Chapter 1, 2, + 6

Suppose the following represents the Canadian production possibilities frontier for two of its most important exports: maple syrup (in millions of bottles) and tree logs (in millions). Please choose the best answer for each question. 1. Point H is below the PPF line, so it is ___. 2. Point M is on the PPF line, so it is ___. 3. Point Y is above the PPF line, so it is ___.

1. Possible, but not efficient. 2. Possible and efficient. 3. Unobtainable through production, but it may be possible for Canada to consume at point Y if international trade occurs.

The graph depicts total non-farm employment in the United States over time. The grey bars represent recessions. 1. Based on the graph, a major characteristic of a recession is ____. 2. Which of these organizations officially determines when the economy is experiencing a recession?

1. a decrease in employment 2. National Bureau of Economic Research

Which statement describes the equity-efficiency trade-off? 1. Actions intended to make economic outcomes fairer may cause efficiency to decrease 2. Government intervention can increase efficiency in a market 3. There is always a more equitable outcome that is also more efficient 4. The least efficient economic outcome is the fairest outcome

Actions intended to make economic outcomes fairer may cause efficiency to decrease

Which demonstrates a scenario with no opportunity cost? 1. It's Friday night and you stay up late talking and hanging out with your friends. 2. The chemistry club is giving out free pizza for lunch to all who come to their table to get it. 3. Naomi, age 8, is at a bookstore and chooses to buy a book about a young wizard instead of buying a math textbook that she would probably never open. 4. Chez Moi and Chez Nous, two premiere French restaurants with three Michelin stars, both offer you a full time sous chef job at the same salary. You are ecstatic because you know it is a win-win scenario and you choose to work for Chez Nous.

All of these scenarios have an opportunity cost.

Which of the statements is the best description of inflation? - An increase in the overall price level has occurred. - Real GDP is rising. - The price of all goods and services in the economy are increasing. - The price of all goods and services have increased proportionately. - The prices of only consumer goods are increasing.

An increase in the overal price level has occured

You start a part-time job as a package handler at a large delivery company. After training, you start your first shift and your supervisor tells you to unload packages from a single truck. Unfortunately, he tells 5 other people to do the same which causes most of you to stand around and wait for your co-workers to get out of the way. There are several other trucks already on the dock waiting to be unloaded. Which of the following terms best describes what your supervisor has failed at?

Efficiency

During the summer, a bumber crop of oranges in Florida causes a surplus in the supply of oranges nationwide. As a result, prices fall to compensate for the surplus and consumers enjoy the fruits of the farmers' labor. Which economic principle is illustrated?

Equilibrium

Which is NOT an example of a resource?

Firms

Sort the following items into boxes based on whether they are examples of monetary or fiscal policy. - Increase taxes - Decrease taxes - Increase interest rates - Decrease interest rates - Increase education spending - Increase the money supply - Cut infrastructure spending - Construct monuments like Mt. Rushmore

Fiscal Policy - Increase taxes - Decrease taxes - Increase education spending - Cut infrastructure spending - Construct monuments like Mt. Rushmore Monetary Policy - Increase interest rates - Decrease interest rates - Increase the money supply

the local river has so much pollution that three-eyed fish are forming. The government responds by regulating the amount of chemicals that can be dumped into the river. Which economic principle is illustrated?

Government intervention

For each scenario, determine whether or not government intervention will improve society's well-being. 1. A local energy company releases pollutants into the regional water reservoir. 2. Consumers are beginning to demand more smartphones than traditional cell phones. 3. A manufacturing company in Texas is switching from producing coats to producing T-shirts in anticipation of warmer weather. 4. The coastal town of Willowby could prevent many shipwrecks by building a lighthouse. However, no individual resident is willing to pay for the lighthouse because they could never recoup the cost from ships that benefit from the lighthouse.

Government intervention will improve society's well-being: - A local energy company releases pollutants into the regional water reservoir. - The coastal town of Willowby could prevent many shipwrecks by building a lighthouse. However, no individual resident is willing to pay for the lighthouse because they could never recoup the cost from ships that benefit from the lighthouse. Government intervention will NOT improve society's well-being: - A manufacturing company in Texas is switching from producing coats to producing T-shirts in anticipation of warmer weather. - Consumers are beginning to demand more smartphones than traditional cell phones.

