Macroeconomics Exam 1 Review from Quiz 2

Consumer income changes can shift market demand. A. True B. False

A

If the U.S. government decides to increase military spending, one opportunity cost will be lower spending on education. A. True B. False

A

The statement "Resources employed in producing X are better suited to making Y" is another way of saying resources A. Are specialized. B. Are scarce. C. Are used inefficiently. D. Are unproductive. E. Have no opportunity cost.

A

Which of the following will shift the demand curve for milk? A. Change in the income of buyers of milk B. Change in the price of milk C. Change in input prices for milk D. All of the above are correct.

A

Why does quantity supplied increase when price increases? A. Producers find it more profitable to make the item. B. People "drop out" of the market, so buyers find it more abundant. C. As demand decreases with a high price, surpluses appear. D. All of the above.

A

. If supply increases, the equilibrium price will rise and the equilibrium quantity will fall. A. True B. False

B

A decrease in price of a certain good most likely will lead to A. An increase in quantity demanded and an increase in demand B. An increase in quantity demanded but no change in demand. C. An increase in demand but no change in quantity demanded. D. No change in demand and no change in quantity demanded.

B

A price ceiling is only effective if it is above the market equilibrium. A. True B. False

B

A society which is inside its production possibilities frontier is efficient. A. True B. False

B

An upward-sloping supply curve shows that A. Buyers are willing to pay more for a scarce product B. suppliers are willing to increase production of their goods if they can receive higher prices for them. C. buyers are unaffected by sellers' costs of production. D. the price of a product is not influenced by the price buyers are willing to pay. E. At higher prices, an envy effect begins to affect the demand curve.

B

At an equilibrium price, quantity demanded A. Exceeds quantity supplied. B. Equals quantity supplied. C. Is less than quantity supplied. D. Any of the above is possible

B

If production involves constant opportunity cost, the production possibilities curve A. Is "bowed inward." B. Is a straight line. C. Is "bowed outward." D. Is a wavy line. E. Has an unpredictable shape.

B

If the price of oil, a close substitute for coal, increases then the A. Supply curve for coal will shift to the right. B. Demand curve for coal will shift to the right. C. Equilibrium price and quantity of coal will not change. D. Demand curve for coal will shift to the left. E. Supply curve of coal will shift to the left.

B

List the three coordination decisions made by every economy. A. Where? When? How? B. How? What? To whom? C. Why? Where? What? D. When? To Whom? Where?

B

Some medical authorities announced in the late 1980s that an acne medicine named Retin-A also had previously unknown wrinkle-reducing properties. An economist would expect to find that, after this announcement, the price of Retin-A ____ and the quantity sold ____. A. Rose; fell B. Rose; rose C. Fell; fell D. Fell; rose

B

The economic problem of scarcity A. Is unique to a capitalist economy. B. Requires that choices be made among alternatives. C. Disappears as technology advances. D. Affects only less-developed countries.

B

The production possibilities curve illustrates the basic principle that A. An economy's capacity to produce increases in proportion to its population B. If all resources of an economy are in use, more of one good can be produced only if less of another is produced. C. An economy will automatically seek that output at which all of its resources are employed. D. No opportunity cost exists in production.

B

Waiting in line to get a free ticket does not involve any opportunity cost. A. True B. False

B

We observe that the price of food rises and the quantity purchased also rises. This means the A. Supply curve shifted to the left. B. Demand curve shifted to the right. C. Demand curve shifted to the left. D. Supply curve shifted to the right.

B

Which of the following quotations best captures the idea of opportunity cost? A. "Opportunity knocks but once." B. "Every choice involves a sacrifice." C. "Let's not ask for the moon; we have the stars." D. "Fools rush in where wise men fear to tread." E. "All that glitters is not gold."

B

Which principle states that as the production of one good expands, the opportunity cost of producing another unit of this good generally increases? A. Principle of total cost B. Principle of increasing cost C. Principle of opportunity cost D. Principle of increasing marginal utility

B

A severe freeze has once again damaged the Florida orange crop. The impact on the market for oranges will be a leftward shift in A. Demand as consumers try to economize because of the shortage. B. Both the supply and demand curves. C. The supply curve. D. The supply curve and a rightward shift in the demand curve, which will result in a higher price.

