MacroEconomics Chapter 1-5
A characteristic of a good model is that A) its predictions can be tested using real-world data. B) it is useful for making irrefutable predictions. C) it applies to all situations. D) it predicts perfectly.
A
A friend wants to learn how a nation's unemployment rate is calculated and how it changes over time. He asks you which economics course to take and you advise him to enroll in A) macroeconomics. B) microeconomics. C) either micro- or macroeconomics. They both concentrate equally on those issues. D) political science because economics doesn't address those topics in its courses.
A
A per-unit government tax on producers of a good tends to A) reduce the supply of the good. B) increase the supply of the good. C) cause an upward movement along the supply curve. D) not have any effect on the good's supply.
A
After an increase in the demand for construction workers, the market will attain its new long-run equilibrium faster if A) wages are flexible. B) wages are inflexible, forcing new people to enter the market. C) unions restrict the number of new construction workers. D) people ignore the shortage in the short run.
A
Economics is an empirical science, which means that economists A) look at evidence to see whether or not the model is applicable. B) test their models by utilizing unknown variables. C) do only laboratory experiments. D) refuse to test their models since the usefulness of a model is determined by whether it is logical or not.
A
Economics is best defined as the A) study of how people make choices to satisfy their wants. B) study of individual self-interests. C) study of why people do not react to incentives. D) process by which goods are sold in free markets.
A
Flowers are more expensive on Valentine's Day than at other times of the year, yet sales of flowers are highest on that day. How does economic theory account for this? A) An increase in demand pushes up the market clearing price of flowers. B) People buying the flowers are irrational. C) Flowers are not subject to the law of demand D) Florists know that there are no substitutes for flowers, so they take advantage of consumers on Valentine's Day.
A
If an economy is operating at a point inside the production possibilities curve, then A) society's resources are being inefficiently utilized. B) the curve will move to the left. C) society's resources are being used to produce too many consumer goods. D) economic policy must implemented to slow growth of the economy further.
A
In the long run, the number of firms in an industry may change. If the number of firms increases, then A) the supply curve will shift outward to the right. B) the demand curve will shift outward to the right. C) the supply curve will shift inward to the left. D) the demand curve will shift inward to the left.
A
Market failures include all of the following EXCEPT A) buyers pay for all the costs involved in the production of goods and services. B) public goods. C) positive externalities. D) negative externalities.
A
Market failures occur when A) externalities exist. B) economic efficiency increases. C) there is an increase in demand. D) there is a change in quantity demanded
A
Public goods are characterized by the free-rider problem because A) no one can be excluded from the benefits of public goods once they are produced. B) public goods are usually things that people really do not want to consume. C) public goods are characterized by the principle of rival consumption. D) public goods can easily be subdivided into small units.
A
Suppose Brad Pitt and Angelina Jolie wear matching platinum jewelry in their new movie. After the movie is released, suppose that consumers increase their demand for the jewelry and at the same time manufacturers increase the supply of the jewelry. As a result A) the equilibrium quantity will increase, and there is an indeterminate change in the equilibrium price. B) the equilibrium quantity and price are both indeterminate. C) the equilibrium quantity will decrease, and the equilibrium price will increase. D) the equilibrium price and quantity will both decrease.
A
The concept of "demand" in economics refers to A) the different quantities of a good or service people will buy at different possible prices. B) the different types of goods and services that people of different income levels want to buy. C) how changes in the prices of all goods affect people's buying behavior. D) changes in people's consumption behavior over time.
A
The market system is also called the price system because A) rising prices are the signal to producers to offer more of a particular good. B) people pay money in markets. C) everything has a price tag. D) inflation is a significant problem.
A
The total amount of consumer surplus and producer surplus is at its maximum when A) consumers and producers are allowed to trade at the market clearing price. B) the government imposes a price floor that is higher than the market clearing price. C) the government imposes a price ceiling that is lower than the market clearing price. D) free market exchanges do not exist.
A
Which of the following is an example of the law of supply? A) The price of gum has increased so producers are making more gum. B) The price of labor has increased and producers decrease supply. C) The amount of a good purchased increases when the price decreases. D) Producers provide less of a good when the price increases.
A
Which of the following would cause a change in the quantity demanded of a product? A) a higher price B) a higher income C) expectations of future price increases D) All of these are correct.
