Macroeconomics Exam 1 Review

Which of the following is considered a firm's "factor of production"? A. Money or cash balances of the firm B. The firm's shares of common stock C. U.S. Treasury bonds owned by the firm D. The office building occupied by the firm

D

Which of the following would not be emphasized in a capitalist economy? A. Private ownership of capital and other resources B. Competition and decentralized decisions C. Reliance on market forces to coordinate economic activity D. Prevention of owners of capital from exposing this resource to risk

D

"Price" in the statement of the Law of Supply refers to: A. The amount that buyers are willing and able to pay for each unit of the product B. The cost of producing each unit of the product C. The total revenues that sellers receives for selling a given quantity of the product D. The total amount that buyers pay in order to acquire a given quantity of the product

A

Near an ocean beach, a high-rise building is being constructed that will block the scenic view of the ocean by the residents of a low-rise building. The Coase theorem suggests that this type of dispute between the owners of high-rise and low-rise buildings: A. Can be resolved by the owners themselves through individual bargaining B. Has to be resolved by city government officials C. Can only be resolved by a zoning ordinance restricting high-rise buildings D. Should be resolved by a government fine for the builder of the high-rise

A

One key is difference between government activities and private transactions is that: A. Government can enforce involuntary transactions, whereas private transactions are mostly voluntary B. Government can only produce services, whereas private producers can produce both goods and services C. Government does not run any production operations, whereas private firms have the main purpose of running production operations D. Government does not earn revenues from its activities, whereas private firms aim to earn revenues and profits

A

Refer to the diagrams above. In which of them would we see a shortage at the initial price after the indicated curve has shifted? A. A and D B. B and D C. B and C D. A and C

A

The economies of North Korea and Cuba are: A. Similar in that they are both basically command systems B. Similar in that they are both basically market systems C. Different in that North Korea has a command system while Cuba has a market system D. Different in that Cuba has a command system while North Korea has a market system

A

The government may not implement policies intended to redistribute income in which of the following economic systems? A. Laissez-faire capitalism B. Command system C. Mixed economy D. Market system

A

When economists speak of "demand" in a particular market, they refer to: A. The whole demand curve or schedule B. One point on the demand curve C. One price-quantity combination on the demand schedule D. How much of an item buyers want to buy at a given price

A

Which of the following is considered to be an entrepreneur? A. A self-employed person B. An MBA graduate hired by a firm to be its CEO C. A production-line worker D. A customer of a firm

A

Which of the following would not be considered a capital resource by economists? A. A van used by a mother to transport the family around B. An office computer used by an accountant C. A crane used by a building contractor D. A camera used by a professional photographer

A

An increase in demand for oil along with a simultaneous increase in supply of oil will: A. Decrease price and increase quantity B. Increase price and decrease quantity C. Increase quantity, but whether it increases price depends on how much each curve shifts D. Increase price, but whether it increases quantity depends on how much each curve shifts

C

From an economist's perspective, an important consideration for policies to address global warming is: A. The market for recyclable inputs B. The supply and demand for recycled products C. The marginal cost and marginal benefit of the policies D. A lawsuit that can arise from the enactment of the policies

C

In the U.S. market economy, the government performs the following prominent roles, except: A. Provide public goods and services B. Promote economic stability and growth C. Set prices for most resources D. Modifies the distribution of income

C

Refer to the above table and information. What project should the government select to achieve the maximum net benefit? A. A B. B C. C D. D

C

Refer to the above table. A technological advance lowers production costs such that the quantity supplied increases by 60 units of this product at each price. As a result of this technological change, equilibrium output in this market: A. Decreased by 60 units B. Increased by 60 units C. Increased by 30 units D. Decreased by 30 units

C

The market system is an economic system that: A. Produces more consumer goods than capital goods B. Produces more capital goods than consumer goods C. Gives private individuals the right to own resources used in production D. Emphasizes the government's power to control markets and direct economic activity

C

Which of the following statements about market failure is not true: A. Market failure causes an inefficient allocation of resources, even in a competitive market B. Market failure can come from causes on the demand-side or the supply-side of a market C. Market failure always results from some government action or policy in a market D. Market failure can result from the number of sellers in a market being too few to ensure competition

C

Which of the following statements about self-interest in a market system is false? A. Self-interest usually motivates an individual to deliver something of value to others B. Self-interest of entrepreneurs implies seeking maximum profits or minimum losses C. Self-interest applies only to capitalists and entrepreneurs, not to workers employed by others D. In a market system, consumers are just like firms: self-interest is what motivates them

C

Why might a company use barter rather than money to make a trade? A. Barter trade is generally more efficient than money-based trade B. Barter can enable two firms to trade when their cash flows are limited C. Money requires a coincidence of wants, barter is more direct D. Money is efficient only for large transactions, so barter is preferred for smaller transactions

