Week 15 (Review)

Scarcity exists because of. (1.1)

unlimited wants and limited resources.

Which of the following best characterizes the circular flow of income? (1.3)

A. Businesses buy resources from the government, and households buy goods and services from businesses. B. Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. C. The government purchases resources from businesses and households and then sells goods and services to businesses and households. D. Households buy factors of production from businesses, and businesses buy goods and services from households. B

Which of the following statements most likely lies within the realm of microeconomics? (1.2)

A. Unemployment rises during a recession and falls during an expansion. B. An increase in government spending will increase the aggregate demand for goods and services in the economy. C. A rapid acceleration of the supply of money may create inflation. D. An increase in labor costs will increase the additional cost of producing another bus. D

Which of the following is most likely a topic of discussion in macroeconomics? (1.2)

A. an increase in the price of a hamburger. B. a decrease in the production of DVD players by a consumer electronics company. C. an increase in the wage rate paid to automobile workers. D. a decrease in the unemployment rate. D

When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being: (1.2)

A. balanced budget. B. prudent monetary policy. C. low inflation. D. assuring competition between firms. C

In the circular flow diagram model: (1.3)

A. households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses. B. businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households. C. households receive revenue for selling goods and services to businesses, and use that revenue to buy inputs from businesses. D. Both (a) and (b) are correct. D

In the ______________, households receive goods and services and pay firms for them. (1.3)

A. labor market B. financial capital market C. goods and services market D. savings market C

Are households primarily buyers or sellers in the goods and services market? In the labor market? What about firms? (1.3)

Households are primarily buyers in the goods and services market, as they use their income to purchase food, housing, education, transportation and many other items. Households are typically sellers in the labor market, offering their labor for a salary or hourly wage in order to earn a living. Firms are primarily sellers in the goods and services market, offering their wares to consumers. They are primarily buyers in the labor market, hiring employees to produce for them.

Suppose you have a team of two workers: one is a baker and one is a chef. Explain why the kitchen can produce more meals in a given period of time if each worker specializes in what they do best than if each worker tries to do everything from appetizer to dessert. (1.1)

The baker and the chef have specialized skills that allow them to be more productive in certain areas than in others. The baker will be able to make a pie faster than the chef, and the chef will be better at cooking the main course. By each worker doing what he does best, productivity and efficiency are maximized and total output is greater.

Macroeconomics is an aggregate of what happens at the microeconomic level. Would it be possible for what happens at the macro level to differ from how economic agents would react to some stimulus at the micro level? Hint: Think about the behavior of crowds. (1.2)

While the macroeconomy is ultimately the sum of individual actions, we can sometimes see a different result from collective action than we do for individual action. This can happen for a number of reasons, including crowd psychology, concentrated benefits and dispersed costs, and difficulties in coordination.

Specialization: (1.1)

can lead to an increase in overall production.

Marginal thinking is best demonstrated by: (1.1)

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

In the first chapter of The Wealth of Nations, Smith introduces the idea of the _______, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers. (1.1)

division of labor

The opportunity cost of an action: (1.1)

is a subjective valuation that can be determine only by the individual who chooses the action.