macro exam 1

(Figure: Understanding Surplus and Efficiency) Using this graph, efficiency in this market is achieved at a price of:

$10.

In economics, the term "land" includes:

all natural resources.

When the mix of goods and services produced is just what the society desires, then we have:

allocative efficiency.

If temperature and ice cream sales are positively related, as the temperature:

falls, ice cream sales decline.

If bagels and doughnuts are substitute goods, then which of the following is likely to occur if the price of bagels is reduced?

The demand curve for doughnuts will shift to the left.

Suppose that a major hurricane hits Florida, causing widespread damage to homes and businesses. If the legislature imposes price controls in order to keep reconstruction costs reasonable, which of the following is the MOST likely result?

a shortage of building materials

(Table) In the table, at a price of $12:

a surplus of 20 units occurs.

A decrease in the quantity supplied of iPads is caused by a(n):

drop in the price of iPads.

what has happened to economic growth and the standard of living in the us over the past 50 years?

economic growth has slowed and the standard of living has risen

The purpose of an economic model is to:

explain the behavior of the issue being examined.

The market-clearing price:

is the price at which quantity demanded equals quantity supplied.

(Figure: Determining Production Possibilities) The graph shows the PPF for goods A and B and X marks a combination that:

is unobtainable with current resources.

___________ includes the mental and physical talents of individuals that are used to produce products and services

labor

the ______ ___ ___________ states that, while holding all other reluctant factors constant, as price increases quantity demanded falls

law of demand

resources are

limited

What would be a possible opportunity cost of you going to a doctor for a check-up?

lost income due to not being at work for those hours

The field of economics that is concerned about the broader issues in the economy such as inflation, unemployment, and national output of goods and services is called:

macroeconomics

Consumer surplus is the difference between willingness to pay and

market price

An institution that enables buyers and sellers to interact and transact with one another is known as a(n):

market.

In a ____ economy, individuals and firms own most resources, and in a _____ economy, the government controls most resources.

market; planned

A price ceiling is a(n) _____ price for a good

maximum

Each point along a production possibilities frontier represents:

maximum output, given the state of technology and resource availability.

production efficiency

means that goods are produced at their lowest resources (opportunity) cost

There is a(n) _____ relationship between price and quantity demanded.

negative

benefit can be ___________ if the cost is negative (marginal benefit will continue to fall)

negative

The government often strictly regulates noise and chemical pollution by industry to overcome which market failure?

negative externality (external costs)

If an increase in income leads to an increase in the demand for opera tickets, then opera concerts are a(n):

normal good.

If there is a price ceiling above the equilibrium, this is

not effective

A shift in the demand curve is caused by a change in:

one of the determinants of demand.

Which of the following is NOT an example of a market?

painting one's house

Discounted matinee movie ticket prices demonstrate that:

people follow incentives

Laws that prohibit price gouging are often politically:

popular, but result in shortages.

a question based on facts is a

positive question

A $2 maximum price on a gallon of gasoline would be an example of:

price ceiling

A binding _____ is set below the equilibrium price for a good

price ceiling

A legal maximum price that can be charged for a product or service is known as a(n):

price ceiling.

________ are used to provide information between buyers and sellers

prices

deadweight loss is a loss in

total surplus

_______________ is choosing 1 of multiple options (always giving up something)

tradeoffs

Production levels to the right of the PPF are:

unattainable

Scarcity is BEST defined as when:

unlimited wants exceed limited resources.

short run value

valuing the cost over the value of the decision

basic economic questions

what to produce, how to produce it, who will get the goods

opportunity cost

what you give up, the value of the next best alternative use of your time

absolute advantage

when a country can produce more of a god than another country

principle 2

when making any decision, one must take into account tradeoffs

comparative advantage

when one country can produce a good at a lower opportunity cost (true basis for trade)

Suppose that a store sells candy bars for $0.89 for one, and $1.50 for two. The marginal cost of the second candy bar is:

$0.61.

Which of the following represents incentives for decisions?

All of these are incentives.

Markets form the foundation of all economic transactions.

True

Which is one of the four major reasons why markets fail?

a mismatch of information

The observation that highly productive countries have taller populations is an example of:

correlation.

Agricultural price supports have:

created surpluses.

If supply increases and at the same time demand decreases, equilibrium price:

decreases and equilibrium quantity is indeterminate.

principle 1

economics is defined as decision making with time, resources, etc.

