Econ Midterm 1

An economy is the set of social arrangements that answers three fundamental questions: 1) What is produced? 2) How is it produced? 3) ___________________ A. Why is it produced? B. When is it produced? C. For whom is it produced? D. Where is it produced?

C

At an annual growth rate of 3.5%, real GDP will double in about A. 25 years B. 20 years C. 15 years D. 10 years

b

Use the list below to answer the following questions: 1. Improvements in technology 2. Increases in the supply (stock) of capital goods 3. Purchases of expanding output 4. Obtaining the optimal combination of goods, each at least-cost production 5. Increases in the quantity and quality of natural resources 6. Increases in the quantity and quality of human resources Which set of items in the above list would shift an economy's production possibilities curve outward? A. 2, 5, and 6 only B. 2, 4, 5, and 6 only C. 1, 2, 5, and 6 only D. 1, 3, 4 only

c

Which is an example of a market failure? A. There are not enough tickets available to concerts of extremely popular performers B. The price of medical care has risen dramatically as a result of the introduction of sophisticated equipment and techniques C. Polio shots and chest x-rays provide widespread benefits to the community as a whole as well as to the individuals who get them D. Extensive decreases in the prices of electronic equipment resulted in large numbers of bankruptcies in the computer industry

c

What matters most in determining the efficient distribution of production over the world is: A. absolute advantage. B. efficiency. C. the allocation of resources. D. comparative advantage.

d

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers. A. market-oriented economy B. macroeconomy C. microeconomy D. command economy

A

What is meant by fiscal policy? A. Economic policies that involve government spending and taxation. B. The study of the production, distribution, and consumption of goods and services. C. The payment in addition to the original investment from those who have received financial capital to those who provided it. D. The trend in which buying and selling in markets have increasingly crossed national borders.

A

Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization? A. division of labour B. international trade C. economies of scale D. command economy

B

In ________________________, individuals or firms who save money and make financial investments are suppliers of financial capital. A. the labor market B. the financial capital market C. households D. business

B

Intra-industry trade between similar trading partners allows the gains from ______________________ that arise when firms and workers specialize in the production of a certain product. A. comparative advantage B. learning and innovation C. creating the value chain D. relative advantage

B

Which of the following refers to an economy in which most economic decisions are made by buyers and sellers, who may be individuals or firms? A. Economies of scale B. Market-oriented economy C. Command economy D. Financial capital market

B

The basic difference between macroeconomics and microeconomics is: A. microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. B. microeconomics concentrates on the behaviour of individual consumers while macroeconomics focuses on the behaviour of firms. C. microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. D. microeconomics explores the causes of inflation while macroeconomics focuses on the #FBNOK: P 6

C

What is meant by globalization? A. An economy in which most economic decisions are made by buyers and sellers, who may be individuals or firms. B. The market in which households sell their labor as workers to businesses or other employers. C. The trend in which buying and selling in markets have increasingly crossed national borders. D. A market in which firms are sellers of what they produce and households are buyers.

C

What term is used to describe dividing the work required to produce a good or service into tasks performed by different workers? A. Goods and services market B. Monetary policy C. Division of labor D. Globalization

C

Which of the following characteristics relate to specialization? A. The market in which households sell their labor as workers to businesses or other employers. B. Dividing the work required to produce a good or service into tasks performed by different workers. C. When workers or firms focus on particular tasks in the overall production process for which they are well-suited. D. Goods and services produced abroad and sold domestically.

C

World exports of goods and services totaled over __________ in 2015. A. $200 billion dollars B. $2 trillion dollars C. $20 trillion dollars D. $200 trillion dollars

C

Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will: A. decrease, quantity demanded will decrease, and quantity supplied will increase. B. decrease and quantity demanded and quantity supplied will both decrease. C. increase, quantity demanded will increase, and quantity supplied will decrease. D. increase, quantity demanded will decrease, and quantity supplied will increase.

D

What name is given to policy that involves altering the quantity of money and thus affecting the level of interest rates and the extent of borrowing? A. Economies of scale B. Fiscal policy C. Specialization D. Monetary policy

D

Which of the following characteristics relate to black market? A. A simplified representation of an object or situation that includes enough of the key features to be useful. B. Policy that involves altering the quantity of money and thus affecting the level of interest rates and the extent of borrowing. C. An institution that brings together buyers and sellers of goods or services. D. An illegal market that breaks government rules on prices or sales.

