MacroEcon Questions

Which of the following events would cause the supply curve to increase from S1 to S3?

A decrease in the price of inputs.

In the diagram to the​ right, illustrating a binding price ceiling at P3​, the amount of producer surplus transferred to consumers is represented by area _______ and the deadweight loss is equal to areas _________.

C; B and D

___________ surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. This component of economic surplus is illustrated in the diagram to the right by area ____

Consumer & A

_____________ ​decide(s) what goods and services will be produced.

Consumers, firms, and Government

_________ surplus is the difference between the lowest price a firm would be willing to accept and the price it actually receives. This component of economic surplus is illustrated in the diagram to the right by area ______

Producer & B

According to the law of supply,

There is a positive relationship between price and quantity supplied, as the price of a product increases, firms will supply more of it to the market.

According to the law of​ demand,

There is an inverse relationship between price and quantity demanded.

A hypothesis in an economic model is

Usually about a causal relationship, A statement that may be either correct or incorrect about an economic variable, Tested before it can be accepted (or not rejected).

According to the law of demand ​, there is an inverse relationship between price and quantity demanded. That​ is, the demand curve for goods and services slopes downward.​ Why?

When the price of a good​ increases, consumers' purchasing power​ falls, and they cannot buy as much of the good as they did prior to the price change.

Microsoft charges a price of​ $599 for a copy of Windows 7. Is this pricing decision​ rational?

When we assume the managers at Microsoft have used all available information and have weighed all known benefits and​ costs, we are assuming rationality.

A production possibilities frontier​ (PPF) is

a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.

Economic efficiency is

a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

The primary difference between absolute and comparative advantage is

absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.

In​ general, the term ​"ceteris paribus​" means

all else equal

A market is a group of _____________ of a good or service and the institution or arrangement by which they come together to trade.

buyers and sellers

In the diagram to the​ right, point A provides the​ _____, point B the​ _____, and point C the​ _____.

equilibrium​ price; market​ equilibrium; equilibrium quantity

In the diagram to the​ right, marginal benefit ________marginal cost at output level Q2. This output level is considered economically ________.

is equal to & efficient

Economics is a social science because

it considers human behavior/ particularly decision-making behavior, it applies the scientific method to the study of the interactions among individuals, it is based on studying the actions of individuals.

Firms choose how to produce the goods and services they sell. In many cases, firms face a trade-off between using more workers or using more machines. For example,

many times in the past several decades, firms may have chosen between a production method in the United States that uses fewer workers and more machines and a production method in China that uses more workers and fewer machines.

The diagram to the right illustrates a very important relationship in economics between two​ variables: the price of a good and the quantity demanded of that good. The two variables in this diagram​ are:

price​ (dollars per​ bushel) on the vertical axis and quantity​ (bushels per​ week) on the horizontal axis.

The primary difference between product markets and factor markets is that

product markets are markets for goods, while factor markets are markets for factors of production; labor, capital, natural resources, and entrepreneurial ability.

When we graph the relationship between two​ variables, we often want to draw conclusions about whether changes in one variable are causing changes in the other variable. Doing​ so, however, can lead to incorrect conclusions. Reasons for drawing incorrect conclusions about cause and effect include

reverse causality, an omitted variable

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls

scarcity.

When the government imposes price floors or price​ ceilings,

some people​ win, some people​ lose, and there is a loss of economic efficiency.

Microeconomics is

the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices.

A free market exists

when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed.

Economic surplus in a market is the sum of​ _____ surplus and​ _____ surplus. In a competitive​ market, with many buyers and sellers and no government​ restrictions, economic surplus is at a​ _____ when the market is in​ _____.

​consumer; producer;​ maximum; equilibrium

Consider the following statement: ​"An increase in supply decreases the equilibrium price. The decrease in price increases​ demand." The statement is

​false: decreases in price affect the quantity​ demanded, not demand.

Economists often are interested in percentage change from one period to the next. The percentage rate of change of gross domestic product​ (GDP) is an important macroeconomic variable. If in 2010 GDP was​ $11,150 billion​ dollars, and GDP increased to ​$11,345 billion in​ 2011, what is the growth rate of the U.S. economy in​ 2011?

1.7%

Which of the following would cause a shift in the demand curve from point A to point B?

An increase in income (Normal good), a decrease income (inferior good), An increase in the price of a substitute good.

In the diagram to the​ right, illustrating a binding price ceiling at P1​, the amount of producer surplus transferred to consumers is represented by area _______ and the deadweight loss is equal to areas _________.

B; C and E

A black market is

a market in which buying and selling take place at prices that violate government price regulations.

The diagram to the right is an example of

a time-series graph

The production possibilities frontiers depicted in the diagram to the right illustrate (only tank increases)

technological advances in the tank industry.

One of the great benefits of trade is

that is makes it possible for society to become better off by increasing both its production and its consumption.

Macroeconomics is

the study of the economy as a while, including topics such as inflation, unemployment, and economic growth.

A perfectly competitive market is a market that meets the conditions of

​(1) many buyers and​ sellers, (2) all firms selling identical​ products, and​ (3) no barriers to new firms entering the market.

​Trade-offs force society to make​ choices, particularly when answering the following three fundamental​ questions:

​One, what goods and services will be​ produced? Two, how will the goods and services be​ produced? Three, who will receive the goods and services​ produced?

