Microeconomics - Final Review
An increase in the price of hamburger would probably result in ________ in the demand for hamburger buns. A) a decrease B) an increase C) no change D) random fluctuations
A
An increase in demand with no change in supply will lead to ________ in equilibrium quantity and ________ in equilibrium price. A) an increase; an increase B) an increase; a decrease C) a decrease; an increase D) a decrease; a decrease
A
(Figure: Comparative Advantage) Look at the figure Comparative Advantage. Eastland has a comparative advantage in producing: A) oranges only. B) peaches only. C) both oranges and peaches. D) neither oranges nor peaches.
A
(Figure: Comparative Advantage) Look at the figure Comparative Advantage. Eastland has an absolute advantage in producing: A) oranges only. B) peaches only. C) both oranges and peaches. D) neither oranges nor peaches.
A
(Figure: Comparative Advantage) Look at the figure Comparative Advantage. The opportunity cost of producing 1 box of oranges for Eastland is: A) 1 box of peaches. B) 1/4 box of peaches. C) 4 boxes of peaches. D) 10 boxes of peaches.
A
(Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods. Point Z: A) is unattainable, all other things unchanged. B) is attainable if the economy is able to reach full employment. C) is attainable if the quantity and/or quality of factors decreases. D) will be attained as soon as the economy becomes efficient and moves to curve 2.
A
(Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods. The movement from curve 1 to curve 2 indicates: A) economic growth. B) a change from unemployment to full employment. C) a decrease in the level of technology. D) instability.
A
(Figure: Guns and Butter) Look at the figure Guns and Butter. On this figure, points A, B, E, and F: A) indicate combinations of guns and butter that society can produce using all of its factors efficiently. B) show that the opportunity cost of more guns increases but that of more butter decreases. C) indicate that society wants butter more than it wants guns. D) indicate constant costs for guns and increasing costs for butter.
A
(Figure: Supply and Demand in the Orange Juice Market) Look at the figure Supply and Demand in the Orange Juice Market. Suppose a hurricane hits Florida, where oranges are grown. What will be the most likely new equilibrium point in the orange juice market? A) A B) B C) D D) E
A
(Table: Employment Data) According to the data from the accompanying table, the unemployment rate is: A) 6.25%. B) 6.45%. C) 9.09%. D) 9.37%.
A
(Table: Labor Force Distribution) Based on the accompanying table, the unemployment rate is: A) 3.85%. B) 10%. C) 4.55%. D) 6.75%.
A
A simplified representation that is used to study a real situation is called: A) a model. B) a production possibility frontier. C) an assumption. D) a trade-off.
A
Consider the supply curve for cotton shirts. An increase in the price of cotton will: A) increase the supply of cotton shirts. B) decrease the supply of cotton shirts. C) increase the quantity supplied of cotton shirts. D) decrease the demand for cotton shirts.
A
GDP is the: A) total market value of all final goods and services produced in one year. B) total accumulated wealth of an economy. C) volume of all dollar transactions made in an economy in one year. D) dollar amount of all sales made in the economy in one year.
A
Government borrowing is: A) the amount of funds raised by government in financial markets. B) government spending on goods and services. C) government tax revenues. D) the amount of funds raised by government in the financial markets, government spending on goods and services, and government tax revenues.
A
If the supply and demand curves intersect at a price of $14, then any price below that would result in: A) a shortage. B) a surplus. C) equilibrium. D) an increase in demand.
A
In a market basket of goods: A) the quantities stay constant and the prices may change. B) the quantities may change and the prices are held constant. C) both the prices and the quantities are held constant. D) both the prices and the quantities may change.
A
In macroeconomics: A) aggregate data such as real GDP, the price level, and unemployment are analyzed. B) individual and firm decisions regarding utility and profit maximization are studied. C) long-term growth in not considered to be important. D) market intervention from the government is not considered important.
A
Inflation can be measured by: A) the percentage change in the CPI. B) the absolute change in the CPI. C) the absolute change in the GDP deflator. D) the percentage change in GDP .
