Econ Exam 1 Practice questions

Suppose a labor market is described by the demand equation, Qd = 60 - 2w, and the supply equation, Qs = -10 + w, where Qd is the quantity demanded of labor, Qs is the quantity supplied of labor, and w is the wage (in dollars). If the government institutes a minimum wage of $25, how many workers will be willing to work in this market?

15,000,000

Which of the following is a scaled number? -government budget deficit as a percentage of GDP -total tax revenues in the economy -the country's national debt -the sum of all incomes earned in the economy

government budget deficit as a percentage of GDP

You have an absolute advantage in producing a product if you:

Can produce the product using the fewest inputs.

What is the difference between spending from a microeconomic standpoint versus spending from a macroeconomic standpoint?

In microeconomics, spending refers to spending by you, or your family, or your company, whereas in macroeconomics, spending refers to the spending by all consumers, all businesses, and the government in the economy.

Which of the following is a social insurance program in the United States? -housing assistance -Medicaid -Social Security -earned income tax credit

Social Security

Which of the following is a negative result of redistributing income toward equality? -The poor have a higher standard of living. -Government expenses fall, and tax revenues rise. -Work incentives are reduced. -Average income rises.

Work incentives are reduced.

A decreasing returns to scale production function is one where increasing all inputs by a certain proportion leads to output rising by:

a smaller proportion.

Argentina and Chile both produce copper and timber. If Chile produces copper much more efficiently than Argentina and timber slightly more efficiently than Argentina, _____ can benefit from trading copper and timber with each other.

both countries

To get maximum output, you should allocate each task to the person who:

can do the task with the lowest opportunity cost.

If a bakery buys a second oven, hires a second baker, buys double the number of ingredients, doubles the size of the bakery, and then produces double the number of cakes, then the bakery is experiencing:

constant returns to scale.

Which of the following encourages the development of new ideas and inventions? -government control of resources -negative economic growth -patents -capital accumulation

patents

In the field of economics, the observation that the living standard of a household is more stable than its income, because people think in terms of their long-term earnings as they spend, is known as:

permanent income versus current income.

Which of the following is NOT a cost of the redistribution of income? -reduced marginal benefits to extra income -reduced incentive to work and earn -administrative costs -tax avoidance and fraud

reduced marginal benefits to extra income

A constant returns to scale production function means that if all inputs are increased by 75%, this should lead to output:

rising by 75%

A tariff is a:

tax on imported products.

An underemployed person is one who is:

working but whose skills are not fully utilized.

Consider the data shown in the table. Assume that the economy produces only frozen fish. What is the real GDP for last year using this year as the base year? Tons of frozen fish sold. Actual Price Last Year: 100. $1,800 This Year: 105. $1,850

$185,000

The table below shows data for Central African Republic (CAR). What was this country's real GDP per person in 2010? GDP: $2,140,503,193 Population: 4,386,768

$487.95

The aggregate production function Y = f(L, H, K) shows that economic growth can occur if: (i) human capital increases. (ii) labor productivity falls. (iii) the capital stock in the country depreciates. (iv) the depreciation rate increases.

(i) human capital increases.

The aggregate production function Y = f(L, H, K) shows that economic growth can occur if: (i) more labor is employed. (ii) human capital is reduced. (iii) the dependency ratio rises. (iv) the capital stock stays constant.

(i) more labor is employed.

Based on the following statistics, how much are net exports? Consumption: $13.312 trillion Investment: $3.371 trillion Gov Spending: $3.412 trillion Exports: $2.357 trillion Imports: $2.932 trillion

-$0.575 trillion

In 2010, Canada's GDP was approximately $1,357 billion, and its population was about 34.12 million. What was Canada's approximate GDP per person in 2010?

$39,770

In 2017, the total population of Africa was estimated to be about 1,250,000,000 people. This number, in billions, is:

1.25

In May 2019, there were approximately 68,980,000 people in Japan's labor force. About 1,650,000 people were unemployed. What was the unemployment rate?

