MacroEcon 2105 Test 1 - Spring 2018

Your employer has asked you to start working overtime and has offered to pay​ $18 per hour for every hour you work beyond forty hours a week. The wage rate for each of the first forty hours will continue to be the usual​ $15 per hour. In terms of​ dollars, what is the marginal benefit of working each hour of​ overtime?

$18.00

Jim​, a medical ​student, buys five cups of coffee a​ day, which costs him ​$10.00. He decides to buy one more cup each day and his expenditure on coffee increases to ​$12.00. The marginal cost to Jim of a cup of coffee is​ _______.

$2.00

The money price of a box of ramen noodles is ​$0.50 and the money price of a tube of toothpaste is ​$1.25. The opportunity cost of a tube of toothpaste is_______. The relative price of a tube of toothpaste is an opportunity cost because _____.

$2.50 boxes of ramen noodles, which is the relative price of a tube of toothpaste. the relative price tells us how many boxes of ramen noodles we must give up to get a tube of toothpaste

If Y = 800 - 4X, what is the slope of this line?

-4

What kind of efficiency are we achieving when we are producing at a point of the PPF that we prefer above all other​ points:

Allocative

Two​ countries, Alpha and​ Beta, have identical production possibilities frontiers. If Alpha produces at point A and Beta produces at point B​, then​ _______.

Alpha consumes more than Beta today, but it will grow slower than Beta.

What kind of economic system relies on private ownership of resources, direct incentives, and decisions made via markets and the price mechanism?

Capitalism

HOMEWORK AND DSM 1

ENDS HERE

HOMEWORK AND DSM 2

ENDS HERE

Who is Chairman of the Board of Governors of the Federal​ Reserve?

Janet Yellen

Facilitate trade, Enable​ buyers/sellers to get info , and do business with each other

Markets

Which of the following countries has an economy where most of the resource allocation is determined by a central planning authority?

North Korea

Govern ownership​ & use of things people value, Provide incentive to​ specialize/produce

Property Rights

The principle of opportunity cost evolves from the concept of:

Scarcity

In his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations," Adam Smith notes that specialization increases productivity. Which of the following was the cause of this phenomenon?

The division of labor

In what type of economy does the government decide how economic resources will be allocated?

a centrally planned economy

If, as the price of a hot dog decreases, the quantity of ketchup that people buy increases, then hot dogs and ketchup are ______.

complements

Pasta and pizza are _____. A video game and a laptop are______.

complements; complements

Pizza and sausage are _______. Wheat and rye are _______.

complements; substitutes

One of the first steps in deciding whether to complete your education is to:

evaluate the marginal cost and marginal benefit of that decision.

What do choices respond to?

incentives

Sheila currently produces at point A in the figure. If Sheila moves from point A to point C​, her opportunity cost of a desk ​_______. (moving from Point A to Point C is going down the curve, increasing desks and decreasing bookcases)

increases

A movie star is an example of the factor of production​ _______.

labor

What is the name given to the highest-valued alternative that must be given up to engage in any activity?

opportunity cost

Macroeconomics is concerned with all of the following except:

political party affiliation

The role of the entrepreneur always involves:

taking risks

A demand curve​ _______.

tells us the maximum that someone is willing to pay for an additional unit of a good or service.

The quantity demanded of a good or service is​ ______.

the amount that consumers plan to buy during a given time period at a particular price.

The opportunity cost of any action is

the highest-values alternative given up

Which of the following is​ correct? Factors of production are

the inputs used to produce goods and services.

Which of the following is critical to the success of the market system?

to allow individuals or firms to have exclusive use of their property

Macroeconomics focuses on which of the following topics?

unemployment, inflation, growth, and trade

The vertical axis on a graph is also known as the:

y-axis

You and your neighbor pick apples and cherries. If you can pick apples at a lower opportunity cost than your neighbor can, which of the following is true?

you have a comparative advantage in picking apples.