A
Inflation is: A) a rising aggregate price level. B) an expansion of output. C) a rise in wages. D) a rise in the unemployment rate.
A
Long-run growth is: A) the sustained upward trend in aggregate output per person over several decades. B) the expansion phase of business cycles. C) the downturn phase of business cycles. D) the sustained downward trend in the employment rate over several decades.
A
Periods in which output and employment are falling are known as: A) recessions. B) booms. C) expansions. D) deflations.
A
Scarcity in economics means: A) We do not have sufficient resources to produce all the goods and services we want. B) The wants of people are limited. C) There must be poor people in rich countries. D) Shortages exist in nearly all markets.
A
Setting government spending and taxes in an effort to change overall spending in an economy is called: A) fiscal policy. B) monetary policy. C) investment. D) the stock market.
A
Structural unemployment is: A) unemployment that results when there are more people seeking jobs than there are jobs available at the current wage rate. B) unemployment experienced by those entering the labor force for the first time. C) zero when the economy is in full employment. D) caused by short-run economic fluctuations.
A
Table: GDP) GDP in the table is: A) $94 billion. B) $188 billion. C) $168 billion. D) $139 billion.
A
The most painful consequence of a recession is: A) rising unemployment. B) increasing inflation. C) increasing aggregate output. D) higher interest rates.
A
The primary difference between a change in supply and a change in the quantity supplied is that: A) a change in quantity supplied is a movement along the supply curve, while a change in supply is a shift in the supply curve. B) both a change in quantity supplied and a change in supply are movements along the supply curve, only in different directions. C) a change in supply is related to the supply curve, while a change in quantity supplied is related to shifts in the demand curve that elicit a change in supply. D) a change in supply is a movement along the supply curve, while a change in quantity supplied is a shift in the supply curve.
A
The total income households have after paying taxes and receiving government transfers is called: A) disposable income. B) private savings. C) aggregate spending. D) investment.
A
The unemployment rate is: A) the percent of the labor force that is unemployed. B) the number of people unemployed. C) the ratio of the labor force to the number of people unemployed. D) the average length of time someone is unemployed.
A
When an economy is in an expansion, unemployment: A) tends to fall, and overall prices tend to rise. B) and overall prices tend to fall. C) tends to rise, and overall prices tend to fall. D) and overall prices tend to rise.
A
When markets fail: A) government intervention may help. B) the market realizes the maximum possible gains from trade given the available resources. C) there may still be an efficient allocation of resources. D) no goods and services are produced.
A
When the price of armchairs increases, the: A) quantity supplied increases. B) supply increases. C) quantity supplied decreases. D) supply decreases.
A
Which of the following influences does not shift the supply curve? A) people deciding that they want to buy more of the product B) a decrease in the price firms expect to receive in the future C) a rise in the wages paid to workers D) the development of a new production technology
A
Which of the following is most likely a macroeconomics question rather than a microeconomics question? A) Is the national unemployment rate rising or falling? B) Are consumers buying more bottled water and less fruit juice? C) Are salaries for nurses rising or falling? D) Should a tax be levied on each ton of carbon a factory emits?
A
Which of the following is true? A) Inflation means an increase in the overall level of prices. B) Deflation refers to a decrease in prices only in the energy and transportation sectors. C) During inflation most people hold more cash than usual. D) Inflation was first a problem in the recession of 1929-1933.
A
Which of the following would NOT be a part of GDP? A) used car sales B) new residential construction C) a new truck purchased by a building contractor D) telephone service purchased for a home
A
With inflation: A) overall prices are increasing, although some prices may be increasing and some may be decreasing. B) all prices must be increasing. C) the economy must be contracting. D) the economy must be producing at full employment.
A
With regard to the aggregate price level, economists generally believe: A) price stability is a desirable goal. B) inflation is worse than deflation. C) deflation is worse than inflation. D) inflation actually benefits most retired people.
