Macroeconomics

Instead of going to college, you could have taken a job making $32,000 a year. Instead, you chose to go to college and work part-time at the university making $8,000 a year. Your cost of college enrollment is $15,000 a year. What is your opportunity cost of going to college per year? a. $32,000 b. $24,000 c. $47,000 d. $39,000

24,000. (32,000-8,000)

Darrell's opportunity cost of producing a pizza is ½ a salad. Susan's opportunity cost of producing a salad is ½ a pizza. Suppose that Darrell specializes in pizza production and Susan specializes in salad production. Which of the following is a price at which both Darrell and Susan would benefit from trading? A) 1 salad for 1 pizza B) 1 pizza for 2 salads C) 1 salad for 1/4 a pizza D) 1 pizza for 1/3 a salad

A

When analyzing a bowed-out PPF, it is clear that economic efficiency is: A) Achieved when it is not possible for society to make more of one good without making less of another good. B) Only attainable if the society produces only one good C) Primarily concerned with what is fair D) The same thing as economic equity

A

Which of the following is an example of a positive statement? A) A higher tax on gasoline burdens firms more than those in poverty B) Unemployment and inflation are equally important problems C) The unemployment rate should never be higher than 6% D) An increase in government spending is bad for the country

A

A car insurance company is willing to offer accident-free drivers a discount. This is an example of: a. A positive incentive b. A negative incentive c. An opportunity cost d. A comparative advantage e. Scarcity

A positive incentive

Economic efficiency is: a. The same thing as economic equity b. Primarily concerned with what is fair c. Only attainable if everyone pursues their own self-interest d. Achieved when it is not possible to make someone better off without making someone else worse off

Achieved when it is not possible to make someone better off without making someone else worse off

A market failure... a. Can arise because of the unregulated operation of markets b. Yields undesirable results c. Can result in a monopoly d. Can result in the underproduction of public goods e. All of the above

All of the above

Which of the following are determinants of economic growth? a. Capital investment b. Technological advances c. Improved production processes d. All of the above e. None of the above

All of the above

Which of the following could provide an indirect incentive? a. Prohibition on alcohol b. An increase in wages c. Seat belt laws d. Lower taxes on gasoline e. All of the above

All of the above

Which of the following is consistent with the law of demand? a. A decrease in the price of a gallon of milk causes a decrease in the quantity of milk demanded. b. An increase in the price of a soda causes a decrease in the quantity of soda demanded. c. An increase in the price of a tape causes an increase in the quantity of tapes demanded. d. A decrease in the price of juice causes no change in the quantity of juice demanded.

An increase in the price of a soda causes a decrease in the quantity of soda demanded.

An Incentive A) Could be a reward but could not be a penalty B) Is a motivation resulting in a decision C) Is the opposite of a tradeoff D) Could be a penalty but could not be a reward

B

Fundamentally, all economic decision-makers are faced with: A) Depreciation of stocks and bonds B) Unlimited wants and scarce resources C) Income distribution inequality D) Excess resource capacity

B

What are the effects of a per-unit tax on sellers? a. Buyers and sellers always split the tax b. Buyers and sellers split the tax depending on their relative elasticities c. The equilibrium quantity decreases d. The equilibrium quantity increases

B. Depends on their relative elasticities

Apartment rent control in New York City is a historical example of: a. Government intervention to ensure a market equilibrium is reached b. A subsidy for landlords c. A nonbinding price floor d. A black market e. A binding price ceiling

Binding price ceiling

The fact of increasing opportunity costs means that a production possibilities frontier will a. Be a straight line b. Reach a maximum and then gradually decrease c. Bow outward d. Shift outward over time e. Be linear

Bow outward

A rational choice A) Results in the most logical outcome B) Is not dependent on preferences C) Compares the marginal cost and marginal benefit associated with a decision D) Will result in zero waste

C

Which of the following is not a microeconomics topic: A) Calculating the optimal amount of production for a firm B) The market for pizza C) Analyzing the factors that affect the unemployment rate over time D) Measuring the total operating costs for a paper manufacturing plant

C

In evaluating a relationship between x and y, ceteris paribus means other variables a. Are not relevant to x and y b. Move in opposite directions to x and y c. Are not changing while x and y change d. Move in the same direction as x and y

C. are not changing

A rational choice: a. Results in the most logical outcome b. Compares the relevant costs and benefits c. Is not dependent on preferences d. Will result in zero waste

Compares the relevant costs and benefits

In 2009, the federal government created a program called Cash for Clunkers whereby consumers could trade in a less efficient car for a more efficient car and receive a higher value than they would have otherwise. How would an economist understand the decision that consumers faced? a. Consumers would compare the marginal benefits to the marginal costs of replacing their car, and this program made sure that the marginal benefits would exceed the marginal costs b. Consumers would compare the marginal benefits to the marginal costs of replacing their car, and this program made sure that marginal costs would exceed marginal benefits c. The Cash for Clunkers program increased the opportunity cost of replacing a car d. The Cash for Clunkers program served as a negative incentive to replacing fuelinefficient cars e. The Cash for Clunkers program served as an indirect incentive to replacing a fuel-inefficient car