The slope at a line tangential to the maximum or minimum of a nonlinear curve will always be equal to:

zero

The night before a midterm​ exam, you decide to go to the movies instead of studying for the exam. You score 60 percent on your exam. I f you had studied the night​ before, you'd have scored 70 percent. What was the opportunity cost of your evening at the​ movies?

10 percent off your grade

In what type of economy does the government decide how most economic resources will be allocated?

Centrally planned economy

______ has a comparative advantage in quilts. ______ has a comparative advantage in chocolate chip cookies. Info: Martha can produce 60 quilts or 180 batches of chocolate chip cookies in a month. Jane can produce 9 quilts or 18 batches of chocolate chip cookies in a month.

Jane; Martha Martha has an absolute advantage in both goods.

__________ is the study of how households and businesses make choices, how they interact in markets, and how government influences their choices.

Microeconomics

Anything accepted as a means of payment, Makes trading efficient

Money

You plan to go to school this summer. If you​ do, you​ won't be able to take your usual summer job that pays ​$12,000 for the summer. The cost of tuition is ​$3,000 and textbooks cost ​$200 . You live with your​ family, which covers your living expenses of ​$1,700. What is your opportunity cost of going to school this​ summer?

Opportunity cost of going to summer school is $15200.

What are the four goals of any economic system?

Stability, equity, efficiency, and growth

The outward shift of the production possibilities frontier from point A to point B in the above graph would most likely be caused by: (curve moves to the right increasing on both axes)

a technological advance that affects both the production of automobiles and aircraft carriers.

Assume there are three variables involved in the previous graph: (1) price, (2) quantity, and (3) a third variable. Which of these variables cause a move from Point C to Point D in the graph? a decrease in demand (quantity) staying at the same price. shifting the curve left

a third variable

The price of food increased during the past year. The law of demand applies to food because when the price of food​ rises, there is​ ______.

both a substitution effect and an income effect.

Suppose that the United States and Cuba decide to open up trade. If each country specializes in the good in which it has a comparative​ advantage, ______ will gain from that trade because ​ ______.

both countries; consumption possibilities in both Cuba and the United States will lie outside their PPFs.

For each news item​ below, indicate whether it involves a what​, how​, or for whom question. ​"Oscar stars' swag dash bags may be taxableOscar stars' swag-bags may be taxable​" involves a​ ______ question. ​"Kids learning business basicsKids learning business basics​" involves a​ ______ question.

for whom; what

"Consultants replacing high school counselorsConsultants replacing high school counselors​" involves a _______ question.

how

Macroeconomics can be used to understand all of the topics listed below, except:

how a consumer decides between the purchase of two different cars

Which of the following is a positive economic statement?

if minimum wage rates rise, then unemployment will rise

Which of the following best defines capital as a factor of​ production?

instruments, machines, and buildings used in production

Economics:

is concerned with how people respond to incentives

The resources provided by nature and used to produce goods and services are also known as:

land

The opportunity cost of catching a pound of salmon is​ ______ for James than for Sam, and the opportunity cost of picking a pound of cherries is​ ______ for James than for Sam. So ______ has the comparative advantage in producing _____. Info: In an hour, James can catch 5 pounds of salmon or pick 10 pounds of cherries. In an hour, Sam can catch 3 pounds of salmon or pick 12 pounds of cherries.

lower; higher James; salmon

Factors of production include all of the following EXCEPT​ ______

money

Marginal benefit from a good or service is the benefit received from consuming​ ______. It is measured by the most that people are willing to pay for​ ______. Marginal benefit from food crops______.

one more unit of it; an additional unit of it. cannot be calculate from the table.

How many variables are involved in explaining the movement from Point A to Point C on this graph? (movement along a demand curve increasing quantity and decreasing price)

one variable

Unattainable points are​ ______.

outside the PPF

The principle of increasing opportunity cost states that the more resources devoted to any activity, the __________ the payoff to devoting additional resources to that activity.

smaller

Coal and oil are​ ______. A skateboard and an iPod are​ ______.

substitutes; complements

Which of the following is not a possible opportunity cost of attending college?

the cost of housing

Marginal cost of a good is​ _______.

the opportunity cost of producing one more unit of it.

