macro exam 1

If a country produces only two goods, then it is not possible to have a comparative advantage in the production of both those goods. True or False

True

If consumers believe the price of hybrid vehicles will decrease in the future, this will cause the demand for hybrid vehicles to decrease now. True or False

True

Refer to Figure above. What is the value of producer surplus after the imposition of the price floor?

a. $3,000

Refer to Figure above. What is the value of the deadweight loss after the imposition of the price floor?

a. $600

Refer to Figure above. What is the opportunity cost of one dozen roses?

a. 0.4 dozen orchids

Published in 1776, ________ was written by Adam Smith.

d. "An Inquiry into the Nature and Causes of the Wealth of Nations"

Refer to Figure above. How much of the tax is paid by buyers?

d. $3

Refer to Table above. Using marginal analysis, how many hours should Eva extend her bakery's hours of operations? She hires a worker for every hour she opens for $8 an hour.

d. 5 hours

Refer to Figure above. Which two arrows in the diagram depict the following transaction: Stanley purchases the novel, "Night of Sorrows" for his summer reading pleasure.

d. K and G

Refer to Figure above. A decrease in the number of firms in the market would be represented by a movement from

d. S2 to S1

Refer to Figure above. If the current market price is $25, the market will achieve equilibrium by

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

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

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

The decision about what goods and services will be produced in a market economy is made by

d. consumers and firms choosing which goods and services to buy or produce.

There is often a trade-off between

d. economic efficiency and economic equity.

A worker is hired in a

d. factor market

The additional cost to a firm of producing one more unit of a good or service is the

d. marginal cost

To affect the market outcome, a price floor

d. must be set above the equilibrium price.

If the production possibilities frontier is linear, then

d. opportunity costs are constant as more of one good is produced.

If, in a competitive market, marginal benefit is greater than marginal cost

d. the quantity sold is less than the equilibrium quantity.

Refer to the figure above. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S2 (point E). If the technology to produce motorcycles improves and the number of buyers increases, how will the equilibrium point change?

a. The equilibrium point will move from E to A.

When every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it, ________ occurs.

a. allocative efficiency

________ a nation's production possibilities frontier represents economic growth.

a. an outward shift of

The ________ effect of a price change refers to the impact of a change in the price of a good on a consumer's purchasing power.

a. income

If a decrease in income leads to an increase in the demand for macaroni, then macaroni is

a. inferior good

Which of the following is a result of government price controls?

a. some people win and some people lose

If the price of smartphones was to increase, then

a. the demand for smartphone apps would decrease

Scarcity refers to the situation in which

a. unlimited wants exceed limited resources.

For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries?

b. Switzerland has the comparative advantage in watches.

An increase in the price of MP3 players will result in

b. a larger quantity of MP3 players supplied.

Which of the following would cause the equilibrium price of ketchup to increase and the equilibrium quantity of ketchup to decrease?

b. an increase in the price of tomatoes

Suppose the U.S. government encouraged new teachers to take jobs in underperforming schools by paying the new teachers a $20,000 bonus. These teachers would be exemplifying the economic idea that

b. people respond to economic incentives.

Comparative advantage means

b. the ability to produce a good or service at a lower opportunity cost than any other producer.

A consumer is willing to purchase a product up to the point wherethe marginal benefit is equal to the price of the product.

b. the marginal benefit is equal to the price of the product.

The production possibilities frontier shows

b. the maximum attainable combinations of two products that may be produced in a particular time period with available resources.

Buyers will bear the entire burden of a unit tax if the demand curve for a product is

b. vertical

Refer to Figure above. Kendra's marginal benefit from consuming the second ice cream cone is

c. $3.00

Which of the following statements is true?

c. A curved line has slope values that change at every point.

The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called

c. macroeconomics

Human capital refers to

c. the accumulated skills and training workers have.

Opportunity cost is defined as

c. the highest valued alternative that must be given up to engage in an activity.

By drawing a demand curve with price on the vertical axis and quantity on the horizontal axis, economists assume that the most important determinant of the demand for a good is

c. the price of the good.

Deadweight loss refers to a loss in revenue resulting from producers having to reduce their selling price to remain competitive. True or False

False

If a country is producing efficiently and is on the production possibilities frontier, the only way to produce more of one good is with an advance in technology. True or False

False

If the demand for a product decreases and the supply of the product does not change, equilibrium price and equilibrium quantity will both increase. True or False

False

It is possible for a market for a good to experience a surplus and a shortage at the same time. True or False

False

Optimal decisions are made at the point where marginal benefit is maximized. True or False

False

Producer surplus is the difference between the highest price someone is willing to pay and the price he actually pays. True or False

False

There is a shortage of every good that is scarce. True or False

False

When voluntary exchange takes place, only one party gains from the exchange. True or False

False

Refer to Figure above. If the economy is currently producing at point E, what is the opportunity cost of moving to point B?

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