Macroeconomics Exam #1

Refer to the figure bekow. Which of the following figures shows a decrease in supply, with no change in demand? A.) A B.) B C.) C D.) D

A.) A

Refer to the figure below. Which of the following moves best represents the law of supply? A.) A to B B.) B to C C.) Both moves D.) Neither moves

A.) A to B

In economics, scarcity refers to: A.) an imbalance between wants and resources B.) the absence of goods C.) a lack of resources D.) a simplification of reality

A.) an imbalance between wants and resources

Arlene quits her $125,000-a-year job to take care of her ailing parents. What is the opportunity cost of her decision? A.) at least $125,000 B.) zero, since she will no longer be earning a salary C.) the value she attributes to the satisfaction she receives from taking care of her parents D.) It depends on the "going rate" for home-care providers

A.) at least $125,000

Jody decreased her consumption of bananas when the price of peanut butter increased. For Jody, peanut butter and bananas are A.) complements in consumption B.) both luxury goods C.) substitutes in consumption D.) both inferior goods

A.) complements in consumption

In economics, the term _______________ means "additional" or "extra." A.) marginal B.) allocative C.) optimal D.) equity

A.) marginal

The term "investment" in economics refers to: A.) the purchase of a capital good B.) the purchase of stocks and bonds. C.) the production of goods and services D.) expenditures on goods and services

A.) the purchase of a capital good

In the labor market, households are ___________ and firms are ___________ of the market. A.) the supply side; the demand side B.) the demand side' the supply side

A.) the supply side; the demand side

In the loanable funds market, households are _______________ and firms are _______________ of the market. A.) the supply side; the demand side B.) the demand side; the supply side

A.) the supply side; the demand side

In the demand equation Qd = 20 - 2P , the rate at which quantity demanded changes when price changes equal A.) 20 units in quantity demanded for ever 2-dollar decrease in price B.) 2 units decrease in quantity demanded for each dollar increase in price C.) 2 units increase in quantity demanded for every 20-dollar decrease in price D.) 20 units increase or decrease in quantity demanded for ever dollar change in price

B.) 2 units decrease in quantity demanded for each dollar increase in price

Refer to the figure above. A decrease in the price of inputs used in the producing this good would be represented by a movement from A.) A to B B.) B to C C.) Both moves D.) Neither moves

B.) B to C

Refer to the figure above. An increase in the number of firms in the market would be represented by a movement from A.) A to B B.) B to C C.) Both moves D.) Neither moves

B.) B to C

Refer to the figure below. Which move represents an increase in demand? A.) A to B B.) B to C C.) Both moves D.) Neither moves

B.) B to C

Which of the following are the four categories of resources in economics? A.) Money, natural resources, invention, and innovations B.) Land, labor, capital, and entrepreneurship C.) Private resources, public resources, human capital, and social capital D.) Wages, interest, profits, and rent

B.) Land, labor, capital, and entrepreneurship

Factors that quickly and directly affect the market demand for a good or service include all of the following EXCEPT one. Which one? A.) The tastes and preferences of consumers B.) The number of sellers, or business firms in the market C.) The price of related goods-substitutes and complements D.) The number of buyers

B.) The number of sellers, or business firms in the market

When should you continue doing more of an activity? A.) When the marginal benefit exactly equals the marginal cost B.) When the marginal benefit is greater than the marginal cost C.) When the marginal benefit is less than marginal cost D.) Once marginal benefits have been exhausted

B.) When the marginal benefit is greater than the marginal cost

Which of the following situations leads to a lower equilibrium price? A.) an increase in demand accompanied by an increase in supply B.) a decrease in demand accompanied by an increase in supply C.) a decrease in supply accompanied by an increase in demand D.) a decrease in supply, without a change in demand

B.) a decrease in demand accompanied by an increase in supply

The law of demand states that there is: A.) a positive relationship between price and quantity demanded B.) a negative relationship between price and quantity demanded C.) a direct relationship between price and quantity demanded D.) a positive relationship between demand and price

B.) a negative relationship between price and quantity demanded

The difference between a change in demand versus a change in quantity demanded is that a change in demand causes ___________ while a change in quantity demanded causes ___________. A.) a move along the demand curve; a shift in the demand curve. B.) a shift in the demand curve; a move along the demand curve C.) a shift in the demand curve; a shift in the supply curve D.) a move along the demand curve; a move along the supple curve

