Chapter 1 test macro fsu
Define economics. Who are economic agents?
Economics is the study of how agents choose to allocate scarce resources and how these choices affect society. An economic agent is an individual or a group that makes choices.
Refer to the figure above. The total demand curve has the vertical intercept at ________ and the horizontal intercept at ________, and its slope ________. A) 15.00 euros; 7,000 liters; changes at 10.00 euros B) 15.00 euros; 7,000 liters; changes at 8.12 euros C) 18.00 euros; 7,000 liters; is twice as steep as Sue's demand curve D) 10.00 euros; 7,000 liters; is half as steep as Carlos's demand curve
A
Why an economy contracts during slowdowns and the analysis of appropriate policies is studied under ________. A) macroeconomics B) microeconomics C) agricultural economics D) international economics
A
________ is a calculation that adds up the costs and benefits using a common unit of measurement, like dollar values. A) Cost-benefit analysis B) Revenue-income analysis C) Budget constraint analysis D) Expenditure-income analysis
A
________ is analysis that generates objective descriptions or predictions about the world that can be verified with data. A) Positive economics B) Negative economics C) Microeconomics D) Normative economics
A
A consumer has $40 that he wants to spend. He faces four choices: a camera that costs $60, a cell phone that costs $150, a book that costs $10, and a Bluetooth speaker that costs $45. Which of the following is a feasible option for the consumer? A) The book B) The camera C) The cell phone D) The Bluetooth speaker
A
Empiricism is analysis that uses ________ to test theories. A) data B) illustrations C) philosophy D) value judgments
A
Feasible options are options that are ________. A) available and affordable B) available but not affordable C) affordable but not available D) optimal for an economic agent
A
What will happen to the equilibrium price and quantity of cars if there is an increase in the price of gasoline?
An increase in the price of gasoline will cause the demand for cars to shift left, supply remaining unchanged. With supply unchanged and a leftward shift in the demand for cars, both the equilibrium price and quantity of cars will decrease.
A student has two options: she can either surf the web or work part-time. Working part-time pays her $20 per hour. What is the student's opportunity cost of surfing the web for 5 hours? A) $4 B) $20 C) $50 D) $100
D
An individual has 8 hours to spare. She has to divide her time between two activities: reading and writing. Which of the following allocations will completely exhaust the individual's budget? A) 3 hours of reading and 4 hours of writing B) 4 hours of reading and 6 hours of writing C) 2 hours of reading and 2 hours of writing D) 5 hours of reading and 3 hours of writing
D
Economics is primarily the study of ________. A) the mental functions and behavior of individuals and groups B) the state, nation, government, and politics and policies of governments C) the problems related to the existence and evolution of society D) how agents choose to allocate scarce resources and how these choices affect society
D
Positive economics is descriptive because ________. A) it is based on ethical judgments B) its predictions cannot be verified with data C) it prescribes what an individual or society ought to do D) it explains what has happened or predicts what will happen
D
Suppose Z is a normal good. The equilibrium price and quantity of Z in the year 2013 was $25 and 60 units, respectively. In 2017, the equilibrium price of Z had increased to $35 and the equilibrium quantity had increased to 70 units. Other things remaining the same, which of the following could explain this change? A) A leftward shift of the supply curve of Z B) A rightward shift of the supply curve of Z C) A leftward shift of the demand curve for Z D) A rightward shift of the demand curve for Z
D
The best alternative use of a resource is referred to as its ________. A) optimization cost B) market price C) social cost D) opportunity cost
D
The net benefit of a particular alternative equals ________. A) the benefits received from the alternative plus the costs incurred when choosing the alternative B) the benefits received from the alternative divided by the costs incurred when choosing the alternative C) the costs incurred when choosing the alternative divided by the benefits received from the alternative D) the benefits received from the alternative minus the costs incurred when choosing the alternative
D
Which of the following best describes scarce resources? A) Resources that most people cannot afford to buy B) Resources that can only be distributed efficiently by the government C) Resources for which the quantity demanded is the same for all economic agents D) Resources for which the quantity that people want exceeds the quantity that is freely available
D
Which of the following correctly identifies the trade-off that a budget constraint represents? A) The amount of income that must be given up to obtain an additional unit of a good B) The maximum amount of two goods that a consumer can purchase given his income C) The optimum combination of goods that a consumer with a given income should purchase D) The amount of one good that has to be given up to purchase an additional unit of the other good
D
Which of the following is NOT a key principle of economics? A) Optimization B) Equilibrium C) Empiricism D) Substitution
D
Which of the following is an example of a normative economic statement? A) A cut in the tax rate will lead to an increase in consumption. B) Relaxation of import duties will encourage imports. C) An increase in subsidies to farmers will boost agricultural production. D) An increase in social security benefits will increase the welfare of all economic agents.
