Macroeconomics Midterm

Wealthy countries tend to have ______ physical capital per worker and _______ human capital per worker.

a lot of; a lot of

Paying the captains of prisoner transport ships for each convict who arrived in Australia instead of for each convict who boarded the ship:

saved the lives of hundreds of convicts.

Each of the following ideas is central to economics, EXCEPT

"good institutions can eliminate economic trade-offs."

It takes approximately _______ years and _______ to bring a new drug to the market.

12; $900 million

Brazil can produce one unit of sugar cane for one unit of labor and one iPod for eight units of labor, and China can produce one unit of sugar cane for two units of labor and one iPod for four units of labor. Which of the following is TRUE?

Brazil has both a comparative advantage and an absolute advantage in sugar cane production.

Poor countries are at a distinct disadvantage when it comes to economic production; they get outcompeted in everything since they do not have a comparative advantage in anything.

False

The central bank of the United States is known as the:

Federal Reserve System.

Both Maria and Jorge bake cookies and bread, but Maria spends less time baking each batch of cookies and each loaf of bread than Jorge does. Which of the following is TRUE?

Maria has an absolute advantage in baking both cookies and bread.

Most people do not buy the safest car they can find. Why not?

Other factors matter besides safety, such as comfort, cost, and fuel economy.

In The Economics of Nonhuman Societies, economist Gordon Tullock describes the economics hidden in biology (e.g., ants and bees). One of the lessons of the book is opportunity cost. In what way does an animal, such as an ant, face opportunity costs?

Searching for food in one direction means an ant cannot search in another direction.

Fluctuations in graduate school enrollment correlate positively with fluctuations in unemployment. What is the most likely reason why?

The opportunity cost of going to graduate school is low when jobs are hard to find.

In many universities, graduate students are employed to teach introductory undergraduate courses, even though the full professors at these universities have more experience and could potentially teach these courses better. Which of the following best explains why universities choose to hire graduate students instead of full professors to teach their introductory courses?

The opportunity cost of teaching an introductory course is higher for full professors than for graduate students

Manuel insists he places an infinite value on his life. Stefan is suspicious of this claim and points out to Manuel that he sometimes eats ice cream when broccoli would be much better for him. What Big Idea is Stefan using?

Trade-offs: Gaining some enjoyment is worth giving up some safety.

The Zimbabwean government printed money as fast as it could for years. As a result:

Zimbabwe experienced inflation at a rate of billions of percent per month

The slope of the production possibilities frontier at a given point indicates ______.

a country's opportunity cost of producti

A production possibilities frontier shows:

all combinations of goods that a country can produce given its productivity and supply of inputs.

On June 13, 2011, writer Sebastian Anthony at Extreme Tech wrote, "During the two days that the Les Paul [Google] doodle was online, those 740 million visitors spent 26 seconds more on the Google home page than normal. That's a total of almost 10.7 million man hours spent playing with the Les Paul Google Doodle. Assuming the average Google user earns $25/hour, the doodle cost companies around the world $268 million in lost productivity." Mr. Anthony's mistake is ignoring opportunity costs. He is doing this by assuming

all those man hours would have been spent working if not for the doodle.

In his book, The Wealth of Nations, Adam Smith claimed that individuals:

are motivated by self-interest.

Absolute advantage is the ability to produce a:

good with fewer inputs than others.

When markets don't align self-interest with social interest:

governments may improve the situation by changing incentives.

The reason why Martha Stewart does not iron her own clothes is that:

her opportunity cost of ironing exceeds the person's wages providing the ironing service.

Many companies pay their sales employees based on commissions—the more they sell, the more they get paid. This practice highlights the role of:

incentives

The opportunity cost of committing a crime and spending 5 years in jail:

is higher for people who are employed than for the unemployed.

When people spend more money without an increase in the supply of goods, prices:

must rise.

Adam Smith wrote, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest." He meant that:

people work for the benefit of others because it benefits them to do so.

Which of the following is NOT a good institution?

political turnover

The better Martha Stewart is at running her business:

the higher her opportunity cost of ironing her own shirts

If market incentives to produce are too weak, the market will end up producing:

too little of the good