ECON 252

For a trade to take place, a buyer's willingness to pay must be a) higher than the seller's willingness to accept b) equal to the seller's willingness to accept c) lower than the seller's willingness to accept d) A and B only e) All of the above

d) A and B only

Policy decisions made by the government are analyzed by a) only microeconomics b) neither microeconomics nor macroeconomics c) only macroeconomics d) both microeconomics and macroeconomics

d) both microeconomics and macroeconomics

In the Law of Demand if the price of a good increases, what happens to the quantity demanded?

Decreases

What happens to the quantity demanded of gasoline if the price of gasoline increases

Decreases

How would you evaluate options and choose an optimal one?

Do cost-benefit analysis to compare the alternatives

When you are trying to save money, what matters?

Dollars, not percentages

Identify the cause and effect: Surge in cocoa prices; Pest attack on the cocoa crop

Surge in cocoa prices (EFFECT) Pest attack on the cocoa crop (CAUSE)

For a market to be in equilibrium, three conditions must hold. The amount produced by sellers must be ____________ to the amount purchased by buyers

The amount produced by sellers must be EQUAL to the amount purchased by buyers

For a market to be in equilibrium, three conditions must hold. The costs of making a product must be _____________ the final price at which the product sells.

The costs of making a product must be LESS THAN the final price at which the product sells.

What is one of the main flaws of economists' attempts to measure changes in living?

These measures don't account for the quality of things we consume

Microeconomics studies...

a small piece of the overall economy

Which of the following will be considered a final good in the calculation of U.S. GDP? (may be more than one) a) School supplies purchased by a local school board b) Canned foods purchased by a grocery store c) Foot massages at spas in California d) Processors manufactured in California for Apple's new range of laptops

a) School supplies purchased by a local school board c) Foot massages at spas in California

Which of the following is NOT one of the four major factors that shifts the supply curve when it changes? a) The price of the good itself b) Technology used in production c) Sellers' beliefs about the future d) The number of sellers

a) The price of the good itself

Which of the following are NOT included in GDP but probably should be? a) Transactions in the underground economy b) The value of intermediate goods used in the assembly of final products c) Financial asset transactions d) The value of leisure

a) Transactions in the underground economy d) The value of leisure

If the level of aggregate expenditure was $16.8 trillion in 2013, the level of aggregate income in the economy during 2013 was a) also $16.8 trillion because of the identity between aggregate expenditure and income b) more than $16.8 trillion because transfers (entitlements) allow income to exceed aggregate expenditure c) less than $16.8 trillion because the United States imports more than it exports d) less than $16.8 trillion because taxes will reduce income below aggregate expenditure

a) also $16.8 trillion because of the identity between aggregate expenditure and income

Equilibrium describes a situation where a)no one would benefit from changing his or her behavior b) economists use data to analyze what is happening in the world c) people weigh costs and benefits when making a decision

a) no one would benefit from changing his or her behavior

What is meant by randomization in the context of an economic experiment? a) Group numbers are arranged in a nonsequential order b) Subjects are assigned to control and test groups by noneconomic factors such as race c) Subjects are assigned by chance, rather than by choice, to a group d) Economic experiments are not arranged in a logical sequence

c) Subjects are assigned by chance, rather than by choice, to a group

A firm's value added refers to the dollar value of a) a firm's sales revenue minus the firm's profits b) the intermediate products a firm buys from other producers c) a firm's sales revenue minus the firm's purchases of intermediate products from other firms d) a firm's total sales revenue

c) a firm's sales revenue minus the firm's purchases of intermediate products from other firms

The market value of the final goods and services produced within the borders of a country a) net national product (NNP) b) gross national product (GNP) c) gross domestic product (GDP) d) gross national income (GNI)

c) gross domestic product (GDP)