The price that results when quantity demanded is just equal to quantity supplied is known as:

equilibrium price.

The increased participation of women in the work force

has contributed to the rate of economic growth.

Which of the following pairs do NOT match?

land—lease payment

what are the exceptions to principle 6

market failure (if you let people do exactly what they want, sometimes there's going to be negative results on society) ex. pollution

absolute advantage

occurs when one country can produce more of a good than another country

A(n) _________________ is the minimum legal price that can be charged for a product.

price floor

If a graph drawn for the relationship between hot chocolate sales and temperature is downward sloping, then sales of hot chocolate:

rise as temperature falls.

unlimited wants but limited resources is

scarcity

a > b or c

short run growth

economists develop "stylized" models to analyze issues. Another word for "stylized" is:

simple

MC = MB at

the optimal point

Markets work most efficiently when

there are many buyers and sellers.

which of the following is an example of a microeconomic topic?

why a movie theater charges different prices to different groups of people

(Figure: Turtletopia and Frogland PPFs) We see that the two countries _____ benefit from trade, and that Frogland should specialize in producing _____ while Turtletopia should specialize in producing _____.

would; pork; corn

How large is deadweight loss in equilibrium?

zero

(Figure: Determining Surplus 2) In the graph, how much is producer surplus?

$12

(Figure: Determining Surplus and Loss) In the graph, producer surplus is _____ in equilibrium and _____ at a price of $5.

$120; $30

Suppose that a customer's willingness to pay for a product is $79, and the seller's willingness to sell is $64. If the negotiated price is $68, how much is producer surplus?

$4

In an eight-hour day, Isabel can produce 15 pounds of taffy or 3 pounds of chocolate chip cookies. In an eight-hour day, Ramona can produce 6 pounds of taffy or 6 pounds of chocolate chip cookies. The opportunity cost of producing 1 pound of chocolate chip cookies is:

5 pounds of taffy for Isabel and 1 pound of taffy for Ramona.

(Table) The table shows the demand of three individuals in a market. Assuming these are the only buyers, what is total market demand if price is $20?

5 units

Which of the following could keep a market from ending up in equilibrium?

Buyers have inadequate information about products.

(Figure: Ships and Autos in Countries A and B) Two countries manufacture automobiles and ships. Based on the graphs:

Country A should specialize in ship building and Country B, in auto manufacturing.

_____ refers to the goods and services people are willing and able to buy during a certain period of time, at various prices, ceteris paribus.

Demand

Jerry sells bicycle tires at the market equilibrium price of $42. Assume the government intervenes and sets the price of bicycle tires at $37. Madison continues to buy the product from Jerry but at a lower price. Marcus, who did not buy tires at the higher price, decides to buy new tires from Jerry. Which individual represents the existing buyer who stays in the market and has a rise in consumer surplus?

Madison

A surplus exists when a _____ is set above the equilibrium price for a good.

Price floor

Jerry sells bicycle tires at the market equilibrium price of $42. Assume the government intervenes and sets the price of bicycle tires at $67. None of Jerry's customers are willing to pay this higher price. What has happened to total surplus in this market?

Total surplus decreases

Trade is:

a driver of economic growth.

A $20 minimum on a taxi fare is an example of:

a price floor.

Paying a salesperson more for increased sales is an example of:

an incentive.

Which of the following would cause a decrease in consumer surplus?

an increase in prices due to a sales tax

Which of the following will cause an increase in the supply of yogurt?

an increase in the number of sellers in the market for yogurt

willingness to pay

an individuals valuation of a good or service. the most one is willing and able to pay

incentives can be used to change a person's:

behavior

____________ includes all manufactured products that are used to produce other goods and services

capital

Economists generally define institutions as all of these, EXCEPT as a:

government that controls resource allocation.

The increased participation of women in the work force:

has contributed to the rate of economic growth.

The _____ the opportunity cost of an activity, the ____ a person will do that activity.

higher;less

_________ __________ could cause the PPF of a country's production possibilities frontier to shift ____________

increased population, outward

(Figure: Interpreting PPF Shifts) According to the graph, which of the following changes may cause the production possibilities frontier to shift inward from PPF1 to PPF0?

increasing government regulation on businesses overall

An economy exhibits production efficiency if:

it produces goods at the lowest cost possible.

principle 6

markets are generally efficient

REMEMBER THIS

markets are generally good for some things, but sometimes gov'ts have to step in to either prevent people from doing bad things, but at the same time they wanna also put incentives to do good things

Macroeconomics deals with all of the following, EXCEPT:

markets for semiconductor chips.

