Exam 1 Macroeconomics
10) Scarcity requires that people must A) make choices. B) compete. C) cooperate. D) trade
A
12) Allocative efficiency occurs when it is A) not possible to produce more of one good without giving up the production of some other good that is valued more highly. B) possible to produce more of all goods. C) not possible to produce more of one good without giving up the production of some other good that is valued less highly. D) possible to produce more of one good without giving up the production of some other good.
A
12) Scarcity guarantees that A) wants will exceed demands. B) most demands will be satisfied. C) demands will be equal to wants. D) demands will exceed wants.
A
14) A country produces only pencils and erasers. Pencil production is allocatively efficient if the marginal ________ of a pencil equals the marginal ________ of ________. A) benefit; cost; a pencil B) benefit; benefit; an eraser C) cost; benefit; an eraser D) cost; cost; an eraser
A
14) Georgine buys more sweaters when her income increases. For Georgine, sweaters are A) a normal good. B) a complement. C) an inferior good. D) a substitute.
A
16) Demands differ from wants because A) demands reflect a decision about which wants to satisfy and a plan to buy the good, while wants are unlimited and involve no specific plan to acquire the good. B) wants imply a decision about which demands to satisfy, while demands involve no specific plan to acquire the good. C) wants require a plan to acquire a good but demands require no such plan. D) demands are unlimited, whereas wants are limited by income
A
16) The 2010 Patient Protection and Affordable Care Act (Obamacare) contains a provision that may require individuals to either purchase private health insurance or pay a tax (see "The Protest Against Market Capitalism" on page 8 in the Parkin textbook). This is an example of A) a mixed economy. B) centrally planned socialism. C) the invisible hand. D) market capitalism
A
2) The opportunity cost of a good is the same as its A) relative price. B) money price. C) price index. D) none of the above
A
2) Which of the following is a macroeconomic issue? A) the effect of increasing the money supply on inflation B) the hiring decisions that a business makes C) the purchasing decisions that an individual consumer makes D) the effect of an increase in the tax on cigarettes on cigarette sales
A
26) Suppose the United States discovers a way to produce clean nuclear fuel. The effect of this discovery would be to A) shift the U.S. PPF outward. B) shift the U.S. PPF inward. C) force the United States to produce at a point inside its PPF. D) lead the United States to produce less nuclear fuel.
A
32) Economic growth is shown on the production possibilities frontier as A) an outward shift in the PPF. B) an inward shift in the PPF. C) a movement from one point on the PPF to another. D) the curvature of the PPF.
A
32) Marginal cost is the cost A) that arises from an increase in an activity. B) that arises from the secondary effects of an activity. C) that your activity imposes on someone else. D) of an activity that exceeds its benefit.
A
36) Today, Julie attended her 12:30 Economics class. If she hadn't gone to class, Julie would have gone out to lunch with friends. She had other options; she could have worked or slept in. Julie's opportunity cost of going to class is the A) lunch she gave up. B) income from working, lunch, and sleep she gave up. C) sleep she gave up. D) income from working she gave up
A
38) Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour. The opportunity cost of producing a unit of Y is A) 1 unit of X per unit of Y for Agnes and 1/2 unit of X per unit of Y for Brenda. B) 1 hour for Agnes and 2 hours for Brenda. C) 1 hour for Agnes and 1/2 hour for Brenda. D) 1 unit of X per unit of Y for Agnes and 2 units of X per unit of Y for Brenda.
A
42) A positive statement is A) about what is. B) about what ought to be. C) always true. D) one that does not use marginal concepts
A
42) In the table above, country B is producing 4 units of X and 6 units of Y. For country B, the opportunity cost of producing an additional unit of Y is A) 2/3 unit of X per unit of Y. B) 3 units of X per unit of Y. C) 1/2 unit of X per unit of Y. D) 2 units of X per unit of Y.
A
46) The statement that ________ is a positive statement. A) the price of sugar in the United States is higher than the price in Australia B) more students should study economics C) too many people in the United States have no health care insurance D) the price of gasoline is too high
A
48) Producers of tablet computers will be able to lower the wage rate that they pay to their workers. You are asked to predict the effects on the supply of tablet computers, and the price of a tablet computer. You predict that the supply curve shifts A) rightward, and the price falls. B) rightward, and the price is constant. C) leftward, and the price is constant. D) leftward, and the price rises.