A
(Table: Employment Data) According to the data from the accompanying table, the labor force is: A) 33 million. B) 32 million. C) 31 million. D) 22 million.
B
During a recession, one will often observe: A) rising aggregate output. B) rising unemployment rates and falling aggregate output. C) rising employment rates. D) zero unemployment rates.
B
Fiscal policy refers to: A) the control of interest rates. B) the control of government spending and taxation. C) the control of the quantity of money. D) the control of interest rates and of government spending.
B
If goods A and Z are complements, an increase in the price of good Z will: A) increase the demand for good A. B) decrease the demand for good A. C) decrease the demand for good Z. D) decrease the demand for both good A and good Z.
B
If steak and potatoes are complements, when the price of steak goes up, the demand curve for potatoes: A) shifts to the right. B) shifts to the left. C) stays the same. D) shifts to the right and then moves back.
B
If the CPI is 180 in year 1 and 190 in year 2, the inflation rate between year 1 and year 2 is about: A) 5.26%. B) 5.56%. C) 6.5%. D) 10%.
B
If the cost of a market basket is $200 in year 1 and $230 in year 2, the price index for year 2 using year 1 as the base is: A) 100. B) 115. C) 130. D) 200.
B
Private savings is equal to: A) disposable income less taxes. B) disposable income less consumption. C) wealth. D) wealth plus government transfer payments.
B
Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette cheese over boiled new potatoes. If the price of Raclette cheese decreased, we would expect to see: A) an increase in demand for Raclette cheese. B) an increase in demand for new potatoes. C) no effect on the demand for either of the Raclette ingredients, since this is a traditional dish and its consumption does not depend on the prices of the ingredients. D) an increase in demand for Raclette cheese and for new potatoes.
B
Setting interest rates and the money supply in an effort to change overall spending in an economy is called: A) fiscal policy. B) monetary policy. C) investment. D) the stock market.
B
Suppose that a doctor who lives alone hires the services of a maid and pays her $15,000 a year to clean his house. Suppose that he marries her the following year. Other things equal, which of the following would be true about the reported official GDP the following year? A) It would rise. B) It would fall. C) It would stay the same. D) There is not enough information to evaluate the impact that it would have on GDP .
B
The ________ apples will decrease when apple prices rise. A) demand for B) quantity demanded of C) supply of D) equilibrium of
B
The local Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think that if you had not purchased the taco, you would have purchased the burrito. The opportunity cost of the taco is: A) the $3. B) your enjoyment of the burrito. C) the $3 and your enjoyment of the burrito. D) the $3, your enjoyment of the burrito, and your enjoyment of the nachos.
B
The money spent on domestically produced final goods and services: A) is called GDP . B) is equal to exports minus imports. C) is subtracted in the circular-flow model. D) is called GDP, is equal to exports minus imports, and is subtracted in the circular-flow model.
B
The paradox of thrift highlights: A) the role investment plays in the macroeconomy. B) how individual decisions to save more may worsen a recession. C) how an increase in spending occurs during recessions. D) the irrational behavior on the part of households.
B
To be counted as unemployed, one must: A) have had a job previously. B) be out of work and be actively looking for a job. C) have had a job before and be actively looking for work. D) be actively looking for a job and have at least a high-school diploma or its equivalent
B
Value added in national income accounts refers to the: A) value added by labor to the production process. B) difference between the final price and the value of inputs purchased. C) difference in profits at various stages of production. D) value of all the inputs used by the final producer.
B
When the value of a nation's imports exceeds the value of that nation's exports, the nation is said to have: A) hyperinflation. B) a trade deficit. C) price stability. D) a trade surplus.
B
(Table: Labor Force Distribution) Based on the accompanying table, the total population is: A) 486 million. B) 253 million. C) 278 million. D) 283 million.
C
A binding minimum wage in a labor market is set _____ the equilibrium wage and creates a _____ of labor. A) below; surplus B) below; shortage C) above; surplus D) above; shortage
C
A choice made ________ is a choice whether to do a little more or a little less of something. A) at the front end B) in the beginning C) at the margin D) ceteris paribus
C
An example of investment spending would be the: A) purchase of a bond. B) purchase of a loaf of bread. C) purchase of a new productive machine. D) purchase of a bond, a loaf of bread, or a new productive machine.
