Test 1 - Chapters 1, 2, 8, & 9

unemployment rate

(number of unemployed/labor force) (100)

Which of the following causes changes in the CPI to overstate the true inflation rate?

- increase in quality bias - substitution bias - new product bias

The effect of labor union on overall unemployment is ____ since only a _____ percentage of the labor force outside the government is unionized.

- small - small

What is the role of an entrepreneur?

- to take risks - to bring together the factors of production - to operate a business that produces a good or service

Alzania produces and consumes​ 500,000 tons of cotton during a year. Reports indicate that​ Alzania's neighbor, which also employs the same number of people in the cotton​ industry, consumed​ 400,000 tons of cotton. This led industry experts to believe that Alzania had an absolute advantage in the production of cotton over its neighbor. Which of the​ following, if​ true, could weaken this​ view?

Alzania's neighbor exported half its production of cotton that year

Which of the following is an example of structural unemployment?

Autoworkers lose jobs due to globalization and must retrain to find new jobs

What are the four major components of expenditures in GDP?

Consumption Investment Government Purchases Net Exports

"The problem with economics is that it assumes that consumers and firms always make the correct decisions. But we know that everyone makes​ mistakes." What is the most correct response to this​ statement?

Economics assumes that consumers and firms are​ rational, not that they always make the right decisions.

Suppose Apple is currently selling 3,000,000 iPods per year. ​ However, managers at Apple are considering whether to increase production by 300,000 iPods. One manager explains that after increasing production by this​ amount, total profit would be​ $100 million. Given this​ information, should Apple increase production by 300,000 iPods​?

Information about the additional revenue earned and the additional cost incurred from producing 300,000 additional iPods is required to answer this question

Which of the following is not one of the conditions someone needs to meet to be counted as unemployed?

They had worked only one hour per week during the previous four weeks

Is Buffet correct that it is the role of the federal government to make sure people who work will have enough income to live a​ "decent lifestyle"?

This is a normative economic​ question, so the answer is a matter of the norms or values of the person answering.

Which equation represents the relationship between GDP and the four major expenditure​ components?

Y = C + I + G + NX

An average of the prices of the goods and services purchased by a typical family is the

consumer price index (CPI)

The short-term unemployment that arises from the process of matching workers with jobs is called

frictional unemployment

In economics, the term capital refers to

goods used to produce other goods

In June​ 2015, the unemployment rate declined to 5.3% from 5.5% in May. The labor force participation rate also declined from May to​ June, from 62.9% to 62.6%. If the labor force participation rate had remained unchanged from May to​ June, the unemployment rate for June 2015 would be

greater than 5.3% because the value in the numerator of the formula for the unemployment rate would increase more than the value in the denominator.

The minimum wage law

has only a small effect on the unemployment rate since only a small part of the labor force earns the minimum wage

The PPF will shift outward

if technological advances occur

Government unemployment insurance tends to

increase the unemployment rate by lowering the opportunity cost of job search

An efficiency wage

increases the unemployment rate since firms pay a higher-than-market wage that increases the quantity of labor supplied

inefficient point on PPF

inside of PPF, production there is not using all available resources

Using the same amount of resources, suppose that Nicaragua can produce twice as much coffee as Columbia. Nevertheless, Columbia could still have the comparative advantage in producing coffee if

it is even less efficient than Nicaragua in the production of goods other than coffee

An optimal decision occurs when

marginal benefit = marginal cost

unattainable point on PPF

outside the PPF

point where country's future growth rate is the highest

point where most resources are used to product capital goods

efficient points on PPF

points on PPF, this is where maximum output is produced with available resources

Suppose an analyst estimates the cost to businesses from minimum wage laws. This is an example of

positive analysis

The payment of government unemployment insurance reduces the severity of recessions by

preventing a huge drop in income and spending for the unemployed

If the GDP deflator in 2012 has a value of 98, then

prices have decreased 2% between the base year and 2012

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 production possibilities frontier (PPF)

shows the maximum attainable combinations of two goods that may be produced with available resources

The labor force participation rate is calculated by

the percentage of the working-age population that is in the labor force (labor force/working-age population) (100)

In 2014, the largest component of gross domestic income was

wages

We can show economic inefficiency

with points inside the PPF

We can show economic efficiency

with points on PPF