A
48) Which of the following is a positive statement? A) An increase in gas prices leads people to car pool more. B) State lotteries are good methods to use for raising revenues. C) Increased prison sentences are the best way to reduce the crime rate. D) Inflation is a more serious problem than is deflation.
A
8) The relative price of a good is A) an opportunity cost. B) equal to the price of that good divided by the quantity demanded of the good. C) equal to the money price of that good. D) expressed in dollar amounts.
A
46) In order for societies to reap the gains from trade, it is necessary to A) achieve productive efficiency. B) define and enforce property rights. C) distribute resources equally. D) foster economic growth.
B
18) A decrease in the price of bowling shifts the A) supply curve of bowling balls leftward. B) demand curve for bowling balls rightward. C) supply curve of bowling balls rightward. D) demand curve for bowling balls leftward
B
20) If the marginal benefit of consuming another unit of a good is positive, then to reach the allocatively efficient level of output more of the good should be produced and consumed A) no matter what. B) if the marginal benefit of the good is greater than its marginal cost. C) if the total benefit of the good is greater than its total cost. D) as long as the consumer can afford to pay for it.
B
22) Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she is choosing at the margin when she compares A) the total revenue from sales of printers to the total cost of producing all the printers. B) the extra revenue from selling a few additional printers to the extra costs of producing the printers. C) HP's printers to printers from competing companies, such as Lexmark. D) the extra revenue from selling a few additional printers to the average cost of producing the additional printers
B
28) Which of the following is NOT one of the factors that influences the supply of a product? A) expected future prices B) income C) technology D) number of suppliers
B
4) Economists point out that scarcity confronts A) the rich but not the poor. B) both the poor and the rich. C) the poor but not the rich. D) neither the poor nor the rich.
B
44) Which of the following is a positive statement? A) Corporations should be more socially responsible. B) People buy more of a good or service when its price falls. C) The distribution of income is fair. D) The government ought to provide health care to everyone
B
46) For consumers, goods A and B are complementary goods. The cost of a resource used in the production of A decreases. As a result A) the equilibrium price of B will fall and the equilibrium price of A will rise. B) the equilibrium price of B will rise and the equilibrium price of A will fall. C) the equilibrium prices of both A and B will rise. D) the equilibrium prices of both A and B will fall.
B
48) The term "market" refers to A) locations where buyers and sellers physically meet. B) any arrangement that enables buyers and sellers to get information and trade with one another. C) trading arrangements that have been approved by the government. D) physical structures only.
B
6) An example of a question that might be explored in microeconomics is to determine A) why the U.S. economy has grown more rapidly than the Japanese economy. B) the number of workers employed by Intel. C) the total employment within the U.S. economy. D) savings by the household sector
B
6) The price of a DVD rental is $1.50 and the price of a downloaded movie is $1.00. If the price of a DVD rental increases by $0.50, the relative price a downloaded movie A) does not change. B) falls. C) rises. D) might change but more information is needed.
B
8) Fundamental economic problems basically arise from A) turmoil in the stock market. B) our wants exceeding our scarce resources. C) the fact that society has more than it needs. D) the unequal distribution of income
B
14) The Occupy Wall Street movement advocates A) following the teachings of Adam Smith. B) centrally planned socialism. C) a shift away from market capitalism. D) a shift towards more market capitalism
C
18) Resource use is allocatively efficient A) whenever marginal cost exceeds marginal benefit. B) when the maximum possible quantity is being produced. C) when marginal benefit equals marginal cost. D) whenever marginal benefit exceeds marginal cost
C
22) A change in which of the following would NOT shift the supply curve for sneakers? A) an increase in technology for making sneakers B) an increase in the price of sneakers C) an increase in the price of rubber, used to make sneakers D) None of the above, that is, each change shifts the supply curve
C
24) During the summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. In terms of dollars, the opportunity cost of attending summer school is A) $4,300. B) $3,300. C) $10,300. D) $6,000
C
26) As the price of a pound of peanuts falls, the A) supply of peanuts increases. B) quantity of peanuts supplied increases. C) quantity of peanuts supplied decreases. D) supply of peanuts decreases.
C
28) Marginal cost is the A) cost of all forgone alternatives. B) cost of an activity minus the benefits of the activity. C) cost of an increase in an activity. D) total cost of an activity.
