Macro Exam 1

You have two options for how to spend the afternoon. You can either go see a movie with your roommate or work as a tutor for the Math Department. From experience, you know that going to see a movie gives you $20 worth of enjoyment, and with your student discount, a movie ticket only costs $12. If you spend the afternoon working as a math tutor, you will get paid $45. On a typical day, you wouldn't be willing to spend the afternoon working as a math tutor for less than $35. What is your economic surplus from working as a math tutor instead of going to the movies?

$2

The country of Northland produced $1,000 billion of output in one year. The population of Northland was 50 million, of whom 45 million were employed. What was average labor productivity in Northland?

$22,222

The country of Northland produced $1,000 billion of output in one year. The population of Northland was 50 million, of whom 30 million were employed. What was average labor productivity in Northland?

$33,333

Electronic scooter rental in Athens charges $1 per ride and $0.29 per minute. Let C be the total rental that you have to pay and M the number of minutes of rental. If you represent the relationship between C and M, what is the value of the slope of such a relationship?

0.29

Electronic scooter rental in Athens charges $1 per ride and $0.29 per minute. Let C be the total rental that you have to pay and M the number of minutes of rental. If you represent the relationship between C and M, what is the value of the vertical intercept of such a relationship?

1.00

In 2019 the United States imported approximately ____ percent of all goods and services produced in the country.

15

Which of the following is incorrect?

A change in quantity supplied is the same as a shift of the supply curve.

Which of the following can NOT cause a shift of the supply for agricultural commodities?

A change in the price of agricultural commodities

Which of the following can NOT cause a shift of the demand for widgets?

A change in the price of widgets

Which one is the most precise or correct statement?

An individual (or a firm or a society) should take an action if, and only if, the extra benefits from taking the action are at least as great as the extra costs.

Electronic scooter rental in Athens charges $1 per ride and $0.29 per minute. Let C be the total rental that you have to pay and M the number of minutes of rental. What is the equation that best describes the relationship between C and M?

C=1+0.29M

Which of the following statements is true?

Comparative advantage does not require absolute advantage.

Decisions to cut taxes are made by _____ and are an example of _____ policy.

Congress; fiscal

Opportunity cost differs among sellers due to all of the following except:

Consumers' preferences

Enrique can either drive to work, which takes half an hour and uses $1.50 worth of gas, or take the bus, which takes an hour and costs $1. How should Enrique get to work?

Enrique should drive if saving half an hour is worth $0.50 or more.

The last time gas prices increased drastically, sales of large sport utility vehicles (SUVs) fell. Why?

Higher gas prices increased the cost of driving a SUV.

................................. is the study of the performance of national economies and the policies that governments use to try to improve that performance.

Macroeconomics

................................. is the study of individual choice under scarcity and its implications for the behavior of prices and quantities in individual markets.

Microeconomics

Which one is the most precise or correct statement?

None of the above are very precise or correct.

The value of output was $1,000 billion in Northland and $2,000 billion in Southland. The population of Northland was 50 million and the population of Southland was 120 million. There were 30 million employed workers in Northland and 75 million employed workers in Southland. Average labor productivity was higher in _________ and the standard of living was _______.

Northland; higher in Northland

Suppose the market demand curve is given by Qd = 80 − 10P, and the market supply curve is given by Qs = 10 + 15P. What is the equilibrium price and quantity?

P* = $2.80 and Q* = 52

The buyer's ................................. price is the highest price an individual is willing to pay for a good.

Reservation

Although we have boundless needs and wants, the resources available to us are limited. So having more of one good thing usually means having less of another. This principle is called the .................................... principle.

Scarcity

In the equation: W = 10 -3Y + 5, which of the following is correct?

The slope is -3

In the equation: Z = 10 -3S - 2S, which of the following is correct?

The slope is -5

Suppose you bought a concert ticket from Ticketmaster for $50, but when you get to the concert, there are a large number of people waiting outside who offer to pay you more than $50 for your ticket. What is probably true?

There is an excess demand for tickets at the Ticketmaster price.

Which of the following is incorrect?

We say that production is efficient if total surplus is maximized

Which of the following is incorrect?

We say that there is "no cash on the table" when there is still an opportunity to gain from additional sales or purchases

Suppose Xin and Zander work in a bakery making pies and cakes. Suppose it takes Xin 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Zander 2 hours to make a pie and 1.5 hours to make a cake. Which of the following statements is correct?

Zander has a comparative advantage in pies, and Xin has an absolute advantage in pies.

The United States generally has a comparative advantage in the development of technology because it has

a disproportionate share of the world's best research universities.

If a nation can produce more computers per year than any other nation, that nation has a(n) ______ advantage in the production of computers.

absolute

Positive analysis

aims at determining only the economic consequences of a particular policy.

When a slice of pizza at the student union sold for $2, Moe did not purchase any. When the price fell to $1.75, Moe purchased a slice each day for lunch. Thus, we can infer that Moe's reservation price for a slice of pizza is

at least $1.75 but less than $2.

The total cost of undertaking "N" units of an activity divided by "N" is usually known as the

average cost

You are trying to decide whether to purchase a Harry Potter book online or borrow it from the library. There is no charge for borrowing a book from the library, but going to the library takes more time than ordering a book online. Regardless of how you get the book, its benefit to you is the same. If the cost of buying the book online is $13, then you should

borrow the book from the library if the cost of doing so (in terms of the extra time it takes) is less than $13.

