Macro quiz 1.

If the government presets a price that turns out to be above the actual equilibrium price, a surplus will develop in the market True or False

True

The fundamental economic problem is that productive resources are scarce in relation to the demand for them. True or false

True

Which would not be considered as capital by an economist? A. A share of corporate stock issued by General Motors B. An automobile used by a salesperson at General Electric C. A crane used by a building contractor D. A razor used by a barber

A. A share of corporate stock issued by General Motors

According to the text, what is the largest source of earned income for U.S. households? A. Wages and salaries B. Interest C. Proprietors' income D. Corporate profits

A. Wages and salaries

The direct exchange of goods for goods is: A. barter. B. the circular flow. C. the invisible hand. D. roundabout production.

A. barter.

DVD players and DVDs are: A. complementary goods. B. substitute goods. C. independent goods. D. inferior goods.

A. complementary goods.

All of the following accurately describe a market economy except: A. government establishes maximum and minimum prices for most goods and services. B. prices serve as a signaling mechanism to buyers and sellers. C. the allocation of resources is determined by their prices. D. the actions of buyers and sellers establish a product's price.

A. government establishes maximum and minimum prices for most goods and services.

A competitive economy assumes each industry consists of a: A. large number of small firms facing a large number of small buyers. B. few large firms facing a large number of small buyers. C. large number of small firms facing a few large buyers. D. few small firms facing a few small buyers.

A. large number of small firms facing a large number of small buyers

The law of demand states that: A. price and quantity demanded are inversely related. B. the larger the number of buyers in a market, the lower will be product price. C. price and quantity demanded are directly related. D. consumers will buy more of a product at high prices than at low prices.

A. price and quantity demanded are inversely related.

The supply curve shows the relationship between: A. price and quantity supplied. B. production costs and the amount demanded. C. total business revenues and quantity supplied. D. physical inputs of resources and the resulting units of output.

A. price and quantity supplied.

37. Drawing demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is: A. price. B. expectations. C. preferences. D. incomes.

A. price.

The "Invisible hand" concept to describe the guiding function of prices was developed by: A. Jeremy Bentham B. Adam Smith C. Milton Friedman D. David Ricard

B. Adam Smith

Which of the following is not a central focus of the "economic perspective"? A. Scarcity and choice B. The scientific method C. Purposeful behavior D. Marginal analysis

B. The scientific method

A decrease in the price of digital cameras will: A. cause the demand curve for memory cards to become vertical. B. shift the demand curve for memory cards to the right. C. shift the demand curve for memory cards to the left. D. not affect the demand for memory cards.

B. shift the demand curve for memory cards to the right.

When modeling consumer choice, the price ratio of the two products is the: A. equilibrium exchange rate. B. slope of the budget line. C. point of tangency for equilibrium. D. demand for the two products.

B. slope of the budget line.

Assume that for Indy, one hour of study time in economics is perfectly substitutable for an hour of study time in calculus. Indy has exams in both subjects tomorrow and he determines that if spends all of his time studying economics, he will receive scores of 96 on his economics exam and 45 on his calculus exam. If he studies only calculus, his econ score will be 81 and his calculus score 90. Based on this information and assuming that Indy has no better alternative use of his time, what is the opportunity cost of improving his econ score by one (1) point? A. 1 point on his calculus exam. B. 1/3 point on his calculus exam. C. 3 points on his calculus exam. D. The opportunity cost cannot be determined with the information given

C. 3 points on his calculus exam.

Which is a major feature of the market system? A. Government-established prices in all markets B. Reallocation of all resources from private to public uses C. The right to own private property and control resource uses D. Central planning by government to provide goods and services

C. The right to own private property and control resource uses

When an economy is at full employment and full production, more of any one product: A. cannot be produced because there is full production. B. can be produced only if there is a general decrease in prices. C. can be produced only if there is less production of some other products. D. cannot be produced unless private enterprise does so rather than government

C. can be produced only if there is less production of some other products.

Assume, in a competitive market, price is initially above the equilibrium level. We predict that price will: A. decrease, quantity demanded will decrease, and quantity supplied will increase. B. decrease and quantity demanded and quantity supplied will both decrease. C. decrease, quantity demanded will increase, and quantity supplied will decrease. D. increase, quantity demanded will decrease, and quantity supplied will increase.

