Macro Final
Suppose you have a money income of $10, all of which you spend on Pepsi and popcorn. In the diagram, the prices of Pepsi and popcorn, respectively, are
$0.50 and $1.00.
In this market, equilibrium price and equilibrium quantity are
$47 and 68 units.
In this market, a surplus of 21 units would exist at a price of
$50
Answer the question on the basis of the following five data sets, wherein it is assumed that the variable shown on the left is the independent variable and the one on the right is the dependent variable. Assume in graphing these data that the independent variable is shown on the horizontal axis and the dependent variable on the vertical axis. Refer to the data sets. Which of the data sets would graph as an upward-sloping line?
1, 2, and 5 only
Refer to the diagram. Other things equal, which of the following positions relative to PP1 would be the most likely to result in a future production possibilities curve of PP3 rather than PP2?
A
Which of the following is a correct statement?
Although they are generalizations, economic laws are useful because they allow us to predict and therefore influence or adjust to events.
The agency responsible for compiling the National Income and Product Accounts for the U.S. economy is the
Bureau of Economic Analysis.
Which of the following is the best example of a microeconomic statement?
Car prices have increased recently because of a microchip shortage.
The Industrial Revolution began in
England in the late 1700s.
True or False: Households sell finished products to businesses.
False
What is the difference between financial investment and economic investment?
Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.
How does the market system answer the following fundamental question: How will the goods and services be produced?
In ways that minimize the cost per unit of output
Which of the following statements is incorrect?
The user experience of driving on a crowded highway corresponds to the network effect; the value of it increases as more people decide to drive on it.
Which of the following statements is correct?
The value of the dependent variable is determined by the value of the independent variable.
If the government reduces the subsidy to universities, we can expect
a decrease in the supply of higher education.
Inflation is defined as
a general increase in the price level.
The phrase "other things equal" means that
a number of relevant variables are assumed to be constant.
The period when output and living standards decline is referred to as
a recession.
a) If the company sells these 100 chairs at $5 per unit, what is its total revenue? b) Using this same information, what is the company's total cost?
a) $500 b) $380
a) If the company sells these 100 chairs at $5 per unit, what is its total revenue? b) Using this same information, what is the company's total cost?
a) $500 b) $670
a) Suppose that businesses buy a total of $100 billion of the four resources (labor, land, capital, and entrepreneurial ability) from households. If households receive $60 billion in wages, $10 billion in rent, and $20 billion in interest, how much are households paid for providing entrepreneurial ability? b) If households spend $55 billion on goods and $45 billion on services, how much in revenues do businesses receive in the product market?
a) 10 billion b) 100 billion
a) Suppose that businesses buy a total of $160 billion of the four resources (labor, land, capital, and entrepreneurial ability) from households. If households receive $84 billion in wages, $22 billion in rent, and $32 billion in interest, how much are households paid for providing entrepreneurial ability? b) If households spend $85 billion on goods and $75 billion on services, how much in revenues do businesses receive in the product market?
a) 22 billion b) 160 billion
a) Should she quit her current job to become an entrepreneur? b)If she does quit her job, which opportunity would she pursue?
a) Yes, she should quit her job to become an entrepreneur. b) She would pursue the soap business.
a) A woman who wants to start a flower shop finds she cannot do so unless the central government has already decided to allow a flower shop in her area. b) Shops stock and sell the goods their customers want, but the government levies a sales tax on each transaction in order to fund elementary schools, public libraries, and welfare programs for the poor. c) The only taxes levied by the government are to pay for national defense, law enforcement, and a legal system designed to enforce contracts between private citizens.
a) command system b) market system c) laissez-faire system
a) Self-interest helps achieve society's economic goals because b) There is such a wide variety of desired goods and services in a market system because c) What is produced is ultimately determined by
a) consumers and producers exercise their freedom to act in their own self-interest b) individual wants are diverse. c) consumers, because if the goods offered are not what consumers want, consumers will not buy them
a) "If you compare a list of today's most powerful and profitable companies with a similar list from 30 years ago, you will see lots of new entries." b) "Managers in the old Soviet Union often sacrificed product quality and variety because they were being awarded bonuses for quantitative, not qualitative, targets." c) "Each day, central planners in the old Soviet Union were tasked with setting 27 million prices—correctly." d) "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."
a) creative destruction b) invisible hand c) invisible hand d) invisible hand
a) Shielding employees and suppliers from business risk_________ economic outcomes. b) The_________ of the business are the ones that assume most of the business risk.
