Econ test 1

Suppose that only two goods are produced in an economy. If a country possesses a comparative advantage at producing one good, then it:

cannot also possess a comparative advantage at producing the other good.

A decrease in the price of spaghetti noodles is likely to cause a(n) _____ in the demand for penne pasta, due to a change in the price of a _____.

decrease; substitute good

According to the circular flow model, expenditures by one person translate:

directly into income for someone else

Investment, as a part of GDP, includes:

goods bought by firms that plan to use those purchases to produce other goods and services in the future.

The most commonly used metric for measuring the value of a national economy is:

gross domestic product (GDP).

The assumption of rational behavior:

helps economists explain how people behave in a way that will best achieve their goals.

GDP per capita is _______ correlated with quality of life.

highly

what does economics study?

how individuals and groups manage resources

Macroeconomics study

how the economy works on a regional, national, or international scale

Choosing to produce at any point within (inside, not on) a production possibilities frontier is:

inefficient, meaning the society would not be using all its available resources in their best possible uses.

The law of demand describes the:

inverse relationship between price and quantity demanded.

When a country is producing goods and services efficiently it:

is getting the most output by using all its available resources.

Suppose a factory recently removed robots from its production line, decreasing productivity. This will likely cause a:

leftward shift of the supply curve.

Scarcity reflects our inability to satisfy wants due to:

limited resources

The extra benefit associated with producing or consuming the next unit of a good or service is known as the:

marginal benefit

One way to estimate GDP is to:

measure the total expenditure of an economy.

the two broad field that make up the subject of economics

microeconomics and macroeconomics

Suppose the price of dog collars has decreased and all other variables have remained constant. This change can be shown graphically as a:

movement along the demand curve to the right.

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. On the other hand, a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day. When trade opens up, the United States should produce _____ because it has a(n) _____ and should _____.

only apples; comparative advantage at producing apples; trade for shoes.

GDP counts:

only final goods and services.

The demand curve represents the relationship between _____, with everything else held constant.

price and quantity demanded

The market value of a good or service is the:

price at which the good or service is bought and sold.

The law of supply states that, all else held equal, quantity supplied rises as:

price rises.

Equilibrium exists at the point where:

quantity supplied equals quantity demanded

Your sister always brags about how savvy she is as a grocery shopper, claiming she saves lots of money by using coupons and shopping at multiple stores to get the lowest prices on all goods. Why might your sister be overestimating her savings?

she is not counting the value of time and gas

Suppose the demand for chicken has increased. This change can be shown graphically as a:

shift in the demand curve to the right.

An increase in productivity as a result of a new technology would cause the production possibilities frontier to:

shift outwards

A production possibilities frontier is a line or curve that:

shows all the possible combinations of outputs that can be produced using all available resources.

what is an Microeconomic issue

something small like apple's newest version of the iphone

Consumption, as a component of GDP, measures:

spending on goods and services by individuals and households.

economists assume that people choose to do something when they believe

the benefits outweigh the costs of the decision.

Consider a market that is in equilibrium. If the market experiences an increase in demand:

the equilibrium price and quantity will rise.

Gross domestic product is the sum of:

the market values of all final goods and services produced within a country in a given period of time.

he demand for Snickers candy bars will decrease if:

the price of Milky Way candy bars (a substitute) decreases.

What is a macroeconomic issue

the unemployment rate in the US falls during the month of june

The value-added approach of calculating GDP:

ways to avoid double counting, breaks down the total amount paid for the product, useful when thinking of service involed.

After paying $12 to enter an all-you-can-eat buffet, you can eat as much food as you desire. The marginal cost of an additional plate of food is:

zero dollars

Why do people often choose to specialize and trade

It allows them to enjoy more goods than they can create on their own.

If a country has an absolute advantage at producing one good, which of the following is true?

It can produce more of that good given the same resources.

If consumption is $7 trillion, wages $10 trillion, interest $1 trillion, rental income $1.5 trillion and profits $2 trillion, what is the value of the economy using the income approach?

$14.5 trillion

When we assume that consumers want to pay the lowest price possible, we assume that consumers are:

Rational

If a country's real GDP increases from one year to the next, we can conclude the country experienced:

a definite increase in output, and may have experienced an increase in prices.

An increase in the price of ice cream is likely to cause:

a movement to the left along the demand curve for ice cream.

If a producer incorrectly sets the price of its product too low:

a shortage (excess demand) will result.

Which actor in the simplified circular flow model buys or rents land, labor, and capital?

Firms

Which actor in the simplified circular flow model is on the supply side of the goods market?

Firms

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. On the other hand, a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day. Which of the following statements is true?

The U.S. has both an absolute advantage and a comparative advantage at producing apples.

Suppose that, given the same number of workers, the United States can produce five times as many computers or ten times as many airplanes as Mexico. Which of the following statements is true?

The United States has an absolute advantage at producing both airplanes and computers.

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. On the other hand, a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day. Which of the following statements is true?

The United States has an absolute advantage at producing both shoes and apples.

Basic model of the economy

The circular flow diagram

hich of the following is an intermediate good?

The rice used to make Chex cereal

Suppose there is an unusually large crop of apples this year. How might this affect the market for apples?

The supply would increase, decreasing equilibrium price and increasing equilibrium quantity.

Which of the following is an intermediate good?

The tomatoes a farmer sells to a factory to be used in the production of spaghetti sauce

If consumption is $6 trillion, investment is $3 trillion, government purchases are $1 trillion, and GDP is $12 trillion, then net exports must equal

$2 trillion.

If total consumption is $5 trillion, investments $2 trillion, government purchases $1 trillion, exports $1 trillion, and imports $3 trillion, the GDP must equal:

$6 trillion.

if Tom spends all day building chairs, he will make 16 chairs. If he instead devotes his day to building tables, Tom will make 4 tables. If Jerry spends his day building chairs, he will make 14 chairs; if he spends the day building tables, he will make 7 tables. At the end of the day, if Jerry was efficient with his resources, he will have produced:

10 chairs and 2 tables

The deadline for your research paper is tomorrow and you anticipate you'll need a full day's worth of writing to complete the paper. Unfortunately, you are scheduled to work all day in the cafeteria. You can turn the paper in one day late for a 10 percent penalty or take the day off of work and turn the paper in by the deadline. Losing a day of wages will cost you $90. The marginal cost of turning the paper in on time is:

90$ in forgone wages

Beyond GDP, which of the following measures can give some indication of the quality of life in an economy?

All of these help assess quality of life.

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. On the other hand, a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day. Which of the following statements is true?

Canada has a comparative advantage at producing shoes.

The "Made in the USA" campaign was popularized by unions in an effort to influence which determinant of demand?

Consumer preferences

If the opportunity cost of producing corn is lower for Ohio than for Iowa, then:

Ohio has a comparative advantage at producing corn.

If Johnny weren't in economics class this morning, he'd be sleeping. The value Johnny places on sleeping represents his:

Opportunity cost

The famous saying, "There is no such thing as a free lunch," is an example of which economic concept?

Trade offs

Yuto is a Japanese citizen working for Toyota at its manufacturing plant located in Tennessee. Yuto's work will contribute toward:

U.S. GDP, because the location of the plant is in the United States.

Scarcity can best be defined as a situation in which

all wants cannot be satisfied due to resource constraints

Demand describes how much of something people:

are willing and able to buy at alternative prices under certain circumstances.

When nations trade, the result would most likely be a(n):

increase in total production, which would benefit every nation involved.