Macroeconomics Exam 1
. Is U.S. border patrol a public good or a private good? What type of good is satellite TV? multiple choice 4U.S. border patrol is a public good, but satellite TV is a private good.U.S. border patrol and satellite TV are both public goods.U.S. border patrol is a private good, but satellite TV is a public good.U.S. border patrol and satellite TV are both private goods.
U.S. border patrol is a public good, but satellite TV is a private good.
Price ceilings during a hyperinflation are problematic because multiple choicethe excess money supply makes prices too high.many producers will go out of business because the costs of production will soon exceed the legal selling price.many government officials will become corrupt.consumers don't like the goods that producers are offering for sale.
many producers will go out of business because the costs of production will soon exceed the legal selling price.
The meaning of the phrase "invisible hand" is that multiple choicemarket prices coordinate the economy by rationing resources and output and by providing incentives to produce the goods and services most desired by society.no one person or firm actually sets the price of the product.since buyers and sellers do not usually transact in person, the transactions are invisible.market prices are not always known to buyers and sellers.
market prices coordinate the economy by rationing resources and output and by providing incentives to produce the goods and services most desired by society.
A public good is multiple choice 1nonrival but excludable.rival and excludable.rival but nonexcludable.nonrival and nonexcludable.
nonrival and nonexcludable.
Money is not considered a capital resource in economics because money is ____
not productive
The free-rider problem occurs when multiple choice 3people benefit from the public good without contributing to the cost.some people receive more in benefits than they pay in taxes.some people pay more in taxes than the good or service is worth to them.people pay for the good without receiving the benefit.
people benefit from the public good without contributing to the cost.
Tammy Hall is the mayor of a large U.S. city. She has just established the Office of Window Safety. Because windows sometimes break and spray glass shards, every window in the city will now have to pass an annual safety inspection. Property owners must pay the $5-per-window cost—and by the way, Tammy has made her nephew the new head of the Office of Window Safety. This new policy is an example of
rent seeking
Suppose that businesses buy a total of $100 billion of the four resources (labor, land, capital, and entrepreneurial ability) from households. If households receive $60 billion in wages, $10 billion in rent, and $20 billion in interest, how much are households paid for providing entrepreneurial ability? ____ If households spend $55 billion on goods and $45 billion on services, how much in revenues do businesses receive in the product market? ____
10, 100
Andy purchased a new drone last year for $1,500. He no longer uses the drone and wants to sell it. He currently values the drone at $400. Suppose Jeff wants to purchase a drone. His maximum willingness to pay for a drone is $900. Instructions: Enter your answers as a whole number. Suppose Andy and Jeff agree on a price of $600 for the drone. a. How much producer surplus will this transaction generate? $ b. How much consumer surplus will this transaction generate? $ c. What will be the total surplus generated from this transaction? $
200, 300, 500
Which statement is consistent with the law of supply? multiple choice 1At a zero price, quantity supplied will be infinite.An increase in market price will lead to an increase in quantity supplied.An increase in market price will lead to a decrease in quantity supplied.A decrease in market price will lead to an increase in quantity supplied.
An increase in market price will lead to an increase in quantity supplied.
Why is entrepreneurial ability distinct from labor even though both are considered a category of economic resource? multiple choice 2Because entreprenuerial ability is directly engaged in production.Because entreprenuerial ability is not directly engaged in production.
Because entreprenuerial ability is not directly engaged in production.
How is the market supply curve derived from the supply curves of individual producers? multiple choice 2By adding up the prices paid for each unit supplied by producersBy calculating the average quantity supplied among all producersBy adding up the quantities supplied by all individual producers for each priceBy using the largest quantity supplied among all producers for each price
By adding up the quantities supplied by all individual producers for each price
What effect will each of the following have on the demand for small cars such as the Mini Cooper and Fiat 500? a. Small cars become more fashionable: (Click to select) Demand decreases Cannot be determined Demand does not change Demand increases . b. The price of large cars rises (with the price of small cars remaining the same): (Click to select) Cannot be determined Demand decreases Demand increases Demand does not change . c. Income declines and small cars are an inferior good: (Click to select) Demand decreases Demand increases Cannot be determined Demand does not change . d. Consumers anticipate that the price of small cars will decrease substantially in the near future: (Click to select) Demand does not change Demand decreases Cannot be determined Demand increases . e. The price of gasoline substantially drops: (Click to select) No change Increase Decrease Cannot be determined .