Which of these is a macroeconomic study?

the study of how fast prices in general are rising

The what​, how​, and for whom questions in economics are questions about​ ______.

what goods and services do we​ produce, how do we use the factors of production to produce these​ goods, and who consumes the goods and services that are produced

Hire factors of production, Organize factors of production to produce, and sell goods and services

Firms

In the circular flow model, which of the following refers to markets where goods such as computers or services such as medical treatment are offered?

Goods markets

In the circular flow model, who supplies factors of production in exchange for income?

Households

Economic decisions are made at every level in society. When we try to decide which production method to use among several alternatives, which of the following key economic questions are we trying to answer?

How do we produce the products?

Every​ week, Bob trains at gymnastics for two hours​, and his grade on each psych test is 90 percent. Last​ week, after training for two hours​, Bob considered training for another hour. He decided to train for another hour and cut his study time by one hour. But last​ week, his psych grade fell to 80 percent. Given that Bob spent a third hour training​, what can you conclude about the marginal benefit and marginal cost of the second hour of training​?

The marginal benefit of the second hour of training exceeded its marginal cost.

You plan to travel in Europe this summer. If you​ do, you​ won't be able to take your usual summer job that pays ​$5,000 for the​ summer, and you​ won't be able to live at home for free. The cost of transportation is ​$1,000​, visas cost ​$300​, and living expenses are ​$1,400. What is the opportunity cost of your plan to travel in​ Europe?

Your opportunity cost is $7700

All of the following will change the demand for hot dogs except​ _______. An increase in the price of a hot dog ______.

a change in the price of a hot dog decreases the quantity of hot dogs demanded and results in a movement up along the demand curve for a hot dog.

Graphs are often used in economics because they:

can simplify complex topics

Before starring as Tony Stark in Iron Man​, Robert Downey Jr. had played in 45 movies that had average​ first-weekend box office revenues of a bit less than​ $5 million. Iron Man grossed​ $102 million in its first weekend. The success of Iron Man​ ______ the opportunity cost of hiring Robert Downey Jr. Movie producers now have​ ______ incentive to hire Robert Downey Jr.

increases; more

The substitution effect influences food purchases because when the price of a certain food​ rises, other things remaining the​ same, ______. Consumers​ ______.

its relative price rises; purchase more of a different food that is less expensive.

When Apple Inc. expands and rents an adjacent building, the flows are a​ ______ from firms to households and a​ ______ from households to firms. When you buy a new e-book from Amazon, the flows are a​ ______ from households to firms and a​ ______ from firms to households.

money flow; real flow money flow; real flow

If the president announced that "we should do something to stimulate economic growth" this is an example of a __________.

normative statement

The stock of computers, factory buildings and machine tools used to produce goods is known as:

physical capital

Absolute advantage is the ability of an individual, firm, or country to:

produce more of a good or service than competitors using the same amount of resources

Harry produces 7 balloon rides and 9 boat rides an hour. Harry could not produce more balloon rides without producing fewer boat rides. Harry is​ ______ his production possibilities frontier.

producing on

What kind of efficiency do we achieve when we produce goods and services at the lowest possible​ cost?

production

Jobs alone are not the measure of economic​ well-being. If this were the​ case, then we could increase the​ well-being of an economy by giving highway workers spoons rather than backhoes and garment workers needles and thread instead of computerized sewing machines. What does provide the source of high living​ standards?

productions of goods and services people value

What are copyrights designed to accomplish?