D
Which of the following statements is TRUE of optimization? A) Optimization analysis only relates to the financial budget of an economic agent. B) Individuals who optimize do not consider costs when choosing the most feasible alternative. C) Economic agents can optimize only when they are able to perfectly estimate all future costs and benefits. D) Economic agents who optimize attempt to choose the best feasible option, given the information that they have.
D
Which of the following statements is TRUE? A) Microeconomics is the study of an economy as a whole. B) Macroeconomics studies how individuals make choices. C) The study of the inflation rate is covered under microeconomics. D) The study of the unemployment rate is covered under macroeconomics.
D
Which of the following statements is TRUE? A) A bar chart has many limitations in comparison to pie charts. B) A bar chart does not allow for the comparison of a single variable across many segments. C) A bar chart can only be used to represent independent variables. D) A bar chart indicates the frequency of a variable by using rectangles of different heights or lengths.
D
Which of the following would NOT cause their family demand for pints of ice cream to increase? A) A decrease in the price of pie, which is frequently consumed with ice cream B) An increase in the price of pudding, a dessert that people may consume instead of ice cream C) Raleigh and Austin have a child that also like to eat ice cream D) A decrease in the price of pints of ice cream
D
________ economics prescribes what an individual or society ought to do. A) Positive B) Negative C) Behavioral D) Normative
D
What is the rationale behind empiricism in economic analysis?
Empiricism refers to the use of data to test theoretical ideas or concepts. Empiricism is important as it enables economists to determine whether economic theories are consistent with actual human behavior. This enables economists to refute faulty theories or modify them such that they would better fit the real world. Empiricism also enables researchers to identify causal relationships between sets of variables.
How does microeconomics differ from macroeconomics?
Microeconomics is the study of how individuals, households, firms, and governments make choices, and how those choices affect prices, the allocation of resources, and the well-being of other agents. In contrast, macroeconomics is the study of the economy as a whole. The scope of macroeconomics extends to the study of economy-wide phenomena, like the growth rate of an economy, the national unemployment rate, or the inflation rate.
35) Which of the following statements is TRUE? A) A rational economic agent is not likely to optimize. B) Cost-benefit analysis can also be used for normative economic analysis. C) Cost-benefit analysis does not yield the same result as optimization analysis. D) The net benefit of an option that costs $50 and provides a benefit of $100 is equal to $150
B
A budget constraint represents the ________. A) total money income that an agent earns in different time periods B) goods and services an economic agent can choose given her limited income C) inequality in the incomes earned by various economic agents D) aggregate income earned by all firms in an economy
B
A consumer has $20 that he wants to spend on two goods: pens priced at $2 each and pencils priced at $1 each. Which of the following correctly represents his budget constraint? A) $20 = ($2/Quantity of pens) + ($1/Quantity of pencils) B) $20 = ($2 × Quantity of pens) + ($1 × Quantity of pencils) C) $20 = ($3/Quantity of pens + Quantity of pencils) D) $20 = $3 × (Quantity of pens - Quantity of pencils)
B
A consumer has $50 to spend. He has to decide between buying two goods: magazines priced at $5 each and DVDs priced at $10 each. Which of the following combinations of the two goods will entirely exhaust his budget constraint? A) 3 magazines and 4 DVDs B) 2 magazines and 4 DVDs C) 6 magazines and 1 DVD D) 2 magazines and 2 DVDs
B
A decision or choice that is made after optimization analysis ________. A) has zero opportunity cost B) is not necessarily risk free C) is the same for all individuals D) cannot be justified using normative analysis
B
Cost-benefit analysis requires ________. A) choosing the alternative with the least net benefit B) that all costs and benefits be measured in the same unit C) evaluating the budget constraint before making a choice D) that the risks associated with different alternatives be ignored
B
Economics is primarily the study of ________. A) the relationship between matter and its motion B) agents' choices and their impact on society C) events of the past and how these events affect present human behavior D) the different types of governments and the impact of their policies on a nation
B
Empiricism refers to the process of ________. A) measuring variables B) testing ideas using data C) collecting and organizing data D) making choices using values and beliefs
B
In 2007, an unseasonably dry spring led to a sharp decline in the quantity harvested of black morels, a wild mushroom found throughout the upper Midwest. Due to the scant harvest, the price of black morels rose from $9 per pound to nearly $45 per pound. In 2008, slightly above-normal rainfall levels led to a large black morel harvest. Assuming that the demand for black morels did not change from 2007 to 2008, we would expect the 2008 black morel supply to ________ and the equilibrium price of black morels to ________. A) increase; rise B) increase; fall C) decrease; fall D) decrease; rise
