macro economics test 1 (chapters 1-6)
The result of free trade between nations is that
goods can be produced in the location where their opportunity cost is the lowest
Which one of the following statements is not true of a market economy
A central planning authority makes decisions about production and consumption.
Which of the following statements best describes the effects of trade
All countries benefit when each country specializes according to its own comparative advantage
Economists typically depict the PPF as a bowed-out curve rather than as a straight line in order to show that
the opportunity cost of producing a good rises as more is produced
Which of the following is not a predictable result of a price ceiling
. exorbitant profits for producers of the good
Overall output
typically declines during recessions
an opportunity cost arises
whenever any choice is made
Economic theory asserts that people will behave in ways that
will enhance their own overall well-being
If a price floor is imposed above the equilibrium price in a market, what is the effect
A surplus results
Which of the following statements is TRUE
Deflation can worsen a recession by giving people an incentive to hold cash rather than to make productive investments
Macroeconomics is the branch of economics studying
Fluctuations in the overall level of business
Suppose you hear an economist make an assertion that, between the two countries, France has a comparative advantage in the production of chocolate and that Italy has a comparative advantage in the production of wine. Which of the following statements is another way of stating the same idea expressed in the assertion
France can produce chocolate at a lower opportunity cost than Italy can.
Which of the following statements is TRUE
Macroeconomists study variables such as the overall levels of prices and output
Which of the following statements is TRUE
Over the business cycle, the economy's level of output and its unemployment rate move in opposite directions
Which of the following statements regarding price floors is TRUE
Price floors are intended to help certain people, but they have side effects that may harm others in predictable ways
If an economist argues that all countries gain from trade, what reasoning is most likely underlying her argument
Production according to the principle of comparative advantage lowers overall costs and therefore allows both countries to have a higher standard of living
Economist would most likely disagree with which of the following statements
Resources and inputs used in production are unlimited
. If air travel to Hawaii becomes less expensive, what is likely to happen in the market for hotel rooms in Hawaii
The demand curve for hotel rooms will shift to the right
Which of the following would cause a surplus of newsprint
The demand for newsprint decreases, and the price does not change
What is the result of a binding quota restriction on quantity
The market-clearing price will be higher than the equilibrium price
Why do minimum wage laws in Italy and Spain result in a greater prevalence of workers being hired in unreported jobs "off the books" than do minimum wage laws in the United States
The minimum wages in these countries are so far above the equilibrium wage that they have generated significant unemployment.
What is the effect of the quota imposed on sugar imports into the United States
The price of sugar within the United States is roughly twice the level of the world price
. How would an increase in the price of cotton affect the market for cotton T-shirts at your university bookstore
The supply curve for cotton T-shirts will shift to the left
Consider the market for kayaks. What happens when the process of manufacturing kayaks becomes less costly through the use of new technology
The supply curve for kayaks will shift to the right
What best describes the competitive market
There are many buyers and sellers of the same good
If a price ceiling is imposed above the equilibrium price, what is the effect
There is no visible effect on the market outcome
Which of the following statements is TRUE
There's no simple relationship between the success of an economy and whether it runs trade surpluses or deficits.
Which of the following is not a likely result of a quantity control in the form of a binding quota
a surplus of the good or service
The MOST important effect of a recession is its effect on the:
ability of workers to find jobs
In which of the following areas does the United States limit imports
agriculture
the purpose of an economic system is to
allocate scarce resources
The long-run effect of macroeconomic growth is to
allow for a higher standard of living
If the demand curve shifts to the left, and the supply curve does NOT change, then the equilibrium price
and quantity both will decrease
Economists generally agree that people are most likely to change their behavior when they
are given incentives to do so
Exchanges taking place in a market system
are voluntary
Why did Venezuela experience a shortage of basic food in 2006
because the price of basic food was legally prevented from rising to its equilibrium level
Which of the following is a normative statement
camera makes a good wedding gift
the condition of scarcity means that
choices must be made in the allocation of productive resources
The downward slope of the demand curve indicates that, all else equal
consumers will buy more of a good when its price decreases
If a country imports a good for which the world price is below its domestic price:
consumers will gain and producers will lose
The tools of monetary policy are
control over the interest rate and the quantity of money
Which group of people would be most likely to support a tariff imposed on cotton imported into the United States
cotton growers in the United States
Which of the following changes would cause a decrease in the demand for DVD rentals
decrease in the price of movie admissions
Autarky is a situation in which a country
does not trade
Suppose that Great Britain and France each specializes according to its own comparative advantage, so that Great Britain produces fish and France produces wine. Then they engage in trade. This means that
each nation can consume more of both goods than they could under conditions of autarky
An economic system is in __________ when no individual would be better off by making a different choice
equilibrium
When the world price of a good exceeds the domestic price, a country is MOST likely to
export the good.