B.) a shift in the demand curve; a move along the demand curve

In economics, the term "equity" means A.) only elected officials have high standards of living B.) economic benefits are distributed fairly C.) everyone has equal standard of living D.) the hardest working individuals consume all they want

B.) economic benefits are distributed fairly

Economist reason that the optimal decision is to continue any activity up to the point where the A.) marginal benefit is zero B.) marginal benefit equals to marginal cost C.) marginal cost is zero D.) marginal benefit is greater than marginal cost

B.) marginal benefit equals to marginal cost

By definition, economics is the study of A.) how to make money in a market economy B.) the choices people make to attain their goals, given their scarce resources C.) supply and demand D.) how to make money in the stock market

B.) the choices people make to attain their goals, given their scarce resources

In goods and service markets, households are ___________ and firms are ___________ of the market. A.) the supply side; the demand side B.) the demand side; the supply side

B.) the demand side; the supply side

A market economy determines what to produce based primarily on: A.) the decisions of business firms B.) the wishes of consumers C.) government production plans D.) technological considerations

B.) the wishes of consumers

Refer to the figure above. An decrease in price could be the result of a increase in supply. Which figure best depicts this outcome? A.) A B.) B C.) C D.) D

C.) C

Refer to the figure below. After the change in demand, the movement to a new market equilibrium is best explained as: A.) An increase in demand and a corresponding increase in supply B.) An increase in quantity demanded and an increase in quantity supplied C.) An increase in demand and an increase in quantity supplied D.) An increase in demand and a decrease in supply

C.) An increase in demand and an increase in quantity supplied

Refer to the figure below. The impact of an increase in the price of public transportation on the demand for bicycles is best described by: the move from A.) C to B in the figure on the right B.) B to A in the figure on the left C.) B to C in the figure on the left D.) All three descriptions

C.) B to C in the figure on the left

Refer to the figure below. Which figure shows the impact of a decrease in income, assuming that the good in question is a normal good? A.) A B.) B C.) C D.) D

C.) C

Which of the following points is the point of market clearing? A.) A or B B.) D or E C.) C only D.) All points show market clearing

C.) C only

An increase in price causes: A.) An increase in demand B.) a decrease in demand C.) No change in demand D.) An unpredictably change in demand

C.) No change in demand

An increase in price causes: A.) An increase in supply B.) A decrease in supply C.) No change in supply D.) An unpredictable change in supply

C.) No change in supply

The graph below describes Sammy Hagar's need for speed versus the need for control. Sammy cant drive at 55. According to the marginal principle, at what speed should Sammy Hagar drive? A.) Sammy would slow down at 55 B.) Sammy's speed would fluctuate somewhere between 55 and 85 C.) Sammy would drive at 85 mph, where the additional need for speed is exactly equal to the additional need for control D.) Sammy Hagar would drive at 120 mph, to maximize his speed

C.) Sammy would drive at 85 mph, where the additional need for speed is exactly equal to the additional need for control

Which of the following are payments made to economic resources? A.) Money (bills and coins), checks, in-kind payments, and deferred payments. B.) Monetary payments and financial payments C.) Wages, rent, interest, and profits D.) Income, taxes, transfers, and payments from foreigners

C.) Wages, rent, interest, and profits

Beef and chickens are two good substitute goods. An increase in the price of beef causes: A.) a leftward shift in demand for beef, and a rightward shift in supply of beef B.) a decrease in the supply of beef because the demand for beef will shift, probably to the left C.) a move along the demand curve fir beef and a rightward shift in the demand curve for chicken D.) a leftward shift in the supply curve of chicken

C.) a move along the demand curve fir beef and a rightward shift in the demand curve for chicken

Economist assume that individuals A.) behave in unpredictable ways B.) will never take actions to help others C.) are rational and respond to incentives D.) prefer to live in a society that values fairness above all else

C.) are rational and respond to incentives

If a firm has an incentive to increase supply now and decrease supply in the future, the firm expects that the A.) price of inputs will be lower in the future than they are today B.) demand for the product will be lower in the future than it is today C.) price of its product will be lower in the future than it is today D.) price of its product will be higher in the future than it is today

