Macroeconomics Module One Exam (Ch. 1-5)
"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:
$44
"If I didn't have class tonight, I would save the $4 campus parking fee and spend five hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:
$54
Which of the following statements most likely lies within the realm of microeconomics?
An increase in labor costs will increase the additional cost of producing another bus.
In which of the following countries will the national government have the greatest influence with respect to the nation's economy?
Cuba
The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.
budget constraint
The law of demand indicates that as the price of a good increases:
buyers desire to purchase less of it.
Marginal thinking is best demonstrated by:
choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.
Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories.
circular flow diagram
The law of ____________________________ explains why people and societies rarely make all-or-nothing choices.
diminishing marginal utility
The ____ is the only price where quantity demanded is equal to quantity supplied.
equilibrium price
The is the quantity where quantity demanded and quantity supplied are equal at a certain price.
equilibrium quantity
The circular flow diagram of economic activity is a model of the:
flow of goods, services, and payments between households and firms.
Government policies that encourage immigration will _______ the supply of labor.
increase
If the demand for software engineers ____________ slower than does supply, then wages of software engineers will:
increases; fall
Macroeconomics:
is concerned with the expansion and contraction of the overall economy.
Consumer surplus
is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.
Economists refer to the relationship that a higher price leads to a lower quantity demanded as the:
law of demand
The basic difference between macroeconomics and microeconomics is:
microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.
Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:
the benefit to his grades from studying for an hour.
When quantity supplied decreases in response to a change in price:
there is a movement down along the supply curve.
Scarcity exists because of:
unlimited wants and limited resources
Nearly all supply curves share a basic similarity in that they slope ________.
up from left to right
Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop?
3.0
Suppose that Bobo purchases 1 pizza per month when the price is $19 and 3 pizzas per month when the price is $15. What is the price elasticity of Bobo's demand curve?
4.25
The demand for a product is unit elastic. At a price of $20, 10 units of a product are sold. If the price is increased to $40, then one would expect sales to equal:
5 units.
Why is there scarcity?
Because our unlimited wants exceed our limited resources
In countries like _____________ the command economy predominates.
Cuba and North Korea
__________ is loss in total surplus that occurs when the economy produces at an inefficient quantity.
Deadweight loss
________________ means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.
Division of labor
Which of the following statements most likely lies within the realm of macroeconomics?
Due to an economic recession, manufacturing firms began implementing layoffs of their workforces.
If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:
Goods X and Y are complement goods.
If an increase in the price of Good X causes a increase in the demand for Good Y, we can conclude that:
Goods X and Y are substitute goods.
are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.
Price floors
In which of the following instances will total revenue decline?
Price rises and demand is elastic.
In which of the following cases will total revenue increase?
Price rises and demand is inelastic.
____________ means that, given the available inputs and technology, it is impossible to produce more of one good without decreasing the quantity that is produced of another good.
Productive efficiency
When government spends a certain amount more on reducing crime, for example, the original gains in reducing crime could be relatively large. But additional increases typically cause relatively smaller reductions in crime, and paying for enough police and security to reduce crime to nothing at all would be tremendously expensive. This is all an example of:
The law of diminishing returns
__________________ holds that as additional increments of resources are added to a certain purpose, the marginal benefit from those additional increments will decline.
The law of diminishing returns
Which of the following would most likely shift the production possibilities curve inward?
a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time.
Which of the following is most likely a topic of discussion in macroeconomics?
a decrease in the unemployment rate
The term ceteris paribus means that:
all variables except those specified are constant.
The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________.
allocative efficiency
The main determinant of elasticity of supply is the
amount of time the producer has to adjust inputs in response to a price change.
Which of the following results in a rightward shift of the market demand curve for labor?
an increase in demand for the firm's product
Which of the following will not result in a leftward shift of the market demand curve for labor?
an increase in the wage rate
Macroeconomics primarily examines:
broad issues such as national output, employment and inflation.
The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible.
budget constraint
A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that:
cross-price elasticity of demand for iced tea is 2.0.
A 10 percent decrease in the price of potato chips leads to a 30 percent increase in the quantity of soda demanded. It appears that:
cross-price elasticity of demand for soda is -3.0.
Specialization
can lead to an increase in overall production.
Demand is said to be ___________ when the quantity demanded is very responsive to changes in price.
elastic
A price cut will increase the total revenue a firm receives if the demand for its product is:
elastic.
If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ______.
excess demand/shortage
If the price is above the equilibrium level, then the quantity supplied will exceed the quantity demanded. This is known as ______.
excess supply/surplus
In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made.
government
Which of the following best describes a fiscal policy tool?
government spending
Price elasticity of demand is generally
greater in the long run than in the short run
If a firm faces ________, while the prices for the output the firm produces remain unchanged, a firm's profits will decrease.
higher cost of production
Which of the following would reduce the supply of microcomputers?
higher wage rates for the workers that assemble the computers.