C
Controlling interest rates is an example of: A) fiscal policy. B) tax policy. C) monetary policy. D) exchange rate policy.
C
Deflation: A) raises the cost of making purchases and sales for which cash is required. B) can result in an increase in employment. C) encourages people to hold cash rather than invest in new factories and productive assets. D) is caused by changes in interest rates.
C
Efficiency wages are usually set by employers to: A) reduce unemployment. B) increase employment. C) provide an incentive for better performance. D) increase employment and provide better incentives for performance.
C
If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment, then its unemployment rate is: A) 4%. B) 7.5%. C) 10%. D) 67.5%.
C
If equilibrium exists: A) all individuals must have an equal amount of income. B) the price in that market will not fluctuate by more than 5%. C) there will be no remaining opportunities for individuals to make themselves better off. D) the number of buyers will equal the number of sellers.
C
If goods A and B are substitutes, a decrease in the price of good B will: A) increase the demand for good A. B) increase the demand for good B. C) decrease the demand for good A. D) increase the demand for good B and decrease the demand for good A.
C
In 2011, consumption spending is $7,000, government purchasing is $2,000, and investment spending is $1,500. If GDP for 2011 is $10,300, then: A) exports are $400 and imports are $200. B) exports are $100 and imports are $200. C) exports are $600 and imports are $800. D) exports are $500 and imports are $300.
C
In movement along a production possibility frontier, the opportunity cost to society of getting more of one good: A) is constant. B) is measured in dollar terms. C) is measured by the amount of the other good that must be given up. D) usually decreases.
C
In the local market for coffee, what would happen if Joyce's Java and Everyday Joe's coffee shops go out of business? A) The supply curve shifts to the right. B) The demand curve shifts to the left. C) The supply curve shifts to the left. D) The demand curve shifts to the right.
C
Ron quit his job in retail management and moved to Florida with his wife, a physician who opened a new practice there. He was not successful in his job search for the next four months. Ron's unemployment is known as: A) structural unemployment. B) cyclical unemployment. C) frictional unemployment. D) seasonal unemployment.
C
Suppose there are 70 million people in the labor force, of whom 60 million are employed. The unemployment rate is: A) 7%. B) 10%. C) 14.28%. D) impossible to calculate.
C
The alternation between recessions and expansions is known as the: A) unemployment rate. B) long-run economic growth. C) business cycle. D) macroeconomy.
C
The official unemployment rate ignores: A) people with professional jobs. B) people who work on commission. C) discouraged workers who have given up looking for a job. D) people with professional jobs, people who work on commission, and discouraged workers who have given up looking for a job.
C
The topics studied in macroeconomics include: A) the price of a motorcycle. B) the wages of engineers. C) the average price level in the economy. D) how much ice cream consumers buy.
C
Unemployment that occurs because it takes workers and employees time to find each other is called: A) cyclical unemployment. B) structural unemployment. C) frictional unemployment. D) discouraged unemployment.
C
When the United States and Mexico trade: A) the United States will be worse off because wages in Mexico are so low. B) Mexico will be worse off because the United States is a stronger economic power. C) both Mexico and the United States will be better off. D) both Mexico and the United States will be worse off.
C
Which of the following is most likely to shift the supply of milk to the right? A) a tax on each gallon of milk produced B) an increase in household income and milk is a normal good C) a decrease in the price of feed given to dairy cows D) the bankruptcy of many small dairy farms
C
You are a college student and not working or looking for work. You are: A) unemployed. B) in the labor force but not employed. C) not part of the labor force. D) not described by any of the above.
C
(Table: Production Possibilities Schedule I) Look at the table Production Possibilities Schedule I. The opportunity cost of producing the fourth unit of consumer goods is ________ units of capital goods.
