Macro Unit 1 Chapter Quizzes
Published in 1776, ________ was written by Adam Smith.
"An Inquiry into the Nature and Causes of the Wealth of Nations"
Trade that is within a country or between countries is based on the principle of
Comparative Advantage
Which of the following is correct about the economic decisions consumers, firms, and the government have to make?
Each faces the problem of scarcity which necessitates trademinus−offs in making economic decisions.
Fast food restaurants produce a range of menu items such as hamburgers, chicken sandwiches, salads, and french fries. What fundamental economic question are they addressing by offering this range of items?
What to produce?
Firms
sell goods in the product market.
Scarcity refers to the situation in which
unlimited wants exceed limited resources.
The figure shows the production possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids. What is the opportunity cost of one dozen orchids?
2.5 Dozen Roses
Which of the following is part of an economic model?
Assumptions
CHAPTER 1
CHAPTER 1
Assume that Honduras has a comparative advantage in producing bananas and exports bananas to Brazil. We can conclude that
Honduras has a lower opportunity cost of producing bananas relative to Brazil.
How are the fundamental economic decisions determined in Canada?
Individuals, firms, and the government interact in a market to make these economic decisions.
________ is (are) unattainable with current resources.
Point C
Lionel's Lawn Care is a company that maintains residential yards. Lionel's cost for his standard package of mowing, edging, and trimming is $15, and he charges $25 for this service. For a total price of $40, Lionel will also trim shrubs, a service that adds an additional $10 to the total cost of the standard package. What is Lionel's marginal cost of adding the shrubminus−trimming service to the standard package?
$10
The table shows the output per week of two people, Minnie and Mickey. They can either devote their time to making hats or making umbrellas. What is Minnie's opportunity cost of making an umbrella?
4 hats
The figure shows the production possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids. If Vidalia chooses to produce 80 dozen roses, how many orchids can it produce to maximize production?
48 Dozen Orchids
At a price of $20, how many units will be sold?
600
Which of the following statements is true?
A decrease in demand causes equilibrium price to fall; the decrease in price then results in a decrease in quantity supplied.
________ means the supply curve has shifted to the right, while ________ refers to a movement along a given supply curve in response to an increase in price.
An increase in supply; an increase in quantity supplied
________ a nation's production possibilities frontier represents economic growth.
An outward shift of
CHAPTER 3
CHAPTER 3
CHAPTERS 2 & 7
CHAPTERS 2 & 7
All of the following are examples of spending on goods and services in the circular flow model except
Chaitanya buys a new spa pedicure chair for her expanding nail salon business.
If opportunity costs are ________, the production possibilities frontier would be graphed as a negatively sloped straight line.
Constant
In a market economy, who decides what goods and services will be produced?
Consumers and Producers
The first discussion of comparative advantage appears in a book written by
David Ricardo
Domestically produced goods and services sold to other countries are referred to as
Exports
The figure shows the supply and demand curves for two markets: the market for original Michelangelo sculptures and the market for Ray Ban sunglasses. Which graph most likely represents which market?
Graph B represents the market for original Michelangelo sculptures and Graph A represents the market for Ray Ban sunglasses.
The figure shows the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles. If the two countries have the same amount of resources and the same technological knowledge, which country has an absolute advantage in the production of popsicles?
Greenland
What is an economic model?
It is a simplified version of some aspect of economic life used to analyze an economic issue.
All of the following questions or statements regarding medical school are positive except:
Medical students who enter specialized fields make a larger contribution to society than do student who enter primary care.
A decrease in the price of substitutes in production would be represented by a change from
S1 to S2
Cassie's Quilts alters, reconstructs, and restores heirloom quilts. Cassie has just spent $800 purchasing, cleaning, and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively, she can sell the quilt "as is" now for $900. What should she do?
She should purchase the period fabric, complete the task and then sell the quilt.
If Sweden exports cell phones to Denmark and Denmark exports butter to Sweden, which of the following would explain this pattern of trade?
Sweden has a lower opportunity cost of producing cell phones than Denmark and Denmark has a comparative advantage in producing butter.
For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries?
Switzerland has the comparative advantage in watches.
Which of the following statements about the importance of trade to the U.S. economy is false?
The US economy is highly dependent on international trade for growth in its gross domestic product.
A consequence of increasing marginal costs of producing laptop computers in the United States is
The US will stop short of complete specialization in the production of laptop computers.
A decrease in input costs in the production of LCD televisions caused the price of LCD televisions to decrease. Holding everything else constant, how would this affect the market for video game consoles (a complement to LCD televisions)?