C
30) When economic growth occurs, the A) economy moves along its production possibilities frontier. B) production possibilities frontier becomes steeper. C) production possibilities frontier shifts outward. D) production possibilities frontier shifts outward but no longer limits the amount that can be produced
C
34) The marginal benefit is the A) additional gain from one more unit of an activity minus the additional cost from one more unit of the activity. B) loss of the highest-valued alternative. C) additional gain from one more unit of an activity. D) additional cost from one more unit of an activity
C
38) Making a choice at the margin means A) waiting until the last minute to make a choice. B) letting someone else choose for you. C) deciding to do a little bit more or a little bit less of an activity. D) making a choice by comparing the total benefit and the total cost.
C
38) The existence of a shortage A) means resources are being allocated efficiently. B) pushes the price down. C) pushes the price up. D) is impossible in a market economy
C
4) The opportunity cost of a hot dog in terms of hamburgers is the A) ratio of the slope of the demand curve for hot dogs to the slope of the demand curve for hamburgers. B) money price of a hot dog minus the money price of a hamburger. C) ratio of the money price of a hot dog to the money price of a hamburger. D) ratio of the slope of the supply curve for hot dogs to the slope of the supply curve for hamburgers.
C
50) Which of the following is TRUE regarding markets? I) Economists define a market as a geographic location where trade occurs. II) A market enables buyers and sellers to get information about each other and to buy and sell from each other. III) Markets coordinate decisions through prices. A) I only B) I and III C) II and III D) I, II and III
C
30) Jill, an economics student, has already spent 5 hours cleaning her room. In deciding whether or not to continue cleaning for another hour, she applies the economic principle of A) scarcity. B) ceteris paribus. C) productivity. D) choosing at the margin
D
36) When there is a shortage in the market, the quantity sold is A) less than the quantity bought. B) greater than the quantity supplied. C) less than the quantity supplied. D) equal to the quantity supplied.
D
10) The price of a bag of corn chips is $3, and the price of a bottle of soda is $1. What is the relative price of a bag of corn chips? A) $3 B) 33¢ C) 1/3 bottle of soda per bag of corn chips D) 3 bottles of soda per bag of corn chips
D
12) Entrepreneurs directly do all of the following EXCEPT A) face risks that arise from making business decisions. B) create new ideas about what and how to produce. C) make business decisions. D) decide for whom goods and services are produced
D
16) Marginal benefit is the benefit ________ one more unit of the good and ________ of the good increases. A) of producing; decreases as production B) of producing; increases as production C) from consuming; increases as consumption D) from consuming; decreases as consumption
D
18) Samantha goes to college to become an engineer. This is an example of an A) increase in entrepreneurship. B) investment in physical capital. C) increase in labor. D) investment in human capital.
D
20) When an economy produces more houses and fewer typewriters, it is answering the ________ part of one of the two big economic questions. A) "how" B) "for whom" C) "where" D) "what"
D
24) Good A and good B are substitutes in production. The demand for good A decreases, which lowers the price of good A. The decrease in the price of good A A) decreases the demand for good B. B) increases the demand for good B. C) decreases the supply of good B. D) increases the supply of good B.
D
24) Technological progress makes the production possibilities frontier A) become more linear and less bowed. B) become less linear and more bowed. C) shift inward toward the origin. D) shift outward from the origin.
D
26) The loss of the highest-valued alternative defines the concept of A) marginal benefit. B) entrepreneurship. C) scarcity. D) opportunity cost.
D
28) The tradeoff between current consumption and the production of capital goods also reflects a tradeoff between A) economic growth and technological change. B) the future production of capital goods and future consumption of goods. C) satisfying today the needs of the poor and the wants of the wealthy. D) current consumption and future consumption
D
4) 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. A) 10/7 of a sandwich B) 7/10 of a sandwich C) 1/3 of a sandwich D) 3 sandwiches
D
40) Comparative advantage is A) the ability to perform an activity at a zero opportunity cost. B) the ability to perform an activity at a higher opportunity cost than anyone else. C) another name for absolute advantage. D) the ability to perform an activity at a lower opportunity cost than anyone else
D
40) On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is A) not clear because not enough information is given. B) zero because you do not have to pay money to use the library. C) working out at the gym, having breakfast with friends, and sleeping late. D) working out at the gym.
D
50) Which of the following is NOT a normative statement? A) The distribution of income is fair. B) Corporations should be more socially responsible. C) The government ought to provide health care to everyone. D) People buy more of a good or service when its price falls
D
6) Sam's production possibilities frontier has good A on the horizontal axis and good B on the vertical axis. If Sam is producing at a point inside his frontier, then he A) is fully using all his resources. B) values good A more than good B. C) values good B more than good A. D) can increase production of both goods with no increase in resources
D
44) Using the above figure, suppose that roses are a normal good. If there is an increase in income A) we cannot predict what will happen to the equilibrium quantity. B) the equilibrium quantity will decrease below 10 dozen roses. C) the equilibrium price will rise above $25 per dozen roses. D) we cannot predict what will happen to the equilibrium price.