Optimization describes a situation where a)no one would benefit from changing his or her behavior b) economists use data to analyze what is happening in the world c) people weigh costs and benefits when making a decision

c) people weigh costs and benefits when making a decision

A budget constraint represents a) the maximum amount of spending the federal government is allowed to do by law b) any actions taken by government officials to limit the amount of government spending c) the bundles of goods or activities that a consumer can choose given her limited budget d) the total amount of income a family earns from all sources

c) the bundles of goods or activities that a consumer can choose given her limited budget

In a perfectly competitive market Sellers...

cannot charge more than the market price

In a perfectly competitive market Buyers...

cannot pay less than the market price

What is the concept of causation?

how one event can bring about change in another

In a perfectly competitive market, if one seller chooses to charge a price for its good that is slightly higher than the market price, then it will...

lose all or almost all of its customers

When does causation occur?

when there's a logical cause-and-effect relationship

When you make your decision about what activity to choose, what two costs should you consider?

1) Monetary Cost 2) Opportunity Cost

What are three principles of economics?

1) Optimization 2) Equilibrium 3) Empricism

For a market to be in equilibrium, three conditions must hold. Buyers must place a value on the uses of the product that is _____________ the cost of buying the product

Buyers must place a value on the uses of the product that is GREATER THAN the cost of buying the product

Causation or Correlation: More economic growth and higher employment levels

Causation

Causation or Correlation: More police officers and lower crime rates

Causation

What is the category of expenditure that accounts for the highest share of GDP in the United States?

Consumption

Causation or Correlation: The length of women's skirts and stock market performance

Correlation

When are items classified as final goods in the chain of production?

End product

True or False: An increase in price will cause a shift of the supply curve.

False

True or False: If an economic experiment works in a randomized controlled trial setting, its policy findings are readily applicable to real life scenarios:

False

True or False: When you have a randomized controlled trial in economics, the only difference between the two groups is the treatment because both groups have been randomly assigned.

False

What is not a well-known problem of using GDP as a measure of welfare?

GDP doesn't take into account intermediate products

The Law of Supply states that as the price of a good increases, what happens to the quantity supplied?

Increases

Who established the modern definition of GDP as the sum of private consumption and investment and government spending?

John Maynard Keynes

Identify the cause and effect: Lower infant mortality; improvement in nutrition

Lower infant mortality (EFFECT) Improvement in nutrition (CAUSE)

What kind of relationship occurs if GDP average shrinks and Price of Gasoline increases?

Negative correlation

Behavioral economics suggests that consumer are often frugal in the wrong way because they a) tend to focus on the percentage rather than the amount they serve b) don't spend enough time shopping around for a good deal c) spend too much time shopping around for a good deal d) tend to focus on the amount rather than the percentage they save

a) tend to focus on the percentage rather than the amount they serve

Which of the following is NOT an example of causation? a) Graduating college will lead to being smarter b) Washing your car will lead to raining that day c) Smoking cigarettes will lead to lung cancer d) All of the above are examples of causation

b) Washing your car will lead to raining that day

Empiricism describes a situation where a)no one would benefit from changing his or her behavior b) economists use data to analyze what is happening in the world c) people weigh costs and benefits when making a decision

b) economists use data to analyze what is happening in the world

The Government component of aggregate expenditure includes which of the following? (may be more than one) a) transfer payments b) military hardware purchases c) interest on the national debt d) salaries to teachers, firefighters, and police officers e) infrastructure, such as highways and bridges

b) military hardware purchases d) salaries to teachers, firefighters, and police officers e) infrastructure, such as highways and bridges

In equilibrium, everyone a) faces a trade-off, such that the individual must give up one thing to get something else. b) simultaneously optimizes, so that nobody benefits by changing his or her own behavior c) maximizes his or her benefits, so that opportunity costs and trade-offs are eliminated d) benefits by changing his or her own behavior

b) simultaneously optimizes, so that nobody benefits by changing his or her own behavior

Macroeconomics studies...

the economy as a whole

When making an optimal choice, the goal is to choose the option that offers...

the greatest net benefits