Economics Test 1
Which of the following questions is a microeconomic question?
- Does the United States benefit from international trade? - How does HP decide what price to charge for a computer? - What is the cause of inflation? - Can the Congress bring prosperity by cutting tax rates? B.
Examples of positive statements
- Most iPods are purchased by teenagers. - If the price of gasoline rises, people will drive less and use less gasoline.
Choose the correct statement.
- The opportunity cost of doing more of an activity is the opportunity cost of the activity. - The opportunity cost of something is the highest-valued alternative that must be given up to get it. - The opportunity cost of an activity you do not enjoy is 0. - The opportunity cost of an activity is constant regardless of the time of day at which you pursue the activity. B.
Which of the following topics is not a macroeconomic question?
- Would a ceiling on the price of gasoline create a shortage of gasoline? - Have we conquered inflation? - Would a tax cut bring an increase in total employment? - Why does Japan have low inflation? A.
A point outside a PPF indicates ...
- an output combination that society cannot attain given its current level of resources and technology.
If a country must decrease current consumption to increase the amount of capital goods it produces today, then it must ...
- be producing along the PPF today and its PPF will shift outward if it produces more capital goods.
A society that is on its PPF is ...
- fully utilizing its productive sources
A president of the U.S. promises to produce more defense goods without decreases in the production of other goods. This promise can be valid ...
- if the U.S. is producing at a point inside its PPF.
Using the PPF model, unemployment is described as producing at a point ...
- inside the PPF curve
Positive Statement
- is a statement that can be tested.
Normative Statement
- is a statement that is opinion-based.
Product efficiency occurs when production ...
- is on the PPF
Harry produces 2 ballon rides and 4 boat rides an hour. Harry could produce more balloon rides but to do so he must produce fewer boat rides. Harry is (_______) his PPF.
- producing on
If an economy is operating at a point inside the PPF, then ...
- society's resources are being inefficiently utilized.
Choose the definition that gives the best overview of economics. Economics is the social science that studies the choices...
- that we make when we trade in the market - made by businesses - that we make as we cope with scarcity - made by the military C.
The PPF illustrates ...
- the combination of goods and services that can be produced by an economy.
Scarcity is represented on a PPF figure by ...
- the fact there are attainable and unattainable points.
The PPF itself shows ...
- the maximum levels of production that can be attained.
Pam, Pru, and Pat are deciding how they will celebrate the New Year. Pam prefers to go on a cruise, is happy to go to Hawaii, but does not want to go skiing. Pru prefers to go skiing, is happy to go to Hawaii, but does not want to go on a cruise. Pat prefers to go to Hawaii or to take a cruise but does not want to go skiing. Their decision is to go to Hawaii. What is the opportunity cost of the trip to Hawaii for each of them?
- the opportunity cost for Pam and Pat is a cruise and for Pru it is skiing.
On the vertical axis, the PPF shows ______; on the horizontal axis, the PPF shows ______.
- the quantity of one good, the quantity of another good
The production possibilities frontier is the boundary between ...
- those combinations of goods and services that can be produced and those that cannot. - STRICTLY PRODUCTION! - tradeoff
What is an example of a tradeoff?
A school board spends more on teachers and less on computers.
Economics
is a subject that studies choices.
Example of a normative macroeconomic statement.
The U.S. government should increase unemployment benefits.
Example of a positive microeconomic statement.
The price of an iPad will fall over the next year.
You plan to go to Europe this summer. If you do, you won't be able to take your usual summer job that pays $9,000 for the summer, and you won't be able to live at home for free. The cost of transportation is $1,000, visas cost $100, and living expenses are $1,100. What is the opportunity cost of your plan to travel in Europe?
Your opportunity cost is what you would have purchased with $11,200 if you did not go to Europe.
You plan to go to school this summer. If you do, you won't be able to take your usual summer job that pays $8,000 for the summer. The cost of tuition is $3,000 and textbooks cost $300. You live with your family, which covers your living expenses of $1,600. What is your opportunity cost of going to school this summer?
Your opportunity cost of going to summer school is the goods and expenses you could have purchased with $11,300.
The production possibilities frontier (PPF) is ...
downward sloping and reflects tradeoffs in choices.
Complement in production
goods that must be produced together
When producing at a production efficient point,
we face a tradeoff and incur an opportunity cost