D

Which of the following characteristics relate to rate of return? A. When the average cost of producing each individual unit declines as total output increases. B. Dividing the work required to produce a good or service into tasks performed by different workers. C. The market in which those who save money provide financial capital and receive a rate of return from those who wish to raise money and pay a rate of return. D. The payment in addition to the original investment from those who have received financial capital to those who provided it.

D

Which of the following is true? A. A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage. B. A nation can have a comparative advantage in the production of every good, but not an absolute advantage. C. A nation cannot have an absolute advantage in the production of every good. D. A nation cannot have a comparative advantage in the production of every good.

D

What term is used to describe goods and services produced abroad and sold domestically? Imports

Imports

A

Refer to the budget line shown in the diagram above. If the consumer's money income is $20, which of the following combinations of goods is unattainable? A. A. 4 units of C, and 6 units of D. B. D. 2 units of C, and 6 units of D. C. C. 1 unit of C, and 8 units of D. D. B. 5 units of C, and no units of D.

Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. The opportunity cost of one bushel of wheat in USA is A. 1/4 yard of textiles. B. 1/3 yards of textiles. C. 4 yards of textiles. D. 3 yards of textiles.

a

Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. Which of the following trade terms would the two producers be most likely to find acceptable? A. 2 yards of textiles per bushel of wheat B. 5 yards of textiles per bushel of wheat C. 12 yards of textiles per bushel of wheat D. there are no terms of trade that would be acceptable to these two producers

a

Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $700. Donita sells the dresses for $1200 to kids attending the prom. The total contribution to GDP of this series of transactions is: A. $1200 B. $500 C. $2300 D. $1100

a

Government Purchases = $15 Consumption = $90 Gross Investment = $20 Consumption of fixed capital = $5 Exports = $8 Imports = $12 Refer to the above data. NDP is: A. $116 B. $121 C. $125 D. $150

a

If a nation's real GDP increases from 100 billion to 106 billion and its population jumps from 200 million to 212 million, its real GDP per capita will: A. remain constant. B. fall by 6 percent. C. rise by 6 percent. D. fall by 12 percent.

a

If nominal GDP in some year is $280 and real GDP is $160, then the GDP price index for that year is: A. 175. B. 57. C. 160. D. 280.

a

If the demand for steak (a normal good) shifts to the left, the most likely reason is that: A. consumer incomes have fallen. B. cattle production has declined. C. the price of steak has risen. D. the price of cattle feed has gone up.

a

On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50.? What will the likely effect of this policy be? A. Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate. B. Low income workers will be better able to survive the recession at the new, higher wage rate. C. More people will be hired at the higher wage rate offsetting the effects of the recession. D. The higher wage will increase the supply of labor offsetting the effects of the recession.

a

Splitting up the value chain is when many of the different stages of producing a good happen in different geographic locations. A. True B. False

a

The law of supply functions in labor markets; that is, a higher ________ for labor leads to a higher quantity of labor supplied. A. price B. demand C. supply D. quantity

a

With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will: A. increase equilibrium price and quantity if the product is a normal good. B. decrease equilibrium price and quantity if the product is a normal good. C. have no effect on equilibrium price and quantity. D. reduce the quantity demanded, but not shift the demand curve.

a

A licensing requirement, or unreasonable standard pertaining to the product quality and safety for a product that is imported into a country, are examples of: A. Protective tariffs B. Nontariff barriers C. Voluntary export restrictions D. Quotas on imported products

b

A recent study found that an increase in the Federal tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that: A. beer and marijuana are substitute goods. B. beer and marijuana are complementary goods. C. beer is an inferior good. D. marijuana is an inferior good.

b

Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. From the data, the USA A. has an absolute advantage over India in the production of textiles. B. has an absolute advantage over India in the production of wheat. C. has a comparative advantage in the production of textiles. D. should export textiles to India.