Which mechanism is the most efficient at allocating resources?

markets with limited external costs and benefits

Which of the following is NOT an economic factor of production?

money

principle 4

people respond to incentives

Allocative efficiency occurs when:

people who wants a product the most gets it.

suppose that you knew that in the country of worthland the productive resources are owned by the state and that most economic decisions are made by its central government. this country has a ______________

planned economy

opportunity cost can also be defined as the ________ cost of a decision

total

long run value

valuing the quality over the cost of the decision

WTP depends on

wants and needs

A _____ is set above the equilibrium price for a good.

binding price floor

A nation's standard of living is primarily a function of:

productivity.

Macroeconomics focuses on:

decisions for the entire economy.

incentives

designed to encourage people to do things

human capital

skilled labor

principle 5

thinking on the margin

(Table) In the table, the equilibrium price is _____, and the equilibrium output is _____.

$10; 60

Suppose the price of a tablet is $200. Dana is willing to pay $190, Brit is willing to pay $210, and Jonah is willing to pay $300. How much consumer surplus is there in this market?

$110 Consumer surplus = Willingness to pay − Price. Consumers will not buy the product if price is higher than their willingness to pay. In this case, only Brit and Jonah buy the product and receive consumer surplus.

Suppose Dana is willing to pay $200 for a tablet, and she has $53 worth of consumer surplus. What is the market price of the tablet?

$147

(Figure: Determining Surplus 2) In the graph, how much is consumer surplus?

$15

(Figure: Determining Surplus and Loss) In the graph, consumer surplus is _____ in equilibrium and _____ at a price of $12.

$160; $40

(Figure: Determining Surplus and Loss) In the graph, consumer surplus is _____ in equilibrium and _____ at a price of $5.

$160; 180

A lawyer can argue a case in court for one hour and make $300. She could alternatively use that hour of time to type a legal brief in her office. What is the opportunity cost of her typing the legal brief?

$300, since that is the amount she could have made by arguing a case in court

Jonathan purchased coffee for $5 at Jennifer's coffee shop; however, he was willing to pay $9. Jennifer was willing to accept $3 for the coffee. The results of this transaction are a consumer surplus of:

$4 and a producer surplus of $2.

Suppose the price of a tablet is $179. Kimdle Co. is willing to sell the tablet for $112. How much producer surplus is there in this market?

$67 [[Producer surplus = Price − Willingness to sell.

(Figure: Determining Surplus and Loss) In the graph, how much is deadweight loss at a price of $12?

$70

suppose you decide to go to a concert. it is on a day you would have not have worked anyway, but your daily earnings are usually $80. your friend gave you the concert ticket, which would have costed you $40, and you can resell it for $40. you can expect to spend $40 on food and beverage. what is the opportunity cost of going to the concert?

$80

Paolo can walk three dogs or mow two lawns in two hours. Ashanti can walk six dogs or mow three lawns in two hours. Ashanti's opportunity cost for each additional dog walked is:

0.5 lawns mowed

Suppose that in Japan one worker can produce either four cars or five tons of grain per year. What is the opportunity cost of producing one car in Japan?

1.25 tons of grain

(Table) The table shows the number of hours Paul spends either reading books or watching movies. Paul only has 10 hours to use on the activities. If Paul decides to go from spending 2 hours reading books to four hours, what is his opportunity cost for watching movies?

2 hours of movie watching

Which of the following is NOT an example of market failure?

Competition leads firms to provide products at the lowest possible price.

What happens to consumer surplus and producer surplus if the equilibrium price of a product is $500 but the market price is $800?

Consumer surplus decreases and producer surplus either increases or decreases.

Miguel sells double-scoop ice cream cones at the market equilibrium price of $4. Assume the government intervenes and sets the price at $6. Benny still pays the higher price and buys double-scoop ice cream from Miguel. April no longer buys double-scoop ice cream cones because the price is too high. What has happened to consumer surplus in this market?

Consumer surplus decreases.

Suppose the equilibrium price of a product is $500 but the market price is $200 BELOW this equilibrium price. Who benefits from the price being set below the equilibrium price?

Consumers who are still able to purchase the product benefit.