Demand increases Demand increases Demand increases Demand decreases Cannot be determined`
What are the two major ways in which an economy can grow and push out its production possibilities curve? multiple choiceBetter weather and nicer carsHigher taxes and lower spendingIncreases in resource supplies and advances in technologyDecreases in scarcity and advances in auditing
Increases in resource supplies and advances in technology
Why does the supply curve slope upward? Increasing opportunity costs Increasing marginal costs Diminishing marginal utility A decrease in resource prices An increase in resource prices Increasing labor productivity
Increasing opportunity costs Increasing marginal costs
With these curves, the optimal allocation of resources to a particular product will occur when ____ = ____
MB=MC
What roles do entrepreneurs play in the economy? check all that applyMake routine pricing decisionsInnovatePurchase capitalCreate market demandTake risksMake decisions
Make routine pricing decisions Innovate Purchase capital Create market demand Take risks Make decisions
For each stock in the stock market, the number of shares sold daily equals the number of shares purchased. That is, the quantity of each firm's shares demanded equals the quantity supplied. Why, then, do the prices of stock shares change? multiple choicePrices change in reaction to a mismatch between quantity demanded and quantity supplied.Prices are set at a different level each day by Wall Street traders.Prices change due to the whims of those selling stock shares.Actually, the prices of stock shares seldom change.
Prices change in reaction to a mismatch between quantity demanded and quantity supplied.
In which of these two statements are the terms "supply" and "demand" used correctly? A. "In the corn market, demand often exceeds supply, and supply sometimes exceeds demand." B. "The price of corn rises and falls in response to changes in supply and demand."
Statement B
An example of rent seeking is multiple choice 3a domestic industry group using resources to try to block imports.a professional organization trying to establish a new membership base.a neighborhood association establishing restrictions on traffic patterns.a firm using resources to try to develop new technologies.
a domestic industry group using resources to try to block imports.
Rent seeking is multiple choice 1an appeal to government for special benefits at the taxpayers' or someone else's expense.charging higher rents for properties in high demand.an appeal to government for special taxes to be applied to a certain group of firms.an effort to get a share of a government contract.
an appeal to government for special benefits at the taxpayers' or someone else's expense.
Rent seeking is different from profit maximization because rent seeking multiple choice 2increases both revenue and cost, so its influence on profit is unclear.attempts to increase profit by influencing the political process.is an effort to minimize cost, not maximize profit.attempts to increase profit by raising rents, not by producing a product.
attempts to increase profit by influencing the political process.
If the income of buyers increases, and good A is an inferior good, the demand for good A Correctwill decrease Correct. This will cause the equilibrium price to decrease Correctand the equilibrium quantity to decrease Correct.
demand for good A will decrease decrease decrease
Explain the typical shapes of the marginal-benefit and marginal-cost curves. The marginal-benefit curve is ____ sloping. The marginal-cost curve is ____ sloping.
downward, upward
When negative externalities exist in a market, multiple choice 1equilibrium output will be greater than the efficient output.equilibrium output will be less than the efficient output.equilibrium output will be greater than the efficient price.equilibrium price will be less than the efficient output.
equilibrium output will be greater than the efficient output.
True or False: "The problem with our democratic institutions is that they don't correctly reflect the will of the people! If the people—rather than self-interested politicians or lobbyists—had control, we wouldn't have to worry about government taking actions that don't maximize allocative and productive efficiency."
false
If current output is such that marginal cost exceeds marginal benefit, should more or fewer resources be allocated to this product?
fewer
The government could correct these divergences between equilibrium output and efficient output by multiple choice 2imposing regulations that force firms to internalize the external costs.shifting the demand curve down.imposing regulations that force firms to externalize the internal costs.
imposing regulations that force firms to internalize the external costs.
Suppose that you initially have $100 to spend on books or movie tickets. The books start off costing $25 each and the movie tickets start off costing $10 each. For each of the following situations, would the attainable set of combinations that you can afford increase or decrease? a. Your budget increases from $100 to $150 while the prices stay the same: (Click to select) Increase Decrease Stay the same . b. Your budget remains $100, and the price of books remains $25, but the price of movie tickets rises to $20: (Click to select) Increase Decrease Stay the same . c. Your budget remains $100, and the price of movie tickets remains $10, but the price of a book falls to $15: (Click to select) Increase Decrease Stay the same .
increase, decrease, increase
Elected officials often accommodate rent-seeking behavior, particularly by special-interest groups located in their home states, because these groups multiple choice 4support the elected officials with financial and nonfinancial resources.are the only groups allowed to appeal to elected officials.are the largest voting block.represent all voters.
support the elected officials with financial and nonfinancial resources.
A student will decide to attend class when multiple choicethe marginal benefit is positive.there is an attendance policy.the marginal cost is low.the marginal benefit of attending exceeds the marginal cost of attending.
the marginal benefit of attending exceeds the marginal cost of attending.
An example of an external benefit is multiple choice 3the safety provided by motion-detector lights.second-hand smoke.pollution.loud noise from your neighbor.
the safety provided by motion-detector lights.
Public goods are not privately provided because multiple choice 2when goods are nonexcludable, there is too much competition for firms to earn a profit.when goods are nonexcludable, those purchasing the good could allow others the use without requiring compensation.when goods are nonrival, there is too much competition for firms to earn a profit.when goods are nonrival, those purchasing the good could allow others the use without requiring compensation.
when goods are nonexcludable, those purchasing the good could allow others the use without requiring compensation.
