Econ 222 Midterm 1

Based on the GDP data in the table below, calculate the GDP per capita for the country of Vietnam in 2020. Real GDP 2020 Population $270 billion 97 million A. $2,784 B. $28,845 C. $3,592 D. $35,920

A

The difference between nominal GDP and real GDP is: A. real GDP adjusts for inflation B. nominal GDP measures actual productivity C. nominal GDP adjusts for inflation D. real GDP excludes imports and exports

A

Consider the recent shortage of lumber as a result of supply chain interruptions. What effect will this shortage have on the rental price of existing apartments? A. Rental prices of existing apartments will not be affected by any shortages in the lumber market. B. Rental prices of existing apartments are likely to fall. C. Rental prices of existing apartments will increase. D. More information is necessary to answer the question.

C

An input factor of production (flour for muffins) becomes more expensive.

supply decreases

A business cycle reflects changes in economic activity, particularly real GDP. The stages of a business cycle are: A. expansion, peak, recession, trough B. trough, expansion, recession, peak C. contraction, recession, expansion, boom D. expansion, trough, recession, peak

A

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good. A. the production possibilities frontier B. allocative efficiency C. scarcity D. utility

A

As the _______________ complement for high-skill labor becomes cheaper, the demand curve for high- skill labor will shift to the right. A. technology B. low-skill labor C. market D. lower wage

A

At Point A in the production possibilities graph shown above, the economy: |. ) |. ) |. .A. ) |______________________)__________ A. is not using its resources efficiently. B. is using its resources efficiently while producing clothing but no food. C. is using its resources efficiently while producing food but no clothing. D. is using its resources efficiently to produce both food and clothing.

A

Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market." A. The statement is correct. B. The statement would be correct if "quantity of wheat demanded" were substituted for "quantity of wheat supplied." C. The statement is incorrect because it confuses a change in quantity supplied with a change in supply. D. The statement would be correct if it read that a "decrease in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."

A

Marginal thinking is best demonstrated by: A. choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. B. deciding to never purchase a coat made with animal skins or furs C. acquiring the information relevant to a choice before making that choice D. measuring all of the costs of 10 meals against all of the benefits when deciding whether to order a second milkshake.

A

One thing economists do to help them understand how the real world works is a. make assumptions. b. ignore the past. c. try to capture every aspect of the real world in the models they construct. d. All of the above are correct.

A

The circular flow diagram of economic activity is a model of the: A. flow of goods, services, and payments between households and firms. B. influence of government on business behaviour. C. role of unions and government in the economy. D. interaction among taxes, prices, and profits.

A

The law of demand indicates that as ___ increased, ___ decreases. A. price, quantity demanded B. price, supply C. quantity demanded, quantity supplied D. price, demand

A

The production possibilities frontier illustrates the A) maximum combinations of goods and services that can be produced. B) resources the economy possess, but not its level of technology. C) goods and services that people want. D) limits to people's wants.

A

When computing the opportunity cost of attending a basketball game you should include A) the price you pay for the ticket and the value of your time. B) the price you pay for the ticket, but not the value of your time. C) the value of your time, but not the price you pay for the ticket. D) neither the price of the ticket nor the value of your time.

A

When computing the opportunity cost of attending a basketball game you should include a. the price you pay for the ticket and the value of your time. b. the price you pay for the ticket, but not the value of your time. c. the value of your time, but not the price you pay for the ticket. d. neither the price of the ticket nor the value of your time.

A

Which of the following is included in GDP? A. the fees charged for a stock broker's services B. revenue from the sale of a three-year old car C. the receipts from a sale of land D. the value of lawn care service provided by a sixteen-year-old as part of his weekly chores

A

Which of the following statements is TRUE? A. GDP includes spending on recreation and travel, but it does not cover leisure time. B. GDP does not include production that is exchanged in the market, but it does cover production that is not exchanged in the market. C. GDP does not include newly produced goods and services, but counts the buying and selling of previously existing assets D. GDP includes production that is not exchanged in the market

A

A change in price of a good or service typically causes ________________ for that specific good or service. A. a new equilibrium price B. a change along the supply curve C. the supply curve to shift D. a decreased demand

B

Are markets always in equilibrium? A. No, they never "settle down" into a stable price and quantity. B. No, but if there is no outside interference, they tend to move toward equilibrium. C. Yes, because very few things tend to alter supply and demand. D. Yes, they are always at the equilibrium point, or very close to it.

