Macro Midterm 1

On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50. What will the likely effect of this policy be? A. Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate. B. Low income workers will be better able to survive the recession at the new, higher wage rate. C. More people will be hired at the higher wage rate offsetting the effects of the recession. D. The higher wage will increase the supply of labor offsetting the effects of the recession.

A. Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate.

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. technology

A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of: A. the supply curve. B. the demand curve, as consumers try to economize because of the shortage. C. both the supply and demand curves. D. the supply curve and a rightward shift of the demand curve, resulting in a higher equilibrium price.

A. the supply curve.

Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. From the data, the USA: a) has an absolute advantage over India in the production of textiles. B) has an absolute advantages over India in the production of wheat c) has a comparative advantage in the production of textiles. d) should export textiles to India.

B) has an absolute advantages over India in the production of wheat

Scarcity implies that a) consumers would be willing to purchase the same quantity of a good at a higher price. b) it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available. c) at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce. d) consumers are too poor to afford the goods and services available.

B) it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.

_____________ refers to the total number of units that are purchased at that price. A. Quantity B. Quantity demanded C. Supply D. Market quantity

B. Quantity demanded

Any given demand or supply curve is based on the ceteris paribus assumption that _____________. A. everything is variable B. all else is held equal 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. all else is held equal

___________________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling. A. Rent controls B. Price ceilings C. Price floors D. Subsidies

C. Price floors

Suppose in the market for iPhones, the following two changes take place: (1) the cost of making iPhones falls, and (2) the price of smart-phone data plans fall. What happens to the equilibrium price and the equilibrium quantity? A. The equilibrium price and the equilibrium quantity rise. B. The equilibrium price falls, but the equilibrium quantity is indeterminate. C. The equilibrium price is indeterminate, but the equilibrium quantity rises. D. The equilibrium price rises, but the equilibrium quantity is indeterminate.

C. The equilibrium price is indeterminate, but the equilibrium quantity rises.

When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right. A. prices rise B. equilibrium is achieved C. costs of production fall D. there is a population increase

C. costs of production fall

Compared to market equilibrium, effective price floor and price ceiling leads to: A. lower price level B. higher than equilibrium quantity traded between the buyer and the seller C. lower than equilibrium quantity traded between the buyer and the seller D. equilibrium price and quantity

C. lower than equilibrium quantity traded between the buyer and the seller

The downward slope of the demand curve illustrates the pattern that as _____________ rises, ______________ decreases. A. quantity demanded, price B. quantity supplied, quantity demanded C. price, quantity demanded D. price, quantity supplied

C. price, quantity demanded

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect: A. Andy's demand for pizza to increase. B. Andy's demand for pizza to decrease. C. Andy's quantity of pizza demanded to decrease. D. Andy's demand for beer to increase.

D. Andy's demand for beer to increase.

When quantity demanded decreases in response to a change in price: A. the demand curve shifts to the right. B. the demand curve shifts to the left. C. there is a movement down along the demand curve. D. There is a movement down along the demand curve.

D. There is a movement down along the demand curve.

Other things being equal, a _____________ supply of workers tends to _________ real wages. A. smaller; not change B. larger; increase C. smaller; decrease D. larger; decrease

D. larger; decrease

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 24 units of food per year or 12 units of clothing. Which of the following is true? a) Alland has an absolute advantage in producing food but will not trade with Georgeland. b) Alland has a comparative advantage, but not an absolute advantage, in producing food. c) Georgeland has both a comparative and absolute advantage in producing clothing. d) Georgeland has a comparative advantage, but not an absolute advantage, in producing clothing.

a) Alland has an absolute advantage in producing food but will not trade with Georgeland.

If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if: a) The USA specializes in potatoes because of its comparative advantage in producing potatoes. b) The USA specializes in wheat because of its absolute advantage in producing wheat. c) The USA specializes in wheat because of its comparative advantage in producing wheat. d) There can be no mutual gains from trade.

a) The USA specializes in potatoes because of its comparative advantage in producing potatoes.

Which of the following would shift a nation's production possibilities frontier outward? a) discovering a cheaper way to convert sunshine into electricity. b) an increase in demand for nation's products c) a decrease in the unemployment rate d) a law requiring workers to retire at age 50

a) discovering a cheaper way to convert sunshine into electricity.

The underlying reason why trade benefits both sides of a trading arrangement is rooted in the concept of a) opportunity cost b) the law of diminishing return c) absolute advantage d) maximum production

a) opportunity cost

The opportunity cost of attending university is likely to include all except which of the following? a) the cost of haircuts received during the school term b) the income you forgo in order to attend classes c) tuition fees d) the cost of required textbooks

a) the cost of haircuts received during the school term

When one nation can produce a product at lower cost relative to another nation, it is said to have a(n)____________________in producing that product. a) relative advantage b) absolute advantage c) economy of scale d) production efficiency

b) absolute advantage

According to international trade theory, a country should: a) import goods in which it has an absolute advantage. b) import goods in which it has a comparative disadvantage. c) export goods in which it has an absolute advantage. d) import goods in which it has an absolute disadvantage.

b) import goods in which it has a comparative disadvantage.

The slope of the production possibility frontier is determined by the _________ of expanding production of one good, measured by how much of the other good would be lost. a) absolute advantage b) opportunity cost c) relative advantage d) specialization

b) opportunity cost

An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from: (Wine, bread graph) a) A to B b) B to E c) C to F d) G to F

c) C to F

According to the principle of comparative advantage, if a rich country trades with a poor country, then a) the rich country will benefit and the poor country will lose. b) the rich country will lose and the poor country will benefit. c) both countries will benefit. d) neither of the countries will benefit.

c) both countries will benefit.

If I didn't have class this morning, 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 morning is: a) $0 b) $4 c) $40 d) $44

d) $44

Along the production possibilities frontier, the most efficient point of production depicted is: (Wine, bread graph) a) B b) C c) D d) All points on the production possibilities frontier are equally efficient.

d) All points on the production possibilities frontier are equally efficient.

The most inefficient point depicted is: (Wine, bread graph) a) A b) C c) D d) G

d) G

Which of the following is most likely a topic of discussion in macroeconomics? a) an increase in the price of a hamburger b) a decrease in the production of DVD players by a consumer electronics company c) an increase in the wage rate paid to automobile workers d) a decrease in the unemployment rate

d) a decrease in the unemployment rate

The idea of comparative advantage implies that people of countries a) should specialize in the production of goods. b) can gain from trading. c) can consume at a point outside their production possibilities frontier. d) all of the above.

d) all of the above.

Scarcity exists because of a) the market mechanism. b) specialization and division of labor. c) the allocation of goods by prices. d) unlimited wants and limited resources

d) unlimited wants and limited resources

The basic difference between macroeconomics and microeconomics is: e) microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. f) microeconomics concentrates on the behaviour of individual consumers while macroeconomics focuses on the behaviour of firms. g) microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. h) microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

g) microeconomics concentrates on the behaviour of individual consumers and firms