MacroEcon Questions
Which of the following events would cause the supply curve to increase from S1 to S3?
A decrease in the price of inputs.
In the diagram to the right, illustrating a binding price ceiling at P3, the amount of producer surplus transferred to consumers is represented by area _______ and the deadweight loss is equal to areas _________.
C; B and D
___________ surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. This component of economic surplus is illustrated in the diagram to the right by area ____
Consumer & A
_____________ decide(s) what goods and services will be produced.
Consumers, firms, and Government
_________ surplus is the difference between the lowest price a firm would be willing to accept and the price it actually receives. This component of economic surplus is illustrated in the diagram to the right by area ______
Producer & B
According to the law of supply,
There is a positive relationship between price and quantity supplied, as the price of a product increases, firms will supply more of it to the market.
According to the law of demand,
There is an inverse relationship between price and quantity demanded.
A hypothesis in an economic model is
Usually about a causal relationship, A statement that may be either correct or incorrect about an economic variable, Tested before it can be accepted (or not rejected).
According to the law of demand , there is an inverse relationship between price and quantity demanded. That is, the demand curve for goods and services slopes downward. Why?
When the price of a good increases, consumers' purchasing power falls, and they cannot buy as much of the good as they did prior to the price change.
Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational?
When we assume the managers at Microsoft have used all available information and have weighed all known benefits and costs, we are assuming rationality.
A production possibilities frontier (PPF) is
a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.
Economic efficiency is
a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.
The primary difference between absolute and comparative advantage is
absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.
In general, the term "ceteris paribus" means
all else equal
A market is a group of _____________ of a good or service and the institution or arrangement by which they come together to trade.
buyers and sellers
In the diagram to the right, point A provides the _____, point B the _____, and point C the _____.
equilibrium price; market equilibrium; equilibrium quantity
In the diagram to the right, marginal benefit ________marginal cost at output level Q2. This output level is considered economically ________.
is equal to & efficient
Economics is a social science because
it considers human behavior/ particularly decision-making behavior, it applies the scientific method to the study of the interactions among individuals, it is based on studying the actions of individuals.
Firms choose how to produce the goods and services they sell. In many cases, firms face a trade-off between using more workers or using more machines. For example,
many times in the past several decades, firms may have chosen between a production method in the United States that uses fewer workers and more machines and a production method in China that uses more workers and fewer machines.
The diagram to the right illustrates a very important relationship in economics between two variables: the price of a good and the quantity demanded of that good. The two variables in this diagram are:
price (dollars per bushel) on the vertical axis and quantity (bushels per week) on the horizontal axis.
The primary difference between product markets and factor markets is that
product markets are markets for goods, while factor markets are markets for factors of production; labor, capital, natural resources, and entrepreneurial ability.
When we graph the relationship between two variables, we often want to draw conclusions about whether changes in one variable are causing changes in the other variable. Doing so, however, can lead to incorrect conclusions. Reasons for drawing incorrect conclusions about cause and effect include
reverse causality, an omitted variable
One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls
scarcity.
When the government imposes price floors or price ceilings,
some people win, some people lose, and there is a loss of economic efficiency.
Microeconomics is
the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices.
A free market exists
when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed.
Economic surplus in a market is the sum of _____ surplus and _____ surplus. In a competitive market, with many buyers and sellers and no government restrictions, economic surplus is at a _____ when the market is in _____.
consumer; producer; maximum; equilibrium
Consider the following statement: "An increase in supply decreases the equilibrium price. The decrease in price increases demand." The statement is
false: decreases in price affect the quantity demanded, not demand.
Economists often are interested in percentage change from one period to the next. The percentage rate of change of gross domestic product (GDP) is an important macroeconomic variable. If in 2010 GDP was $11,150 billion dollars, and GDP increased to $11,345 billion in 2011, what is the growth rate of the U.S. economy in 2011?
1.7%
Which of the following would cause a shift in the demand curve from point A to point B?
An increase in income (Normal good), a decrease income (inferior good), An increase in the price of a substitute good.
In the diagram to the right, illustrating a binding price ceiling at P1, the amount of producer surplus transferred to consumers is represented by area _______ and the deadweight loss is equal to areas _________.
B; C and E
A black market is
a market in which buying and selling take place at prices that violate government price regulations.
The diagram to the right is an example of
a time-series graph
The production possibilities frontiers depicted in the diagram to the right illustrate (only tank increases)
technological advances in the tank industry.
One of the great benefits of trade is
that is makes it possible for society to become better off by increasing both its production and its consumption.
Macroeconomics is
the study of the economy as a while, including topics such as inflation, unemployment, and economic growth.
A perfectly competitive market is a market that meets the conditions of
(1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.
Trade-offs force society to make choices, particularly when answering the following three fundamental questions:
One, what goods and services will be produced? Two, how will the goods and services be produced? Three, who will receive the goods and services produced?
