Ch 1&2 Macroecon

Which of the following sayings best reflects the concept of opportunity cost?

"There is no such thing as a free lunch."

A farmer is deciding whether or not to add fertilizer to his or her crops. If the farmer adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, the farmer should add fertilizer if it costs less than:

$20 per pound.

In Exhibit 1A-3, the slope for straight line AB is:

-1.

In Exhibit 1A-4, the slope of the straight line A-D is:

0

In Exhibit 1A-1, the slope of straight line AB is:

1/2.

What is the slope of the line shown in Exhibit 1A-7?

1/20.

Mikki decides to work five hours the night before her economics exam. She earns an extra $75, but her exam score is 10 points lower than it would have been had she stayed home and studied. Her opportunity cost is the:

10 points she lost on her exam.

In Exhibit 2-15, if the economy moves from point L to point M, the opportunity cost of producing 10 more capital goods is:

15 less consumer goods.

In Exhibit 2-2, the opportunity cost of coffee when moving from A to B is:

2 million bushels of corn.

In Exhibit 2-1, the opportunity cost of producing the fourth unit of capital is:

4 units of consumption goods.

In Exhibit 2-15, if the economy produces no capital goods, what is the maximum number of consumer goods that can be produced?

50

In Exhibit 2-1, according to the information, the opportunity cost of producing 3 units of capital is:

6 units of consumption goods.

Which of the following would cause a shift in the relationship shown in Exhibit 1A-8?

A fall in household incomes.

Which of the following is used to illustrate an independent relationship between two variables?

A horizontal or vertical line

In Exhibit 2-11, which of the following could have caused the production possibilities curve to shift from the one labeled B to the one labeled A?

A major natural disaster.

Which of the following would cause a shift in the relationship shown in Exhibit 1A-7?

A rise in the price of air travel.

In Exhibit 2-11, which of the following could have caused the production possibilities curve of an economy to shift from the one labeled A to the one labeled B?

An advance in technology

Which one of the following is a positive economic statement?

An increase in the minimum wage will reduce employment for teenagers.

Which of the following statements is true?

An opportunity cost is what must be given up in order to get something else.

In Exhibit 2-5, movement between which of the following points represents an increase in economic efficiency?

C to D.

Which of the following would not lead to a shift in an economy's production possibilities curve?

Change in the composition of current output.

Which one of the following is the most accurate definition of economics?

Economics is the study of how society chooses to allocate scarce resources.

Which of the following most accurately indicates the implications of an economy's production possibilities curve?

If all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.

Which of the following is true of the production possibilities curve?

It assumes a fixed level of technology. It assumes resources are fixed. It assumes resources are fully employed. All of these are correct.

If individuals who sit in the back of the classroom receive lower grades on average than the rest of the class, does that mean that sitting in the back of a classroom causes one to perform poorly on exams?

Not necessarily. The reoccurrence of a certain relationship between two variables does not necessarily imply causation.

In Exhibit 2-15, the economy will experience the most future economic growth if it chooses what point now?

P.

Which of the following is a normative statement?

People would be better off if government expenditures were higher.

What type of economic analysis is limited to testable, verifiable statements?

Positive economics.

Which of the following is true of resources?

Resources are inputs used to produce goods and services. Labor is the mental and physical capacity of workers to produce goods and services. Entrepreneurship organizes resources to produce goods and services. All of these are true.

Which of the following statements is correct?

Slope is the ratio of the vertical change (the rise or fall) to the horizontal change (the run). A direct relationship is one in which two variables change in the same direction. An inverse relationship is one in which two variables change in opposite directions. An independent relationship is one in which two variables are unrelated. All of these.

For the economy shown in Exhibit 2-7, which of the following is true when the economy is at point A?

Some car production must be forgone in order to produce more grain in the same period.

Which of the following is a macroeconomics topic?

The economy's annual growth rate.

Which of the following is a normative economic statement?

The inflation rate in the United States is too high.

Which of the following pairs is the most likely to exhibit an inverse relationship?

The price of a concert and the number of tickets people purchase.

In Europe during the 14th century, the Black Plague killed 24 million people or close to 37 percent of the population. How would this affect the production possibilities curves for the countries of Europe at that time?

The production possibilities curves for these countries would have shifted inward.

Which of the following correctly lists the three fundamental economic questions?

What to produce? How to produce? For whom to produce?

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

a decrease in the stock of physical capital

An upward-sloping line or curve is used to illustrate:

a direct relationship.

In a graphic relationship, shifts in a curve are caused by a change in:

a factor not measured on the axes of the graph.

Which of the following would be least likely to cause the production possibilities curve to shift outward?

a shift in consumer preferences that causes expansion in the output of one product and a decline in output of other products.

When deciding whether to buy a second car, marginal analysis indicates that the purchaser should compare the:

additional benefits of the second car with the additional cost of the second car.

The term Ceteris paribus means that:

all other things remain unchanged.

When economists use the term Ceteris paribus, they are indicating that:

all other variables except the ones specified are assumed to be constant.

In Exhibit 2-15, the production possibilities curve demonstrates:

changing technology.

In Exhibit 2-2, the slope of the production possibilities curve indicates that the opportunity cost of:

coffee is constant.

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has:

confused association and causation.

The production possibilities in Exhibit 2-2 indicates that the opportunity cost of corn is:

constant.

In Exhibit 2-13, which of the following is not true regarding point H? Point H:

could be achieved today if the economy only achieved full employment.