2.4%

Refer to the table below, which shows data for the United Arab Emirates (UAE). Based only on the data in this table, in which year(s) did the UAE experience an increase in the standard of living? Year: GDP per person: 2007. $47,283.90 2008. $42,456.79 2009 $36,024.06 2010 $33,893.30 2011 $34,634.86 2012 $35,416.89

2011 and 2012

In May 2019, Texas reported a civilian labor force of 14,012,711. The number of employed people was 13,516,387. What was the unemployment rate?

3.5%

Which of the following benefits could a company gain from using internal markets? -Better allocation of its resources and more accurate predictions. -Greater market power and reduced costs of production. -Access to more input markets and greater levels of competition. -Increased profits and reduced competition.

Better allocation of its resources and more accurate predictions.

You purchase a new car (produced this year) for $38,000. After six months, you sell the car for $31,500. How much does GDP rise because of these two transactions?

GDP rises by $38,000.

Which of the following is NOT one of the four key reasons that the government provides in-kind benefits rather than cash benefits? -In-kind benefits give the recipient the greatest flexibility to choose what matters most. -Giving goods rather than cash prevents recipients from making bad choices. -Taxpayers may care more about reducing homelessness or hunger than what will make the recipient happiest. -An in-kind benefit like child care is a complement to work, which provides some incentive for recipients to provide for themselves rather than rely on the safety net.

In-kind benefits give the recipient the greatest flexibility to choose what matters most.

You have four friends. Which of your friends can be described as "cyclically unemployed"? -Arthur, who quit his job to look for a better job -Martha, who is a full-time stay-at-home parent -Keele, who lost her job after her company lost a lot of customers during an economic downturn -Regan, who is in a nursing home

Keele, who lost her job after her company lost a lot of customers during an economic downturn

During the Great Recession, the United States Congress increased the length of time that unemployment benefits could be received from 52 weeks to 99 weeks. This change caused:

an increase in the costs for the government.

Managers can harness market forces by setting up internal markets, which:

are organized within a company to buy and sell scarce resources.

Russia and Kazakhstan both produce horses and oil. If Kazakhstan is much more efficient than Russia in the production of horses and slightly more efficient than Russia in the production of oil, _____ can benefit from trading horses and oil with each other.

both countries

The moral of the story of the Solow growth model is that:

capital accumulation alone cannot lead to sustainable economic growth.

Property rights refer to:

control over a tangible or intangible resource.

If you need to make a decision and all the information needed to make a good decision is not available, then you:

have a knowledge problem.

Countries benefit from trade by exporting goods in which their opportunity costs are relatively _____ and importing goods in which their opportunity costs are relatively _____.

low; high

An income level below which a family is defined to be in poverty is known as the:

poverty line.

Government social insurance programs are funded by:

taxes and fees that are assessed on workers and employers specifically for each program

Along the same aggregate production function, the level of _____ is the same.

technology

Technological advancement is NOT represented by which of the following? -the invention of the light bulb -the adoption of an existing technology by new firms -the creation of new apps designed to enhance efficiency and reduce wastage in production lines -the invention of robotic meal preparation

the adoption of an existing technology by new firms

Which of the following is NOT a trade cost? -the cost of producing a good -the hassle of working across language barriers -adapting to different ways of doing business -dealing with foreign laws

the cost of producing a good

Which of the following is an example of a trade cost associated with a U.S. citizen importing a sweater produced in India? -the cost of the labor used in producing the sweater -the cost of the wool used in producing the sweater -the cost of the tariff on imported sweaters from India -the final price of the sweater

the cost of the tariff on imported sweaters from India

If the frictional rate of unemployment is 1.45%, the structural rate of unemployment is 2.3%, and the total unemployment rate is 6%, then we can conclude that:

the equilibrium rate of unemployment is 3.75%.

Which of the following is a mean-tested social safety net program in the United States? -earned income tax credit -worker's compensation -Social Security -Medicare

earned income tax credit

The higher the minimum wage, as compared to the equilibrium wage, the:

higher the structural unemployment rate.

Use the data in the table to answer the question. Maria: 3 hours to mow lawn. 1 hour to weed flower beds. Juanita: 4 hours to mow lawn. 2 hours to weed flower beds Who has a comparative advantage in mowing lawns?