Britney, Alex, Melissa, and Danny are trying to form a band. They each have some basic skills on most intruments, so their current plan is for each of them to rotate among vocals, guitar, bass, and drums. After a year of practice and rehearsals the band still sounds awful. Britney cannot keep a steady beat when on bass or drums, Melissa sounds terrible on everything except the bass, nobody except Alex can remember all the chords on guitar, and even Danny's own mother thinks his singing sounds like a dying cow. At their current rate, they expect it will be several years before they are good enough to land their first paid performance. None of them have enough money saved up to last that long. They all know you are taking economics and ask your advice. What would you say to them?

Have each member specialize in the role that they are best in to take advantage of benefits from specialization.

Your economics professor is attempting to recruit more students to major in economics. She presents data showing that economics majors develop skills valuable in private industry, government, and research. She also argues that they earn a relatively higher income than other majors. Your professor is presenting you with to major in economics. Your professor is presenting you with ___ to major in economics.

Incentives

In a market-oriented economy, individuals' economic lives are said to be 1. interrelated with many other individuals and firms 2. almost completely controlled by government regulation 3. illegal and in violation of government rules on prices and sales 4. based more on production than on consumption

Interrelated with many other individuals and firms

Consider the statements. Indicate whether each statement falls mainly under the field of microeconomics or macroeconomics. As a result of severe recession, the total output, or GDP, of a nation falls by 4%

Macroeconomics

Consider the statements. Indicate whether each statement falls mainly under the field of microeconomics or macroeconomics. Increase consumer spending causes the rate of inflation to rise.

Macroeconomics

Consider the statements. Indicate whether each statement falls mainly under the field of microeconomics or macroeconomics. Increased consumer spending causes the national unemployment rate to fall.

Macroeconomics

The owner of a snow cone trailer realizes that the demand for snow cones is low during the winter, and thus, closes shop until the temperature warms back up near summertime. Which economic principle is illustrated?

Market Efficiency

You and other college students are deciding whether to major in music or engineering. You learn that there is a shortage of engineers, making it easy for engineering graduates to find employment, while there is a glut of musicians for whom finding a job is difficult. As a result, you and many other college students decide to major in engineering. Which economic principle does this illustrate? 1. Individuals do not normally take into account the decisions of other individuals. 2. Government intervention can improve efficiency when there is a market failure 3. Specialization leads to economic efficiency 4. Changes in incentives are unlikely to change the decisions people make 5. Markets tend to move towards equilibrium as individuals respond to incentives

Markets tend to move towards equilibrium as individuals respond to incentives

Consider the statements. Indicate whether each statement falls mainly under the field of microeconomics or macroeconomics. A tax on tires increases the price of tires paid by car owners.

Microeconomics

Consider the statements. Indicate whether each statement falls mainly under the field of microeconomics or macroeconomics. Optimism about future car sales leads General Motors to hire more auto workers.

Microeconomics

Consider the statements. Indicate whether each statement falls mainly under the field of microeconomics or macroeconomics. Robotic technology reduces the demand for auto workers.

Microeconomics

Determine if the items represent an example of positive economics or normative economics. Social welfare spending in Sweden occupies too large a portion of the national budget.

Normative economics

Determine if the items represent an example of positive economics or normative economics. The richest 1% of Americans should pay more taxes than the rest of the 99%.

Normative economics

Suppose you are a freshman in college and you have not declared a major. One reason you enrolled at your respective college was the school's vibrant social life. At the same time, you want to balance your academic life because you know that your grades will matter for graduate school or job applications. You decide to forgo partying for two hours to study for an upcoming economics exam. To make that decision you weighed you ___.

Opportunity cost(s)

Determine if the items represent an example of positive economics or normative economics. A decrease in the supply of coconut will increase the price of German chocolate cake, a good which requires coconut shavings as a key ingredient.

Positive economics

Determine if the items represent an example of positive economics or normative economics. As minimum wage increases, the prices of all goods and services also tends to increase.

Positive economics

Classify each statement based on whether or not it is a primary goal of macroeconomic policy. - low unemployment - elminating political conflict - low inflation - help set the optimal price for a pound of peaches at the local grocery store - calculate how much urban residents are willing to pay to protect biodiversity - growth in the standard of living

Primary macroeconomic policy goal: - low unemployment - low inflation - growth in the standard of living Not a primary goal: - help set the optimal price for a pound of peaches at the local grocery store - calculate how much urban residents are willing to pay to protect biodiversity - elminating political conflict

You are assigned a final group project for your economics course. One member of your group is really good at finding resources for the project, one is really good at proofreading and editing, and you are really good at making a presentation. Based on this, you know that via ___ you can complete the project more efficiently than if you all did each part together.

