Econ Test Review

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During a​ year, a​ firm's depreciation is ​$600 and gross investment is $3,000. What is the​ firm's net investment​?

2,400

Refer to​ this​ graph, which​ represents​ Alice's Production Possibilities Frontier. At which levels of production is Alice​ producing​ inefficiently?v

200 units of lemonade and 50 units of pizza

Explain why a relative price is an opportunity cost. The money price of a pound of bananas is ​$0.20 and the money price of a pack of microwave popcorn is ​$0.60. The opportunity cost of a pack of microwave popcorn is​ _______.

3 pounds of bananas​, which is the relative price of a pack of popcorn

At one point along a PPF​, 10 pizzas and 7 sandwiches can be produced. At another point along the same PPF​, 9 pizzas and 10 sandwiches can be produced. The opportunity cost of a pizza between these points is​ ________ per pizza.

3 sandwiches

Because of the biases in calculating the​ CPI, actual inflation is

less than the measured inflation rate.

Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a​ day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following statements is​ correct?

Homer has an absolute advantage in both catching fish and picking fruit.

So​ ______ has a comparative advantage in producing​ ______.

Jim; tuna

The opportunity cost to produce 1 pretzel for Mark is 2 cookies. For​ Jessica, the opportunity cost to produce 1 pretzel is 3 cookies. From this​ information, we know that

Mark has a comparative advantage in pretzel production.

Martha can produce 90 quilts or 180 batches of chocolate chip cookies in a month. Jane can produce 6 quilts or 18 batches of chocolate chip cookies in a month. Distinguish between comparative advantage and absolute advantage.

Martha has an absolute advantage in both goods. ​Martha has a comparative advantage in quilts.​ Jane has a comparative advantage in chocolate chip cookies.

Consider gardening books. What will happen to the market for these books as gardening becomes more popular and simultaneously printing costs​ increase?

The price of gardening books definitely increases.

Consider the market for broccoli. If the price of a pound of broccoli​ increases, what happens to the supply of​ broccoli?

There will be no change in the supply of​ broccoli, but instead is an increase in the quantity supplied of broccoli.

The effect of the United States returning millions of workers to their countries of origin is​ _____ the U.S. PF and​ _____ in potential GDP.

a movement down​ along; a decrease

According to classical growth​ theory, the growth of real GDP per person stops when​ _______.

a population explosion eventually occurs and real GDP per person returns to the subsistence level

Which of the following always raises the equilibrium​ price?

an increase in demand combined with a decrease in supply

An increase in the demand for computers and a decrease in the number of sellers of computers will​ ________.

an increase in the price of a computer

John has two hours of free time this evening. He ranked his​ alternatives, first go to a​ concert, second go to a​ movie, third study for an economics​ exam, and fourth answer his mail. What is the opportunity cost of attending the concert for​ John?

attending a movie

graduates from college and his income increases by ​$30,000 a year. Nothing else changes. Stephen decreases the quantity of donuts and potato chips that he buys and increases the quantity of bottled water that he buys. For Stephen​, ​_______.

bottled water is a normal good

If demand and supply change in the same​ direction, we​ _____ the direction of change of the equilibrium quantity and we​ _____ the direction of change of the equilibrium price.

can​ predict; cannot predict

The consumer price index​ (CPI)

compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period

By specialization and​ trade, two individuals can

consume at a point beyond their individual production possibilities frontiers.

Ski trips and ski jackets are complements. If the price of a ski trip increases​, how does the demand for ski jackets ​change?

decrease, ​and the demand curve for ski jackets will shift leftward

If shoes rise in​ price, the demand curve for shoes​ ________ and the quantity of shoes demanded​ ________.

does not​ shift; decreases

The income earned by the people who sell the services of the factor of production​ _______ is called​ _______.

entrepreneurship​; profit

When the unemployment rate​ ______ the natural unemployment​ rate, real GDP​ ______ potential GDP.

