals

A) $7,000.

Refer to Figure below. What is the opportunity cost of one dozen roses?

A) 0.4 dozen orchids

The Farm Factory, a booth at the local Farmer's Market, sells fresh eggs for $1.50 per dozen and fresh milk for $2.50 per gallon. What is the opportunity cost of buying a gallon of milk?

A) 1 2/3 dozen eggs

Table 1 Julius runs a small tailor shop in the city of Bloomfield. He is debating whether he should extend his hours of operation. Julius figures that his sales revenue will depend on the number of additional hours the tailor shop is open as shown in the table above. He would have to hire a worker for those hours at a wage rate of $18 per hour. 6) Refer to Table 1. Using marginal analysis, how many hours should Julius extend his shop's hours of operations?

A) 2 hours

Refer to Figure below. If the economy is currently producing at point X, what is the opportunity cost of moving to point W?

A) 3 million tons of steel

Suppose Bob works for Mary as a proofreader. Mary and Bob fall deeply in love, marry, and have eight children. Bob stops working for Mary in order to care for the children. What will be the effect on GDP?

A) GDP will decrease.

Refer to Figure below. Which country has a comparative advantage in the production of coconuts?

A) Guatemala

If the GDP deflator is 142, by how much have prices changed since the base year?

A) Prices have increased by 42%.

Which of the following is a normative economic statement?

A) Tobacco products should be banned in all public spaces.

Which of the following is a macroeconomic question?

A) What determines the minimum wage?

When every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it, ________ occurs.

A) allocative efficiency

If an increase in income leads to a decrease in the demand for salami, then salami is

A) an inferior good.

A black market is a market where buying and selling take place

A) at prices that violate government price regulations.

Voluntary exchange increases economic efficiency

A) because neither the buyer nor the seller would agree to a trade unless they both benefit.

The willingness of consumers to buy a product at different prices is shown on a

A) demand curve.

In the circular flow model, the value of total income for an economy ________ the value of total production.

A) equals

Refer to Figure above. In the circular flow diagram, economic agents M represent

A) households.

The ________ effect of a price change refers to the impact of a change in the price of a good on a consumer's purchasing power.

A) income

The area above the market supply curve and below the market price

A) is equal to the total amount of producer surplus in a market.

If the price of smartphones was to increase, then

A) the demand for smartphone apps would decrease.

A demand curve shows the relationship between

A) the price of a product and the quantity of the product demanded.

Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states. In the market for gasoline

A) the supply curve shifted to the left resulting in an increase in the equilibrium price.

Refer to Table above. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The base year used in calculating real GDP is

B) 2016.

Refer to Figure above. If Vidalia chooses to produce 80 dozen roses, how many orchids can it produce to maximize production?

B) 48 dozen orchids

Refer to Figure above. At a price of $25, how many units will be sold?

B) 500

All of the following are examples of spending on goods and services in the circular flow model except

B) Chaitanya buys a new spa pedicure chair for her expanding nail salon business.

If the United States lifts the embargo on Cuban products, what will happen in the U.S. market for Cuban cigars?

B) The supply curve will shift to the right.

The minimum wage is an example of

B) a price floor.

An example of a factor of production is

B) a worker hired by an auto manufacturer.

Marginal cost is the ________ associated with a particular increase in an activity.

B) additional cost

If you can produce more of something than others with the same resources, you have

B) an absolute advantage.

When the marginal benefit equals the marginal cost of the last unit sold in a competitive market,

B) an economically efficient level of output is produced.

Which of the following is part of an economic model?

B) data

The output of Mexican citizens who work in Texas would be included in the

B) gross national product of Mexico

A sharp increase in the number of medical errors increases the number of lawyers hired to determine medical malpractice settlements. This will

B) increase GDP and decrease well-being in the economy.

A(n) ________ is represented by a rightward shift of the demand curve while a(n) ________ is represented by a movement along a given demand curve.

B) increase in demand; increase in quantity demanded

The ability to exercise control over one's own resources within the confines of the law refers to

B) one's property rights.

In a market economy, those who are willing and able to buy what is produced

B) receive the most of what is produced.

The study of economics arises due to

B) scarcity

A supply curve shows

B) the marginal cost of producing one more unit of a good or service.

The circular flow model demonstrates

B) the roles played by households and firms in the market system.

Investment, as defined by economists, would include the purchase of a

D) computer by an accounting firm.

Every society faces economic trade-offs. This means

C) producing more of one good means less of another good can be produced.

The processes used to produce goods and services describes

C) technology.

Assume that the hourly price for the services of personal trainers has risen and sales of these services have also risen. One can conclude that

C) the demand for personal trainers has increased.

Opportunity cost is defined as

C) the highest valued alternative that must be given up to engage in an activity.

An example of an intermediate good would be

C) the rims on a new car.

If in the market for apples the supply has decreased, then

C) the supply curve for apples has shifted to the left.

Published in 1776, ________ was written by Adam Smith.

D) "An Inquiry into the Nature and Causes of the Wealth of Nations"

Monique buys a new television for $795. She receives consumer surplus of $355 from the purchase. How much does Monique value her television?

D) $1150

Economics promotes which of the following as the way to make the best decision?

D) Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost.

Minnie Mickey Hats 40 50 Umbrellas 10 5 10) Refer to Table above. Which of the following statements is true?

D) Mickey has a comparative advantage in making hats and Minnie in making umbrellas.

________ shows that if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

D) The production possibilities frontier model

If the government implements a binding price ceiling on insulin, this will have all of the following effects on the market for insulin except

D) a more efficient equilibrium.

An increase in the demand for peanuts due to changes in consumer tastes, accompanied by an increase in the supply of peanuts as a result of favorable growing conditions, will result in

D) an increase in the equilibrium quantity of peanuts; the equilibrium price may increase or decrease.

an outward shift of a nation's production possibilities frontier can occur due to

D) an increase in the labor force.

At a product's equilibrium price

D) any buyer who is willing and able to pay the price will find a seller for the product.

In Venezuela, the government attempted to control rising food prices by implementing price ceilings in the market. These price ceilings were set ________ the market prices, which resulted in ________ of food.

D) below; shortages