a) improves b) owners
a) An advantage of using capital in the production process is that it b) The term "division of labor" means that workers c) When an economy relies on specialization
a) improves efficiency, increases output, and provides growth. b) specialize in tasks that take advantage of their individual abilities and skills. c) trade enables individuals to obtain the goods in which they do not have a specialization
a) An institution that brings buyers and sellers together b) The right of private persons and firms to obtain, control, employ, dispose of, and bequeath land, capital, and other property c) The presence in a market of independent buyers and sellers who compete with one another and who are free to enter and exit the market as they each see fit d) The freedom of firms to obtain economic resources, decide what products to produce with those resources, and sell those products in markets of their choice e) What each individual or firm believes is best for itself and seeks to obtain f) Economic transactions willingly undertaken by both the buyer and the seller because each feels that the transaction will make him or her better of
a) market b) private property c) competition d) Freedom of enterprise e) self-interest f) Mutually agreeable
a) In a market system, scarce goods are allocated by b) In a command economy, scarce goods are allocated by
a) market prices that are determined by consumers and producers acting in their own self-interest b) a government-appointed planning board based on the board's long-term priorities
a) In the circular flow model, b) In the circular flow model, c) In the goods and services portion of the circular flow model, there is a flow of
a) resource markets provide for the exchange of labor and product markets provide for the exchange of goods and services. b) businesses sell goods and buy labor; households buy goods and sell labor c) real goods and services and a flow of money
a) Should she quit her current job to become an entrepreneur? b) If she does quit her current job, which opportunity would she pursue?
a) yes b) the internet based company
For which of the following goods and services are prices least sticky?
airline tickets
Sticky output prices are caused by
all of the above are reasons for sticky output prices.
The term "market-clearing price" refers to the
all of these choices are correct.
Which of the following would cause a rightward shift in the supply curve for car washes?
an increase in the number of car wash businesses in the city
Rising demand for motor homes is most likely caused by
an increase in the number of retirees who wish to travel.
Most retailers try to maintain stable prices as much as they can
because consumers would be annoyed if the price of a product cost one price one day and another price another day.
Refer to the diagram. Assume that the horizontal axis measures the quantity of a good and the vertical axis measures the marginal benefit and marginal-cost of the good. Assuming that producing any amount of a good comes with positive costs, which line(s) represent(s) best represent possible marginal-cost curve(s)?
both A and D
Refer to the diagram. Which line(s) show(s) a negative relationship between x and y?
both C and E
Which of the following is an example of a product with an excise tax?
both cigarettes and indoor tanning
College classes and textbooks are
complementary goods.
Snowboards and lift tickets are
complementary goods.
The post hoc fallacy is the error of
concluding that just because one event precedes another, the first must have caused the second.
Answer the question on the basis of the following data. The data suggest that:
consumption varies directly with after-tax income.
Savings are generated whenever
current income exceeds current spending.
One principle of economic growth is the notion that, to raise living standards over time, an economy must
devote some portion of its current output to increasing its future output.
Which of the following goods would most probably be a normal good?
electronic equipment
Prices for oil and other commodities tend to be
flexible.
g) The freedom of resource owners to dispose of their resources as they think best; of workers to enter any line of work for which they are qualified; and of consumers to spend their incomes in whatever way they feel is most appropriate
g) Freedom of choice
Which of the following goods would most probably be an inferior good?
generic beer
There are several ways to measure aggregate output. The one favored by the Bureau of Economic Analysis is
gross domestic product.
A decrease in supply, holding demand constant, will cause
higher prices and a smaller quantity sold.
In market economies, firms rarely worry about the availability of inputs to produce their products, whereas in command economies input availability is a constant concern. This is because
in command economies, no market-pricing mechanism exists to incentivize resource suppliers to increase resource availability when a shortage occurs.
For an economy to increase investment, it must
increase saving.
Butter and golf balls are
independent goods.
An increase in the overall level of prices in an economy is called
inflation
A price war
is possible when a firm has just one or two major rivals.
The economizing problem is one of deciding how to make the best use of
limited resources to satisfy virtually unlimited wants.
Which of the following is not a pitfall to sound economic reasoning?
marginal analysis
The meaning of the phrase "invisible hand" is that
market prices coordinate the economy by rationing resources and output and by providing incentives to produce the goods and services most desired by society
A higher rate of investment now will generate
more future production.
Refer to the diagram. The concept of opportunity cost is best represented by the
move from B on PP1 to C on PP1.
The system that measures the economy's overall performance is formally known as
national income accounting.