Specialization

At a high-end restaurant, the restaurant owner has one chef at a meat station, one chef at a vegetable station, and one chef, who has an artistic eye, plate the food she is given. The result is increased service speed, and the kitchen is able to serve more customers in an evening. Which economic principle is illustrated?

Specilization

The five-dollar Burger Joint gift card that your friend gave you for your birthday expires today. You can either use the gift card to buy yourself dinner at Burger Joint, or you can stay home and eat a delicious home-cooked meal. What is the opportunity cost of eating the home-cooked meal?

The value of ingredients that go into the home-cooked meal, and the value of a five-dollar dinner at Burger Joint.

The day-to-day living conditions of modern Americans are very different from what they were in the 20th century. While doing research for an economics project, Charlie discovers that more households today, as compared to households 100 years ago, have electricity, air conditioning, and a car. Which of the following explains why modern Americans enjoy a higher standard of living than Americans 100 years ago?

There has been economic growth in our society.

Daniel has decided to open his own bakery using locally sourced ingredients and supplies. He provides income and jobs to local suppliers. He also provides his community with a place to buy delicious baked goods.

This is an example of the invisible hand.

Classify each statement as true or false by dragging it into the corresponding category. - Through specialization and trade it is possible for a country to consume a combination of goods that is beyond its original production possibilities frontier - Countries trade for goods in which they do not have a comparitive advantage, and therefore, would never trade with nations that have similar resource endowments - Wealthier countries always benefit more from international trade than poorer countries - When two countries choose to partake in international trade, it is mutually beneficial activity for both countries

True: - Through specialization and trade it is possible for a country to consume a combination of goods that is beyond its original production possibilities frontier - When two countries choose to partake in international trade, it is mutually beneficial activity for both countries False: - Countries trade for goods in which they do not have a comparitive advantage, and therefore, would never trade with nations that have similar resource endowments - Wealthier countries always benefit more from international trade than poorer countries

Which of the following questions would be studied in the area of microeconomics? - Do interest rates affect net exports? - Will an increase in government spending cause inflation? - What portion of total spending comes from households? - What determines the number of hours an individual works? - Does hosting the Olympics decrease the unemployment rate?

What determines the number of hours an individual works?

Determine if the people in the example have benefited (i.e., are winners) or have been harmed (i.e., are losers) by unexpected inflation. - Herb, who keeps his savings in an old coffee can - Third National, a bank that loaned many people money for home purchases - Karen, a retired school teacher who relies upon her fixed pension to pay for her expenses - Joy, who borrowed $40000 to pay for her college education - The United States federal government, which had almost $15 trillion in debt in 2011

Winners: - Joy, who borrowed $40000 to pay for her college education - The United States federal government, which had almost $15 trillion in debt in 2011 Losers: - Herb, who keeps his savings in an old coffee can - Third National, a bank that loaned many people money for home purchases - Karen, a retired school teacher who relies upon her fixed pension to pay for her expenses

Which deicison is least likely to be well explained by marginal analysis? 1. deciding whether to do more sit-ups at the gym 2. deciding how fast to go on the freeway 3. deciding between watching another episode of Brooklyn 99 and going to bed 4. deciding which college to attend 5. deciding whether to tale a lunch break or knock on another door as a door-to-door salesperson

deciding which college to attend

Suppose two economists are debating a tax reform bill. Both economists agree that the bill would increase the after-tax income of the top 5% of income earners; however, they disagree on whether the bill would improve the tax system. Which is the most plausible reason for why these economists disagree?

difference in values

According to the paradox of thrift, ________.

individuals saving more during recessions can actually be harmful to the short‑run economy due to decreases in consumption.

If all of the households and businesses start saving more during economic hard times, then aggregate income will fall, hurting everyone in the economy. This is known as the:

paradox of thrift

In a competitive market, all of the choices along the production possibility frontier display ________________ efficiency, while the specific choice on the frontier that society picks is the one with _______________ efficiency.

productive; allocative

Prior to ____ most economic believed that the economy _____. Had society known at the time of the selected event what it knows now about the macroeconomy, what course of action might federal policymakers have taken?

the Great Depression; was self regulating. decreased taxes, supported decreased interest rates, or both.