Macroeconomics Exam 1 Worksheets February 28th

All of the following questions or statements regarding medical school are positive except: 39) A) Medical students who enter specialized fields make a larger contribution to society than do student who enter primary care. B) Have tuition increases had a large effect or a small effect on the number of applications to medical school? C) How do changes in expected future incomes affect the decisions of medical students about which specialty to choose? D) What role does tuition play in a student's decision about whether to attend medical school?

A

An office supply store sells a ream of printer paper at a fixed price of $4.50. Which of the following is a term used by economists to describe the money received from the sale of an additional ream of paper? A) marginal revenue B) gross earnings C) marginal costs D) pure profit E) net benefit

A

Cassie's Quilts alters, reconstructs, and restores heirloom quilts. Cassie has just spent $800 16) 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 is the marginal cost of completing the task? A) $200 B) $500 C) $1,000 D) $1,000 plus the value of her time

A

Economic models A) are simplified versions of reality. B) can not be used to analyze real-world issues. C) make no assumptions in order to remain as accurate as possible. D) magnify the complexity of economic issues in order to provide useful data.

A

Economics is the study of the ________ people make to attain their goals, given their ________ 3) resources. A) choices; scarce C) purchases; unlimited B) decisions; household D) income; available

A

In the first six months of 2003, branches of Commerce Bank in New York City were robbed 14 48) times. The New York City Police recommended steps the bank could take to deter robberies, including the installation of plastic barriers called "bandit barriers." The police were surprised the bank did not take their advice. According to a deputy commissioner of police, "Commerce does very little of what we recommend. They've told our detectives they have no interest in ever putting in the barriers." It would seem that Commerce Bank would have a strong incentive to install "bandit barriers" to deter robberies. Why wouldn't they do it? A) The banks must have weighed the cost of installing bandit barriers against the benefits and decided that they have "no interest in ever putting in the barriers." B) The banks would rather delay installation of any theft deterring equipment in anticipation of new, lower-cost innovations in the security devices market. C) The banks probably resent any interference from the police department. D) The banks are concerned that "bandit barriers" would send the wrong message to customers that the bank is unsafe.

A

Opportunity cost is defined as A) the highest valued alternative that must be given up to engage in an activity. B) the total value of all alternatives that must be given up to engage in an activity. C) the monetary expense associated with an activity. D) the benefit of an activity.

A

Which of the following best describes an assumption economists make about human behavior? 49) A) They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time. B) They assume that people take into account the question of fairness in all decisions they make. C) They assume that individuals act rationally all the time in all circumstances. D) They assume that individuals act randomly.

A

Which of the following is a macroeconomics question? 43) A) What determines the minimum wage? B) What factors determine the price of Oreo cookies? C) What determines the production of video game consoles? D) What determines the salaries of college professors?

A

Which of the following is a normative economic statement? A) The federal government is considering raising the gasoline tax to promote the use of public transportation. B) With falling home prices and rising mortgage interest rates, the amount of foreclosures has increased. C) Fashion designers should be allowed to copyright designs to promote innovation. D) Rising global demand for diesel and heating oil has led to increases in the price of crude oil.

A

________ involves undertaking an activity until its marginal benefits equal marginal costs. A) Marginal analysis B) Scarcity reduction C) Market intervention D) Central planning

A

9) What does the term "marginal" mean in economics? A) the edge of a market B) an additional or extra C) illegal D) trivial E) secondary D) a and b. E) a, b, and

B

Cassie's Quilts alters, reconstructs, and restores heirloom quilts. Cassie has just spent $800 15) 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 is her marginal benefit if she sells the quilt "as is" now? A) $100 B) $900 C) She makes a marginal loss of $600, not a marginal benefit. D) The marginal benefit cannot be determined.