A
Which of the following would provide an incentive to increase the amount of beef consumed? A) a decrease in the price of beef B) a tax on beef sales C) promotion of chicken consumption D) a ban on beef sales by the Food and Drug Administration
A
A negative externality is a situation in which A) there is a spillover of benefits. B) a cost associated with an economic activity is borne by a third party. C) a firm is paying in excess of the total costs of producing a good. D) None of these
B
An appropriate test of the effectiveness of an economic model is A) the number of variables contained within the model. B) the model's ability to predict future economic activity. C) the number of economists who have worked on the model. D) the number of assumptions which the economist has made.
B
An example of a quantity restriction is A) the minimum wage. B) an import quota. C) rent controls. D) price supports in agriculture.
B
An externality can best be defined as A) a party not directly involved in a transaction. B) a consequence of a transaction that spills over to affect third parties. C) a right of an owner to use and exchange property. D) a cost associated with the production of one more unit of output.
B
Ceteris paribus, as the price of a good or service increases A) people will buy more of it. B) people will buy less of it. C) people will want less of it. D) people will want more of it.
B
Charitable donations to the Red Cross A) can be explained by the rational ignorance theory. B) can be explained by the rational self-interest theory. C) cannot be explained by the rational self-interest theory. D) prove that there is no scarcity in the United States.
B
Comparative advantage implies that you A) can produce more units of a good or service than another. B) can produce a good or service at a lower opportunity cost. C) can produce goods with more capital resources. D) can produce goods with more human resources.
B
Economic models A) are used to explain how people think. B) are used to explain how people behave. C) are essential representations of the real world. D) are used to explore the thought processes of individuals or groups.
B
Efficiency is achieved A) when output is being produced at a point inside a production possibilities curve. B) when producers are getting the maximum possible output from the available resources. C) when consumers are able to buy everything that they want. D) when prices of all goods and services go to zero.
B
If the price of bananas goes down, then the demand for pears will A) increase, assuming bananas and pears are substitutes. B) decrease, assuming bananas and pears are substitutes. C) decrease, assuming bananas and pears are complements. D) remain constant, assuming bananas and pears are related goods.
B
In economics, ________ are limited but ________ are unlimited. A) wants; resources B) resources; wants C) money; ideas D) ideas; money
B
In order to be effective, a price ceiling A) must be set above equilibrium price. B) must be set below equilibrium price. C) must be set at equilibrium price. D) must be a negative price level.
B
Market failure occurs when A) a good is too expensive for the market to provide. B) an unrestrained market economy leads to too few or too many resources going to a specific economic activity. C) one good is superior to another and drives it out of the market. D) the stock market experiences a very large loss.
B
Modern economists are increasingly using microeconomic analysis in macroeconomics because A) microeconomic theory is more scientific. B) aggregate outcomes stem from decisions made by individuals, business firms and government. C) macroeconomic subjects such as inflation affect all individuals. D) macroeconomics is older and more outdated.
B
One way of addressing the associated market failure that generates both private costs and external costs is for this activity to be A) left alone. B) taxed. C) subsidized. D) banned.
B
Opportunity cost A) can only be measured as a paid cost. B) is always the value of the next best forgone opportunity. C) does not exist since there are no receipts .D) is always the lowest valued alternative.
B
Physical capital is distinguished from human capital because A) physical capital refers to trained people. B) physical capital refers to equipment and machinery, whereas human capital refers to trained people. C) human capital refers only to day laborers. D) physical capital refers to trained people, whereas human capital refers to equipment and machinery.
B
Please refer to the homework I could not upload a picture Refer to the above figure. Suppose the demand curve shifts from DA to DB, while the supply curve remains at SA. Which of the following statements is FALSE? A) There has been an increase in demand. B) Supply has increased. C) More consumers in the market might have caused the demand curve to shift. D) The new equilibrium price is P2, and the new equilibrium quantity is F.
B
Please refer to the homework for the picture Refer to the above figure. If government sets the maximum legal price of gasoline at $2 per gallon, then the $2 limit acts as A) a price floor. B) a price ceiling. C) an equilibrium price. D) a just price.
B
Question 32. Please refer to the homework I was not able to insert a picture. In the above figure, how many bushels of corn are produced at point "a"? A) 10,000 B) 2,500 C) 1,000 D) 0
B
Rent controls often have adverse effects, including A) too much housing in a community. B) deterioration in the quality of existing rental units. C) too much construction of new rental units in the community. D) income transfers from the poor to landlords.
