Macroeconomics - Ch. 1- 5 Homework

Every society faces​ trade-offs because we live in a world of scarcity. Suppose a​ student-athlete has the opportunity to earn ​$600,000 next year playing for a minor league baseball​ team, ​$100,000 next year playing for a European professional football​ team, or​ $0 returning to college for another year. Part 2 The opportunity cost of the​ student-athlete returning to college next year is ​$__. ​(Enter your response as an​ integer.)

$600,000

​Trade-offs force society to make​ choices, particularly when answering the following three fundamental​ questions:

1. What goods and services will be​ produced? 2. How will the goods and services be​ produced? 3. Who will receive the goods and services​ produced?

Suppose Ford is currently building 6 thousand cars per day. To build an additional 1 thousand​ cars, how many fewer trucks can be​ built?

1.0 thousand fewer trucks per day

The figure to the right illustrates the​ trade-offs facing Ford Motor Company. The line in the graph is​ Ford's production possibilities frontier. Part 2 If Ford uses all its resources to produce​ trucks, how many can it​ produce?

10 thousand trucks per day

Consider the market for​ gasoline, illustrated in the figure to the right. Part 2 The equilibrium quantity of gasoline is ____ million gallons ​(enter a numeric response using a real number rounded to two decimal​ places) and the equilibrium price is ​$____per gallon. If instead the market price were ​$​, then there would be a ________ of ____ million gallons.

12.5 2.50 shortage 7.5

Which of the following events would cause the supply curve to increase from S1 to S3​?

A decrease in the price of inputs.

Consider the market for​ Hewlett-Packard (HP)​ printers, depicted in the figure to the​ right, where the supply of HP printers has increased from S1 to S2. Part 2 What would cause the supply curve for HP printers to shift to the​ right?

A positive technological change. A decrease in the price of a substitute in production.

Which of the following would cause a shift in the demand curve from point A to point​ B?

All of the above.

A state of the economy in which production is in accordance with consumer​ preferences; in​ particular, every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it.

Allocative efficiency

Which of the following may have caused the shift you have​ drawn? ​(Check all that​ apply.) Economic growth​ (outward shifts in the​ PPF) happens when more economic resources​ (primarily capital and​ labor) become available and technology advances.

An increase in the capital stock. A larger labor force. Advances in technology.

From the PPFs shown above it can be determined that the opportunity cost of oil is higher in country __. Given the comparative opportunity costs as revealed by the PPFs shown​ above, the comparative advantage for country A lies in ____. After these two countries specialize and trade with each​ other, country B will be importing ____.

B oil oil

​Trade-offs force society to answer questions such as what goods and services will be​ produced, how will the goods and services be​ produced, and who will receive the goods and services produced. Part 2 Which of the following countries has an economy where households and firms make these​ decisions?

Canada

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 Economy; Market Economy

An economy in which the government decides how economic resources will be allocated.

Centrally planned economy

Choco Dream is a firm that produces both dark chocolates as well as liquor chocolates. During a given​ month, the firm uses its resources to produce both varieties.​ Initially, the firm produced​ 5,000 bars of dark chocolates and​ 4,000 bars of liquor chocolates in a month. In order to increase production of the latter to​ 4,500, they had to reduce production of dark chocolates by 800 bars. When demand for liquor chocolates increased​ further, Choco Dream produced​ 5,000 bars of liquor chocolates and​ 3,200 bars of dark chocolates per month. Which of the following inferences can be drawn from the given​ information?

Choco Dream faces increasing marginal opportunity cost in the production of liquor chocolates.

​____________ decide(s) what goods and services will be produced.

Consumers. firms, and

________________ is the study of the choices people make to attain their​ goals, given their scarce resources.

Economics

Jonathan Baker is a market analyst. He works at a firm that is one of the few producers of good X. Jonathan formulates a hypothesis that an increase in advertising will increase the demand for this​ firm's products by attracting new customers. Which of the​ following, if​ true, would suggest that​ Jonathan's hypothesis will​ hold?

Even brand-loyal customers can be convinced to change their preferences.

Choco Fantasy is a firm that produces both dark chocolates as well as liquor chocolates. It can produce​ 10,000 bars of dark chocolate per month if all its resources are used to produce only this variety.​ Similarly, using all its resources in the production of liquor​ chocolates, the firm can produce​ 8,000 bars per month.​ However, during a given​ month, the firm produces both varieties. Which of the​ following, if​ true, would suggest that the firm is operating on its​ PPF?

Even though the demand for both liquor and dark chocolates has​ increased, the company can increase the production of only one variety.

Terbia is a closed​ economy, which has been growing at a very slow pace over the last decade. In order to boost economic​ growth, the government removed trade barriers earlier this year and increased its spending on the economy. These moves were expected to generate employment and increase economic growth.​ However, unemployment did not decline as much as expected. Which of the​ following, if​ true, can explain this​ outcome?