T/F: "How do interest rates influence employment?" is an example of a normative question.

False

T/F: (Figure: Determining Surplus and Loss) In the graph, a price of $8 would allow for an effective price floor.

False

T/F: Positive questions are questions about how things ought to be.

False

T/F: The concept of equity relates to how quickly something can be produced.

False

T/F: Total producer surplus for an entire market equals the area under the demand curve and above the equilibrium price.

False

All of the following involve thinking at the margin, EXCEPT:

I worked eight hours today.

A leather company produces shoes and belts. What will the company do if it expects the price of shoes to rise in the near future?

Move resources from belt production to shoe production, thereby decreasing the supply of belts

Which of the following questions is NOT an example involving marginal analysis?

Should K-Mart convert all its stores to Sears stores?

T/F: Adam Smith suggested that it is almost as if an "invisible hand" guides the market to equilibrium.

True

T/F: Another term for market economy is capitalist economy.

True

T/F: At the equilibrium price, all consumers who want to buy a good at that price are able to find a seller willing to sell at that price.

True

T/F: Consumer surplus is the difference between what the consumer is willing to pay and the market price.

True

T/F: Entrepreneurs combine land, labor, and capital to produce goods and services.

True

T/F: Examining whether the country's price level has increased last quarter is a macroeconomic topic.

True

T/F: If a firm produces its mix of output at the lowest possible cost, it is said to achieve production efficiency.

True

T/F: Normative questions involve societal beliefs on what should or should not be done.

True

T/F: One reason that buyers purchase less of a product when its price rises is that they switch to substitute items.

True

T/F: When a scarce good or resource is consumed by the person who does not value it most, economists refer to the situation as a misallocation of resources.

True

Comparative advantage exists when one country can produce:

a good at a lower opportunity cost than can another country.

Which of the following is an example of a price floor?

a legally mandated minimum wage for food service workers

production possibilities frontier

a model that shows the combinations of two goods a society can produce a full employment

a decrease in quantity demanded brought on by a change in price. how would this change in quantity demanded by represented on a demanded curve?

a movement from one point on the line to a higher point on the line

In economics, capital refers to:

actual manufactured products used in the production process.

Marginal analysis would put an emphasis on:

additional costs and benefits.

law of demand

all else equals as price increases, quantity demanded falls, and vice versa

If we classify people by income level, which group or groups must deal with scarcity?

all income groups, even the very rich

____________ _____________ occurs when individuals who desire a product the most (as measured by their willingness to pay) get those goods and services).

allocative efficiency

based on the study of the sources of economic growth done by the organization for economic cooperation and development. which of the following is likely to have the largest impact on a country's standard of living (as measured by the percentage change in per capita GDP)?

an additional one year increase in average education levels

based on the study of the sources of economic growth done by the organization for economic cooperation and development. which of the following is likely to have the largest impact on a country's standard of living?

an additional one year increase in average education levels

physical capital

any equipment, intermediate good used to produce something else

Points inside (below and to the left of) the PPF are

attainable and inefficient.

Points inside (below and to the left of) the PPF are:

attainable and inefficient.

(Figure: Interpreting Market Shifts) The graph shows how supply and demand increased between the years 2011 and 2012. The final effect is:

both price and quantity rose.

Jan is most efficient at making braided bracelets, Martin is most efficient at making clay pots, and marcus is most efficient at making beaded necklaces. which good should jan specialize in making?

bracelets

a medical imaging facility just recently purchased a new, open MRI machine to cater to patients who find the older machines a bit claustrophobic. this new machine is an example of

capital

which of the following illustrates an inferior good?

cassie eats less mac n cheese because she received a large year end bonus at work

to study the effect of price on Brett's demand for rock climbing issues, we hold his monthly income constant. This is an example of a(n) _________ assumption

ceteris paribus

what is the opportunity cost of going to class?

choosing the most valuable thing you gave up work (10) beach (6) sleep (8) video games (3)

the quantity demanded of mattresses increased due to a ____________ decrease in price. because of this the demand for bed frames increased. in this example, mattresses and bed frames are

complementary goods

(Table) The table shows coffee and tea units produced for the United States and Japan. The opportunity costs are:

constant for the United States and increasing for Japan.