C.) price of its product will be lower in the future than it is today

Consider a system of demand and supply equations in which Qd= 20 - 2P and Qs = -4 + 2P, If the government imposes a maximum price of $4.00, there will be a: A.) shortage of 4 units B.) surplus of 4 units C.) shortage of 8 units D.) surplus of 20 units

C.) shortage of 8 units

Economic models are: A.) general interpretations of cause and effect B.) analytical interpretations of economic behavior involving a good deal of the surrounding social and political structure of society C.) simplifications of reality that focus only on key relationships and ignore less relevant details D.) precise representations of reality that include as many details as possible in order to accurately predict behavior

C.) simplifications of reality that focus only on key relationships and ignore less relevant details

When studying an economic phenomenon, economist focus on specific variable and assume that other variables remain the same. This assumption is called: A.) the laissez faire assumption B.) the fallacy of association C.) the ceteris paribus assumption D.) the fallacy of composition

C.) the ceteris paribus assumption

Refer to the figure below. The move A to B can be best described as: A.) A decrease in demand B.) An increase in demand C.) A decrease in quantity demanded D.) An increase in quantity demanded

D.) An increase in quantity demanded

Here is a list of alternatives to taking your economics exam today, in order of preference: 1) Partying with friends; 2) Sleeping; 3) Playing tennis. How is the opportunity cost of taking the exam measured? A.) By using another measure of value that may not be related to these alternatives B.) By comparing it to the value of any of the alternatives, but only one of the three C.) By adding up the value of the three alternatives D.) By the value of partying with friends only

D.) By the value of partying with friends only

What is opportunity cost? A.) Opportunity cost is a cost associated with the allocation of abundant resources among alternative uses B.) Opportunity cost is the value of the best alternative sacrificed when a choice is made C.) Opportunity cost refers to cost that cannot be avoided, regardless of what is done in the future, because they have already been incurred D.) Opportunity cost is a business concept that explains why it is important to consider the additional cost of production, not just the initial coast, in making production decisions

D.) Opportunity cost is a business concept that explains why it is important to consider the additional cost of production, not just the initial coast, in making production decisions

Refer to the figure below. If the price level id P1, and the market is fee to correct itself, we draw the following conclusions: A.) Since quantity is greater than quantity supplied. the price will fall below P1, and further away from equilibrium B.) Since quantity demanded is greater than quantity supplied, the price will tend to rise above P1, towards equilibrium C.) Since quantity suplied is greater than quantity demanded, the price will tend to fall below p!, and away from equilibrium D.) Since quantity supplied is greater than quantity demanded, the price will rise above P1, and towards equilibrium

D.) Since quantity supplied is greater than quantity demanded, the price will rise above P1, and towards equilibrium

In June, buyers of titanium expect that the price of titanium will fall in the following month, July. What happens in the titanium market in June holding everything else constant? A.) The quantity demanded increase B.) The demand curve shifts to the right C.) The quantity demanded decreases D.) The demand curve shifts to the left

D.) The demand curve shifts to the left

Which of the following would NOT cause the demand curve for Pepsi to shift? A.) a change in the preference for Pepsi B.) an increase in the price of Coke C.) a decrease in the price of Coke D.) a decrease in the price of Pepsi E.) an increase in the number of Pepsi consumers

D.) a decrease in the price of Pepsi

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is A.) a neutral good B.) a normal good C.) a necessity D.) an inferior good

D.) an inferior good

Markets promote A.) equity and competition. B.) voluntary exchange and equality. C.) equity and equality. D.) competition and voluntary exchange.

D.) competition and voluntary exchange.

The concept of consumer sovereignty refers to: A.) firms choosing which goods and services to buy or produce to earn the highest profit B.) lawmakers representing the consumer voting on what will be produced C.) producers deciding what consumers want most D.) consumers ultimately deciding which goods and services will be produced

D.) consumers ultimately deciding which goods and services will be produced

During the recession of 2007-2009. despite falling income levels, the fast-food chain Subway experienced increased sales. The increase in demand for Subway sandwiches despite the decline in income that Subway sandwiches are considered A.) substitute goods B.) normal goods C.) complementary goods D.) inferior goods

D.) inferior goods

The value of national income in an economy is roughly equal to: A.) the value of stocks and bonds in the stock market B.) the amount of money in checking, and saving accounts, and money market mutual funds C.) the value of wealth held in the form of real assets D.) the value of the output produced

D.) the value of the output produced