Imported varieties of many goods were cheaper than the domestically produced varieties.

Harry Fletcher is a market analyst at an automobile firm. He formed a hypothesis that an increase in advertising would increase demand for the​ firm's cars. The ad campaign ran for a period of six months.​ However, the results were not as positive as Harry had anticipated. Which of the​ following, if​ true, can explain this​ outcome?

Interest rates increased substantially during this time.

Which of the following covers the study of topics such as inflation or​ unemployment?

Macroeconomics

Which of the following is not a step economists follow when developing an economic​ model?

Make value judgements to be proven or disproven.

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.

An economy in which the decisions of households and firms interacting in markets allocate economic resources.

Market economy

A __________ economy is an 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

An 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 economy

The economy of East Paragon has been experiencing deflation for the last few​ months, with prices of goods and services declining. Because firms are charging lower​ prices, they expected higher sales.​ However, consumption spending did not increase​ much, resulting in substantial losses for these firms. Which of the​ following, if​ true, explains why consumers did not increase consumption in spite of falling​ prices?

Most people were expecting prices to decline further.

______________ is concerned with what is​, and ____________ is concerned with what ought to be. Economics is about ____________ , which measures the costs and benefits of different courses of action.

Positive analysis ​normative analysis positive analysis

The situation in which a good or service is produced at the lowest possible cost.

Productive efficiency

___________ 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

As part of their budget tightening​ process, many states are cutting aid to colleges and​ universities, with students being asked to pick up a bigger part of the escalating tab of higher education. Which of the following would do the most to enable you to cope with those higher expenses without impairing your progress toward a​ degree?

Reducing your consumption of goods and services not essential to your education.

Which of the following are examples of intellectual​ property? ​(Check all that​ apply.)

Software Ideas for new products or new production techniques Books and films

Suppose the United States and Mexico both produce hamburgers and tacos. The combinations of the two goods that each country can produce in one day are presented in the table below. Which country has an absolute advantage in producing​ tacos? Which country has a comparative advantage in producing​ tacos? Suppose the United States is currently producing 180 tons of hamburgers and 54 tons of tacos and Mexico is currently producing 18 tons of hamburgers and 45 tons of tacos. If the United States and Mexico each specialize in producing only one good​ (the good for which each has a comparative​ advantage), then a total of____additional​ ton(s) of hamburgers can be produced for the two countries combined and a total of ____ additional​ ton(s) of tacos can be produced.

The United States Mexico 72 36

Comparative advantage

The ability of an​ individual, a​ firm, or a country to produce a good or service at a lower opportunity cost than competitors.

Absolute advantage

The ability of an​ individual, a​ firm, or a country to produce more of a good or service than​ competitors, using the same amount of resources.

Choco Fantasy is a firm that produces both dark chocolates as well as liquor chocolates. It can produce​ 10,000 bars of dark chocolate per month if all its resources are used to produce only this variety.​ Similarly, using all its resources in the production of liquor​ chocolates, the firm can produce​ 8,000 bars per month.​ However, during a given​ month, the firm produces both varieties. Which of the​ following, if​ true, would suggest that the firm is operating at a point inside its​ PPF?

The firm believes in maintaining a certain amount of excess capacity to meet unexpected changes in demand.

The government seeks to protect intellectual property rights by granting

The government grants patents and copyrights in its effort to protect intellectual property.

Xylo​ Inc., a manufacturer of domestic​ appliances, lowered the prices of its​ products, expecting an increase in demand and sales by at least 20 percent.​ However, it was observed that sales increased by only 8 percent. Which of the​ following, if​ true, can explain this​ outcome?

The government increased personal income tax rates earlier this year.

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​ decreases, and they cannot buy as much of the good as they did prior to the price change.

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.

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

The diagram in panel a is an example of

a demand schedule.

The diagram in panel b is an example of

a supply curve.

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

Economics is a social science because

all of the above

A hypothesis in an economic model is

all of the above.

Any model is based on making assumptions because

both a and b. (A) models have to be simplified to be useful (B) we cannot analyze an economic issue unless we reduce its complexity

The production possibilities frontiers depicted in the diagram to the right illustrate

both the labor force and capital stock increasing.

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

On the diagram to the​ right, a movement from A to B represents a

change in quantity demanded.

On the diagram to the​ right, a movement from represents a

change in quantity supplied.

The basis for trade is _________ advantage.

comparative

Microeconomics is most likely to include the study of

consumer choices.

After World War II in​ 1945, the United States experienced a​ "baby boom" as birthrates rose and remained high through the early 1960s. In​ 2011, the first members of the baby boom generation became older than 65. What effect will this have on the market for ​? Part 2 As the first baby boomers become older than​ 65, the

demand curve for doctors will shift to the right.

