Macroeconomics (Chapters 1,2,3) Exam

Entrepreneurs receive profits for their efforts primarily because they:

combine land, labor, and capital to produce goods and services.

If there is a surplus in a given market, then:

the price will decrease.

In the market economy, the primary channel through which buyers and sellers communicate with each other is:

price

The conversion of resources to satisfy wants is described as:

production

The father of modern demand and supply analysis is:

Adam Smith

Stylized economic models must include:

assumptions

What is the difference between a change in quantity supplied and a change in supply?

A change in the market price affects the quantity supplied, but not the supply.

___________________ costs include the time and money that could have been spent on another highly valued activity

Opportunity

Markets tend to be efficient because:

People respond to incentives

Which of the following is TRUE regarding production efficiency?

Producing at the lowest possible resource cost is equivalent to getting as much output as possible from a given set of resources.

___________ occurs when the mix of goods society decides to produce is produced at the lowest possible resource or opportunity cost.

Production efficiency

Trade is:

a driver of economic growth

If one country has a(n) ____________ advantage in the production of one item, it can always produce more of the item than another nation.

absolute

Prices typically contain useful information:

both for buyers and for sellers.

Economics is a social science that involves the study of how individuals, firms, and societies:

choose among alternatives to satisfy their unlimited wants.

(Figure: Demand for Shoes) A shift to the right of the demand curve would be caused by anything, EXCEPT a(n):

decrease in the population.

Which of the following results in a higher standard of living?

higher levels of education

If both demand and supply decrease, but the decrease in demand is greater than the decrease in supply, then the equilibrium price _________________ and equilibrium output _____________.

falls; falls

Which of the following is one of China's top five exports to the United States?

furniture

When consumers have no choice but to buy from one firm (local utility, etc.):

government regulation is usually used to protect consumers.

According to the Organisation for Economic Co-operation and Development (OECD), an increase in which of the following would lead to a lower rate of per capita growth?

greater tax burden

Markets work as if they are:

guided as if by an "invisible hand," according to Adam Smith

A basic supposition of economics is that:

in general, people respond to economic incentives

Suppose it is discovered that consumption of Greek yogurt leads to a longer life. This information would lead to a(n):

increase in demand.

(Figure: Demand for Shoes) A shift to the right of the demand curve could be caused by a(n):

increase in income if the good is normal.

Capital, which includes all manufactured products that are used to produce other goods and services, earns:

interest

A market demand curve:

is the horizontal summation of individual demands.

The market-clearing price:

is the price at which quantity demanded equals quantity supplied.

(Figure: Determining Production Possibilities) The graph shows the PPF for goods A and B and X marks a combination that:

is unobtainable with current resources.

If an economy is producing at a point inside its PPF:

it is possible to produce more of one good without sacrificing some of the other good.

Resources are:

limited, but wants are unlimited

The main difference between macroeconomics and microeconomics is that:

macroeconomics focuses on the aggregate economy, and microeconomics focuses on small components of that economy

Which is NOT a determinant of supply?

national income

A nation's standard of living is primarily a function of:

productivity.

Economic models must:

rely on the ceteris paribus assumption.

To say that economics is a way of thinking about how people make rational decisions means that people:

respond to incentives.

The theory of comparative advantage says that countries:

should export those goods they can produce at a lower opportunity cost than another country.

Economists like to use graphs and equations primarily because:

these tools efficiently express economic concepts.

Which of the following is a case when the government should intervene in the economy?

when the market fails to provide goods efficiently

A surplus exists:

when the quantity supplied exceeds the quantity demanded