The demand for video game consoles would increase and the equilibrium price of video game consoles would increase.
Several studies have shown promising links between green tea consumption and cancer prevention. How does this affect the market for green tea?
The green tea demand curve shifts to the right because of a change in tastes in favor of green tea.
Assume there is a surplus in the market for hybrid automobiles. Which of the following statements correctly describes this situation?
The price of hybrid automobiles will fall in response to the surplus; as the price falls the quantity demanded will increase and the quantity supplied will decrease.
Which of the following is a normative economic statement?
The price of milk is too high.
Examining the conditions that could lead to economic growth is an example of a macroeconomics topic.
True
Which of the following is a macroeconomics question?
What determines the minimum wage?
The figure shows various points on three different production possibilities frontiers for a nation. A movement from ________ could occur because of additional government restrictions toward allowing immigrant labor.
Y to X
The figure shows various points on three different production possibilities frontiers for a nation. A movement from ________ is the result of advancements in plastic production technology.
Y to Z
Which of the following would cause the equilibrium price of apple juice to decrease and the equilibrium quantity of apple juice to increase?
a decrease in the price of apples
The term "market" in economics refers to
a group of buyers and sellers of a product and the arrangement by which they come together to trade.
Pakistan has developed a comparative advantage in the production of clothing. The source of its comparative advantage in this product is
a large supply of unskilled workers.
If property rights are not well enforced, all of the following are likely to occur except
a significant number of people will be willing to risk their funds by investing them in local businesses.
A decrease in the price of pork will result in
a smaller quantity of pork supplied.
Which of the following is a factor of production?
an acre of forested land
An increase in the demand for peanuts due to changes in consumer tastes, accompanied by an increase in the supply of peanuts as a result of favorable growing conditions, will result in
an increase in the equilibrium quantity of peanuts; the equilibrium price may increase or decrease.
Which of the following will not shift the demand curve for a good?
an increase in the price of the good
Holding everything else constant, a decrease in the price of GPS systems will result in
an increase in the quantity of GPS systems demanded.
If a decrease in income leads to an increase in the demand for macaroni, then macaroni is
an inferior good.
Voluntary exchange increases economic efficiency
because neither the buyer nor the seller would agree to a trade unless they both benefit.
Individuals who have never been the best at doing anything
can still have a comparative advantage in producing some product.
Economics is the study of the ________ people make to attain their goals, given their ________ resources.
choices; scarce
Many economists ________ protectionism because it ________ consumers and ________ jobs in domestic industries that use protected products.
criticize; cause losses to; eliminates
The basic economic problem of scarcity
has always existed and will continue to exist.
If smartwatches are considered substitutes for smartphones, the increase in the price of smartwatches would, all else equal,
increase the demand for smartphones.
As job opportunities for women and the wages those jobs pay have increased, the opportunity cost of doing housework has ________, so many families have chosen to hire specialists in households chores, such as cleaning services and lawn care services, because the cost of these specialists is ________ than the cost of the wife (or husband) performing those chores.
increased; lower
Suppose consumer preference for beef starts to rise while the cost of raising beef continues to rise. In the market for beef, this would be represented by the equilibrium price ________ and the equilibrium quantity ________.
increasing; increasing or decreasing
Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets. This statement describes the ________ argument for protectionism.
infant industry.
In general, the costs tariffs and quotas impose on consumers are
large in total but relatively small per person.
Economists assume that
optimal decisions are made at the margin.
Suppose the U.S. government encouraged new teachers to take jobs in underperforming schools by paying the new teachers a $20,000 bonus. These teachers would be exemplifying the economic idea that
people respond to economic incentives.
Economists believe the most persuasive argument for protectionism is to
protect infant industries.
If the quantity demanded for a product exceeds the quantity supplied, the market price will rise until
quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.
How has the growing popularity of factory outlet stores affected the market for clothing at retail department stores?
the demand curve for clothing at retail department stores shifts to the left.
If a firm expects that the price of its product will be lower in the future than it is today
the firm has an incentive to increase supply now and decrease supply in the future.
Which of the following are represented by the same flow in the circular flow model?
the flow of costs and the flow of revenue
A demand curve shows the relationship between
the price of a produce and the quantity of the product demanded.
Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states. In the market for gasoline,
the supply curve shifted to the left resulting in an increase in the equilibrium price.
Examples of comparative advantage show how trade between two countries can make each better off. Compared to their preminus−trade positions, trade makes both countries better off because in each country
total consumption of goods is greater.