B

As the circular flow model shows, the factors of production flow from A) firms to households through the factor market. B) households to firms through the factor market. C) firms to households through the goods market. D) households to firms through the goods market.

B

Consider the recent shortage of lumber as a result of supply chain interruptions. How will the market of new housing construction be affected by this shortage? A. The supply of newly constructed housing will increase. B. The supply of newly constructed housing will decline. C. The shortage in lumber has no effect on either supply or demand in the market for newly constructed housing. D. The shortage in lumber affects both, supply and demand in the housing market. The effect on supply exceeds the effect on demand.

B

Consider the recent shortage of lumber as a result of supply chain interruptions. The government decides to address the problem of lumber shortages for the market of new constructed housing by imposing a Price ceiling in the market for lumber. This will A. increase the supply of newly constructed housing. B. decrease the supply of newly constructed housing. C. have no effect. D. increase the Price and decrease the quantity in the market for newly constructed housing.

B

Consider the recent shortage of lumber as a result of supply chain interruptions. What effect will this shortage have on the price and quantity traded of newly constructed housing? A. The price will increase and the quantity traded will increase. B. The price will increase and the quantity traded will decline. C. There is no change to the Price or quantity traded. D. The quantity traded will remain constant and the price will increase.

B

How do apple growers react to the news of medical research findings that suggest that eating apples leads to greater health benefits than were previously known? A. They increase the supply of apples. B. They increase the quantity of apples supplied. C. They decrease the supply of apples. D. They decrease the quantity of apples supplied.

B

Items bought by businesses to help produce other goods and services are called A) consumption goods and services. B) capital goods. C) government goods and services. D) exports of goods and services.

B

Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel? A. There is an increase in the cost of producing steel, which shifts the supply curve of steel to the right, thereby increasing the price of steel. B. There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel. C. There is a decrease in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel. D. The increase in wage costs will shift the demand curve for steel to the left, increasing the cost of steel.

B

The supply curve of textbooks (which are produced using paper made from trees) will shift to the left in response to: A. a decline in college tuition. B. a sharp increase in the demand for and construction of wood-frame homes. C. an increase in the supply of lumberjacks. D. an end to government regulations that limit timber harvesting in national forests.

B

The term "ceteris paribus" means that: A. everything is variable. B. all variables except those specified are constant. C. no one knows which variables will change and which will remain constant. D. what is true for the individual is not necessarily true for the whole.

B

Which of the following best characterizes the circular flow of income? A. Businesses buy resources from the government, and households buy goods and services from businesses. B. Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. C. The government purchases resources from businesses and households and then sells goods and services to businesses and households. D. Households buy factors of production from businesses, and businesses buy goods and services from households.

B

Which of the following lies primarily within the realm of macroeconomics? A. a study of the demand for gasoline B. a study of how tax cuts stimulate aggregate production C. an analysis of supply and demand conditions in the electricity market D. a study of the impact of "mad cow" disease on the price of beef worldwide

B

Which of the following would most likely shift the production possibilities curve inward? A. an increase in the number of hours factories are in use B. a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time C. an increase in the production of capital goods D. technological progress

B

A student has only a few hours to prepare for two different exams tomorrow morning. The above table shows alternative possible exam outcomes with three alternative uses of the student's time. The opportunity cost of scoring an 84 on the history exam rather than 76 is: Possibility A Economics History I. 94. 76 II 87 84 III 77 91 A. 10 points on the economics exam B. 8 points on the history exam C. 7 points on the economics exam D. 12 points on the economics exam

C

Consider a policy aiming to reduce the quantity demanded for cigarettes, this policy should a. shift the demand curve to the left b. shift the demand curve to the right c. increase the price for cigarettes by imposing a tax d. decrease the Price for cigarettes by imposing a subsidy

C

Consider the recent shortage of lumber as a result of supply chain interruptions. The government decides to address the problem of lumber shortages for the market of new constructed housing by imposing a Price ceiling in the market for lumber. Given the significant size of the housing market which of the following effects do you expect? A. An increase in housing for everyone improving the economy overall . B. An increase in efficiency of overall production in the economy. C. A decline in efficiency of overall production in the economy. D. It will help the economy to achieve all major macroeconomic goals: Price stability, low unemployment and economic growth.