A perfectly elastic supply or demand curve is:
horizontal
If the demand curve is perfectly elastic, then an increase in supply will:
increase the quantity exchanged but result in no change in the price.
Demand is said to be ___________ when the quantity demanded is not responsive to changes in price.
inelastic
Supply is said to be ___________ when the quantity supplied is not responsive to changes in price.
inelastic
Taxes on goods with _____ demand curves will tend to raise more tax revenue for the government than taxes on goods with _____ demand curves.
inelastic; elastic
Which of the following best describes a monetary policy tool?
interest rates
Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?
international trade
Scarcity implies that:
it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.
Other things being equal, a _____________ supply of workers tends to _________ real wages.
larger; decrease
Economists refer to the relationship that a lower price leads to a lower quantity supplied as the:
law of supply
If more education is required for a labor market, the _____ supply of labor will be available.
less
Supporters of the _________ argue that full-time workers should be assured a high enough wage so that they can afford the essentials of life: food, clothing, shelter, and healthcare.
living wage
When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being:
low inflation
If a firm faces ________, while the prices for the output the firm produces remain unchanged, a firm's profits will increase.
lower cost of production
Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.
marginal analysis
As a person receives more of a good, the _______________ from each additional unit of the good declines.
marginal utility
In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.
market-oriented economy
The marginal benefit of a slice of pizza is the:
maximum amount that a consumer is willing to pay for the slice.
When higher interest rates are present in the market,
more firms are willing to lend money.
Many economists believe that the trend toward greater wage inequality across the U.S. economy was primarily caused by ___________________.
new technologies
Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.
normative statement
In contrast to goods and services markets, ______________ are rare in labor markets, because rules that prevent people from earning income are not politically popular.
price ceilings
In the ______________, households receive goods and services and pay firms for them.
product/goods & services market
A demand curve shows the relationship between price and ___ on a graph.
quantity demanded
___ refers to the total number of units that are purchased at that price.
quantity demanded
A supply curve shows the relationship between price and ____ on a graph.
quantity supplied
When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _________.
quantity supplied
A straightforward example of a ____________, often used for simplicity, is the interest rate.
rate of return
The price elasticity of demand measures the:
responsiveness of quantity demanded to a change in price.
If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to:
rise and the equilibrium quantity to stay the same.
The economics approach portrays people as ____________.
self-interested
A more efficient means of processing algae to produce an anticancer drug is discovered. As a result, the supply curve for the drug will:
shift to the right, decreasing the price of the drug.
If a(n) _______ exists, consumers who are unhappy about not being able to purchase the products or services they want will tend to bid the prices higher, moving the market toward equilibrium.
shortage
If the income elasticity of demand for store brand macaroni and cheese is −3.00, this means that
store brand macaroni and cheese is an inferior good.
The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options.
sunk costs
A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the _______.
supply curve to the right
As the _______________ complement for high-skill labor becomes cheaper, the demand curve for high- skill labor will shift to the right.
technology
As the _______________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.
technology
The elasticity of demand for a product is likely to be greater,
the greater the amount of time over which buyers adjust to a price change.
The more time consumers have to adjust to a change in price,
the greater will be the price elasticity of demand.
Price elasticity of demand is defined as:
the percentage change in quantity demanded divided by the percentage change in price.
Cross-price elasticity of demand measures how sensitive purchases of a specific product are to changes in
the price of some other product.
As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good.
the production possibilities frontier
Macroeconomic topics do not usually include:
the profit maximizing decisions of an individual manufacturer.
When consumers and businesses have greater confidence that they will be able to repay in the future, _________.
the quantity demanded of financial capital at any given interest rate will shift to the right.
If new manufacturers enter the computer industry, then assuming all else constant:
the supply curve shifts to the right.
If two products are considered substitutes products for consumers, then it is likely that:
their cross price elasticities are greater than zero (positive).
If two products are considered complement products for consumers, then it is likely that:
their cross price elasticities are less than zero (negative).
When quantity demanded decreases in response to a change in price:
there is a movement up along the demand curve.
A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result:
total revenue will decrease.
Demand is said to be __________ when the quantity demanded changes at the same proportion as the price.
unit elastic
Many states do have ____________, which impose an upper limit on the interest rate that lenders can charge.
usury laws
The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern.
utility
If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages _______________.
will increase
Are markets always in equilibrium?
No, but if there is no outside interference, they tend to move toward equilibrium.
The elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in __________.
price
Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi's demand curve?
1.0
____________ means that the particular mix of goods being produced (along the production possibilities frontier) represents the allocation that society most desires.
Allocative efficiency
Which of the following best characterizes the circular flow of income?
Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.
In the circular flow diagram model:
Businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households.
_____________ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines.
Economies of scale
When ___________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right.
costs of production fall
Assume that a 4 percent increase in income across the economy produces an 8 percent increase in the quantity demanded of peanuts. The coefficient of income elasticity of demand is
positive, and therefore peanuts are a normal good.