(Figure: Demand for Shoes) A shift to the right of the demand curve would be caused by anything, EXCEPT a(n):

decrease in the population.

a __________ in the price of a resource used in the production of a good will cause an ___________ in supply, shown as a shift of supply curve, so to supply curve s1

decrease, increase

which of the following would cause a country's production possibilities frontier PPF to shift inward?

decreased population

when you repeatedly do something, it is caused by

diminishing returns

Which of the following is NOT correct? Price floors and price ceilings:

help a market balance the interests of sellers and buyers.

Which of the following is NOT a determinant of demand?

history of the product

example of a bad incentive that is intentional

housing bubble collapsing

Prices help consumers decide all of the following, EXCEPT:

how much of a product to produce.

Where is a shortage represented in a supply and demand graph?

in the area below the equilibrium point

principle 7

institutions and creativity explain the wealth of nations deals with nations abundant creativity (cures to medicine, entertainment) strong institutions (strong laws, banks, innovation)

Capital, which includes all manufactured products that are used to produce other goods and services, earns:

interest

the quantity supplied for sugar has decreased due to a change in price

is represented by a movement from one point on the line to a lower point on the line

Suppose the equilibrium price of a product is $500 but the market price is now set $200 ABOVE this equilibrium price. Who benefits from the price being set above the equilibrium price?

producers who can sell the product better

___________ occurs when the mix of goods society decides to produce is produced at the lowest possible resource or opportunity cost.

production efficiency

much of the world's supply of textiles is now manufactured in china. this has led to textile factories closing in part of the united states. a textile firm choosing to move its manufacturing to china would argue that it is doing so because of:

production efficiency

oranges are grown in florida because the warm weather allows for the efficient growth of the trees and fruit. this is why most of the orange juice in the country is made in florida. this is an example of

production efficiency

The process of converting factors of production into goods and services is called:

production.

the money made by entrepreneurs is referred to as

profit

The payment to entrepreneurship is called:

profit.

the market price would be likely to fall when

quantity supplied is greater than quantity demanded

law of diminishing returns

receiving less satisfaction with each additional unit of a good consumed

Which is NOT a source of economic growth?

reducing the level of international trade

the decreased death rate (and healthier population) would mean more production and that would cause the production possibilities frontier to shift to the ____________

right

as you move ____________ to _____________ on a linear production possibilities frontier (PPF) the opportunity cost of producing the good on the vertical axis

right to left

opportunity costs ___________ as you specialize in a good

rise

When people cannot buy all of a good they demand at the going price, there is a:

shortage.

___________ occurs when people (or countries) engage in the economic activity in which they have the greatest advantage over others

specialization

One of the drivers of economic growth is:

specialization. consumption. international trade.

To gain from trade, a country should:

specialize in the commodity in which it has a comparative advantage

principle 3

specializing leads to gains for all, being efficient with resources

the quantity demanded of lemonade increased due to a decrease in price. because of this, the demand for tea decreased. in this example, lemonade and tea are what type of good?

substitute goods

(Figure: Understanding Price Ceilings and Floors) In the graph, if the government sets a price of $75, there is a:

suplus of 600

markets depend on

supply and demand

The maximum amount of a product that sellers are willing and able to provide for sale over some period at various prices, ceteris paribus, is called:

supply.

(Figure: Determining Surplus and Loss) In the graph, if the government sets a price of $12, there is a:

surplus of 40.

(Table) Germany has a comparative advantage in producing:

sweaters only.

A market with external costs:

tends to overproduce goods

(Figure: Wheat and Autos in the United States and Korea) According to the graph:

the United States should import cars and export wheat.

productivity

the ability to get the most output possible for the smartest amounts of imputs

allocative efficiency

the ability to produce goods that society desires

market failure can be caused by

the market not providing enough of something

what is the name of the major trade agreement that exists between canada, mexico, and the us?

the north american free trade agreement

According to the law of supply, producers will supply more of their products when:

the price rises.

If there is a surplus in a given market, then:

the price will decrease.

The expansion of the Internet and sites like eBay has probably reduced:

the problem of asymmetric information

At equilibrium price:

the sum of consumer surplus and producer surplus is maximized.

Electricity is essential in the production of aluminum. If electricity prices increase:

the supply curve for aluminum shifts leftward.

suppose that the US can produce 5x more oil and 10x as many microcomputer chips as mexico, and that each country has a production possibilities frontier that is concave. which of the following statements is correct?

the us has the comparitive advantage in microcomputer chips but its advantage compared with mexico will diminish as it produces more chips, this is due to increasing opportunity costs