B
Scarcity and shortages differ in that A) scarcity is caused by natural disasters and shortages are caused by mistakes people make. B) scarcity is a condition of human life while shortages are usually temporary phenomena related to an imbalance between the amount desired and the amount produced. C) scarcity is a type of shortage but shortage is a broader concept. D) shortages apply to resource markets while scarcity applies to product markets.
B
The difference between the economic and political functions of government is that A) the economic function is concerned with the Federal Taxation system while the political function is not. B) the economic function is concerned with correcting for market failures while the political function is not. C) the economic function is concerned with the reallocation of income while the political function is not. D) the economic function encourages merit goods while the political function discourages demerit goods.
B
The headline in the local paper today is "College tuition next fall rise by 6 percent." This statement is an example of A) a normative statement. B) a positive statement. C) an invalid statement. D) ceteris paribus.
B
The impact of an increase in the gasoline tax on sales of electric vehicles is A) a macroeconomics topic because it deals with taxes. B) a microeconomics topic because it deals with one industry. C) not an economic issue, but rather a political issue. D) a normative issue and so it is not an economic topic.
B
The price of a tablet increased from $250 to $400 while the price of a tablet app increased from $1 to $2. The relative price of tablets in terms of tablet apps A) increased from 175 to 350. B) decreased from 250 to 200. C) increased from 0.003 to 0.05. D) decreased from 0.35 to 0.2.
B
The price system features A) exchanges made in currency only. B) voluntary exchange that makes both the consumer and producer better off. C) exchanges made only on a barter basis. D) an exchange in which consumer is made better off and the producer is made worse off.
B
The production possibilities curve shows all possible combinations of A) two goods that are desired by society. B) two goods that can be efficiently produced with a given set of resources. C) two goods that can be purchased given the prices of the goods. D) two goods that two countries can trade with each other.
B
To test their theories, economists usually have to A) set up careful laboratory experiments with all variables controlled. B) first examine theory and compare it with what happened in the past in the real world. C) use only models that have a proven record of success. D) conduct experiments that involve people who do not behave rationally.
B
What is the result of an agricultural support price established above the equilibrium price? A) The market gravitates toward and remains in equilibrium. B) There will be excess quantity supplied of the product involved. C) There will be excess quantity demanded the product in this market. D) Since the support price is set above the equilibrium price, it will have no impact on the market price.
B
Which of the following is a price floor? A) rent controls B) minimum wage rates C) a freeze on upward-moving gasoline prices D) college tuition caps
B
Which of the following statements about economic scarcity is FALSE? A) Scarcity occurs among the poor and the rich. B) Scarcity only occurs if there are shortages and people wait in line to buy things. C) Scarcity results from not having enough resources to produce all the things we want. D) Scarcity results in the necessity to make choices.
B
Which of the following will LEAST likely generate positive external effects to society? A) education B) a comic book C) health care D) requiring drivers to undergo a test for alcohol consumption
B
Which one of the following is NOT a determinant of demand? A) prices of related goods B) cost of inputs in production C) income D) future price expectations
B
With specialization A) opportunity costs tend to be constant. B) there are greater gains in material well-being. C) there is more emphasis on self-reliance. D) society is more productive while individuals are less productive.
B
otal producer surplus in a market is measured as the A) area bounded above the market clearing price and beneath the market demand curve. B) area bounded below the market clearing price and above the market supply curve. C) vertical distance from the horizontal (quantity) axis to the market clearing price. D) horizontal distance from the vertical (price) axis to the equilibrium quantity.
B
A bowed outward production possibilities curve occurs when A) opportunity costs are constant. B) resources are not scarce. C) additional units of output of one good necessitate greater reductions in the other good. D) there are surpluses in the goods being produced.
C
A mixed economic system is best described as an economy with a mix of A) state and federal governments. B) domestic and foreign firms. C) free markets and government control. D) for-profit organizations and not-for-profit organizations.
C
Anthony and Kelly decide to watch a movie on Netflix using a promotion code so they do not need to pay for that movie. We know that A) both bear the same opportunity cost because they are seeing the same thing. B) both bear the same opportunity cost because the tickets have the same face value. C) both bear an opportunity cost that depends on what each person is giving up to watch the movie. D) neither bears an opportunity cost since neither needs to pay for the movie.
C
If price increases and the quantity purchased increases, we know that A) supply increased. B) supply decreased. C) demand increased. D) demand decreased.