C. decrease, quantity demanded will increase, and quantity supplied will decrease.

Effective price ceilings and price floors: A. cause surpluses and shortages, respectively. B. make the rationing function of free markets more efficient. C. interfere with the rationing function of prices. D. shift demand and supply curves and therefore have no effect on the rationing function of prices

C. interfere with the rationing function of prices.

A market: A. exhibits upsloping demand and downsloping supply curves. B. entails the exchange of goods but not services. C. is an institution or mechanism that brings together buyers and sellers. D. always requires face-to-face contact between buyer and seller.

C. is an institution or mechanism that brings together buyers and sellers.

From an economic perspective, when a consumer decides to buy more life insurance, the consumer has most likely concluded that the: A. marginal costs of more insurance coverage have increased. B. marginal benefits of more insurance coverage have decreased. C. marginal benefits of more insurance coverage are greater than the marginal costs. D. opportunity costs of more insurance coverage are greater than the payment for more insurance coverage.

C. marginal benefits of more insurance coverage are greater than the marginal costs.

Another term for capitalism is the: A. command system. B. socialist economy. C. market system. D. system of inputs and outputs.

C. market system.

If an economy that produces capital and consumer goods is operating at a point on its production possibilities curve: A. it is achieving full employment but not full production. B. it is achieving full production but not full employment. C. more capital goods can be produced only at the cost of some consumer goods. D. the economy is incapable of achieving significant economic growth.

C. more capital goods can be produced only at the cost of some consumer goods.

. In a capitalistic economy: A. consumers are not sovereign. B. markets are not competitive. C. there is a reliance on the market system. D. the government owns the means of production.

C. there is a reliance on the market system

Which best describes the "invisible hand" concept? A. Highly detailed central direction of an economy will maximize the public's best interests. B. The market system works best when resources are highly substitutable. C. The problem of scarcity can best be overcome in a system of mixed capitalism. D. The desires of producers and resource suppliers to further their own self-interest will tend to promote the social interest.

D. The desires of producers and resource suppliers to further their own self-interest will tend to promote the social interest.

Which statement best describes a command economy? A. The production of goods and services is determined primarily by markets, but the allocation of goods and services is determined primarily by government. B. The production of goods and services is determined primarily by government, but the allocation of goods and services is determined primarily by markets. C. The production and allocation of goods and services is determined primarily through markets. D. The production and allocation of goods and services is determined primarily through government.

D. The production and allocation of goods and services is determined primarily through government.

The Soviet Union economy of the 1980s would best be classified as: A. a market system. B. pure capitalism. C. laissez-faire capitalism. D. a command system.

D. a command system.

36. Economists use the term "demand" to refer to: A. a particular price-quantity combination on a stable demand curve. B. the total amount spent on a particular commodity over a stipulated time period. C. an upsloping line on a graph that relates consumer purchases and product price. D. a schedule of various combinations of market prices and amounts demanded.

D. a schedule of various combinations of market prices and amounts demanded.

The "war on terror" waged by the United States: A. shifted the production possibilities curve to the right. B. shifted the production possibilities curve inward. C. caused the United States to shift from "defense goods" to "civilian goods." D. caused the perceived marginal benefit curve for "defense goods" to shift out

D. caused the perceived marginal benefit curve for "defense goods" to shift out

A binding price floor means that: A. inflation is severe in this particular market. B. sellers are artificially restricting supply to raise price. C. government is imposing a maximum legal price that is typically below the equilibrium price. D. government is imposing a minimum legal price that is typically above the equilibrium price.

D. government is imposing a minimum legal price that is typically above the equilibrium price.

The circular flow model: A. assumes that central planning is taking place. B. illustrates how natural resources are created. C. illustrates how money is created by the banking system. D. illustrates the interdependence of businesses and consumers.

D. illustrates the interdependence of businesses and consumers.

When a state government chooses to build more roads, the required resources are no longer available for spending on public education. This dilemma illustrates the concept of: A. marginal analysis. B. full employment. C. full production. D. opportunity cost.

D. opportunity cost.

A product market is in equilibrium: A. when there is no surplus of the product. B. when there is no shortage of the product. C. when consumers want to buy more of the product than producers offer for sale. D. where the demand and supply curves intersect.

D. where the demand and supply curves intersect.

If effective, a government-set price ceiling will lower equilibrium price and quantity in a market True or False

False

In the U.S. economy, sole proprietorships account for over half the firms and over half of total sales revenue. True or Flase

False

Toothpaste and toothbrushes are substitute goods True or false

Flase

A division of labor enhances society's output by permitting people to take advantage of existing differences in their abilities and skills. True or False

True

A government tax per unit of output reduces supply True or false

True

A market system is characterized by the private ownership of resources and the use of markets and prices to coordinate and direct economic activity. True or False

True