On the diagram to the​ right, a movement from A to C represents a (D2 moves to the right)

change in demand

A(n) ____________ is someone who operates a​ business, bringing together the factors of production; labor, capital, and natural resources; to produce goods and services.

entrepreneur

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

marginal benefit equals marginal cost.

A_________ economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources

mixed

The diagram to the right illustrates a common economic relationship. Economists know this relationship as marginal cost​ (MC). The diagram illustrates the relationship between the change in total cost and quantity produced. There are three lines​ (A, B, and​ C) drawn tangent to the MC curve. At line​ A, the MC curve has a​ _____ slope. Where lines B and C touch the MC​ curve, the slope is​ _____ and​ _____.

negative; positive; increasing

​"Rent controls, government farm​ programs, and other price ceilings and price floors are​ bad." This is an example of a

normative statement. The statement is concerned with what should be.

The diagram to the right illustrates a supply curve. As with all supply curves, this curve's slope is _________ .

positive

The Scottish philosopher Adam Smith argued in 1776 that

prices would be a better job of coordinating the activities of better and sellers than guilds could.

The distinction between substitutes and complements is

substitute goods are used for the same purposes while complementary goods are used together.

Tax incidence is

the actual division of the burden of a tax between buyers and sellers in a market.

When the federal government crafts environmental policies that make it less expensive for firms to follow green​ initiatives,

the policies are consistent with economic incentives.

Property rights are

the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it.

Any model is based on making assumptions because

we cannot analyze an economic issue unless we reduce its complexity, Models have to be simplified to be useful

The distinction between a normal and an inferior good is

when income increases, demand for a normal good increases while demand for an inferior good falls.

Which of the following shows a positive nonlinear relationship?

y= 2 + sqrt(x)

Consumer and producer surplus measure the​ _____ benefit rather than the​ _____ benefit.

​net; total

Societies organize their economies in two main ways to answer the three questions of​ what, how, and who. A society can have a _________ economy in which the government decides how economic resources will be allocated. Or a society can have a __________ economy in which the decisions of households and firms interacting in markets allocate economic resources.

Centrally Planned & Market

The diagram to the right represents a demand curve for apples. The original demand curve is D1. If a factor other than price which affects demand​ changes, causing demand to decrease​, the resultant demand curve is represented by ____

D3

Market price is determined by

both supply and demand

The production possibilities frontiers depicted in the diagram to the right illustrate (both increase)

both the labor force and capital stock increasing

In the diagram to the right, point C indicates an

efficient result

Two key groups participate in markets. A _________ consists of all the individuals in a home. _________ are suppliers of goods and services. We can use a simple economic model called the _________ to see how participants in markets are linked.

household; firms; circular-flow diagram

Equity is

the fair distribution of economic benefits

Opportunity cost is

the highest valued alternative that must be give up to engage in an activity.

In the diagram to the​ right, the curve labeled​ "S" is apparently​ _____, while the curve labeled​ "D" is apparently​ _____.

​nonlinear; linear

The diagram to the right shows a hypothetical demand curve for apples. The slope of this curve is _____

-1.75

The basis for trade is _______ advantage.

Comparative

Deadweight loss is the reduction in economic surplus resulting from a market not being in competitive equilibrium. In the diagram to the​ right, deadweight loss is equal to the​ area(s):

C​ & E.

In the diagram to the​ right, illustrating a​ per-unit tax equal to P2 minus P3​, tax revenue is represented by the areas _________ and the excess burden of the tax is represented by areas ________.

D and F; E and G

____________is the study of the choices people make to attain their​ goals, given their scarce resources.

Economics

Consider the figure to the right and assume that it is the market for​ health-care services. When the​ "baby boomer" generation​ retires, the number of people who require health care increases by​ 30%, and, as a​ result, the number of​ health-care providers also​ increases, but by only​ 25%. What is the effect on the price of​ health-care services over​ time?

It increases because demand increased by more than supply.

Which of the following covers the study of topics such as inflation or​ unemployment?

Macroeconomics

A price ceiling is a legally determined __________ price that sellers may charge. A price floor is a legally determined __________ price that sellers may receive.

Maximum & Minimum

_________ is concerned with what is, and ________ is concerned with what ought to be. Economics is about _______ , which measures the cost and benefits of different courses of action.

Positive analysis & Normative analysis & Positive analysis

________ occurs when a good or service is produced at the lowest possible cost. _________ occurs when production is in accordance with consumer preferences.

Productive efficiency & Allocative efficiency

In the diagram to the​ right, when the price is ​$45 per player, the amount of the ________ is ___ million players per month.

Shortage & 14

The diagram in panel B is an example of

a demand curve

On the diagram to the​ right, a movement from B to C represents A

change in supply

In the United​ States, who receives the goods and services produced depends largely on __________.

how income is distributed

On the diagram to the​ right, movement along the curve from points A to B to C illustrates

increasing marginal opportunity costs.

The pie chart to the right illustrates hypothetical data for the market share for the United States automobile market. The percentage of the U.S. market that U.S. auto firms control is ________.

45%

In your economics​ class, you scored a 70 on the first​ quiz, a 88 on the second​ quiz, and an 73 on the third quiz. Your average quiz grade is ____ On the fourth​ quiz, you scored an 82. Did the fourth quiz raise your average? ______

77 & Yes