​Suppose, in an effort to prevent the population from​ declining, Italy begins offering new mothers extended periods of paid family leave from work​ and, consequently, the birthrate per woman increases. If​ so, then this could best be characterized as an example of people responding to

economic incentives.

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

In the diagram to the​ right, point A provides the​ _____, point B the​ _____, and point C the​ _____. Part 2

equilibrium​ price; market​ equilibrium; equilibrium quantity

In economic​ terminology, the inputs used to make goods and services are referred to as

factors of production.

Consider the supply of crude oil on the world market. In August​ 2011, the price of oil was roughly​ $80 per barrel. Which of the following changes would increase the supply of​ oil? Part 2 The oil supply curve would shift to the right if

future oil prices were expected to be lower.

In​ economics, the term capital refers to

goods used to produce other goods.

If country ABC can produce a unit of good 1 by sacrificing fewer units of good 2 than can country​ XYZ, it is correct to say that country ABC

has a comparative advantage in producing good 1.

Suppose an increasing number of school districts across the country find themselves with too few teachers at a time of rising enrollments and calls for improved outcomes in terms of student performance. A​ market-based remedy for this emerging mismatch between the availability of teachers and school​ districts' needs would likely emphasize

higher compensation to elicit both a larger quantity of teacher services and a greater reliance by districts on​ non-traditional instruction methods.

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

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.

In the United​ States, who receives the goods and services produced depends largely on

how income is distributed.

In the​ circular-flow diagram showing how a market system​ works,

income flows to households through factor markets.

On the diagram to the​ right, movement along the curve from points A to B to C illustrates

increasing marginal opportunity costs.

Opportunity cost is

is the​ highest-valued alternative that must be given up to engage in that activity.

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.

Examining the costs and benefits of approving the sale of a new prescription drug is most likely an issue in

microeconomics.

When economists develop models designed to explain the choices people​ make, they generally assume that

people are rational.

Consider the demand for condominiums illustrated in the figure to the right. What demographic change would likely result in the demand curve for condominiums shifting to the right​? Part 2 The demand curve for condominiums would likely shift to the right if the

portion of the population that is elderly increases.

Suppose an analyst estimates how many jobs have been lost from family leave laws. Part 2 This is an example of _______________.

positive analysis

The Scottish philosopher Adam Smith argued in 1776 that

prices would do a better job of coordinating the activities of buyers and sellers than guilds could.

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.

Germany had a market economy. As such, Germany's economy (relative to centrally planned economies) tends to result in

productive efficiency and allocative efficiency but not necessarily equity.

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.

A large corporation that runs nursing homes estimates that changes to Medicare will result in lower payments by Medicare to nursing homes for​ short-term stays by patients that require therapy or care upon leaving hospitals. Assume the corporation is considering expanding the number of​ "beds" it offers at its nursing homes. Part 2 Given the changes to​ Medicare, if the marginal benefit of offering an additional bed is ​$1,000 and the marginal cost is ​$4,000 per​ bed, then the corporation __________ offer additional beds.

should

The distinction between substitutes and complements is

substitute goods are used for the same purposes while complementary goods are used together.

According to the​ graph, building 3 thousand cars per day and 3 thousand trucks per day is

technically inefficient

The production possibilities frontiers depicted in the diagram to the right illustrate

technological advances in the tank industry.

One of the great benefits of trade is

that it makes it possible for society to become better off by increasing its consumption.

Equity is

the fair distribution of economic benefits.

A freelance​ singer-songwriter is planning the restoration of a recently purchased civil​ war-era farmhouse. While he professes an enjoyment​ of, and talent in the construction​ trades, the theory of comparative advantage implies that

the income lost while away from music will likely exceed the savings realized by doing the work​ himself, thus, he should hire professionals to do the restoration work.

Prepping for a​ next-day exam over the course of an evening​ (and possibly into the wee hours of test​ day) poses increasing costs since

the longer you choose to study will result in an increase in the number and value of foregone activities.

In a free​ market, the actions people take are largely determined by

the motivation of financial reward.

Property rights are

the rights individuals or firms have to the exclusive use of their​ property, including the right to buy or sell it.

Macroeconomics is

the study of the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.

A number of political leaders have expressed concern about the​ nation's decline as a major steel producer. Many have advocated policies to restrict imports and promote domestic production. These individuals would see their position weakened most by the knowledge that

the substitution of domestic steel for foreign steel absorbs resources that would otherwise produce goods of greater value.

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. more of a good will be offered by suppliers as the price rises

According to the law of​ demand,

there is an inverse relationship between price and quantity demanded

In the diagram to the​ right, point G indicates an

unattainable result

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.

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.

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.

The people of a previously quiet and peaceful country have come to recognize the need to expand and improve their security forces after a wave of terroristic threats and acts. Considering their resource​ limitations, the extent to which security is enhanced will most likely be determined by

​society's willingness to forego other goods and​ services, both public and private.