Econ Macro Test 1

Optimal decisions are made at the point where marginal cost equals zero. a) True b) False

(B) False

Using marginal analysis, determine how many hours should Lydia extend her nail salon's hours of operations? a) 2 hours b) 3 hours c) 4 hours d) 5 hours e) 6 hours

(A) 2 hours

Daniel Ocean pays for monthly pool maintenance for his home swimming pool. Last week the owner of the pool service informed Daniel that the cost of pool chemicals he uses has increased substantially. How is the market for pool maintenance services affected by this? a) There is a decrease in the supply of pool maintenance services. b) There is an increase in the supply of pool maintenance services. c) There is a decrease in the quantity of pool maintenance services supplied. d) There is a decrease in the demand for pool maintenance services.

(A) There is a decrease in the supply of pool maintenance services

Consider a country that produces only two goods: kayaks and coconuts. Suppose it is possible for this country to increase its production of kayaks without producing fewer coconuts. In this case, its current output combination is not technically efficient. a) True b) False

(A) True

Increasing marginal opportunity cost implies that as more and more resources are devoted to any activity, the opportunity costs of that activity will increases by progressively larger amounts. a) True b) False

(A) True

Without an increase in the supplies of factors of production, a nation can achieve economic growth through technological advancement. a) True b) False

(A) True

In economics, choices must be made because we live in a world of a) scarcity. b) unemployment. c) unlimited resources. d) greed.

(A) scarcity

The circular flow diagram shows a) the flow of expenditure and income between different sectors of the economy b) how nominal GDP is distinct from real GDP c) the effects of inflation in a simple economy d) how prices of factors of production are determined

(A) the flow of expenditure and income between different sectors of the economy

Chips and salsa are complements. If the price of salsa decreases, the supply curve for chips will shift to the right. a) True b) False

(B) False

Opportunity cost is defined as the monetary expense associated with an activity. a) True b) False

(B) False

Economists assume that individuals a) will never take actions to help others. b) are rational and respond to incentives. c) behave in unpredictable ways. d) prefer to live in a society that values fairness above all else.

(B) are rational and respond to incentives

When free trade between two countries occurs, the result is that a) one country gains because it can consume more than before and the other country loses. b) both countries could gain because producers can specialize in production. c) both countries lose because the increase in demand for each country's output causes prices to rise. d) both countries gain because each country produces all goods that its consumers demand.

(B) both countries could gain because producers can sepals in production

Suppose that when the price of raspberries increases, Lonnie increases his purchases of papayas. To Lonnie, a) raspberries and papayas are complements. b) raspberries and papayas are substitutes. c) raspberries and papayas are normal goods. d) raspberries and papayas are inferior goods.

(B) rasberries and papayas are substitutes

Which of the following is not a factor of production? a) an acre of farmland b) the manager of the local tire shop c) $1,000 in cash d) a drill press in a machine shop

(C) $1,000 in cash

If the economy is currently producing at point X what is the opportunity cost of moving to point S? a) 11 million tons of paper b) 19 million tons of steel c) 5 million tons of steel d) 7 million tons of paper

(C) 5 million tons of steel

What is the difference between an "increase in demand" and an "increase in quantity demanded"? a) There is no difference between the two terms; they both refer to a shift of the demand curve. b) An "increase in demand" is represented by a movement along a given demand curve, while an "increase in quantity demanded" is represented by a rightward shift of the demand curve. c) An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve. d) There is no difference between the two terms; they both refer to a movement downward along a given demand curve.

(C) An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.

What does the expression "ceteris paribus" mean in economics? a) Correlation does not equal causation. b) Prior to an event occurring. c) Holding everything else constant. d) Where marginal cost = marginal benefit.

(C) Holding everything else constant

The figure above represents the market for canvas tote bags. Assume that the market price is $15. Which of the following statement is true? a) There will be a shortage that will cause the price to increase; demand will then decrease and supply will increase until the price equals $25. b) There is a surplus that will cause the price to decrease; quantity supplied will then increase and quantity demanded will decrease until the price equals $25. c) There is a shortage that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals $25. d) There is a shortage that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price exceeds $25.

(C) There is a shortage that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals $25

Which of the following is a macroeconomics question? a) What factors determine the price of carrots? b) What determines the wage of auto workers? c) What determines the inflation rate? d) What determines the production of DVDs?

(C) What determines the inflation rate?

If a decrease in income leads to a decrease in the demand for peanut butter, then peanut butter is a) a necessity. b) a complement. c) a normal good. d) an inferior good.