Consumers would compare the marginal benefits to the marginal costs of replacing their car, and this program made sure that the marginal benefit exceeded the marginal cost

As output moves from point a to point b to point c along the PPF in the above figure, the opportunity cost of one more unit of good X A) Falls. The opportunity cost of one more unit of good Y also falls B) Falls. The opportunity cost of one more unit of good Y rises C) Rises. The opportunity cost of one more unit of good Y also rises D) Rises. The opportunity cost of one more unit of good Y falls

D

You have the choice of going to the mall for the day, staying at home to clean your room, or taking a day-trip vacation to the coast. If you decide to take the day-trip to the coast, the opportunity cost of the trip is A) Staying at home and cleaning your room B) Going to the mall C) Nothing because you value your vacation time more than your other options D) Going to the mall or staying home, depending on which you would have done otherwise

D

A society that is producing on its production possibilities frontier is a. Not utilizing all of its resources b. Not being technologically efficient c. Producing too much output d. Fully utilizing all of its productive resources

Fully utilizing all of its productive resources

Positive and negative incentives

Incentives that encourage action

You have the choice of going to the mall for the day, staying at home to clean your room, or taking a day-trip vacation to the coast. If you decide to take the day-trip to the coast, the opportunity cost of the trip is a. Staying at home and cleaning your room b. Going to the mall or staying home, depending on which you would have done otherwise c. Nothing because you value your vacation time more than your other options d. Going to the mall

Mall/staying at home, depends on what you would have done otherwise

A competitive market... a. Consists of a small amount of buyers and sellers b. Is a market where no one buyer or seller can influence the price c. Is the result of government regulation in the economy d. Is a market where there is one seller e. None of the above

No one buyer or seller can influence the market

In economics we learn that: a. Tradeoffs allow us to have more of everything we value b. Tradeoffs allow us to avoid the problem of opportunity cost c. Opportunity costs are all of the possible alternatives given up when we make a choice d. None of the above answers is correct.

None of the above

In the case of a positive externality a. Too much is produced at too low of a price b. Too little is produced at too high of a price c. Too much is produced at too high of a price d. Too little is produced at too low of a price e. None of the above

None of the above

Which of the following would cause demand to shift to the right? a. Technological innovation b. A newly discovered oil reserve c. Popularity growing for a particular good d. Producers temporarily run a clearance sale e. Higher taxes

Popularity growing for a particular good

The government has imposed a price control for many agricultural products in an effort to support farmers. The equilibrium price is $3 and the equilibrium quantity is 105,000 units. The government imposes a price control of $6. As a result, quantity demanded falls to 90,000 units and quantity supplied rises to 120,000. Which of the following is true about the disequilibrium that occurred: a. This is a price floor that results in a shortage is 30,000 units b. This is a price ceiling that results in a surplus of 120,000 units c. This is neither a price floor or a price ceiling, as the price control is not effective d. This is a price floor that results in a surplus of 30,000 units e. This is a price ceiling that results in a surplus of 30,000 units

Price floor that results in a surplus

If demand and supply both shift simultaneously to the left then what can you know for sure? a. Ep increases; Eq uncertain b. Eq decreases; Ep uncertain c. Ep decreases; Eq uncertain d. Eq increases; Ep uncertain e. Eq decreases; Ep remains the same

Quantity decreases, price is uncertain

Which of the following is NOT an assumption that economists make when developing a production possibilities frontier (PPF)? a. We live in a world with only two goods b. There are no increases in technology c. There is no change in available resources d. Society will always be producing somewhere on the PPF e. There are no decreases in technology

Society will be producing somewhere along the PPF

A technological advancement for Good A will shift the _______ curve of good A to the _________, making the equilibrium price _________. a. Demand; left; decrease b. Supply; right; increase c. Demand; right; increase d. Supply; left; increase e. Supply; right; decrease

Supply, right, decrease

What is the opportunity cost of taking this exam? a. All of the things that you could have done by not studying b. Each of the questions that you miss on the exam c. The highest valued alternative that you gave up to prepare for and take this exam d. The money you spent purchasing the textbook and other materials you study with e. The money you spent on tuition

The highest valued alternative that you gave up to prepare for and take this exam

As a discipline, economics is best described by which of the following? a. The study of how to control the effects of government actions b. The study of how to control the preferences of consumers so that there will be enough resources to produce all the goods and services that consumers want c. The study of how to use scarce resources to satisfy unlimited wants and needs d. The study of how to dispose of excess goods and services that nobody wants e. The study of how to maximize profits for firms

The study of how to use scarce resources to satisfy unlimited wants

invisible hand

The unobservable market force that helps the demand and supply of goods in a free market to reach equilibrium automatically

Which of the following is true about common-pool resources a. They are rival, but not excludable b. They are excludable, but not rival c. They are rival and excludable d. They are non-rival, and non-excludable e. They consist of cinemas, private parks, and satellite television

They are rival, but not excludable

Which of the following is a macroeconomic question? a. How many textbooks should be published by a publisher? b. How much should English majors earn after college? c. How do members of a household decide whether to clean their own house or hire someone else to do it? d. What is the rate of unemployment? e. What is the price of a new 40-inch television?