B

Cassie's Quilts alters, reconstructs, and restores heirloom quilts. Cassie has just spent $800 17) 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? A) She should not do any more work on the quilt because she has already spent too much time on it and has not been paid for that time. B) She should purchase the period fabric, complete the task and then sell the quilt. C) She should cut her losses and sell the quilt now. D) It does not matter what she does; she is going to take a loss on her project.

B

How does a market system prevent people from getting as many goods and services as they 30) wish? A) Governments interfere with the market mechanism to influence the allocation of goods and services. B) The market system allocates goods and services to those who are able to pay for those products and therefore income is a limiting factor. C) In a market system, firms can charge any price they want, thus preventing poor people from getting as many goods and services as they wish. D) The government imposes taxes on those who earn beyond a certain amount of income.

B

In a market economy, ________ interact in markets to decide the answers to the fundamental 31) economic questions. A) large corporations B) households and firms C) state and local governments D) the judicial and legislative branches of the federal government

B

In economics, activities done for others, such as providing house cleaning or dental work, are 45) referred to as A) physical capital. B) services. C) goods. D) technology.

B

Lionel's Lawn Care is a company that maintains residential yards. Lionel's cost for his standard 19) 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 shrub-trimming service to the standard package? A) $15 B) $10 C) $25 D) $40

B

Lionel's Lawn Care is a company that maintains residential yards. Lionel's cost for his standard 20) 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. Should Lionel continue to offer the shrub-trimming service? A) yes, but only if he raises the price of the standard package B) yes, his marginal benefit is greater than his marginal cost C) no, his marginal benefit is less than his marginal cost D) More information is needed for Lionel to make this decision.

B

The Stogie Shop, a cigar store in the mall, sells hand-rolled cigars for $10.00 and machine-made cigars for $2.50 each. What is the opportunity cost of buying a hand-rolled cigar? A) one-quarter of a machine-made cigar C) $10.00 B) 4 machine-made cigars D) $2.50

B

The cost incurred from the production of an additional unit of a product A) is called a loss. B) is a marginal cost to the firm. C) is called opportunity cost. D) must be zero for a firm to be efficient.

B

The processes used to produce goods and services describes 44) A) capital. B) technology. C) entrepreneurship. D) innovation.

B

The revenue received from the sale of an additional unit of a product 11) A) is called gross sales. B) is a marginal benefit to the firm. C) is called profit. D) is called a net gain.

B

The term "market" in economics refers to A) a legal institution where exchange can take place. B) a group of buyers and sellers of a product and the arrangement by which they come together to trade. C) a place where money changes hands. D) an organization which sells goods and services.

B

What is an economic model? 50) A) It is a description of an economic issue that includes all possible related information. B) It is a simplified version of some aspect of economic life used to analyze an economic issue. C) It is a description of an economic issue based on official government information. D) It is a detailed version of some aspect of economic life used to analyze an economic issue.

B

Which of the following is a macroeconomics question? 41) A) What factors determine the price of iPhones? B) What determines the unemployment rate? C) What determines the wages and benefits of flight attendants? D) How is the production quantity of digital cameras determined?

B

Which of the following is an example of an economic trade-off that a firm has to make? A) deciding why consumers want its products B) whether it is cheaper to produce with more machines or with more workers C) deciding what profit margin it desires for its products D) whether or not consumers will buy its products

B

Your roommate, Serafina, a psychology major, said, "The problem with economics is that it 7) assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with her comment? A) I disagree with her. If we cannot assume that decisions are correct, then we will not be able to examine the moral implications of these decisions. B) I disagree with her. Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave rationally, meaning they make the best decisions given their knowledge of the costs and benefits. C) Yes, I agree with her. Economic theory should allow for irrational behavior so that we can have more reliable predictions. D) Yes, I agree with her. One cannot make predictions about economic behavior because in reality people make incorrect choices in many situations.

B

Economists assume that A) people put other people's interests ahead of their own. B) consumer behavior is explained by the existence of unlimited resources. C) optimal decisions are made at the margin. D) individuals behave in unpredictable ways.