An individual has an absolute advantage in producing pizzas if that individual

can produce more pizzas in a given amount of time than anyone else.

A price ................................... is a maximum allowable price, set by law.

ceiling

If a nation has the lowest opportunity cost of producing a good, that nation has a(n) ______ in the production of that good.

comparative advantage

If the demand for cucumbers falls when the price of tomatoes rises, then we know that tomatoes and cucumbers are

complements.

The ...................................... curve illustrates the quantity buyers would purchase at each possible price.

demand

A demand curve is ______ sloping because ______.

downward; fewer people are willing to buy an item at higher prices

Suppose that the extra cost to Ava of a third glass of soda is zero because she's at a restaurant that gives free refills. According to the Cost-Benefit Principle Ava should

drink a third glass of soda if the extra benefit of doing so is positive.

The ...................................... price is the price at which the supply and demand curves intersect.

equilibrium

When jobs are easy to find, wage increases are frequently given, and businesses are doing well, the economy is most likely in a(n)

expansion.

A trade deficit occurs when

exports are less than imports.

A government is running a budget surplus if

government revenue exceeds government spending.

The emergence of English as the de facto world language _____ a comparative advantage in the production of books, movies, and popular music.

has given English-speaking countries

According to the ........................................ principle, a person (or a firm or a society) is more likely to take an action if its benefit rises, and less likely to take if it its cost rises; this principle is a positive economic principle.

incentive

By the ................................. effect, buyers' overall purchasing power goes down when the price of a good goes up

income

Economic growth can result from a(n)

increase in the amount of productive resources

If living standards in a country, as measured by output per person, decrease, then total output must have

increased more slowly than population increased.

If total output increases from $100 billion to $200 billion as population increases from 100 million to 150 million, then output per person:

increases, but by less than 100 percent.

If average labor productivity increases while population and the number of employed workers remain constant, then total output

increases.

A country is most likely to have a comparative advantage in the production of cars if

it has a relative abundance in the natural resources needed to produce cars.

If individuals are rational, they should choose actions that yield the

largest economic surplus.

When Thurston catches 10 fish a day, he can gather a maximum of 40 coconuts, and when he catches 20 fish a day, he can gather a maximum of 30 coconuts. If Thurston's opportunity cost of producing each good increases as he produces more of it, and he decides to catch 30 fish a day, then the maximum number of coconuts he can gather must be

less than 20.

In the 1950s and 1960s the European unemployment rate tended to be ______ the U.S. unemployment rate, while in the 1990s the European unemployment rate tended to be ____ the U.S. unemployment rate.

lower than; higher than

The increase in total cost that results from carrying out one additional unit of an activity is called the ................................. cost.

marginal

The ...................... for any good consists of all the buyers and sellers of the good.

market

An increase in interest rates by the Federal Reserve is an example of _______ policy.

monetary

The unemployment rate in the United States

never falls to zero.

A [......] economic principle is one that says how people should behave. It is subjective and value-based. A [......] economic principle is one that predicts how people will behave. It is objective and fact-based.

normative,positive

The value of what must be forgone to undertake an activity is the ............................................. cost. This includes all costs, both implicit and explicit.

opportunity

Average labor productivity equals

output per employed worker.

Average consumption in an economy is best measured by _____, while average productivity in an economy is best measured by _____.

output per person; output per worker

An implication of scarcity is that

people must make trade-offs

"U.S. exports will increase as a result of joined CAFTA," is an example of a ______ statement, while "The U.S. should join CAFTA," is an example of a _____ statement.

positive; normative

Which of the following is incorrect? A system is in equilibrium when

quantity supplied equals quantity demanded at any given price

A(n) ........................ person is someone with well-defined goals who tries to fulfill those goals as best as he or she can.

rational

Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 is her

reservation price.

Economics is the study of how people make choices under conditions of ................................... and of the results of those choices for society.

scarcity

The .......'s reservation price is the lowest price the seller would be willing to sell for and it is equal to its ..... cost.

seller,marginal

By the ........................................ effect, buyers switch to substitutes when the price of a good goes up.

substitution

A ............................ cost is a cost that is beyond recovery at the moment a decision must be made.

sunk

The ............................... curve illustrates the quantity of a good that sellers are willing to offer at each price.

supply

A seller's ............................. is the market price minus the seller's reservation price.

surplus

The economic ...................... is the benefit of taking an action minus its cost.

surplus

In the equation: X = 10, which of the following statements about the graphical representation of this equation on the plane (X, Y) is incorrect?

the equation represents a horizontal straight line

In the equation: Y = 10, which of the following statements about the graphical representation of this equation on the plane (X, Y) is incorrect?

the equation represents a vertical straight line

You can spend $10 for lunch and you would like to purchase two cheeseburgers. When you get to the restaurant, you find out the price for cheeseburger has increased from $5 to $6, so you decide to purchase just one cheeseburger. This is best described as

the income effect of a price change.

The opportunity cost of an activity includes the value of

the next-best alternative that must be forgone.

A trade imbalance occurs when

the quantity of a country's exports differs significantly from the quantity of imports.

As coffee becomes more expensive, Joe starts drinking tea instead of coffee. This is called

the substitution effect of a price change.

You have noticed that there is a persistent shortage of teachers in an urban school district in your state. Based on this observation, you suspect that

the wage for teachers in that district is lower than the equilibrium wage.

Economists use abstract models because

they are useful for describing general patterns of behavior.

If you have a comparative advantage in a particular task, then

you give up less to accomplish that task than do others.