b

As the technology complement for high-skill labor becomes cheaper, the demand curve for high-skill labor will: A. remain unchanged B. shift to the right C. shift to the left D. slope upward

b

Assume a drought in the Great Plains reduces the supply of wheat. Noting that wheat is a basic ingredient in the production of bread and potatoes are a consumer substitute for bread, we would expect the price of wheat to: A. rise, the supply of bread to increase, and the demand for potatoes to increase. B. rise, the supply of bread to decrease, and the demand for potatoes to increase. C. rise, the supply of bread to decrease, and the demand for potatoes to decrease. D. fall, the supply of bread to increase, and the demand for potatoes to increase.

b

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by: A. an increase in the price of coffee. B. a change in buyer tastes. C. an increase in the cost of making donuts. D. consumers expecting donut prices to fall.

b

In the second quarter (3-month period) of 2001, U.S. nominal GDP increased but U.S. real GDP declined. We can conclude that: A. nominal income declined by more than personal income. B. the price level rose by more than nominal GDP. C. real wages declined by more than real GDP. D. the price level fell by more than real GDP.

b

Intra-industry trade between similar trading partners allows the gains from ______________________ that arise when firms and workers specialize in the production of a certain product. A. comparative advantage B. learning and innovation C. creating the value chain D. relative advantage

b

Many states do have____________ , which impose an upper limit on the interest rate that lenders can charge. A. price ceiling laws B. usury laws C. price floor laws D. minimum interest rate

b

Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel? A. There is an increase in the cost of producing steel, which shifts the supply curve of steel to the right, thereby increasing the price of steel. B. There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel. C. There is a decrease in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel. D. The increase in wage costs will shift the demand curve for steel to the left, increasing the cost of steel.

b

Suppose that inventories were $80 billion in 2007 and $70 billion in 2008. In 2008, accountants would: A. add $10 billion to other elements of investment in calculating total investment. B. subtract $10 billion from other elements of investments in calculating total investment. C. add $75 billion (= $150/2) to other elements of investment in calculating total investment. D. subtract $75 billion (= $150/2) from other elements of investment in calculating total investment.

b

The slope of the production possibility frontier is determined by the ________________ of expanding production of one good, measured by how much of the other good would be lost. A. absolute advantage B. opportunity cost C. relative advantage D. specialization

b

Use the list below to answer the following questions: 1. Improvements in technology 2. Increases in the supply (stock) of capital goods 3. Obtaining the optimal combination of goods, each at least-cost production 4. Increases in the quantity and quality of natural resources 5. Increases in the quantity and quality of human resources Which set of items in the above list would move an economy from a point inside its production possibilities curve to a point on its production possibilities curve? A. 1, 2, 4, and 5 only B. 3 only C. 5 only D. 1, 2, 4 only

b

Which of the following activities is excluded from GDP, causing GDP to understate a nation's well-being? A. the services of used-car dealers B. the child-care services provided by stay-at-home parents C. the construction of new houses D. government expenditures on military equipment

b

Which of the following is an intermediate good? A. the purchase of gasoline for a ski trip to Colorado. B. the purchase of baseball uniforms by a professional baseball team. C. the purchase of a pizza by a college student. D. the purchase of jogging shoes by a professor

b

Which of the following is not economic investment? A. the purchase of a new drill press by the Ajax Manufacturing Company B. the purchase of 100 shares of AT&T stock by a retired business executive C. construction of a suburban housing project D. the piling up of inventories on a grocer's shelf

b

Which of the following purchases would be an example of an economic investment by a business? A. shares of stock in another business B. new computers to improve data analysis C. a certificate of deposit with a high interest rate

b

A straightforward example of a _______________, often used for simplicity, is the interest rate. A. price ceiling B. financial investment C. rate of return D. price floor

c

About how many times greater, on average, are the material standards of living of citizens in the richest nations compared with the material living standards of citizens in the poorest nations? A. approximately 5 times B. approximately 10 times C. approximately 40 times D. approximately 100 times

c

Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. The USA's comparative advantage is in _________ production, while India's comparative advantage is in _________ production. A. wheat, wheat B. textiles, textiles C. wheat, textiles D. textiles, wheat

c

Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. The opportunity cost of one bushel of wheat in India is A. 1 yard of textiles. B. 3 yards of textiles. C. 4 yards of textiles. D. 12 yards of textiles.