What is the rate of unemployment?

4. Consumer surplus is calculated as: a. Price - WTP b. Price - WTS c. WTS - Price d. WTP - Price e. None of the above

Willingness to pay- price

Scarcity

a limited nature of society's resources,nothing is infinite in nature (not even air or water)more is preferred to less --- unlimited wants

Which of the following is an example of a positive statement? a. An increase in government spending is bad for the country b. A higher tax on gasoline burdens firms more than those in poverty c. The unemployment rate should never be higher than 6% d. Unemployment and inflation are equally important problems

b. A higher tax on gasoline burdens firms more than those in poverty

If a country must decrease current consumption to increase the amount of capital goods it produces today, then it must a. Be using resources inefficiently today, but will be more efficient in the future b. Be producing along the production possibilities frontier today and its production possibilities frontier will shift outward if it produces more capital goods c. Must be producing outside the production possibilities frontier and will continue to do so in the future d. Must not have private ownership of property and will have to follow planning authorities' decisions today and in the future

b. Be producing along the production possibilities frontier today and its production possibilities frontier will shift outward if it produces more capital goods

Google has started a project to scan all books and make those that are not copyrighted available to people free of charge. Why is it important that only books without a copyright are available? a. If all books were scanned and available free of charge, copyright holders would have a positive incentive to continue writing and publishing books. b. If all books were scanned and available free of charge, copyright holders would have a negative incentive to continue writing and publishing books. c. If only copyrighted texts were scanned and available free of charge, copyright holders would face an indirect incentive to continue writing and publishing books. d. If only non-copyrighted texts were scanned and available free of charge, copyright holders would face a negative incentive to continue writing and publishing books. e. If only non-copyrighted texts were scanned and available free of charge, copyright holders would face an indirect incentive to continue writing and publishing books.

b. If all books were scanned and available free of charge, copyright holders would have a negative incentive to continue writing and publishing books.

Jen and Michelle both produce posters and t-shirts, and want to make gains through trade. How should they decide who will specialize in t-shirts and who will specialize in posters? a. If Jen has an absolute advantage for producing t-shirts, she should specialize in t-shirts b. Jen and Michelle should each produce the goods with their respective lowest opportunity costs c. Michelle should only trade if she has an absolute advantage for both t-shirts and posters d. They should not specialize since posters and t-shirts require different raw materials

b. Jen and Michelle should each produce the goods with their respective lowest opportunity costs

As output moves from point a to point b to point c along the PPF in the above figure, the opportunity cost of one more unit of good X a. Rises. The opportunity cost of one more unit of good Y also rises b. Rises. The opportunity cost of one more unit of good Y falls c. Falls. The opportunity cost of one more unit of good Y rises d. Falls. The opportunity cost of one more unit of good Y also falls

b. Rises. The opportunity cost of one more unit of good Y falls

15. Nolan can mow 10 lawns per day or trim 20 bushes per day. Meanwhile, John can mow 12 lawns in a day or trim 16 bushes per day. Which of the following is true? a. Nolan has the absolute advantage over John in terms of mowing lawns b. John's opportunity cost of mowing one lawn is trimming 3/4 of a bush c. John has a comparative advantage over Nolan in terms of mowing lawns d. Nolan's opportunity cost of trimming one bush is mowing 2 lawns

c. John has a comparative advantage over Nolan in terms of mowing lawns Nolan OC for mowing 1 lawn is 2 (20/10=2) bushes trimmed. John's OC for mowing 1 lawn is 4/3 (16/12=4/3) 4/3 is less than giving up 2

17. On the vertical axis, the production possibilities frontier shows ________; on the horizontal axis, the production possibilities frontier shows ________. a. the quantity of a good; the number of workers employed to produce the good b. the quantity of a good; the price of the good c. the quantity of a good; a weighted average of resources used to produce the good d. the quantity of one good; the quantity of another good

d. the quantity of one good; the quantity of another good

Indirect and direct incentives

ex) if one gas station lowers its prices, it most likely will get business from customers who would not usually stop there. This is a direct incentive. Lower gasoline prices also work as an indirect incentive, since lower prices might encourage consumers to use more gas.indirect incentives can can cause unintended consequence, ex) people who were supposed to use government assistance as a safety net until they can find a job use it instead as a permanent source of income.

Incentives

factors that motivate you to act or to exert effort(positive and negative, and direct and indirect)

If the price of a candy bar is $1 and the price of a fast food meal is $5, a. the money price of a fast food meal is 1/5 of a candy bar. b. the money price of a candy bar is 1/5 of a fast food meal. c. the relative price of a fast food meal is 5 candy bars. d. the relative price of a candy bar is 5 fast food meals

the relative price for a fast-food meal is five candy bars