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In a small economy, investment is $2,500, consumption spending is $6,300, government spending is $1,300, exports are $2,500, and imports are $1,400. What is gross domestic product (GDP) equal to?

$11,200 GDP: Y = C + I + G + NX

Suppose your expenses for this term are as follows: tuition: $9,000, room and board: $1,500, books and other educational supplies: $1,000. Further, during the term, you can only work part-time and earn $3,000 instead of your full-time salary of $8,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college?

$15,000

Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The base year used in calculating real GDP is

2009. Good! This is the year for which real and nominal GDP are identical.

A car that is produced in 2014 is not sold until 2015. According to the definition of GDP, in which year's GDP should it be counted?

2014 Yes, it is recorded as a change in business inventories in investment.

The Farm Factory, a booth at the local Farmer's Market, sells fresh eggs for $1.50 per dozen and fresh milk for $2.50 per gallon. What is the opportunity cost of buying a dozen eggs?

3/5 of a gallon of milk

These are the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles. What is the opportunity cost of producing 1 snow cone in Greenland? Which country has a comparative advantage in snow cones? 1-1/5 popsicles; Greenland

5/6 of a popsicle; Iceland

Suppose an economy has only three goods and the typical family purchases the amounts given in the table above. If 2006 is the base year, then what is the CPI for 2013?

87.5

Which of the following statements about economic resources is false?

Economic resources include financial capital and money.

When an economy is at its natural rate of unemployment, which of the following will be true?

The unemployment rate will be greater than 0%.

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?

consume a combination of goods that lies outside its own production possibilities frontier

Which of the following would shift a nation's production possibilities frontier outward?

discovering a more efficient process to desalinate water

Legalizing all forms of illegal activities...

increases GDP and reduces the size of the underground economy

Suppose that when the price of pickles decreases, Teddy increases his purchase of ketchup. To Teddy,

pickles and ketchup are complements.

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to overstate the true extent of joblessness?

unemployed persons falsely report themselves to be actively looking for a job

If it costs Vijay $150 to design 5 websites and $175 to design 6 websites, what is the marginal cost of designing the sixth website?

$25

The production possibilities frontier model assumes all of the following except

any level of the two products that the economy produces is currently possible.

Lionel's Lawn Care is a company that maintains residential yards. Lionel's cost for his standard package of mowing, edging, and trimming is $15, and he charges $25 for this service. For a total price of $40, Lionel will also trim shrubs, a service that adds an additional $10 to the total cost of the standard package. What is Lionel's marginal benefit if he sells the standard package?

$25

Your roommate, Seth, a psychology major, said, "The problem with economics is that it assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with his comment?

I disagree with him. Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave rationally, meaning they make the best decisions given their knowledge of the costs and benefits.

Selling tickets to graduation ceremonies has long been a tradition among students at institutions that limit the number of guests. Suppose your classmate, Heidi purchased two tickets for $40 each. Is this transaction economically efficient?

Yes, it was a voluntary exchange that benefited both parties.

A very simple economy produces three goods: movies, burgers, and bikes. The quantities produced and their corresponding prices for 2006 and 2013 are shown in the table above. Calculate nominal GDP for 2013.

$7,035

Suppose the working-age population of a fictional economy falls into the following categories: 88 are retired or homemakers; 61 have full-time employment; 23 have part-time employment; 19 do not have employment, but are actively looking for employment; and 13 would like employment but do not have employment and are not actively looking for employment. The official unemployment rate would equal

(19/103) * 100 = 18.4%.

This is the production possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids. Suppose Vidalia is currently producing 20 dozen orchids per period. How many roses is it also producing, assuming that resources are fully utilized?

150 dozen roses

Which of the following statements is true?

A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in quantity demanded.

Investment, as defined by economists, would not include which of the following?

Keebler buys US government bonds.

All of the following questions or statements regarding medical school are positive (as opposed to normative) except:

Medical students who enter specialized fields make a larger contribution to society than do student who enter primary care.

Which of the following statements is true about a simple circular flow model?

Producers are buyers in the input market.

Tabitha shares a flea market booth with her sister. Her share of the rent is $150 per month. She is considering moving to her own, larger booth which she will not have to share with anyone. The larger booth rents for $450 per month. Recently, you ran into Tabitha in the grocery store and she tells you that she has rented the larger booth. Tabitha is as rational as any other person. As an economics major, you rightly conclude that

Tabitha figures that the additional benefit of having her own booth (as opposed to sharing) is at least $300.

How does a market system prevent people from getting as many goods and services as they wish?

The market system allocates goods and services to those who are able to pay for those products and therefore income is a limiting factor.

Given the information above, what can we say has happened in the economy from 2012 to 2013?

The price level has risen. Yes - because nominal GDP has increased by more than real GDP, the difference must be a price increase.

In recent years the cost of producing wines in the U.S. has increased largely due to rising rents for vineyards. At the same time, more and more Americans prefer wine over beer. Which of the following best explains the effect of these events in the wine market?

The supply curve has shifted to the left and the demand curve has shifted to the right. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

Consider the following statements: a. Consumers buy more donuts from a donut shop that sells donuts at a lower price than other rival donut shops in the area. b. Department stores take steps to increase security since they believe it is more costly to allow shoplifting than to install expensive security monitoring equipment. c. Farmers produce more cotton when its selling price falls. Which of the above statements demonstrates that economic agents respond to incentives?

a and b.

This figure shows various points on three different production possibilities frontiers for a nation. Consider the following events: Which of the events listed above could cause a movement from Z to V ?

a only

In a free market such as that depicted above, a shortage is eliminated by

a price increase, increasing the quantity supplied and decreasing the quantity demanded.

Increases in real GDP would understate the well-being of a country over time if, over that time period, the

amount of pollution decreased.

Last month, the Tecumseh Corporation supplied 400 units of three-ring binders at $6 per unit. This month, the company supplied the same quantity of binders at $4 per unit. Based on this evidence, Tecumseh has experienced

an increase in supply.

An increase in the demand for peanuts due to changes in consumer tastes, accompanied by an increase in the supply of peanuts as a result of favorable growing conditions, will result in

an increase in the equilibrium quantity of peanuts; the equilibrium price may increase or decrease.

Farmers can raise either goats or ostriches on their land. Which of the following would cause the supply of goats to decrease?

an increase in the price of ostriches

In the circular flow model, the value of total production for an economy ________ the value of total expenditures on final goods and services.

equals

Wanda is a designer who is producing a suite of bedroom furniture for Daniel. Daniel will paying Wanda $6500 for this furniture. When Daniel and Wanda get married, Wanda continues to produce furniture for their home, but she no longer charges Daniel for her work. As a result, GDP ________ because ________.

falls; Wanda's furniture production is no longer purchased by Daniel once they're married Yes - this is household production now.

Izzy Amador is a highly talented tattoo artist. She has chosen to specialize in tattoo art because of all of the following except__

her opportunity cost of pursuing another career is very low.

Suppose that homemakers are included as employed in the labor force statistics, rather than being counted as out of the labor force. This would

increase the measured labor force participation rate.

The law of demand implies, holding everything else constant, that as the price of yoga mats...

increases, the quantity of yoga mats demanded will decrease.

The "new product bias" in the consumer price index refers to the idea that

new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers.

Increasing marginal opportunity cost implies that

the more resources already devoted to any activity, the benefit from allocating yet more resources to that activity decreases by progressively larger amounts.

Select the phrase that correctly completes the following statement. "A decrease in the number of manufacturers caused a decrease in the supply of sailboats. As a result,

the price of sailboats increased and the quantity demanded of sailboats decreased."