c

As measured in 2005, about ____ of U.S. trade and ___ of European trade is intra-industry trade. A. 10%; 10% B. 30%; 30% C. 60%; 60% D. 90%; 90%

c

If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will: A. increase the supply of X and decrease the demand for X. B. increase the demand for X and decrease the supply of X. C. increase the quantity supplied and decrease the quantity demanded of X. . D. decrease the quantity supplied of X and increase the quantity demanded of X

c

Improvements in the productivity of labor will tend to: A. decrease wages. B. decrease the supply of labor. C. increase wages. D. increase the supply of labor.

c

Other things equal, which of the following would increase the rate of economic growth, as measured by changes in real GDP? A. A decline in the average length of the work week. B. A decrease in the labor force participation rate. C. An increase in the size of the working age population. D. A decline in the amount of capital per worker.

c

Suppose a nation's 2010 nominal GDP was $972 billion and the general price index was 90. To make the 2010 GDP comparable with the base year GDP, the 2010 GDP must be: A. deflated to $678 billion. B. deflated to $896 billion. C. inflated to $1080 billion. D. deflated to $1080 billion.

c

Suppose that Scoobania, which has full employment, can obtain 1 unit of capital goods by sacrificing 2 units of consumer goods domestically, but can obtain 1 unit of capital goods from another country by trading 1 unit of consumer goods for it. This reality illustrates: A. A. a rightward (outward) shift of the production possibilities curve. B. B. increasing opportunity costs. C. C. achieving points beyond the production possibilities curve through international specialization and trade. D. D. productive efficiency.

c

When consumers and businesses have greater confidence that they will be able to repay in the future, _______________________. A. the quantity demanded of financial capital at any given interest rate will remain unchanged. B. the quantity demanded of financial capital at any given interest rate will shift to the left. C. the quantity demanded of financial capital at any given interest rate will shift to the right. D. the quantity demanded of financial capital at any given interest rate will achieve equilibrium.

c

Which is an example of a negative externality? A. An increase in the value of land you own when a nearby development is completed B. The costs paid by a company to build an automated factory C. Decreased property values in a neighborhood where a disreputable nightclub is operating D. The higher price you pay when you buy a heavily advertised product

c

Which of the following will not result in a rightward shift of the market supply curve for labor? A. a decrease in non-wage income B. an increase in the working-age population C. an increase in labor productivity D. an increase in immigration

c

Colombia produces coffee with less labor and land than any other country; it therefore necessarily has: A. a comparative advantage in coffee production. B. both a comparative and absolute advantage in coffee production. C. an absolute advantage and comparative disadvantage in coffee production. D. an absolute advantage in coffee production

d

If the United States government were to impose a quota on wristwatches imported from Switzerland, the: A. Price of wristwatches in the United States would decrease B. Prices of wristwatches in Switzerland would rise C. Price of wristwatches in the United States would remain the same, but the quantity will fall D. Total quantity of wristwatches (domestically produced and imported) purchased would decline

d

Other things equal, which of the following would decrease the rate of economic growth, as measured by changes in real GDP? A. An increase in the educational attainment of the labor force B. A permanent decrease in frictional unemployment C. An increase in the amount of capital per worker D. A decrease in the labor force participation rate

d

Suppose that an economy's labor productivity and total worker-hours each grew by 3 percent between year 1 and year 2. We could conclude that this economy's: A. real GDP remained constant. B. capital stock increased by 3 percent. C. production possibilities curve shifted inward. D. production possibilities curve shifted outward.

d

The idea behind comparative advantage reflects the possibility that one party: A. may be able to produce everything relatively more efficiently than another party. B. may be able to produce something at a lower dollar cost than another party. C. with an absolute advantage in producing two different may export goods both of those goods to the other party. D. may be able to produce something at a lower opportunity cost than another party.

d

Which of the following results in a rightward shift of the market demand curve for labor? A. a decrease in labor productivity B. a decrease in the firm's product price C. an increase in the wage rate D. an increase in demand for the firm's product

d

With a downsloping demand curve and an upsloping supply curve for a product, placing an excise tax on this product will: A. increase equilibrium price and quantity. B. decrease equilibrium price and quantity. C. decrease equilibrium price and increase equilibrium quantity. D. increase equilibrium price and decrease equilibrium quantity.

d

What term is used to describe goods and services that are produced domestically and sold in another country?

Exports