C
In a market system, which component conveys information about what is relatively scarce and what is relatively abundant? A) the number of producers B) the number of consumers C) market price D) the amount of resources used in producing the goods and services
C
In economic terms, the total price of a pound of meat for an individual who has waited in line is A) the money price paid to the butcher for the pound of meat. B) the money price of meat relative to the price of bread or other necessity. C) the money price of the meat plus the opportunity cost of time spent waiting in line. D) the money price of an equal amount of meat substitute, such as beans and rice.
C
Please refer to the homework for the picture Refer to the above figure. The market equilibrium quantity is Q1. Point Q2 represents the optimal amount of production. This indicates that there is A) a public good which should be produced. B) regressive taxation of the product. C) a positive externality. D) a negative externality.
C
Suppose that jeans that were fashionable in the 1990s become unfashionable today. If other factors were held constant, then there would be in the market of jeans A) a rightward movement along the supply curve. B) a rightward shift of the demand curve. C) a leftward shift in the demand curve. D) a leftward movement along the supply curve.
C
Suppose there is a simultaneous increase in the demand for rice and increase in the supply of rice. Which of the following will occur as a result of these simultaneous events? A) Both the market clearing price and equilibrium quantity will rise. B) The market clearing price will fall, but the equilibrium quantity will rise. C) The market clearing price may rise, fall, or stay the same, but the equilibrium quantity will rise. D) The market clearing price will fall, but the equilibrium quantity may rise, fall, or stay the same.
C
The threat of a large fine for failure to pay income taxes is an example of A) the excessive power of the Internal Revenue Service. B) the ineffectiveness of incentives to get people to pay their taxes. C) a negative incentive to get all people to pay taxes. D) people failing to consider all the benefits the government provides them.
C
What is the type of economic system that relies on one central authority to make economic decisions? A) free market B) price system C) command and control D) mixed economic system
C
What situation gives rise to a surplus? A) The market clearing price of the good is too high. B) The current price of the good is below its market clearing price. C) The current price of the good is above its market clearing price. D) Supply of the good decreases, but the market price is not permitted to change.
C
Which factor would cause a movement along the demand curve for pizza? A) an increase in the number of students in town B) a renewed preference for Italian food C) a drop in the price of pizza D) an increase in average income
C
Which of the following causes a movement along a supply curve? A) a change in resource costs B) a change in technology C) a change in the price D) all of these
C
Which of the following statements is TRUE of external costs? A) External costs should not be corrected since people will bear the costs whether they are corrected or not. B) There are no good ways to correct for external costs. C) When external costs exist, the price of the good will be deceptively low leading to an overallocation of resources. D) External costs should only be corrected for if the correction will not increase the market price.
C
Which of the following statements is a positive economic statement?A) The Congress should pass the president's tax package. B) The U.S. tax system always gives too much favor to rich people. C) The President's budget included an increase in unemployment insurance payments. D) None of these
C
A production possibilities curve will shift inward A) when the unemployment rate increases. B) when production is inefficient. C) when resources are expanding. D) when a war or natural disaster destroys the capital goods of a country.
D
According to the law of demand, a decrease in the price of a good causes A) a rightward shift of the demand curve for that good. B) a leftward shift of the demand curve for that good. C) an upward movement along the demand curve for that good. D) a downward movement along the demand curve for that good.
D
Adding the quantities demanded by all consumers at every price will yield A) the market-clearing price. B) the number of consumers. C) the total substitution effect from a price change. D) the market demand curve.
D
An increase in the price of steel to car manufacturers will cause A) the quantity demanded for cars to increase. B) the demand for cars to decrease. C) the quantity supplied of cars to increase. D) the supply curve for cars to shift left.
D
An irrigation system is installed on a farm in Idaho. This is an example of which factor of production? A) labor B) land C) human capital D) physical capital
D
Assume that the market clearing price for wireless earbuds is $10, but that the maximum price that can be charged is $9. This is an example of A) a price control that will lead to a surplus of wireless earbuds on the market. B) a price floor that will lead to a shortage of wireless earbuds on the market. C) markets failing to ration a fixed quantity of wireless earbuds. D) a price ceiling that will likely lead to a shortage of wireless earbuds on the market.
D
Economics is a A) hard science. B) physical science. C) natural science. D) social science.