FIGURES C
42) The above figures show the market for gasoline. Which figure(s) shows the effect of a new U.S. tax on oil that suppliers must pay? A) Figures A and C B) Figures B and D C) Figure A only D) Figure C only
FIGURES D
50) The above figures show the market for oranges. Which figure shows the effect of great growing conditions that produce an aboveaverage sized crop? A) Figure A B) Figure B C) Figure C D) Figure D
FIGURES D
2) The bowed outward shape of the production possibilities frontier in the above figure indicates that A) some resources are better suited for producing computers. B) computer technology is subject to the principle of decreasing costs. C) the opportunity cost of producing more computers decreases as more computers are produced. D) All of the above answers are correct.
GET FIGURE A
10) The above table shows production points on Sweet-Tooth Land's production possibilities frontier. What is the opportunity cost of one chocolate bar if Sweet-tooth Land moves from point C to point D? A) 10 cans of cola per chocolate bar B) 1/3 can of cola per chocolate bar C) 3 cans of cola per chocolate bar D) 30 cans of cola per chocolate bar
GET FIGURE C
22) In the above figure, if 2 million computers are produced per year then the ________ should be produced to achieve the allocatively efficient use of resources. A) marginal cost of a computer exceeds the marginal benefit of a computer, so fewer computers B) marginal cost of a computer exceeds the marginal benefit of a computer, so more computers C) marginal benefit of a computer exceeds the marginal cost of a computer, so more computers D) marginal benefit of a computer exceeds the marginal cost of a computer, so fewer computers
GET FIGURE C
30) The above figure shows the market for oil. Because of the development of a new deep sea drilling technology the A) demand curve does not shift, and the supply curve shifts from S2 to S1. B) demand curve shifts from D1 to D2 and the supply curve shifts from S1 to S2. C) demand curve does not shift, and the supply curve shifts from S1 to S2. D) demand curve shifts from D1 to D2 and the supply curve does not shift.
GET FIGURE C
34) At a price of $10 in the above figure, there is A) a shortage of 200 units. B) a surplus of 200 units. C) a surplus of 400 units. D) a shortage of 400 units
GET FIGURE C
36) Two countries, Blue Violet and Sweet Pansy, produce only two goods: teapots and coffeepots. The table above gives their production possibilities. A) Sweet Pansy has a comparative advantage in teapots. B) Both have a comparative advantage in teapots. C) Blue Violet has a comparative advantage in teapots. D) Sweet Pansy has an absolute advantage in teapots
GET FIGURE C
32) The figure illustrates the market for pens. The equilibrium quantity is A) 2 pens a month. B) between 400 and 600 pens, but it is impossible to be precise. C) 5 pens a month. D) 500 pens a month.
GET FIGURE D
8) The opportunity cost of producing a unit of consumption at point b in the figure ________ point a. A) is greater than at B) is the same as C) cannot be compared with D) is less than at
GET FIGURE D
44) Anna and Maria produce shirts and ties. The figure above shows Anna's PPF and Maria's PPF. Anna and Maria can achieve the gains from trade if Anna produces ________ and Maria produces ________. A) only ties; shirts and ties B) ties; shirts C) shirts; ties D) shirts and ties; only ties
GET FIGURES B
20) Consider the demand curves for soft drinks shown in the figure above. Suppose the economy is at point a. What of the following could result in a movement to point b? A) a decrease in the price of bottled water B) an increase in the opportunity cost of soft drinks C) an increase in the price of bottled water D) a decrease in the relative price of a soft drink
GET FIGURES C
40) The initial supply and demand curves for a good are illustrated in the above figure. If there are technological advances in the production of the good, then the new equilibrium price for the good A) is more than $6. B) is $6. C) is less than $6. D) could be less than, equal to, or more than $6
GET FIGURES C
34) In the figure above, Joe is producing at point A. Joe's opportunity cost of producing one shirt is A) 5 pairs of pants per shirt. B) 2 pairs of pants per shirt. C) 3/5 of a pair of pants per shirt. D) 5/3 of a pair of pants per shirt.
GET FOGIRE B