Juanita because she has a lower opportunity cost

The main role of markets is:

Reallocating resources to better uses.

Which of the following countries enjoyed significant catch-up economic growth in the second half of the twentieth century? -Argentina -Spain -South Korea -United States

South Korea

Why would a company set up internal markets?

To solve the knowledge problem.

Henry Ford's $5 per day wage is an example of:

an efficiency wage

A minimum wage that is above the equilibrium wage is:

an example of a price floor.

You have a comparative advantage if you can complete a task:

at a lower opportunity cost than anyone else.

When people focus on their comparative advantage and then trade for other things, they:

improve their standard of living or increase their leisure time.

A prediction market is a market where:

payoffs are linked to whether an uncertain event occurs.

An import is a good or service:

purchased from a foreign seller.

Internal markets, which are markets that managers set up within their organization, are:

set up to allocate resources of a company more efficiently, often not using real money.

An export is a good or service:

sold to a foreign buyer.

Unemployment rate

unemployed/labor force x 100

Based on the following statistics, how much is consumption? Total Spending: $11.62 trillion Investment: $2.56 trillion Gov Spending: $2.95 trillion Exports: $1.80 trillion Imports: $2.18 trillion

$6.49 trillion

Refer to the diagram of the circular flow of income. The key lessons from this diagram are that: (i) all flows of resources are matched by flows of money. (ii) the market value of total output must be equal to total spending. (iii) total spending must equal total income. (iv) all inputs are provided by businesses.

(i) all flows of resources are matched by flows of money. (ii) the market value of total output must be equal to total spending. (iii) total spending must equal total income.

Refer to the table below, which shows data for the United Arab Emirates (UAE). What was the economic growth rate in UAE in 2010? Year: GDP per person: 2007. $47,283.90 2008. $42,456.79 2009 $36,024.06 2010 $33,893.30 2011 $34,634.86 2012 $35,416.89

-5.91%

According to diminishing marginal utility, which of the following people would gain the lowest marginal benefit from an extra $100 of income? -Chin, a single person with an annual household income of $20,000 -Devin, head of a three-person household with an annual household income of $120,000 -Ariana, an actress with an annual household income of $1,500,000 -Shawna, a single mother of three young children with an annual household income of $19,000

Ariana, an actress with an annual household income of $1,500,000

Which of the following is NOT one of the three questions that should guide discussions and policies related to the redistribution of income that were presented in the chapter? -How long will it take to redistribute income? -How large are the costs of redistribution of income? -How large are the benefits of redistributing income to those who most benefit from it? -How fair is this redistribution?

How long will it take to redistribute income?

Specialization will increase output when it is based on:

comparative advantage.

Which of the following is an example of transfer payments? -government loans -unemployment benefits -interest earned on savings in banks -military salaries

unemployment benefits

Which of the following would lead to a slowdown in economic growth? -an increase in capital accumulation coupled with technological advancement -a reduction in the birth rate coupled with an increase in the retirement rate of a population -an increase in innovation in the economy -the institution of a savings tax credit

a reduction in the birth rate coupled with an increase in the retirement rate of a population

As prices _____, they provide useful business intelligence.

aggregate information

Which of the following is consistent with the view that "fairness" means equality of outcomes? -equal incomes -equal access to education -equal productivity that yields equal pay -nondiscrimination in hiring processes

equal incomes

In 2018, the unemployment rate in the United States went as low as 3.7%, as measured by the Bureau of Labor Statistics. This historically low level of unemployment occurred simultaneously with a large trade deficit. This provides evidence against which of the following arguments against international trade? -International trade may lead to job loss. -International trade may hurt national security. -International trade may promote unfair competition. -International trade may hurt infant industries.

International trade may lead to job loss

The government passes a new investment tax credit initiative. Which input in the production function changes, and what is the effect on economic growth in the country?

The capital stock increases, and economic growth is positively affected.