Suppose that Toyota buys a factory previously owned by Chrysler Motors. Economists would
not consider this to be an economic investment, because no new capital is created through the purchase.
Refer to the graph. Which of the following schedules correctly reflects "Demand"?
option A
The Latin term "ceteris paribus" means
other things equal.
Aaliyah, Madison, Mia, and Maya have decided to pool their financial resources and business skills to open and run a new coffee shop. They will share any profits or losses that the business generates and will be personally responsible for making good on any debt that their business undertakes.
partnership
Retailers that attempt to keep prices stable and predictable cause
price inflexibility.
The slope of a budget line reflects the
price ratio of the two products.
The market system depends on private property and the protection of property rights to
provide an incentive to maintain the property and allow for the orderly transfer of property ownership.
A increase in the excise tax on gasoline
raises the price of gasoline by shifting the supply curve left.
The three statistics that are the main focus for those measuring macroeconomic health are
real GDP, inflation, and unemployment.
When economists refer to "investment," they are describing a situation where
resources are devoted to increasing future output.
The emergence of self-driving cars is an example of "creative destruction" because
self-driving cars will likely replace most cars that require drivers.
If product Y is an inferior good, an increase in consumer incomes will
shift the demand curve for product Y to the left.
If product Y is an inferior good, a decrease in consumer incomes will
shift the demand curve for product Y to the right.
The business cycle depicts
short-run fluctuations in output and employment.
Which of the following goods have prices that are least flexible?
soda
Bagels and muffins are
substitute goods.
If possible, firms will switch to production of an alternative good when its price increases; this is referred to as a
substitute in production.
A decrease in the price of iron ore, a key resource in steel production, will decrease the price of steel by shifting the
supply curve for steel rightward.
The Mississippi River have become impassible for riverboats due to low water levels because of the drought. Farmers that normally transport their grain by barge must now use more costly big trucks to get their products to market. This will cause the
supply curves for agricultural products to shift left.
Some large hardware stores, such as Home Depot, boast of carrying as many as 20,000 different products in each store. This volume of goods is the result of
the choice of consumers regarding what to purchase to satisfy their wants and the choice of producers regarding what to produce to maximize profits.
If we are considering the relationship between two variables and release one of the other-things-equal assumptions, we would expect
the line representing that relationship on a graph to shift.
The equilibrium price refers to
the market-clearing price.
The decrease in demand for housing in small rural communities is likely because
the out-migration from small rural towns is reducing the number of buyers.
The fact that the slope of the production possibilities curve becomes steeper as we move down along the curve indicates that
the principle of increasing opportunity costs is relevant.
Some agricultural sub-Saharan nations of Africa have overfarmed and overgrazed their land to the extent that significant portions of it have turned into desert. This suggests that
the production possibilities curves of such nations have shifted inward.
If a positive relationship exists between x and y,
the relationship will graph as an upward-sloping line.
Camille is at the candy store with Grandma Mary, who offers to buy her $6 worth of candy. If lollipops are $1 each and candy bars are $2 each, what combination of candy can Camille's Grandma Mary buy her? Multiple Choice
two lollipops and two candy bars
The average amount of time between price changes for gasoline is
two to three weeks.
Kelly works at an ice cream shop and observes that the number of people buying ice cream varies greatly from day to day. For a couple of weeks, she has recorded the number of people at the shop each day, as well as the daily temperature. If Kelly is using the scientific method to better understand ice cream buying habits, her next step is to
use the observed data to form a hypothesis about ice cream buying behavior.
The scientific method is
used by economists and other social scientists, as well as by physical scientists and life scientists, to formulate and test hypotheses.
Lower resource prices reduce production costs and increase profits; therefore
when resource prices fall, firms supply greater output at each product price.
To maximize profits, farmers anticipating a higher wheat price in the future might
withhold some of their current wheat harvest from the market, reducing the current wheat supply.
Which of the following is an example of economic investment?
New Balance buys a new machine that increases shoe production.
Answer the question on the basis of the following five data sets, wherein it is assumed that the variable shown on the left is the independent variable and the one on the right is the dependent variable. Assume in graphing these data that the independent variable is shown on the horizontal axis and the dependent variable on the vertical axis. Refer to the data sets. The equation for data set 3 is
P = 90 − 0.5N.
Which of the following is a characteristic of a market system?
Private ownership of property resources
Ted and Fred are the owners of a gas station. They invested $150,000 each and pay an employee named Lawrence $35,000 per year. This year's revenues are $900,000, while costs are $940,000. Who is legally responsible for bearing the $40,000 loss?
Ted and Fred