B
In economics, scarcity refers to the situation of ________. A) making the best use of limited information B) having more wants than the amount of available resources C) the government rationing available goods and services D) sellers setting the prices of their products too high for people to be able to afford them
B
________ is the study of how individuals, households, governments, and firms make choices and how those choices affect prices, the allocation of resources, and the well-being of other agents. A) Cost-benefit analysis B) Microeconomics C) Macroeconomics D) Empiricism
B
Which of the following is a normative statement? A) Income inequality has been increasing in the US since the 1980s. B) Income inequality is the biggest issue facing the next generation of leaders. C) Increasing the minimum wage should decrease income inequality. D) The earnings of top executives are many times higher than most of their employees.
B
Which of the following is a topic studied by microeconomists? A) National income calculations B) Price determination by a firm C) Measures to combat inflation D) Interest rate determination
B
Which of the following is an example of a positive economic statement? A) The government should ideally work as a welfare state. B) An increase in income causes an increase in savings. C) Economics is the most useful social science. D) Eliminating poverty is more important than reducing inflation.
B
Which of the following statements is TRUE? A) A budget constraint remains the same for a consumer at all levels of income. B) A budget constraint quantifies the trade-offs that economic agents face while making decisions. C) A budget constraint is a function of the income of the consumer and not of the prices of the goods and services available for consumption. D) A budget constraint is based on the minimum amount of money that an economic agent can spend on goods and services.
B
Which of the following statements is TRUE? A) Positive economics deals with issues that are subjective. B) Normative statements depend on personal preferences. C) Positive economics recommends what people ought to do. D) Normative economic statements can be confirmed or disproven.
B
Students in a class are discussing how a firm that does not face any competition in a market should decide how many units of output to supply in the market. Would this discussion be considered microeconomic or macroeconomic analysis?
Microeconomics
Define the three key principles of economics.
i) Optimization: optimization refers to the process of choosing the best option from a set of alternatives, given the available information. ii) Equilibrium: equilibrium is a special situation all agents are simultaneously optimizing, so that nobody would benefit personally by changing his or her behavior. iii) Empiricism: empiricism is analysis that is evidence-based—it uses data to test theories and to determine what is causing things to happen in the world.
) If Darvez is willing to supply his labor according to the following supply: Q supply their labor according to the following supply equation: Q her labor according to the following supply equation: Q price of labor (or the wage rate). If the wage falls from $10 to $8 per hour, how many fewer hours will they all be willing to work? A) 16 B) 20 C) 41 D) 45
A
Out of a set of feasible alternatives, an optimizer should choose the alternative with the ________. A) highest net benefit B) highest opportunity cost C) lowest total cost, regardless of benefit D) highest total benefit, regardless of cost
A
Roberta is moving to be closer to her children. Roberta is a nurse and makes $45 per hour. She has to decide whether to hire movers to pack up her belongings or pack it all up herself. The movers will charge $1,000 to supply packing materials and pack up all of Roberta's belongings. It would take 20 hours for her to pack up herself, and she would need to spend $300 on packing materials. 40) Refer to the scenario above. What is the total cost to Roberta of packing up herself? A) $1200 B) $900 C) $300 D) $1000
A
Suppose Z is a normal good. The equilibrium price and quantity of Z in the year 2013 was $25 and 60 units, respectively. In 2017, the equilibrium price of Z had increased to $35 but the equilibrium quantity had decreased to 50 units. Other things remaining the same, which of the following could explain this change? A) A leftward shift of the supply curve of Z B) A rightward shift of the supply curve of Z C) A leftward shift of the demand curve for Z D) A rightward shift of the demand curve for Z
A
The automobile market in the United States is often said to be highly competitive. But it is not perfectly competitive. What makes this market not perfectly competitive? A) Different car companies make different vehicles with different features. B) An individual car buyer can dictate what price he or she pays for a vehicle. C) More than three major car companies exist in this market. D) An individual seller can dictate what price a consumer pays for a vehicle.
