Macro test one

A price ceiling is a legally mandated:

maximum price above which goods or services cannot be sold.

Which component is the smallest part of U.S. GDP?

net exports

Increasing opportunity costs occur along the PPF because:

not all resources are equally well suited to produce all goods.

One of the key concepts involved in the circular flow diagram is that:

one person's spending is another person's income.

Which of the following is NOT a concern regarding GDP as a measure of economic activity?

the value of investments in the stock and bond markets

At the equilibrium price:

total surplus is maximized.

Suppose that a customer's willingness to pay for a product is $5, and the seller's willingness to sell is $4. If the negotiated price is $3, how much is consumer surplus?

$2

Which of the following items would be included in the GDP accounts?

$50 consultation on the phone with a psychic adviser

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

David Ricardo would be MOST likely to agree with which one of the following statements?

Free trade benefits both trading countries.

Which is an example of a normative question?

How should a society achieve full employment?

Which of the following is a macroeconomic topic?

a study of the business cycle

Marginal analysis would put an emphasis on:

additional costs and benefits.

Efficiency within economics focuses on:

how well resources are used and allocated.

A shift to the right of the supply curve could be caused by

improvement in production technology.

Voluntary trade between nations

is a positive-sum game.

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

money

All of the following fall under the category of microeconomics, EXCEPT:

the cost of living has risen due to rising housing and food prices.

The best definition of externalities is:

the economic effects of individual actions on third parties.

When economists refer to a "market demand" curve, we know that it represents:

the horizontal summation of individual demand curves.

The opportunity cost of buying a ticket to a major league baseball game and then going to the game is:

the next best alternative activity that could have been undertaken.

Which of the following is NOT correct about markets?

They require a physical location for transactions to take place.

Suppose the equilibrium price of a bunch of carrots is $1. The price floor instituted by the government is $1.50.

We would expect to see a surplus of carrots.

Which of the following will cause a movement down along a demand curve?

a decrease in the product price

Which of the following is NOT a factor of economic growth?

a drop in the savings rate

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

a mismatch of information

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

allocative efficiency.

It must be recognized that private markets:

can fail.

John is a farmer and thinks he will make a profit next year, if the weather stays the same, if the price of his crop doesn't change, and if the price of fertilizer and seed doesn't change. An economist would say that the farmer thinking he will make a profit is an example of:

ceteris paribus.

Deadweight loss reduces:

consumer surplus and producer surplus.

The difference between what the market would be willing to pay and the market price is:

consumer surplus.

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

decrease in the population.

Everything else the same, if investment expenditures rise by $300 billion and imports increase by $300 billion, then GDP:

decreases by $600 billion.

Ceteris paribus, the effect of a decrease in income on a normal good is to shift the:

demand curve to the left, reducing both equilibrium price and output.

The way an economy allocates output to consumers is called:

distribution.

A decrease in demand causes the equilibrium price to __________ and the equilibrium quantity to ____________.

fall; fall

When a recession gets under way:

firms start to lay off workers to reduce costs.

In the national income and product accounts system the two main approaches to measuring the size of the economy are:

income and expenditures.

If a country has few resources:

it will still have a comparative advantage in something.

An individual's valuation of a good or service is:

known as "willingness to pay."

Disposable personal income can be either __________ or __________.

spent; saved

scarcity is best defined as

unlimited wants exceed limited resources

There would be no economic problems in a world where all resources are:

unlimited.

Business cycles:

vary in duration and magnitude.