D
A person who has no job but is looking for one is: A) unemployed. B) a discouraged worker. C) part of the labor force. D) unemployed and part of the labor force.
D
A price index: A) always includes a base year. B) measures the cost of purchasing a market basket of output across different years. C) is normalized to 100 for the base year. D) always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year.
D
Cyclical unemployment is characterized as: A) unemployment that occurs when people are between jobs. B) a lack of good matches between available jobs and the skills people have. C) the normal unemployment around which the actual unemployment rate fluctuates. D) the deviation in the actual rate of unemployment away from the natural rate.
D
Discouraged workers are those individuals: A) who are getting paid too little. B) who do not like their job. C) who are working part time but are looking for a full-time job. D) who have given up looking for a job.
D
Fiscal and monetary policies: A) have no role in macroeconomic policies. B) have been used by the government for over 250 years. C) are most effective in microeconomic settings. D) are used to correct for short-term economic fluctuations.
D
Gross domestic product is defined as: A) consumer spending + government purchases + financial spending + exports -imports. B) consumer spending + government transfers + investment spending + exports -imports. C) disposable income + taxes + investment spending exports + imports. D) consumer spending + government purchases + investment spending + exports -imports.
D
If nominal GDP increases from one year to the next: A) prices must have risen from one year to the next. B) real GDP must have risen from one year to the next. C) prices and real GDP must have risen from one year to the next. D) either output or prices or both must have risen from one year to the next.
D
In much of the country, homeowners choose to heat their houses with either natural gas or home heating oil. Which of the following would cause a change in the demand for natural gas? A) a change in the price of home heating oil B) a change in income C) an increase in consumer tastes for natural gas as an energy source D) all of the above
D
In one hour, the United States can produce 25 tons of steel or 250 automobiles. In one hour, Japan can produce 30 tons of steel or 275 automobiles. This information implies that: A) Japan has a comparative advantage in the production of automobiles. B) the United States has an absolute advantage in the production of steel. C) Japan has a comparative advantage in the production of both goods. D) the United States has a comparative advantage in the production of automobiles.
D
Market equilibrium occurs when: A) there is no incentive for prices to change in the market. B) quantity demanded equals quantity supplied. C) the market clears. D) there is no incentive for prices to change in the market, quantity demanded equals quantity supplied, and the market clears.
D
Opportunity cost is: A) about half of the monetary cost of a product. B) the dollar payment for a product. C) the benefit derived from a product. D) the value of the best alternative forgone in making any choice.
D
The demand curve for videos has shifted to the right. What could have caused it? A) a fall in the price of videos B) an increase in the price of videos C) an increase in the supply of videos D) an increase in the incomes of buyers
D
The labor force is: A) the total of people employed. B) the total population. C) the total of the population of working age. D) the total of people employed and unemployed.
D
The law of demand states that other things equal: A) as the price increases, the quantity demanded will increase. B) as the price decreases, the demand curve will shift to the right. C) as the price increases, the demand will decrease. D) as the price increases, the quantity demanded will decrease
D
The national accounts keep track of everything except: A) the spending of consumers and the government. B) the sales of producers. C) business investment. D) exchange rates.
D
The natural rate of unemployment: A) is composed of frictional, structural, and cyclical unemployment. B) is equal to zero. C) is always greater than the actual unemployment rate. D) is composed of structural and frictional unemployment.
D
Which is not an example of a resource? A) land B) labor C) capital D) production
D
Which of the following is not a determinant of supply? A) expectations regarding future prices B) the technology of production C) the cost of production D) consumer tastes
D
Which of the following is not one of the five principles for understanding how individual choices interact? A) There are gains from trade. B) Markets move toward equilibrium. C) Resources should be used as efficiently as possible to achieve society's goals. D) Markets always lead to efficiency.
D
Which of these is one of the four principles of individual choice? A) Resources are usually renewable. B) The real cost of something is impossible to measure. C) People take advantage of opportunities to make themselves better off only if there is no risk involved. D) Resources are scarce.
D