Macroecon exam1

Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. This means that, in order to buy two bananas, this consumer must forgo

1 apple.

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities schedule. Production Possibilities Product ABCDEF Tanks 012345 Autos 1,000 950 850 650 350 0 In moving from combination C to B, the opportunity cost of producing 100 more autos is

1 unit of tanks.

A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule. Production Possibilities Product ABCDEF Steel 012345 Wheat 100 90 75 55 30 0 If the nation uses all of its resources to produce only wheat, then its production combination will be

A

Suppose you are given a $100 gift card and you choose to spend it on a number of goods. You will select a combination of goods that is best for you and that maximizes your satisfaction. Your choices will involve which of the following?

A comparison of marginal benefits and marginal costs for each good considered

Which of the following describes a budget line?

A curve showing various combinations of two products a consumer can purchase with a specific amount of income.

A point that lies inside the production possibilities curve reflects which of the following?

A failure to achieve full employment

Which of the following enables society to produce more goods with current resources?

Advances in technology

Which of the following resources would be considered to be land by an economist?

Arable land Forests Oil and mineral deposits Water

Which of the following are ways of expressing the meaning of ceteris paribus?

Assuming other things remain constant Assuming factors other than those being considered in a particular analysis do not change

he following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18. ResourcePrice Per Unit of ResourceTechniques (# of Units of Each Resource Required)ABCD Labor$ 2 3212 Land 1 2131 Capital 4 1223 Entrepreneurship 3 1211 If the price per unit of labor were to increase from $2 to $3, the most efficient production technique would then be

C

Of the following countries, which one best exhibits the characteristics of a market economy?

Canada

For economists, ______ goods include all manufactured aids used in producing consumer goods and services.

Capital

If economists examine the relationship between the price of a good and the sales of that good while ignoring other related factors, or assuming those other factors are equal, they are using which of the following?

Ceteris paribus

Specializing and participating in international trade allows an economy to do which of the following?

Circumvent the output limits imposed by its own production possibilities curve Increase the quantities of capital and consumer goods available to society

Examples of command economies are

Cuba and North Korea.

True or false: Everyone except for the super wealthy has a finite, or limited, amount of income.

FALSE

True or false: Positive economics encourages value judgments.

False (Reason: Positive economics avoids value judgments, instead seeking to empirically describe the facts of the case.)

Which of the following is a result of having scarce economic resources for the production of goods and services?

Fewer options that require choices

When a country engages in international specialization, it focuses on producing which of the following?

Goods with the lowest opportunity costs

Economic efficiency is the primary guide in answering which of the fundamental questions in a market economy?

How will the output be produced?

______ comes in the form of wages, interest, rent, profit, and even from government programs.

Income

How does human specialization contribute toward increasing an economy's output?

It exploits the differences in abilities.

Which of the following can be stated as potentially true about any economy?

Its current choice of position on its production possibilities curve helps determine the curve's future location.

What do economists call the physical actions and mental activities that people contribute to the production of goods and services?

Labor

Which discipline studies the economy as a whole or its basic subdivisions or aggregates?

Macroeconomics

_________ is the discipline that examines the performance and behavior of an economy as a whole.

Macroeconomics

Which of the following statements is an explanation for the law of increasing opportunity costs?

Many economic resources are better at producing one product rather than another.

Matt observes that "there is a high correlation between educational attainment and the level of income." Jean concurs and adds that "high school graduates should all proceed to college."

Matt's statement is positive, while Jean's statement is normative.

Which discipline studies the decision-making process of customers, workers, households, and business firms on an individual basis rather than as aggregates?

Microeconomics

Which of the following illustrates the attainable combination of two goods that can be produced given a specific set of resources?

Production possibilities curve

______ economic resources means limited goods and services.

Scarce

True or false: A decrease in income will shift the budget line to the left.

TRUE

True or false: A trade-off occurs when some quantity of production of a good is given up in order to produce another good.

TRUE

Suppose an economy produces consumer goods and capital goods. Its current combination of production involves a higher level of capital goods than consumer goods. Which of the following can be inferred from this current choice on its production possibilities curve?

That its present choice in production may result in higher future prospects for economic growth

Which of the following are issues most explored in microeconomics?

The expenditures of a government entity Measuring total revenues of a firm Measuring the price of specific goods

Which best defines utility?

The satisfaction or pleasure obtained from consuming a good or service

The pleasure, satisfaction, or happiness obtained from consuming a good or service is known as _____________ . (Enter one word in the blank.)

Utility

Which of the following do economists consider to be capital?

a construction crane

A well-tested economic theory is often called

a principle.

Suppose an economist says that "other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that

all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant.

The budget line shows

all possible combinations of two goods that can be purchased, given money income and the prices of the goods.

The assertion that "there is no free lunch" means that

all production involves the use of scarce resources and thus the sacrifice of alternative goods.

Answer the question based on the following information: Suppose 30 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3, respectively. Production Techniques 1234 Labor 4325 Capital 2351 If the price of product A is $0.50, the firm will realize

an economic profit of $2.

(Last Word) Starbucks should continue to add stores in a city

as long as the marginal benefit of opening a new location does not fall below the marginal cost.

The production technique that is most efficient is the one that produces a given amount of output

at the lowest cost per unit.