Long-run growth refers to the
growth of the economy over several decades
Adam Smith used the idea of the invisible hand to refer to the ability of market economies to
harness the power of individual self-interest for the good of society as a whole
Compared with autarky, international trade leads to
higher production in exporting industries and lower production in import-competing industries
The United States has a comparative advantage in the production of aircrafts, because this task is intensive in the use of:
human capital.
The effect of a tariff is to
increase both the price paid by consumers and the price received by producers
If the price of a bale of cotton increases from $0.80 to $1.20, and a pound of Kenyan coffee decreases from $12 a pound to $10 a pound, we can expect a(n):
increase in the quantity demanded of Kenyan coffee
. If coffee is a normal good, then an increase in consumer income will
increase the demand for coffee
In the United States, growing international trade has
increased the wages of highly educated workers
the focal point of economic inquiry is
individual choice
If a country specializes according to its own comparative advantage and then trades with other nations
it can consume at a higher level than the domestic production possibility frontier
A binding price ceiling is designed to
keep the price below the equilibrium price
What is traded in factor markets
land, labor, capital, and human capital
Consider gas stations. As a result of an economic recession and a decrease in consumer incomes, there will be a
leftward shift in the station's demand curve and lower gas prices
Which of the following is not one of the standard arguments for restricting imports?
preventing an outflow of gold
A binding price floor is presented graphically as a(n)
price above equilibrium
A binding price ceiling is presented graphically as a(n
price below equilibrium
A binding minimum wage is a type of:
price floor
The upward slope of the supply curve indicates that
producers supply more of a good when its price increases
What is the name given to the wedge that occurs between the supply price and the demand price of the transacted quantity, when a good is subject to quantity restrictions
quota rent
medallion system used to license taxicabs in New York City is an example of a(n)
quota.
A binding price floor is designed to
raise the price above the equilibrium price
Which of the following would enhance the level of efficiency in a market?
removing a binding price floor, allowing the price to return to its equilibrium level
A price above the equilibrium price will
result in quantity supplied being greater than quantity demanded
Which group would be most likely to benefit from a binding price floor imposed on wheat
sellers of wheat that are seeking higher prices
The business cycle is the
short-run alternation between economic recessions and expansions
In his book The Wealth of Nations, Adam Smith used the example of pin-making to illustrate the advantages of
specialization
Which of the following is a macroeconomic variable
the overall level of output
. A shortage is the result of when
the price of a good is held below the equilibrium price
Which of the following is a microeconomic variable
the price of coffee
When economists want to describe how much an economy can produce with a given amount of resources, they use a model known as
the production possibility frontier
The production of aluminum baseball bats is characterized by increasing returns. This means that
the productivity of resources tends to increase as production increases
Most individuals choose careers in which they specialize in producing only one type of good or service, yet as consumers they have access to a wide variety of goods and services. What principle allows for this
trade
Which of the following statements is true
All countries can gain from trade if they all specialize in production according to comparative advantage
Fiscal policy attempts to
stabilize the economy through changes in taxation and government spending
If the supply curve shifts to the left, and the demand curve does not change then the equilibrium price
will increase, and the quantity will decrease