D
Economics is a social science that involves the study of how individuals A) develop their tastes and preferences. B) develop their goals and objectives in life. C) pursue happiness. D) choose among alternatives to satisfy their unlimited wants.
D
Economists argue that unhindered international trade leads to an efficient outcome. What is meant by "an efficient outcome" in this context? A) an outcome in which wages are roughly equal around the world B) an outcome in which the standard of living is roughly equal around the world C) an outcome in which an individual can choose to specialize in a certain line of work and be certain that he or she can make a living at that until retirement D) an outcome in which resources are devoted to their most efficient use
D
Economists assume that people are motivated by A) benevolence. B) altruism. C) greed. D) rational self-interest.
D
If a price floor is set below the current market clearing price, then A) a surplus must immediately occur. B) a shortage must immediately occur. C) there will be incentives for black markets to develop. D) quantity demanded will remain equal to quantity supplied at the current market clearing price.
D
In a market system, the costs associated with exchanging goods are known as A) voluntary costs. B) signaling costs. C) opportunity costs. D) transaction costs.
D
In a market system, the costs associated with exchanging goods are known as A) voluntary costs. B) signaling costs. C) opportunity costs. D) transaction costs.
D
Nonprice rationing devices are required A) because the price system does not allocate resources efficiently. B) when there are price floors but not when there are price ceilings. C) so that prices will go back to equilibrium. D) to allocate goods when there is a price ceiling.
D
Please refer to the homework I cannot add a picture .At a price of P0 in the above figure, which of the following statements is FALSE? A) Quantity demanded equals quantity supplied. B) There is an equilibrium in the market. C) P0 is the market clearing price. D) There is a surplus equal to Q0.
D
Please use homework for picture Refer to the above figure for the corn market. The government wants to set an effective price support in the corn market. To be effective the price should be set A) below P1. B) at P1. C) at P2. D) at P3.
D
Public goods are A) rival and exclusive. B) rival, but not exclusive. C) exclusive, but not rival. D) neither exclusive nor rival.
D
Services can be thought of as A) unvalued goods. B) unwanted goods. C) inferior goods. D) intangible goods.
D
The legal system in the United States tends A) to support monopolies. B) to actively discourage unionization. C) to discourage the entry of new firms into industries. D) to promote competition.
D
The price of tea increases. Which of the following is NOT part of the likely chain of events that follows from this price change? A) Some tea consumers reduce their consumption of tea. B) Tea leaf producers increase their production of tea. C) Tea leaf producers increase production. D) Tea leaf producers lay off some more workers.
D
The production possibilities curve shifts outward when A) the law of increasing additional cost takes hold. B) the economy is producing efficiently. C) we produce more consumption goods over productive investment in equipment. D) there is an increase in resources or technology.
D
The term ceteris paribus is an economic assumption that means A) let the buyer beware. B) logical common sense. C) the detail is in the interrelationship. D) other things being equal.
D
The trade-off between current consumption and the production of capital goods is also a trade-off between A) the future cost for capital goods and future cost of consumption goods. B) having fewer needs and more wants in the future. C) satisfying the needs of the poor and the wants of the wealthy. D) current consumption and future consumption.
D
There is an increase in the demand for cookies when the price of milk falls. Other things constant, we can conclude that cookies and milk are A) substitute goods. B) inferior goods. C) independent goods. D) complementary goods.
D
Ways to ration goods include A) first-come, first-served. B) political power. C) prices. D) All of these.
D
What is meant by saying that economics is an empirical science? A) Economic theories will be tested by seeing how well they correspond to people's declared preferences. B) Economic theories cannot be tested because there is no means of measuring economic variables with adequate precision. C) Economic theories cannot be tested because economic variables change too quickly. D) Economic theories will be tested by seeing how well they correspond to real-world phenomena.
D
When we say that an individual behaves according to "rational self-interest," we mean that this individual A) is motivated by greed. B) will always buy the most fashionable items available. C) never considers the well-being of any other individual. D) is making choices that he or she believes will leave him or her better off.
D
Which of the following is a normative statement? A) An increase in consumer income will lead to increased sales of beef. B) A decrease in the rate of unemployment will lead to upward pressure on consumer prices. C) An increase in the income tax will cause a greater reduction in savings than an increase in the sales tax. D) An economy with high unemployment can be worse off than an economy with high inflation.
D
Which of the following would be considered an economic function of government? A) providing a legal system B) promoting competition C) providing public goods D) All of these are correct.
D
