ECON 110 Macroeconomics Chapter 1-2
If bagels and doughnuts are substitute goods, then which scenario is likely to occur if the price of bagels is reduced?
The demand curve for doughnuts will shift to the left.
Investment in human capital refers to
education, on-the-job training, and professional training activities.
(Figure: Tanks and Health Care) Which point in the figure is obtainable but NOT efficient?
f
Economists refer to rent as a payment toward
land
What is NOT an economic factor of production?
money
The law of comparative advantage suggests that
nations can benefit if they trade with each other.
The answers to normative questions
often involve value judgments.
The market economy is often called the price system because
prices provide information for both buyers and sellers.
In the market for electric vehicles (EVs), more vehicle manufacturers are releasing electric models at the same time that EVs are becoming more popular with consumers. As a result, we can expect an
unknown change in the equilibrium price but an increase in the equilibrium quantity of EVs.
There are two sellers in the market for gourmet salsa, Wen and Ahmed. When the market price is $5 per bottle, Wen is willing to sell 10 bottles and Ahmed is willing to sell 15 bottles. If the market price rises to $7, then, ceteris paribus
we can confidently say that market quantity supplied is at least 25 bottles.
Suppose in the market for iPhones, the following two changes take place: (1) the cost of making iPhones falls, and (2) the price of smartphone data plans falls. What happens to the equilibrium price and the equilibrium quantity?
The equilibrium price is indeterminate, but the equilibrium quantity rises.
(Figure: Predicting Market Shifts) Why is there a tendency for this market to adjust from a price of P1 to P2?
The presence of excess inventories forces firms to cut prices.
Free trade is known as a positive-sum game because both parties to a transaction can receive positive gains.
True
If the price of the cotton used in making trousers increases, then the supply curve for trousers will shift to the left.
True
If two goods are substitutes and the price of one rises, then the demand for the other good will also rise.
True
The demand curve slopes downward and to the right.
True
(Figure: Turtletopia and Frogland PPFs) _____ has the absolute advantage for producing corn; and _____ has the absolute advantage for producing pork.
Turtletopia; Turtletopia
The production of too many Matchbox cars and not enough Barbie Dolls is an example of _____ inefficiency.
allocative
(Figure: Predicting Demand Shifts) Which factor would change demand from D0 to D1?
an increase in the price of a substitute good
A production possibilities frontier with increasing opportunity costs is
bowed or concave.
Which are the principal resources that can be changed through actions taken by the government?
capital and labor
A market economy is also known as a _____ economy, and decisions are made by _____.
capitalist; private individuals
The supply of coffee has increased twice as much as the demand for coffee has increased. As a result, we can predict a(n)
decrease in equilibrium price, but equilibrium quantity increases.
The opportunity costs of attending college do NOT include
food expenditures.
Which of these circumstances would NOT affect the supply of new automobiles?
higher interest rates for new car financing
A country operating outside of the production possibilities frontier is operating
impossibly because a country cannot operate outside the production possibilities frontier.
The key difference between microeconomics and macroeconomics is microeconomics focuses on _____ while macroeconomics focuses on _____.
individual decisions; aggregate issues
Economists refer to the payment toward capital as
interest
The study of economics
is about people making decisions regarding their use of scarce resources.
When goods are produced at the lowest possible cost, an economy is said to have achieved
production efficiency.
The _____ shows the combination of two goods that are possible for a society to produce at full employment.
production possibilities frontier
Economic growth is shown as a _____ the PPF.
rightward shift of
When quantity demanded exceeds quantity supplied, a _____ occurs, putting _____ pressure on the price.
shortage; upward
Economics is a _____ science.
social
A shift in the demand curve is NOT caused by
technology
Planned economies rely heavily on _____ to make most economic decisions.
the government
The opportunity cost of buying a ticket to a major league baseball game and then going to the game is
the next best alternative that could have been undertaken.
Electricity is essential in the production of aluminum. If electricity prices increase
the supply curve for aluminum shifts leftward.
(Figure: Pork and Corn PPF 2) If we want to produce 10 units of corn, then we can produce no more than _____ unit(s) of pork.
3
(Figure: Interpreting a Market Graph) If the price of leather used to make shoes falls such that the supply of shoes increases by 20 shoes at every price, then the amount of shoes supplied at a price of $60 before the change would be _____ pairs, and after the change, it would be _____ pairs.
30; 50
Suppose the demand for gasoline is rising. Which statement describes a possible cause?
Consumers expect prices to rise in the near future.
_____ is the fairness of various issues and policies.
Equity
An increase in supply causes the supply curve to shift upward.
False
Positive questions are questions about how things ought to be.
False
Selling a used textbook online does not involve markets because the book has already been sold once before.
False
Which situation(s) may require government intervention? I. A local business has made a profit in each of the last 10 years. II. Students are having difficulty deciding whether to go the beach or to go hiking for their class trip. III. A manufacturing firm on a river is dumping production runoff into the water.
III only
Capital includes all of these EXCEPT
dollar bills in a bank vault