(C) a normal good

What is George's opportunity cost of weeding a garden? a) one fourth of a garden weeded b) five gardens weeded c) four lawns mowed d) one fourth of a lawn mowed

(C) four lawn mowed

DeShawn's Detailing is a service that details cars at the customers' homes or places of work. DeShawn's cost for a basic detailing package is $40, and he charges $75 for this service. For a total price of $90, DeShawn will also detail the car's engine, a service that adds an additional $20 to his total cost of providing the package. Should DeShawn continue to offer the engine detailing service? a) yes, but only if he raises the price of the basic detailing package b) More information is needed for DeShawn to make this decision. c) no, his marginal benefit is less than his marginal cost d) yes, he still makes a profit by selling the engine detailing service with the basic detailing package

(C) no, his marginal benefit is less than his marginal cost

Tom just sold his 30 acres of farmland to Amazon to build a new warehouse. In this scenario, ________ is the demander in the factor market and __________ is the supplier. a) Nobody; Tom b) Tom; Nobody c) Tom; Amazon d) Amazon; Tom

(D) Amazon; Tom

Which of the following statements is true? a) Sue has an absolute advantage in both tasks. b) Sue has an absolute advantage in lawn mowing and George in garden weeding. c) Sue has an absolute advantage in garden weeding and George in lawn mowing. d) George has an absolute advantage in both tasks.

(D) George has an absolute advantage in both tasks

Which of the following statements is true? a) George has a comparative advantage in both tasks. b) Sue has a comparative advantage in garden weeding and George in lawn mowing. c) Sue has a comparative advantage in both tasks. d) Sue has a comparative advantage in lawn mowing and George in garden weeding.

(D) Sue has a comparative advantage in lawn mowing and George in garden weeding

A movement along the demand curve for tennis rackets would be caused by a) a change in population b) a change in consumer income. c) a change in the price of tennis balls. d) a change in the price of tennis rackets.

(D) a change in the price of tennis rackets

The term ________ in economics refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade. a) collective b) trade-off c) cooperative d) market

(D) market

If, in the market for oranges, the supply has decreased then a) equilibrium price will increase and equilibrium quantity will decrease. b) equilibrium price will decrease and equilibrium quantity will decrease. c) equilibrium price will increase and equilibrium quantity will increase. d) equilibrium price will decrease and equilibrium quantity will increase.

A) Equilibrium price will increase and equilibrium quantity will decrease

Which of the following statements is true? a) Every individual, no matter how rich or poor, is faced with making trade-offs. b) Economics is a social science that studies the trade-offs we are forced to make because resources are unlimited. c) Trade-offs do not apply when the consumers purchase a product for which there is excess supply, such as a stock clearance sale. d) Anytime you have to decide which action to take you are experiencing economic equity.

A) Every individual, no matter rich or poor, is faced with making trade-offs

Economic growth is represented by an outward shift of a production possibilities curve. a) True b) False

A) true

It is not possible to have a comparative advantage in producing a good or service without having an absolute advantage. a) True b) False

B) False

The Law of Demand states that, when the price of a good increases, quantity demanded of that good will also increase. a) True b) False

B) False

Economists reason that the optimal decision is to continue any activity up to the point where the a) marginal cost is zero. b) marginal benefit equals the marginal cost. c) marginal benefit is zero. d) marginal benefit is greater than the marginal cost.

B) Marginal benefit equals marginal cost

Assume that the graphs in this figure represent the demand and supply curves for automobiles. Which panel best describes what happens in this market when the price of steel rises? a) Panel (a) b) Panel (b) c) Panel (c) d) Panel (d) e) None of the above. Which

B) Panel (b)

Everything has an opportunity cost, except those things we are able to consume without paying money. a) True b) False

B) false

Assume that the graphs in this figure represent the demand and supply curves for butter, and that butter and margarine are substitutes. What panel describes what happens in this market when the price of margarine rises? a) Panel (a) b) Panel (b) c) Panel (c) d) Panel (d) e) None of the above.

C) Panel (c)

Which of the following would cause the equilibrium price and quantity of white bread to increase? a) an increase in the price of butter, a complement for white bread b) a decrease in the price of flour c) an increase in the price of rye bread, a substitute for white bread d) an increase in the price of flour

C) an increase in the price of rye bread, a substitute for white bread

The attainable production points on a production possibility curve are a) the points along the production possibilities frontier. b) the horizontal and vertical intercepts. c) the points along and inside the production possibility frontier. d) the points outside the area enclosed by the production possibilities frontier.

C) the points along and inside the production possibility frontier

Assume that the graphs in this figure represent the demand and supply curves for do-it-yourself plumbing supplies, an inferior good. Which panel describes what happens in this market as a result of an increase in income? a) Panel (a) b) Panel (b) c) Panel (c) d) Panel (d) e) None of the above.

D) Panel (d)

Assume that the graphs in this figure represent the demand and supply curves for McAlister's Iced Tea. What panel describes what happens in this market when the price of McAlister's Iced Tea falls? a) Panel (a) b) Panel (b) c) Panel (c) d) Panel (d) e) None of the above.

E) None of the above

Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets, and that helmets and bicycles are complements. Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles? a) Panel (a) b) Panel (b) c) Panel (c) d) Panel (d) e) None of the above.

Panel (d)