protect intellectual property rights

In​ 1998, the price of a barrel of oil was​ $20. In​ 2012, the price of a barrel of oil was​ $106. In​ 1998, the price of a loaf of bread was​ $0.86. In​ 2012, the price of a loaf of bread was​ $2.32. Between 1998 and​ 2012, the relative price of a barrel of oil with respect to a loaf of bread​ _______ and the relative price of a loaf of bread with respect to a barrel of oil​ _______.

rose; fell

Ms. Boulware is the best lawyer and the best secretary in town. She has:

she has an absolute advantage in both jobs

Choose the correct statements about competitive markets. 1. A single buyer in a competitive market cannot influence the price. 2. A competitive market has many sellers. 3. A competitive market is a market for goods but not for services. 4. In a competitive market, prices are eventually driven down to zero.

statements 1 and 2 are correct.

When most economists wake up in the​ morning, their first decision is whether or not to hit the snooze alarm. What statement best represents their thought process as a rational decision​ maker? ​ (How does an economist approach analyzing a situation like​ this?)

the marginal benefit of sleeping 10 more minutes is greater than the marginal benefit of 10 minutes of work

The income effect influences food purchases because when the price of a certain food​ rises, other things remaining the​ same, ______. Consumers​ ______.

the price rises relative to income; cannot afford to buy all the things they previously​ bought, so they normally buy less of the food that has experienced the price rise.

The slope of a straight line equals the change in the value on the __________ axis __________ by the change in the value of the other axis measured between any two points on the line.

vertical; divided

All economic questions arise because we

want more than we can get

Allocative efficiency occurs when​ ______.

we are producing at a point on the PPF such that marginal benefit at the quantity produced equals marginal cost.

According to the economic way of thinking, people:

Compare costs and benefits and make a choice to achieve the greatest benefit over the cost for the person making the choice.

Kelly is an​ architect, and she is trying to decide whether to hire​ Mike, a​ draftsman, to assist with her work. Kelly could hire Mike at​ $20 per​ hour, but it would take him three times as long to complete a task as it takes Kelly. Kelly is able to earn​ $90 per hour and has more architectural jobs than she is able to handle. Which of following is true?

Mike should be hired, but only if he is paid more than $30 an hour.

Choose the correct statements. 1. To describe preferences comma economists use the concept of marginal benefit. 2. We measure the marginal benefit from a good or service by the most that people are willing to pay for an additional unit of it. 3. We measure the marginal benefit from a good or service by the least that people are willing to pay for an additional unit of it. 4. We measure the marginal benefit from a good or service by the most that people are willing to pay for all the units they consume.

Statements 1 and 2 are correct.

Choose the correct statements. a. Opportunity cost of a good is the decrease in the quantity produced of one good divided by the increase in the quantity produced of another good as we move along the PPF. b. Opportunity cost of a good is the increase in the quantity produced of one good divided by the decrease in the quantity produced of another good as we move along the PPF. c. There is no relationship between the opportunity cost of producing an additional good measured on the x-axis and the opportunity cost of producing an additional good measured on the y-axis. d. The opportunity cost of producing more x, illustrated as a movement between two points on the PPF is equal to the inverse of the opportunity cost of producing more y, illustrated as a movement between the same two points in the opposite direction.

Statements a and d are correct.

The figure shows the production possibilities frontier for a firm that produces pet food. Point A is​ ______ and point B is​ ______. (Point A is on the production possibilities frontier curve, Point B is outside of the curve)

attainable; unattainable

A cellphone and a phone call are​ ______. A text message and an email are​ ______.

complements; substitutes

Making a choice at the margin means ________

deciding to do a little bit more or a little bit less of an activity

This PPF​ ______ illustrate scarcity because​ ______.

does; the firm cannot produce points outside the frontier and as the firm moves along the PPF​, it cannot produce more dog biscuits without producing less cat food

Understanding economics can help policymakers devise strategies to do all of the following except:

eliminate climate change

Heather has three slices of pizza for lunch. The marginal benefit that Heather receives from the third slice of pizza is​ _______.

the benefit she receives from eating the third slice of pizza.