On the diagram to the right, a movement from A to C represents a (D2 moves to the right)
change in demand
A(n) ____________ is someone who operates a business, bringing together the factors of production; labor, capital, and natural resources; to produce goods and services.
entrepreneur
Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when
marginal benefit equals marginal cost.
A_________ economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources
mixed
The diagram to the right illustrates a common economic relationship. Economists know this relationship as marginal cost (MC). The diagram illustrates the relationship between the change in total cost and quantity produced. There are three lines (A, B, and C) drawn tangent to the MC curve. At line A, the MC curve has a _____ slope. Where lines B and C touch the MC curve, the slope is _____ and _____.
negative; positive; increasing
"Rent controls, government farm programs, and other price ceilings and price floors are bad." This is an example of a
normative statement. The statement is concerned with what should be.
The diagram to the right illustrates a supply curve. As with all supply curves, this curve's slope is _________ .
positive
The Scottish philosopher Adam Smith argued in 1776 that
prices would be a better job of coordinating the activities of better and sellers than guilds could.
The distinction between substitutes and complements is
substitute goods are used for the same purposes while complementary goods are used together.
Tax incidence is
the actual division of the burden of a tax between buyers and sellers in a market.
When the federal government crafts environmental policies that make it less expensive for firms to follow green initiatives,
the policies are consistent with economic incentives.
Property rights are
the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it.
Any model is based on making assumptions because
we cannot analyze an economic issue unless we reduce its complexity, Models have to be simplified to be useful
The distinction between a normal and an inferior good is
when income increases, demand for a normal good increases while demand for an inferior good falls.
Which of the following shows a positive nonlinear relationship?
y= 2 + sqrt(x)
Consumer and producer surplus measure the _____ benefit rather than the _____ benefit.
net; total
Societies organize their economies in two main ways to answer the three questions of what, how, and who. A society can have a _________ economy in which the government decides how economic resources will be allocated. Or a society can have a __________ economy in which the decisions of households and firms interacting in markets allocate economic resources.
Centrally Planned & Market
The diagram to the right represents a demand curve for apples. The original demand curve is D1. If a factor other than price which affects demand changes, causing demand to decrease, the resultant demand curve is represented by ____
D3
Market price is determined by
both supply and demand
The production possibilities frontiers depicted in the diagram to the right illustrate (both increase)
both the labor force and capital stock increasing
In the diagram to the right, point C indicates an
efficient result
Two key groups participate in markets. A _________ consists of all the individuals in a home. _________ are suppliers of goods and services. We can use a simple economic model called the _________ to see how participants in markets are linked.
household; firms; circular-flow diagram
Equity is
the fair distribution of economic benefits
Opportunity cost is
the highest valued alternative that must be give up to engage in an activity.
In the diagram to the right, the curve labeled "S" is apparently _____, while the curve labeled "D" is apparently _____.
nonlinear; linear
The diagram to the right shows a hypothetical demand curve for apples. The slope of this curve is _____
-1.75
The basis for trade is _______ advantage.
Comparative
Deadweight loss is the reduction in economic surplus resulting from a market not being in competitive equilibrium. In the diagram to the right, deadweight loss is equal to the area(s):
C & E.
In the diagram to the right, illustrating a per-unit tax equal to P2 minus P3, tax revenue is represented by the areas _________ and the excess burden of the tax is represented by areas ________.
D and F; E and G
____________is the study of the choices people make to attain their goals, given their scarce resources.
Economics
Consider the figure to the right and assume that it is the market for health-care services. When the "baby boomer" generation retires, the number of people who require health care increases by 30%, and, as a result, the number of health-care providers also increases, but by only 25%. What is the effect on the price of health-care services over time?
It increases because demand increased by more than supply.
Which of the following covers the study of topics such as inflation or unemployment?
Macroeconomics
A price ceiling is a legally determined __________ price that sellers may charge. A price floor is a legally determined __________ price that sellers may receive.
Maximum & Minimum
_________ is concerned with what is, and ________ is concerned with what ought to be. Economics is about _______ , which measures the cost and benefits of different courses of action.
Positive analysis & Normative analysis & Positive analysis
________ occurs when a good or service is produced at the lowest possible cost. _________ occurs when production is in accordance with consumer preferences.
Productive efficiency & Allocative efficiency
In the diagram to the right, when the price is $45 per player, the amount of the ________ is ___ million players per month.
Shortage & 14
The diagram in panel B is an example of
a demand curve
On the diagram to the right, a movement from B to C represents A
change in supply
In the United States, who receives the goods and services produced depends largely on __________.
how income is distributed
On the diagram to the right, movement along the curve from points A to B to C illustrates
increasing marginal opportunity costs.
The pie chart to the right illustrates hypothetical data for the market share for the United States automobile market. The percentage of the U.S. market that U.S. auto firms control is ________.
45%
In your economics class, you scored a 70 on the first quiz, a 88 on the second quiz, and an 73 on the third quiz. Your average quiz grade is ____ On the fourth quiz, you scored an 82. Did the fourth quiz raise your average? ______
77 & Yes