C

All of the points inside a production possibilities frontier are ____; all of the points outside the production possibilities frontier are ____. A. Efficient, inefficient B. Optimal, irrational C. Attainable, unattainable D. Rational, zero-cost E. Unattainable, efficient

C

If the supply curve for housing has the normal positive slope, rent controls will likely A. Increase the amount of housing. B. Improve the quality of housing. C. Aggravate the housing shortage. D. Help low-income families find suitable housing. E. Increase the demand for housing

C

The major drawback of a price ceiling is A. It causes a surplus. B. Government regulations of this kind are difficult to enforce. C. It causes a shortage. D. There is no drawback.

C

What mechanism assures that producers use inputs efficiently? A. Governmental regulations on use of resources B. altruism C. the desire for profit D. An innate desire to be efficient E. All of the above are correct.

C

Which of the following would be most likely to cause an outward shift of the demand curve for electricity? A. A decrease in the price of electricity B. An increase in the price of air conditioners C. An increase in the price of heating oil D. A decrease in the price of natural gas

C

A decrease in demand will have what effect on equilibrium price and quantity? A. Price will increase; quantity will decrease. B. Price will decrease; quantity will increase. C. Both price and quantity will increase. D. Both price and quantity will decrease.

D

A demand schedule is a table showing how the ____ of some product during a specified period of time changes as ____ changes, holding all other determinants of quantity demanded constant. A. Demand; the price of its complement B. Demand; the quantity supplied C. Quantity demanded; the price of its substitute D. Quantity demanded; the price of that product

D

A market will experience a ____ when the price is above equilibrium and a ____ when the price is below equilibrium. A. Shortage, shortage B. Surplus, surplus C. Shortage, surplus D. Surplus, shortage

D

A production possibilities curve always slopes downward to the right because A production possibilities curve always slopes downward to the right because resources A. Are not scarce. B. Have no opportunity cost. C. Are freely available. D. Are limited. E. Are not related to outputs.

D

How are the slope of a production possibilities frontier and the opportunity cost of the goods related? A. The slope is a graphical representation of the cost of expanding production of both goods. B. The slope is a graphical measure of the growth rate of the economy. C. The slope is a graphical representation of the cost of decreasing unemployment. D. The slope is a graphical representation of the rate of trade-off between the goods. E. The slope is a graphical representation of the cost of economic growth in the economy.

D

In terms of the production possibilities diagram, the principle of increasing cost simply asserts that the frontier is A. Downward sloping. B. Upward sloping. C. Bowed inward. D. Bowed outward. E. Undefined, because no market will exist in this case.

D

One popular definition of economics is the study of A. How scarcity increases opportunities to meet ends. B. How markets overcome scarcity. C. One goal and three tasks. D. How to use limited means to meet unlimited wants. E. Wants versus needs.

D

The idea of opportunity cost is relevant A. Only in consumption decisions B. Only in production decisions. C. Only in financial decisions. D. In almost any kind of decision.

D

Which of the following would cause an increase in demand for Toyota automobiles? A. an increase in the price of Toyota automobiles B. a decrease in the price of Toyota automobiles C. a decrease in the price of Honda automobiles D. an increase in the price of Honda automobiles

D

For a given production possibilities frontier, which points are attainable? A. Points inside the frontier B. Points outside the frontier C. Points on or outside the frontier D. Points on the frontier only E. Points on or inside the frontier

E

Probably the most important source of efficiency in production is A. Investing in more capital goods. B. Consuming rationally. C. Expanding the production possibilities frontier. D. Increasing inputs of energy and raw materials. E. The specialization of labor.

E

When a demand schedule is drawn as a graph, A. Price is measured on the vertical axis. B. Quantity is measured on the horizontal axis. C. The resulting curve has a negative slope. D. The other variables (besides price and quantity) are held constant. E. All of the above are correct.

E

Which of the following is likely to affect the position and shape of society's production possibilities frontier? A. Volume of physical resources B. Level of labor skills C. Level of technology D. Amount of factories on hand E. All of the above are correct.

E