MACRO FINAL EXAM

The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the __________ principle.

interdependence principle

Enforceable property rights encourage economic growth by encouraging:

investment

If you see that the consumer price index this year is lower than the consumer price index last year, this means that:

on average, prices went down across the economy

Which principle tells you that the true cost of something is the next best alternative you have to give up to get it?

opportunity cost principle

Holding all else constant, if people eat out more at expensive restaurants when they earn more, then expensive restaurant meals are

normal goods

An underemployed person is one who is:

working but whose skills are not fully utilized

According to the figure, if there is no international trade, the equilibrium price in this market is:

$600

According to the figure, if there is an international trade in this market, and the world price of televisions is $500, the quantity demanded is _______, and the quantity supplied is _______ at the world price.

70,000 ; 40,000

What happens to the equilibrium price and quantity when demand increases and simultaneously supply decreases, and the relative size of the shifts is not known?

The equilibrium price rises, and the change in the equilibrium quantity is ambiguous.

What is the difference between microeconomics and macroeconomics?

Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole.

Which of the following is a source of comparative advantage? a) Specialized skills b) small-scale production c) High tariff rates d) Scarce inputs

Specialized skills

A production function is:

a method which inputs can be turned into outputs, given the available resources.

When quantity demanded exceeds quantity supplied, ___________ exists.

a shortage

In a market graph, consumer surplus is the area:

above the price and below the demand curve

On a market graph, producer surplus is the area that is:

above the supply curve and below the price

The working age population includes people who are:

age 16 or older who are not in the military or institutionalized

a TRADE COST is:

an extra cost incurred as a result of buying or selling a good abroad rather than domestically.

When a US consumer buys Canadian maple syrup at the grocery store, this purchase is:

an import

Market failure occurs when market forces lead to:

an inefficient outcome

Sunk Costs are costs that

are incurred in the past and cannot be reversed

The consumer price index is an index that tracks the:

average price that consumers pay over time for a representative basket of goods and services

The cost-benefit principle states that a decision should be pursued only if the

benefits are greater than the costs.

Specialization will increase output when it is based on:

comparative advantage

The "market value" of a good or service refers to the:

current dollar value of that good or service

Which of the following items is an inferior good? a) Discount stores b) Airline tickets c) Luxury SUVs d) Car rentals

discount stores

Frictional unemployment is unemployment:

due to the time it takes for employers to search for workers and for workers to search for jobs.

A "final" good or service is one that is:

finished and ready for the final user.

Positive Analysis is based on identifying _____ and _____.

facts ; relationships

The concept of equity focuses on:

fairness

You go to Starbucks and see that the price of your favorite tall vanilla latte has gone up by 25 cents. All sizes of the vanilla lattes are now more expensive. As a result of this price increase, you would expect to see a

fall in the quantity demanded of vanilla lattes

To maximize production, people should

focus on the task in which they have a comparative advantage

What is quantity supplied?

it is the amount of an item that a seller is willing to sell at a particular price.

Which of the following is an argument for limiting international trade? An increase in international trade may:

lead to anticompetitive practices, such as dumping

Shifts in demand

lead to price and quantity to move in the same direction

The ___________ suggests, decisions about quantities are best made incrementally.

marginal principle

GDP is defined as the:

market value of all final goods and services produced within a country in a given year.

The labor force participation rate is the:

percentage of the working age population that is either employed or unemployed

The Producer Price Index is an index that tracks the:

price that businesses pay over time for the inputs used in the production process

An import is a good or service:

purchased from a foreign seller

An equilibrium price is a price where the

quantity supplied equals the quantity demanded

If the price of jet fuel rises, the

quantity supplied of jet fuel increases

A market is a

setting that brings together potential buyers and sellers.

Government-provided financial funding to households to compensate for bad outcomes such as unemployment, illness, disability, or outliving your savings is known as a:

social insurance system

Due to a decline in demand and popularity, Ford Motor Company is planning to phase out traditional sedans such as 'Fusion' and 'Taurus' to focus on SUVs and trucks. Ford's sedans and trucks/SUVs are

substitutes-in-production

Suppose that a CPI basket includes avocados, pineapples and oranges. Avocados become very expensive, and consumers substitute away from avocados and buy hummus instead. If the CPI basket does not change to reflect the move away from avocados, the result is:

substitution bias

When a manager uses comparative advantage to assign tasks in a workplace, then each

task is assigned to the worker with the lowest opportunity cost for performing the task.

A tariff is a:

tax on imported products

Intergenerational mobility is the extent to which:

the economic status of children is independent of the economic status of their parents.

A market's deadweight loss is calculated as:

the economic surplus at the efficient quantity minus the economic surplus at the actual quantity.

The law of demand refers to

the inverse relationship between price and quantity demanded

The law of supply refers to

the positive relationship between price and quantity supplied

The law of diminishing returns states that:

when one input is held constant, while other inputs are increased, eventually output will increase by smaller and smaller amounts.

Human capital refers to:

worker skills and knowledge

Diminishing marginal benefit

is when buying an additional item yields a smaller marginal benefit than the previous item.