Macroeconomics Chapter 1

D. all of the above.

A hypothesis in an economic model is A. usually about a causal relationship. B. tested before it can be accepted​ (or not​ rejected). C. a statement that may be either correct or incorrect about an economic variable. D. all of the above.

should

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. Given the changes to​ Medicare, if the marginal benefit of offering an additional bed is ​$8,000 and the marginal cost is ​$6,000 per​ bed, then the corporation _______ offer additional beds.

buyers and sellers

A market is a group of ________________ of a good or service and the institution or arrangement by which they come together to trade.

we cannot analyze an economic issue unless we reduce its complexity and models have to be simplified to be useful.

Any model is based on making assumptions because

D. Lobbyists believe that those who lose jobs​ won't find alternative opportunities in the short term.

Best​ Goods, one of the leading department store​ chains, offers goods at low prices. It recently opened many new stores across the country. After successfully setting up stores in most major​ cities, Best Goods faced substantial opposition in the city of​ Joberg, where lobbyists for smaller general stores​ (local businesses) opposed its entry. These lobbyists argued that Best Goods would put many local stores out of business and would also increase income inequality and unemployment in the city. Which of the following can most reasonably be concluded from the information given in the​ question? A. Lobbyists believe that income inequality can be reduced if Best Goods can be prevented from operating in Joberg. B. Equity of income is the most important indicator of economic​ well-being. C. The government will provide tax benefits to the retail sector to fuel its growth. D. Lobbyists believe that those who lose jobs​ won't find alternative opportunities in the short term. E. The purchasing power of the average consumer in Joberg is low.

D. The quality of goods offered at Best Goods is usually the same quality as those offered at local stores.

Best​ Goods, one of the leading department store​ chains, offers goods at low prices. It recently opened many new stores across the country. After successfully setting up stores in most major​ cities, Best Goods faced substantial opposition in the city of​ Joberg, where lobbyists for smaller general stores​ (local businesses) opposed its entry. These lobbyists argued that Best Goods would put many local stores out of business and would also increase income inequality and unemployment in the city. Which of the​ following, if​ true, would strengthen the stand of the​ lobbyists? A. The level of unemployment in Joberg is low. B. Best Goods created​ 15,000 jobs in the last year. C. Retail profits grew only by two percent this year. D. The quality of goods offered at Best Goods is usually the same quality as those offered at local stores. E.Many consumers prefer to shop in local stores because they offer goods on credit.

It is based on studying the actions of individuals. It applies the scientific method to the study of the interactions among individuals. It considers human behavior—particularly ​decision-making behavior.

Economics is a social science because

Positive analysis

Economics is about _________________, which measures the costs and benefits of different courses of

False

Economists assume that the only reason people take the actions they do is in response to economic incentives. A. True B. False

marginal benefit equals marginal cost.

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

$1,000,000

Every society faces​ trade-offs because we live in a world of scarcity. Suppose a​ student-athlete has the opportunity to earn ​$1,000,000 next year playing for a minor league baseball​ team, ​$500,000 next year playing for a European professional football​ team, or​ $0 returning to college for another year. The opportunity cost of the​ student-athlete returning to college next year is ​_______

E. Interest rates increased substantially during this period.

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? A. Data reveal substantial growth in consumption demand during this period. B. The domestic economy grew by 2 percent last year. C. The prices of cars have remained stable over the last year. D. The firm increased investment in supply chain management. E. Interest rates increased substantially during this period.

A. by the decisions of households and firms interacting in markets

How are economic resources allocated in a market​ economy? A. by the decisions of households and firms interacting in markets B. by consumers acting alone C. by firms acting alone D. by the government

C. Consumers, firms, and the government determine what goods and services will be produced by the choices they make.

In a market​ system, how does society decide what goods and services will be​ produced? A. Firms alone determine what goods and services will be produced. B. The government decides what goods and services will be produced. C. Consumers, firms, and the government determine what goods and services will be produced by the choices they make. D. What goods and services will be produced is determined by a vote of consumers.

C. Who receives the goods and services produced depends largely on how income is distributed.

In a market​ system, how does society decide who will receive the goods and services​ produced? A.The government determines the goods and services produced. B. Firms determine who receives the goods and services produced. C. Who receives the goods and services produced depends largely on how income is distributed. D. Consumers determine who receives the goods and services produced.