equals;equals

The table shows the marginal benefit and marginal cost schedules for frozen fish. If Antarctica produces 95 frozen fish​, the marginal benefit from frozen fish ​______ the marginal cost of frozen fish. To achieve allocative​ efficiency, Antarctica must​ ______ the quantity of frozen fish produced.

exceeds; increase

According to the​ figure, the opportunity cost of producing another computer is

higher at B

By​ itself, an increase in exports

increases GDP

A discouraged worker​ ________ counted as officially unemployed and​ ________ counted as in the labor force.

is not; is not

A supply curve that illustrates the law of supply​ _______.

is upward sloping

Suppose you always study 5 evenings for an exam, but this week you decide to study for one more evening. The​ _____ of one more evening of studying is​ _____.

marginal cost; an evening not spent with your friends, if that is your best alternative use of time

In calculating​ GDP, household production is

not included because there is no market transaction.

Full employment occurs

only if the unemployment rate is equal to the natural unemployment rate.

According to new growth​ theory, the growth of real GDP per person​ _______.

persists indefinitely

If the demand curve for bikes shifts leftward and the supply curve for bikes shifts​ rightward, the equilibrium

price of bikes definitely decreases.

Harry produces 2 balloon rides and 4 boat rides an hour. Harry could produce more balloon rides without producing fewer boat rides. Harry is​ ______ his production possibilities frontier.

producing inside

Aggregate expenditures include all of the following EXCEPT

purchases of intermediate goods.

PPP is​ _______.

purchasing power parity

In the post World War II​ period, considerable growth in total production took place in the U.S. But at the same​ time, businesses were dumping their waste into the Great Lakes with minimal cost to​ themselves, significantly polluting the bodies of water as a result. This occurrence is an example where

real GDP gives an overly positive view of economic welfare.

Which of the following statements are positive​? 1. China is the largest trading partner of the United States 2. People who buy weekly lottery tickets win a prize at least once a year 3. Drunk drivers should have their licenses suspended for the remainder of their lives 4.

statements 1 and 2 are positive

If new capital increases labor​ productivity, the supply of labor ​ ________ and the demand for labor​ ________.

stays the same; increases

Real GDP is calculated by​ _______.

summing together the value of the​ year's production using the prices of the reference base year

According to neoclassical growth​ theory, the growth of real GDP per person stops when​ _______.

technology stops advancing

The marginal benefit that Anne receives from the second bowl of soup is​ _______.

the maximum amount she is willing to pay for a second bowl of soup

Using the​ figure, suppose that roses are a normal good. If incomes decrease while simultaneously there is an increase in the price of the resources used to produce​ roses, then

the quantity will definitely decrease below 10 dozen roses.

The relative price of a pack of microwave popcorn is an opportunity cost because​ ______.

the relative price tells us how many pounds of bananas we must give up to get a pack of microwave popcorn

At the full employment equilibrium in the labor​ market,

there is neither a shortage nor a surplus of labor.

Which of the following measurements of inflation tracks the rate at which infrequently changed prices are​ changing?

the​ sticky-price CPI

When we use PPP we can make valid international comparisons of real GDP because​ ______.

we calculate the value of goods and services produced in two countries using the same prices

The law of supply states that other things remaining the​ same, the​ _______ the price of a​ good, the​ _______.

​higher; greater is the quantity supplied

Question Facts In an​ hour, Jim can catch 10 pounds of tuna or pick 10 pounds of peaches. In an​ hour, David can catch 10 pounds of tuna or pick 20 pounds of peaches The opportunity cost of catching a pound of tuna is​ ______ for Jim. than for David​, and the opportunity cost of picking a pound of peaches is​ ______ for Jim than for David.

​lower; higher

Flights to Paris are a normal good and​ people's incomes rise. At the same​ time, the price of jet fuel rises. The equilibrium price of a flight to Paris​ ________ and the equilibrium quantity of flights to Paris​ ________.

​rises; might​ increase, decrease, or not change

An advance in technology increases the productivity of labor. As a​ result, the​ nation's production function shifts​ ________ and the​ ________ labor curve shifts rightward.

​upward; demand for


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