Macroeconomics
Every society faces trade-offs because we live in a world of scarcity. Suppose a student-athlete has the opportunity to earn $1,000,000 next year playing for a minor league baseball team, $700,000 next year playing for a European professional football team, or $0 returning to college for another year. The opportunity cost of the student-athlete returning to college next year is $______________________________________
$1,000,000
Any model is based on making assumptions because _________________________________
A. we cannot analyze an economic issue unless we reduce its complexity. B. models have to be simplified to be useful. C. both a and b.
A market is a group of ______________▼ of a good or service and the institution or arrangement by which they come together to trade.
Buyers and Sellers
Societies organize their economies in two main ways to answer the three questions of what, how, and who. A society can have a ▼ centrally planned market mixed economy in which the government decides how economic resources will be allocated. Or a society can have a ▼ centrally planned mixed market economy in which the decisions of households and firms interacting in markets allocate economic resources.
Centrally planned, market
__________________________________decide(s) what goods and services will be produced.
Consumers, firms, and government
_______________is the study of the choices people make to attain their goals, given their scarce resources.
Economics
Jonathan Baker is a market analyst. He works at a firm that is one of the few producers of good X. Jonathan formulates a hypothesis that an increase in advertising will increase the demand for this firm's products by attracting new customers. Which of the following, if true, would suggest that Jonathan's hypothesis will hold?
Even brand-loyal consumers can be convinced to change their preferences.
Terbia is a closed economy, which has been growing at a very slow pace over the last decade. In order to boost economic growth, the government removed trade barriers earlier this year and increased its spending on the economy. These moves were expected to generate employment and increase economic growth. However, unemployment did not decline as much as expected. Which of the following, if true, can explain this outcome?
Imported varieties of many goods were cheaper than the domestically produced varieties.
Harry Fletcher is a market analyst at an automobile firm. He formed a hypothesis that an increase in advertising would increase demand for the firm's cars. The ad campaign ran for a period of six months. However, the results were not as positive as Harry had anticipated. Which of the following, if true, can explain this outcome?
Interest rates increased substantially during this period.
Which of the following covers the study of topics such as inflation or unemployment?
Macroeconomics
Which of the following is not a step economists follow when developing an economic model?
Make value judgments to be proven or disproven.
The economy of East Paragon has been experiencing deflation for the last few months, with prices of goods and services declining. Because firms are charging lower prices, they expected higher sales. However, consumption spending did not increase much, resulting in substantial losses for these firms. Which of the following, if true, explains why consumers did not increase consumption in spite of falling prices?
Most people were expecting prices to decline further.
Trade-offs force society to answer questions such as what goods and services will be produced, how will the goods and services be produced, and who will receive the goods and services produced. Which of the following countries has an economy where the government makes these decisions?
North Korea
When economists develop models designed to explain the choices people make, they generally assume that
People are rational
Positive analysis - is concerned with what is, and normative analysis - is concerned with what ought to be. Economics is about - Positive analysis which measures the costs and benefits of different courses of action.
Positive Analysis normative analysis positive analysis
Suppose an analyst estimates how many jobs have been lost from family leave laws.
Positive analysis
Suppose an analyst estimates the cost to businesses from minimum wage laws.
Positive analysis
▼_______________________________ occurs when a good or service is produced at the lowest possible cost. ▼_______________________________ occurs when production is in accordance with consumer preferences.
Productive efficiency Allocative efficiency
One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls
Scarcity
A large corporation that runs nursing homes estimates that changes to Medicare will result in lower payments by Medicare to nursing homes for short-term stays by patients that require therapy or care upon leaving hospitals. Assume the corporation is considering expanding the number of "beds" it offers at its nursing homes. Part 2 Given the changes to Medicare, if the marginal benefit of offering an additional bed is $3,000 and the marginal cost is $9,000 per bed, then the corporation Should or Should not offer additional beds.
Should not
Xylo Inc., a manufacturer of domestic appliances, lowered the prices of its products, expecting an increase in demand and sales by at least 20 percent. However, it was observed that sales increased by only 8 percent. Which of the following, if true, can explain this outcome?
The government increased personal income tax rates earlier this year.
A hypothesis in an economic model is
all of the above
Economics is a social science because
all of the above
Microeconomics is the study of
how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices
In the United States, who receives the goods and services produced depends largely on ____________________________________
how income is distributed
Macroeconomics is most likely to include the study of
inflation
Examining whether government intervention can reduce the severity of recessions is most likely an issue in
macroeconomics
Firms choose how to produce the goods and services they sell. In many cases, firms face a trade-off between using more workers or using more machines. For example,
many times in the past several decades, firms may have chosen between a production method in the United States that uses fewer workers and more machines and a production method in China that uses more workers and fewer machines.
Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when
marginal benefit equals marginal cost.
A _______________________economy is an economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.
mixed
Japan has a market economy. As such, Japan's economy (relative to centrally planned economies) tends to result in
productive efficiency and allocative efficiency but not necessarily equity.
Equity is
the fair distribution of economic benefits
Opportunity cost is
the highest valued alternative that must be given up to engage in an activity.
Macroeconomics is
the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth
Trade-offs force society to make choices, particularly when answering the following three fundamental questions:
One, what goods and services will be produced? Two, how will the goods and services be produced? Three, who will receive the goods and services produced?