C. Firms determine how goods and services will be produced.

In a market​ system, what determines how goods and services will be​ produced? A. The government determines how goods and services will be produced. B. Consumers determine how goods and services will be produced. C. Firms determine how goods and services will be produced. D. Consumers, firms, and the government determine together how goods and services will be produced.

E. Julia saves more in rent than she spends on commuting to work.

Julia​ Paul, an analyst at a research​ institute, lives very close to her office and walks to work every day.​ Meanwhile, her​ colleague, Amanda​ Jones, dislikes the fact that it takes her almost an hour to commute to work every day. As a​ result, when Julia decides to move to a suburb farther​ away, Amanda is very surprised. Which of the​ following, if​ true, would explain​ Julia's behavior? A. ​Julia's office is located in the heart of the city. B. The city has one of the highest crime rates in the country. C. During​ weekends, Julia teaches painting at an orphanage close to work. D. Amanda earns more than Julia does. E. Julia saves more in rent than she spends on commuting to work.

scarcity

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

positive analysis

Suppose an analyst estimates how many jobs have been lost from free trade laws. This is an example of __________

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

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? A. Favorable weather conditions resulted in a bumper production of corn this year. B. Many firms expanded their capacities to cater to the higher demand. C. Imported varieties of many goods were cheaper than the domestically produced varieties. D. With liberalization of​ trade, the export market expanded and many domestic firms benefitted from it. E. Growth in the service sector of the economy was higher than growth in the manufacturing sector after the government took these measures.

D. Allocative efficiency occurs when production is in accordance with consumer preferences.

When does allocative efficiency​ occur? A. Allocative efficiency occurs when an economy no longer relies on voluntary exchange. B. Allocative efficiency occurs when an economy achieves equity. C. Allocative efficiency occurs when a good or service is produced at the lowest possible cost. D. Allocative efficiency occurs when production is in accordance with consumer preferences.

C. Productive efficiency occurs when a good or service is produced at the lowest possible cost.

When does productive efficiency​ occur? A. Productive efficiency occurs when an economy achieves equity. B. Productive efficiency occurs when production is in accordance with consumer preferences. C. Productive efficiency occurs when a good or service is produced at the lowest possible cost. D. Productive efficiency occurs when an economy no longer relies on voluntary exchange.

A. people are rational.

When economists develop models designed to explain the choices people​ make, they generally assume that A. people are rational. B. people make the best decisions. C. consumers do not act to achieve their goals. D. consumers do not use all available information. E. everyone knows everything.

D. the policies are consistent with economic incentives.

When the federal government crafts environmental policies that make it less expensive for firms to follow green​ initiatives, A. the policies are futile because where the environment is​ concerned, it has been repeatedly shown that firms do not respond to economic incentives. B. the policies are likely to be more successful than policies that cost firms​ more, but they do not recognize economic incentives. C. pollution is likely to increase. D. the policies are consistent with economic incentives.

C. In a mixed​ economy, most economic decisions are made in markets but the government plays a significant role in the allocation of resources.

Which of the following is a correct statement about a mixed​ economy? A. In a mixed​ economy, the government makes all economic decisions. B. In a mixed​ economy, most economic decisions are made by the government but markets plays a significant role in the allocation of resources. C. In a mixed​ economy, most economic decisions are made in markets but the government plays a significant role in the allocation of resources. D. In a mixed​ economy, all economic decisions are made in markets.

D.Make value judgments to be proven or disproven.

Which of the following is not a step economists follow when developing an economic​ model? A.Formulate a testable hypothesis. B.Decide on the assumptions to use in developing the model. C.Use economic data to test the hypothesis. D.Make value judgments to be proven or disproven. E.Revise the model if it fails to explain well the economic data

A. The idea assumes that consumers and firms use all available information as they act to achieve their goals.

Which of the following statements about the idea that people are rational is​ correct? A. The idea assumes that consumers and firms use all available information as they act to achieve their goals. B. The idea assumes that consumers and firms always make correct decisions. C. The idea assumes that consumers and firms take into account the costs of their actions but ignore the benefits. D. The idea assumes that consumers and firms take into account the benefits of their actions but ignore the costs.

Positive analysis

is concerned with what is​

normative analysis

is concerned with what ought to be

Equity

the fair distribution of economic benefits.

Opportunity cost

the highest valued alternative that must be give up to engage in an activity.

economics

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

Macroeconomics

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

C. North Korea

​Today, which of the following countries has a centrally planned​ economy? A. United States B. Germany C. North Korea D.Canada

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?

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