A point inside the production possibilities curve is __________, while a point outside the curve is __________.

attainable; unattainable

Positive economics ______ value judgments, tries to establish ______ statements about economic behavior, and deals with ______ economic events.

avoids; scientific; actual

The slope of the typical production possibilities curve

becomes steeper as one moves southeast along the curve.

Refer to the diagram. The movement down the production possibilities curve from point A to point E suggests that the production of

both bicycles and computers is subject to increasing opportunity costs.

A consumer's ________ line or constraint shows various combinations of two products that can be purchased with a specific amount of income. (Enter one word in the blank.)

budget

Which of the following best represents the economic perspective used in customer decision making at fast-food restaurants?

customers selecting the shortest line.

The marginal benefit curve is

downsloping because successive units of a specific product yield less and less extra benefit.

The __________ problem refers to the need to make choices because economic wants exceed economic means. (Enter one word in the blank.)

economizing

Property rights are important because they

encourage cooperation by improving the chances of mutually agreeable transactions.

Which of the following is another way of saying "marginal benefits of an action"?

extra benefits resulting from the action

Refer to the provided production possibilities curves. Curve (a) is the current curve for the economy. Focusing on curve (a), point N suggests that the economy currently produces

fewer goods for the future than at point P.

The use of money for exchange and trade

fosters more specialization in production.

All of the following statements describe a market economy except

government prescribes the market prices for goods and services.

The "invisible hand" concept refers to the

guiding function of prices in a market system.

The production possibilities curve

is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced.

According to economists, economic self-interest

is a reality that underlies economic behavior.

Refer to the diagram. The combination of computers and bicycles shown by point F

is attainable but implies that the economy is not using all its resources.

Unemployment

is illustrated by a point inside the production possibilities curve.

The work-related activities of a teacher and doctor fall under the resource category of

labor

Improvements in the methods of production allows for the creation of ______.

more goods with available resources

Assume that a consumer purchases only two products. Suppose that the consumer's money income doubles, and the prices of the two products also double. These changes in income and prices will result in

no change in the budget line.

A production possibilities curve (PPC) illustrates the attainable combination ______.

of two goods that can be produced given a specific set of resources

The Latin term "ceteris paribus" means

other things equal.

For economists, the word "utility" means

pleasure or satisfaction.

The slope of a budget line reflects the

price ratio of the two products.

A ______ lists the different combinations of two products that can be produced with a specific set of resources, assuming full employment.

production possibilities table

According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because

productive resources are limited.

Copyrights and trademarks are examples of

property rights.

Which of the following is not a major category of business structure?

public agency

Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. This is a reflection of

purposeful behavior.

In a graph of the production possibilities curve, the two axes of the graph indicate the

quantities of the two products that a nation can produce.

Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as

rational self-interest because he is attempting to increase his own income by identifying and satisfying someone else's wants.

When an economy produces a good such that the marginal benefit equals the marginal cost, this indicates that ______.

resources are being allocated efficiently

Land and mineral resources, transportation and communication facilities, factories and farm buildings, equipment, and tools and machinery are all examples of:

scarce economic resources.

In deciding whether to study for an economics quiz or go to a concert, one is confronted by the idea(s) of

scarcity and opportunity costs.

An increase in income will ______.

shift the budget line to the right

Economic profits in an industry suggest the industry

should be larger to better satisfy consumers' desire for the product.

Refer to the diagram for athletic shoes. If the current output of shoes is Q3, then

society would consider additional units of shoes to be less valuable than alternative products.

The distinction between microeconomics and macroeconomics is

that microeconomics studies the behavior of individual consumers, workers, and firms, while macroeconomics studies the economy as a whole.

Economic analysis assumes "purposeful behavior," which means that people will pursue decisions or actions

that will increase their well-being.

Which situation would most likely cause a nation's production possibilities curve to shift inward?

the destruction caused by bombing and warfare in a losing military conflict

Your next-door neighbors want to go on a European vacation but cannot afford it. So they decide to visit a local amusement park instead. This is an example of:

the economizing problem.

The idea that the desires of resource suppliers and firms to further their own self-interest will automatically further the public interest is known as

the invisible hand.

The outward bowing shape of the production possibilities curve is due to ______.

the law of increasing opportunity costs

The optimal allocation of resources occurs when ______.

the marginal benefit of the good equals the marginal cost

The fact that the slope of the production possibilities curve becomes steeper as we move down along the curve indicates that

the principle of increasing opportunity costs is relevant.

The major "success indicator" for business managers in command economies like the Soviet Union and China in the past was

the quantity or volume of production.

Which of the following terms implies the greatest degree of confidence in an economic generalization?

theory

Which of the following most closely relates to the idea of opportunity costs?

trade-offs

People desire goods and services that provide maximum utility. In fact, our desires or wants are:

unlimited.

For better or worse, people have ______.

virtually unlimited wants

Because consumers behave in a rationally self-interested manner, the consumer will purchase a good or service ______.

when the marginal benefit is greater than the marginal cost

The optimal allocation of resources is found

where MB = MC.

Answer the question on the basis of the data given in the following production possibilities table. Production Possibilities (Alternatives) ABCDEF Capital Goods 5 4 3 2 1 0 Consumer Goods 0 5 9 12 14 15 Refer to the table. A total output of 3 units of capital goods and 4 units of consumer goods

would involve an inefficient use of the economy's scarce resources.