The opportunity cost of your college education is:

d and e. your best alternative use of the money you spend for a college education. money you could have earned working instead of going to college.

The central question in economics is how to:

deal with the problem of scarcity.

According to Exhibit 1A-7, the relationship between annual income and air-travel expenditures is:

direct.

In Exhibit 1A-1, as X increases along the horizontal axis, corresponding to points A-B on the line, the Y values increase. The relationship between the X and Y variables is:

direct.

When an inverse relationship is graphed, the resulting line or curve is:

downward-sloping.

Compare two economies A and B that start out with identical production possibilities curves. Economy A chooses an efficient point with 6 consumption goods and 3 capital goods, while economy B also chooses an efficient point, but with 4 consumption goods and 5 capital goods. In the future we can predict:

economy B will grow faster than economy A.

For the economy shown in Exhibit 2-7 to operate at point C, it must:

experience an increase in its resources and/or an improvement in its technology.

The law of increasing costs indicates that the opportunity cost of producing a good:

increases as more of the good is produced.

Straight line A-D in Exhibit 1A-4 shows that:

increasing values for X do not affect the value of Y.

Straight line AB in Exhibit 1A-3 shows that:

increasing values for X reduces the value of Y. decreasing values for X increases the value of Y. there is an inverse relationship between X and Y. all of these.

According to the data given in Exhibit 2-3, the production of 1 unit of capital goods and 14 units of consumer goods:

is possible but would be inefficient. may be a result of unemployment. may be a result of unused natural resources. all of these.

If an economy is operating at a point inside the production possibilities curve,

its resources are not being used efficiently.

Exhibit 1A-9 represents a three-variable relationship. As the annual income of consumers falls from $50,000 (line A) to $30,000 (line B), the result is a:

leftward shift in curve A to curve B.

When building a model, an economist must:

make simplifying assumptions.

Any point on the production possibilities curve illustrates:

maximum production combinations.

The basic difference between macroeconomics and microeconomics is:

microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

On a production possibilities curve, the opportunity cost of good X, in terms of good Y, is represented by the:

movement along the curve.

A production possibility graph slopes down because of:

nonhomogeneous resources.

In Exhibit 2-13, the combination of goods given by point H could:

not be achieved today.

An inverse relationship exists when:

one variable increases and the other variable decreases.

A direct relationship exists when:

one variable increases and the other variable increases.

Production possibilities curve analysis includes the idea of:

opportunity cost. scarcity. maximum production choices. all of these.

An economic theory claims that a rise in gasoline prices will cause gasoline purchases to fall, Ceteris paribus. The phrase "Ceteris paribus" means that:

other relevant factors like consumer incomes must be held constant.

The perpetual problem in economics is:

our inability to satisfy everyone's wants with the available resources.

Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as a(n):

outward shift of the curve.

According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study:

outweighs the extra cost.

Scarcity can be eliminated if:

people satisfy needs rather than wants. sufficient new resources were discovered. output of goods and services were increased. none of these.

In Exhibit 2-13, in terms of efficiency:

point A is preferred to point D.

The statement, "Violent crime has decreased in the last five years," is:

positive because it is testable.

In Exhibit 1A-1, the slope of straight line AB is:

positive.

Economists use ____ economic analysis to understand an individual market. They then use ____ economic analysis to guide future national economic policy.

positive; normative

A direct relationship is expressed graphically as a:

positively sloped line or curve.

As shown in Exhibit 1A-1, the slope of straight line AB:

remains constant with changes in X.

As shown in Exhibit 1A-3, the slope of straight line AB:

remains constant with changes in X.

Exhibit 1A-10 represents a three-variable relationship. As the annual income of consumers rises from $20,000 (line A) to $40,000 (line B), the result is a:

rightward shift in curve A to curve B.

The most fundamental concepts underlying the discipline of economics are:

scarcity and choice.

A change in a third variable not on either axis of a graph is illustrated with a:

shift of a curve.

Over time, an increase in a nation's stock of physical capital will:

shift the production possibilities curve outward.

A model is defined as a:

simplified description of reality to understand and predict an economic event.

Measured between two points on a curve, the ratio of the change in the variable on the vertical axis to the change in the variable on the horizontal axis is the:

slope.

The production possibilities curve shows that:

some of one good must be given up to get more of another good in an economy that is operating efficiently.

Scarcity is a(n):

subjective concept that human wants can never be satisfied.

In economics, the term marginal refers to:

the change or difference from a current situation.

The production possibility curve is bowed outward from the origin because of:

the law of increasing opportunity costs.

In Exhibit 2-2, the opportunity cost of coffee when moving from A to B is:

the same as moving from B to C.

The opportunity cost of an action is:

the value of the best opportunity that must be sacrificed in order to take the action.

An analysis of production possibilities curves indicates that the reason why underdeveloped nations have difficulties increasing their economic growth rates is because:

they must cut back their already meager consumption levels to increase capital production.

A point outside the production possibilities curve represents a combination of goods that is:

unattainable.

An efficient economy:

uses available resources fully. uses the best division of labor. produces an output combination at some point along the production possibility curve. all of these.

To abstract from reality in an economic model means that:

we include only a few of the essential aspects of reality.

After the terrorist attacks on September 11, 2001, the United States began devoting substantial resources toward the War on Terrorism, homeland security, and relief efforts. As long as our resources were being used efficiently, the production possibilities curve would suggest that:

we will have to give up the production of other goods that could have been produced with these resources.

An economic model is useful only if it:

yields accurate predictions.