C

Consider the recent shortage of lumber as a result of supply chain interruptions. The government decides to address the problem of lumber shortages for the market of new constructed housing by imposing a Price floor in the market for lumber. This will A. increase the supply of newly constructed housing. B. decrease the supply of newly constructed housing. C. have no effect. D. increase the Price and decrease the quantity in the market for new constructed housing.

C

Economics, the cost of something is A. the dollar amount of obtaining it B. always measured in units of time given up to get it C. what you give up to get it D. often impossible to quantify, even in principle

C

For consumers, taco chips and salsa are complements. If the price of salsa rises, what is the effect on the market of taco chips? A) Demand increases. B) Quantity demanded increases. C) Demand decreases D) Quantity demanded decreases

C

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is: A. nothing, because he enjoys playing basketball more than studying. B. the increase in skill he obtains from playing basketball for that hour. C. the benefit to his grades from studying for an hour D. nothing, because he had a free pass into the sports complex to play basketball.

C

The law of ____________________________ explains why people and societies rarely make all-or-nothing choices. A. consumption B. marginal analysis C. diminishing marginal utility D. utility

C

The productive resource that organizes labor, land, and capital is A) human capital. B) financial capital. C) entrepreneurship. D) government.

C

When consumers and businesses have greater confidence that they will be able to repay in the future, ___________________. A. the quantity demanded of financial capital at any given interest rate will remain unchanged. B. the quantity demanded of financial capital at any given interest rate will shift to the left. C. the quantity demanded of financial capital at any given interest rate will shift to the right. D. the quantity demanded of financial capital at any given interest rate will achieve equilibrium.

C

Which of the following statements about economic models is correct? a. Economic models are built to mirror reality exactly. b. Economic models are useful, but they should not be used for the purpose of improving public policies. c. Because economic models omit many details, they allow us to see what is truly important. d. Economic models seldom incorporate equations or diagrams.

C

_____________ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines. A. Skill B. Specialization C. Economies of scale D. Division of labor

C

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is: A. $0 B. $4 C. $40 D. $44

D

A marginal change is a a. change that involves little, if anything, that is important. b. large, significant adjustment. c. change for the worse, and so it is usually a short-term change. d. small, incremental adjustment.

D

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate? a. People face tradeoffs. b. The cost of something is what you give up to get it. c. Rational people think at the margin. d. People respond to incentives.

D

Because it is difficult for economists to use experiments to generate data, they generally must A. do without data. B. substitute assumptions for data when data are unavailable. C. rely upon hypothetical data that were previously concocted by other economists. D. use whatever data the world gives them.

D

Consider the recent shortage of lumber as a result of supply chain interruptions. The government decides to address the problem of lumber shortages for the market of new constructed housing by imposing a Price ceiling in the market for lumber. Over the next 2 years the economy will likely experience A. surpluses in the market for newly constructed housing, existing housing and in the rental housing and apartment market. B. shortages in the market for newly constructed housing and surpluses in the existing housing and in the rental housing and rental apartment market. C. shortages in the market for newly constructed housing and efficient outcomes (neither shortage nor surplus) in the existing housing and in the rental housing and rental apartment market. D. shortages in the market for newly constructed housing, existing housing and in the rental housing and apartment market.

D

The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if: A. the economy moves along the production possibilities in the direction of a greater quantity of defense. B. the economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve. C. the production possibilities frontier shifts outward due to an improvement in technology. D. either b) or c) occurs, but not as a result of a).

D

The study of economics is best described as a study of: A. the factors that influence the stock and bond markets. B. capitalism C. the choices made in producing goods and services. D. coping with scarcity, and choices made as a result of scarcity.

D

Whenever there is a surplus at a particular price, the quantity sold at that price will equal: A. (quantity demanded plus quantity supplied)/2. B. the quantity supplied at that price. C. the quantity supplied minus the quantity demanded. D. the quantity demanded at that price.

D

|. ) |. ).B |. .A. ) |______________________)__________ When the economy moves from Point A to Point B in the diagram: A. the economy begins using its resources efficiently to produce both food and clothing. B. the economy operates at its productive capacity once it reaches Point B. C. the economy increases production of both clothing and food. D. All of the above occur.

D

A substitutable good becomes more cheaply and abundantly available to buyers

demand decreases

Income grows and the good in question is an inferior good.

demand decreases

A complementary good becomes more cheaply and abundantly available to buyers

demand increases

There is a price increase of a substitute good (consider the production of trucks and SUVs)

supply decreases

Technological improvements in the production of a good makes it cheaper for sellers in the market to produce a good.

supply increases