C

Economists assume that rational people A) only weigh the benefits and costs of the most desirable alternative actions. B) never use all available information as they act to achieve their goals. C) respond to economic incentives. D) undertake activities that benefit others and hurt themselves.

C

Scarcity refers to the situation in which A) a country's population is larger than its resource base. B) a nation's poverty level increases faster than its population. C) unlimited wants exceed limited resources. D) unlimited resources exceed limited wants.

C

Which of the following is a microeconomics question? 40) A) Why has growth in the economy slowed down over the past decade? B) Why do economies experience periods of recession? C) How will Apple decide on a selling price for the iPad? D) Will government intervention lower the unemployment rate?

C

Which of the following is a microeconomics question? 42) A) Why hasn't the federal government raised the minimum wage? B) When will the government better secure the borders? C) How does Fiat decide on the price of the 500 Pop model? D) What determines the level of U.S. imports and exports?

C

Which of the following is a positive economic statement? A) U.S. firms should not be allowed to outsource production of goods and services. B) Everyone should live at the same standard of living. C) If the price of gasoline rises, a smaller quantity of it will be bought. D) The government should close income tax loopholes.

C

Which of the following is correct about the economic decisions consumers, firms, and the government have to make? A) Only individuals face scarcity; firms and the government do not. B) Firms and the government face scarcity, individuals only face shortages. C) Each faces the problem of scarcity which necessitates trade-offs in making economic decisions. D) Governments may face the problem of shortages but not scarcity in making economic decisions.

C

Which of the following is part of an economic model? A) opinions C) assumptions B) preferences of economic agents D) norms

C

Consider the following statements: Which of the above statements demonstrates that economic agents respond to incentives? A) a only. B) b only. C) c only. D) a and b. E) a, b, and a. Consumers rent more kayaks from a vendor that rents kayaks at a lower price than other rival kayak vendors along Waikiki beach. b. Department stores take steps to increase security since they believe it is more costly to allow shoplifting than to install expensive security monitoring equipment. c. Farmers produce more cotton when its selling price falls.

D

Every society faces economic trade-offs. This means A) not everyone can have enough goods to survive. B) society's output cannot be made available to all. C) some people live better than others do. D) producing more of one good means less of another good can be produced.

D

If the marginal cost of producing a television is constant at $200, then a firm should produce this item A) as long as its marginal cost does not rise. B) until the marginal benefit it receives reaches zero. C) only if the marginal benefit it receives is greater than $200 plus an acceptable profit margin. D) as long as the marginal benefit it receives is just equal to or greater than $200.

D

In economics, the difference between a firm's revenues and its costs is referred to as 46) A) factor payments. B) physical capital. C) capital gains. D) profit.

D

Marginal cost is the ________ associated with a particular increase in an activity. A) forgone cost B) total cost C) opportunity cost D) additional cost

D

Ted quits his $60,000-a-year job to be a stay-at-home dad. What is the opportunity cost of his 28) decision? A) depends on the "going rate" for stay-at-home dads B) the value he attributes to the joy of parenting C) zero, since he will no longer be earning a salary D) at least $60,000

D

The Farm Factory, a booth at the local Farmer's Market, sells fresh eggs for $1.50 per dozen and 32) fresh milk for $2.50 per gallon. What is the opportunity cost of buying a gallon of milk? A) $2.50 B) $1.50 C) 3/5 of a dozen eggs D) 1 2/3 dozen egg

D

The study of economics arises due to A) greed. B) resources. C) money. D) scarcity.

D

Which of the following statements about positive economic analysis is true? A) There is much less disagreement among economists over normative economic analysis than over positive economic analysis. B) Unlike positive economic analysis, normative economic analysis can be tested. C) There is much more disagreement among economists over positive economic analysis than over normative economic analysis. D) Positive analysis uses an economic model to estimate the costs and benefits of different course of actions.

D