Below is U.S. economic data for 2018. What was total spending? Consumption: $13.999 trillion Investment: $3.628 trillion Gov Spending: $3.591 trillion Exports: $2.510 trillion Imports: $3.148 trillion

$20.58 trillion

Consider the data shown in the table. Assume that the economy produces only textbooks. What is the nominal GDP for last year? Textbooks Sold. Actual Price Last Year: 5,000. $50 This Year: 5,250. $55

$250,000

In order to be considered unemployed, a person must: (i) be part of the working-age population. (ii) be actively looking for work. (iii) not have been self-employed. (iv) must be noninstitutionalized.

(i) be part of the working-age population. (ii) be actively looking for work. (iv) must be noninstitutionalized.

Which of the following is (are) included in investment? (i) military spending (ii) the purchase of an aircraft by a domestic airline (iii) the purchase of $45,000 worth of bonds (iv) the purchase of $32,000 worth of stock(v) social security payments (vi) the construction of a highway by the federal government

(ii) the purchase of an aircraft by a domestic airline

Consider the data shown in the table. Assume that the economy produces only textbooks. What is the growth rate of real GDP between the two years using last year as the base year? Textbooks Sold. Actual Price Last Year: 5,000. $50 This Year: 5,250. $55

5%

Which of the following taxes is regressive? Raj pays a 10% tax on the first $10,000 he earns plus a _____ tax on any additional income.

5%

Assume that a country with total income of $160,000 has a population of 10 households whose incomes are listed in Table: Income of Households. Household. Household Income % of total income 1 $2,000. 1% 2. $2,000. 1% 3 $2,000. 1% 4. $4,000. 3% 5. $5,000. 3% 6. $5,000. 3% 7. $10,000. 6% 8. $20,000. 13% 9. $40,000. 25% 10. $70,000. 44%

69%

Which of the following is NOT true of the incidence of poverty in the United States? -Most people in poverty will spend much of their lives in poverty, but most -people will spend some time in poverty during their lifetime. -People of color are more likely than others to experience poverty. -Elderly people are more likely than other age groups to be in poverty. -Children and single moms are most likely to be in poverty.

Elderly people are more likely than other age groups to be in poverty.

Suppose that one hour of labor in Singapore can produce 20 computers or 40 cellphones. Further, suppose that one hour of labor in Ireland can produce 10 computers or 15 cellphones. _____ has a comparative advantage in the production of computers. _____ has a comparative advantage in the production of cellphones.

Ireland;Singapore

What is the difference between microeconomics and macroeconomics?

Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole.

Dale is a stay-at-home-parent whose typical day consists of getting the kids ready for school, doing the laundry, cooking three meals, and cleaning the house. How are Dale's home activities counted in GDP?

They are not counted.

The aggregate production function is represented as:

Y = f(L, H, K)

Which tax is regressive? Arturo pays an 8% tax on the first $9,000 he earns plus _____ tax on any additional income.

a 5%

Southeast Asian countries experience high temperatures and high humidity during the monsoon seasons. This makes working conditions difficult. Because air conditioners are expensive and consume a lot of electricity, an alternative air cooler called an Eco-cooler was invented. This device does not use electricity, is made from readily available soda bottles, and works by funneling air into a room. This scenario is an example of:

a technological innovation that can increase labor productivity and thus increase economic growth.

Which of the following would lead to a slowdown in economic growth? -reduced inefficiency in production -an increase in human capital -an increase in the dependency ratio -an increase in capital accumulation in the economy

an increase in the dependency ratio

If Bishan wants to capitalize on comparative advantage in his life, then he should:

do more of what he is relatively good at and then trade for other things.

When the definition of poverty focuses on relative poverty, a person is in poverty if the household income is:

in the bottom 10% of household incomes in the nation.

In the United States, the poverty line income:

is adjusted based on family size.

The equilibrium unemployment rate is also known as the _____ unemployment rate.

long-run

The cash-assistance, goods, and services provided by the government to better the lives of those at the bottom of the income distribution are known as the:

social safety net

Which of the following is LEAST likely to be traded internationally? -sports arenas -sporting equipment -sports broadcasts -sports trading cards

sports arenas

Which of the following is an example of a durable good? -your haircut -fresh flowers from the florist -a soft drink -your new car

your new car