B

Laissez-faire capitalism limits the government's economic functions to the following, except: A. Protecting private property rights B. Establishing a legal environment to enforce contracts among individuals C. Preventing individuals and firms from coercing others D. Setting prices of individual goods and services

D

One implication of the median-voter model is that at any point in time, most voters will: A. Be happy with the amount of government involvement in the economy B. Find government involvement in the economy to be too much C. Find government involvement in the economy to be too little D. Be unhappy with the amount of government involvement in the economy

D

One major role that the government plays in the market economy of the U.S. is: A. Setting production targets for major industries B. Requiring minimum levels of employment in major industries C. Allocating resources in various market activities D. Setting laws governing economic activity

D

Private ownership and property rights in a market system have the following implications, except: A. Individuals are free to take on the financial risks involved in a business B. Trades that take place in the economy are mutually-agreeable transactions among individuals C. Economic agents are allowed to act in their own self-interest D. Large firms are allowed to coerce other firms and individuals

D

Suppose that a consumer purchases just two goods, X and Y. The ratio of the price of good X to the price of good Y is the: A. Intercept on the Y axis of the budget line B. Intercept on the X axis of the budget line C. Size of the shift in the budget line D. Slope of the budget line

D

The so-called collective action problem refers to the: A. Problems faced by organizers in setting up a labor union B. Challenges faced by business when they have to deal with a labor union C. Inability of the government to discern the true preferences of everyone in society D. Greater difficulty in organizing and motivating large groups than small ones

D

Which statement is true about supply? A. There is an inverse relationship between price and quantity supplied B. Supply refers to the amount of inventory that sellers have in their warehouses C. As price decreases, producers are willing to put more of the good on the market for sale D. To entice producers to offer more of a good on the market for sale, price must rise

D

In understanding and analyzing "demand," we focus on how much of a product the buyers are: A. Willing and wanting to buy B. Actually buying now and in the recent past C. Able to buy with their given income D. Willing and able to buy

D

Which of the following situations is not an example of market failure: A. Ben's Department Store cannot charge passers-by for using the sidewalk outside the store B. Ben cannot afford to buy a high-end Mercedes Benz luxury car C. Ben's Place is the only restaurant in town and thus he has significant power to set menu prices D. Ben's Industries is dumping its wastewater into the unregulated river behind the factory

B

Which of the following will not cause a change in the demand for product A? A. A change in the number of buyers B. A change in the price of A C. A decline in consumer incomes D. A decrease in the price of close-substitute product B

B

At equilibrium in a market for a product, the total revenues received by sellers equal the: A. Market producer surplus B. Total amount spent by buyers on the product C. Total profits of sellers D. Market consumer surplus

B

From an economic perspective, when a student decides to go to the movies instead of studying for a test, it indicates that in the student's thinking the marginal: A. Benefit of studying is greater than the marginal cost of studying B. Cost of going to the movies is less than the marginal benefit of going to the movies C. Benefit of studying are greater than the marginal benefit of going to the movies D. Cost of going to the movies is greater than the marginal cost of studying

B

In a free-market economy, a product which entails a positive externality will be: A. Overproduced B. Underproduced C. Produced at the optimal level D. Provided solely by the government

B

International specialization and trade: A. Has to be done on a barter system B. Often requires the exchange of currencies C. Does not illustrate the division of labor D. Requires active government regulation

B

Oftentimes, the socially optimal quantity for a product that imposes external costs on the society is not zero, but something greater than zero. This is because completely eliminating the externality would involve: A. A much greater marginal benefit than marginal cost B. A much greater marginal cost than marginal benefit C. Having shortages in the market D. Having surpluses in the market

B

Refer to the above data. The government now introduces a subsidy payment to producers of $30 per unit. Assuming a purely competitive market for the product, the new equilibrium price will be between: A. $40-$50 B. $50-$60 C. $60-$70 D. $70-$80

B

The use of money for exchange and trade: A. Increases the importance of barter B. Fosters more specialization in production C. Reduces consumer sovereignty D. Raises the need for a coincidence of wants

B

A market for pollution rights can be expected to: A. Eliminate all pollution B. Produce a shortage of pollution C. Encourage potential polluters to increase emissions D. Provide potential polluters with a monetary incentive to reduce emissions

D

An increase in the demand for corn is more than offset by an increase in its supply. As a result the equilibrium price will: A. Increase and the equilibrium quantity will decrease B. Increase and the equilibrium quantity will increase C. Decrease and the equilibrium quantity will decrease D. Decrease and the equilibrium quantity will increase

D

By requiring car producers to install emission control devices on cars, the government forces these producers to internalize some of the external costs of auto pollution. This will lead to the equilibrium price of cars: A. Decreasing and the quantity increasing B. Decreasing and the quantity decreasing C. Increasing and the quantity increasing D. Increasing and the quantity decreasing

D