A
The impact of carbon taxes on the energy usage of individual households and firms is studied under ________. A) microeconomics B) macroeconomics C) normative economics D) positive economics
A
The relationship between a firm's advertising expenditure and its profit is studied under ________. A) microeconomics B) macroeconomics C) behavioral economics D) international economics
A
Which of the following does NOT illustrate one of the three principles of economics? A) Jessica is looking for a new job, but there are no jobs available. B) When driving on the highway, if one lane is moving faster than the other, people will change lanes until both lanes are moving at the same speed. C) Congress proposes an increase in income taxes, but they are worried that the tax hike might discourage work. Economists at the Congressional Budget Office are asked to examine data to see how labor supply responds to changes in the tax rate. D) Mallory owns a physical therapy clinic and has to decide if hiring an additional physical therapist would allow her to expand her business enough to offset the cost of the additional therapist and thus increase her profits.
A
Which of the following is NOT a question that would be asked by a microeconomist? A) Why has the level of income inequality been increasing over time? B) How large should a carbon tax be to lower pollution to an efficient level? C) How does class size influence student learning outcomes? D) How does the availability of men affect a woman's likelihood of marriage?
A
Which of the following is a topic studied by macroeconomists? A) Aggregate demand in an economy B) Price determination by a firm C) The consumption choice of a single household D) The production decision of a firm
A
Which of the following is a topic studied by microeconomists? A) Energy consumption by a firm B) Nationwide inflation rate C) Economic growth as a means to alleviate poverty D) Aggregate demand and aggregate supply in an economy
A
Which of the following is an example of a normative economic statement? A) An increase in government expenditure will lead to an increase in well-being. B) An increase in the money supply will lead to an increase in the inflation rate. C) An increase in income is accompanied by an increase in savings. D) An increase in income is accompanied by an increase in consumption.
A
Which of the following statements correctly differentiates between positive and normative economics? A) Positive economics is descriptive, whereas normative economics is advisory. B) Positive economics describes what people ought to do, whereas normative economics describes what people actually do. C) Positive economics is based on judgments, whereas normative economics is not.
A
Which of the following statements is TRUE? A) Rational economic agents maximize more than just monetary income. B) An individual does not require information to make optimal decisions. C) The principle of optimization is only accurate when it comes to making monetary decisions. D) It is not necessary to consider the risks of alternatives while making an optimal decision.
A
Which word best describes the main focus of economics? A) Choice B) Money C) Equilibrium D) Causation
A
Roberta is moving to be closer to her children. Roberta is a nurse and makes $45 per hour. She has to decide whether to hire movers to pack up her belongings or pack it all up herself. The movers will charge $1,000 to supply packing materials and pack up all of Roberta's belongings. It would take 20 hours for her to pack up herself, and she would need to spend $300 on packing materials. 42) Refer to the scenario above, what is Roberta's opportunity cost of packing up herself? A) $300 B) $900 C) $1000 D) $1200
B
The gasoline market in the United States is often said to be highly competitive. But it is not perfectly competitive. What makes this market not perfectly competitive? A) If you don't like the price at one gas station, you can go to another one. B) Different companies put different additives (designed to reduce engine deposits) in the gas they sell. C) An individual seller can dictate what price a consumer pays for its gas. D) Gas stations located near each other tend to charge the same or very similar prices.
B
The market for running shoes can be represented by the following equations: Q D = 2000 - 10P and Q S = 10P - 80. 75 Copyright © 2022 Pearson Education, Inc. 67) Refer to the information above on the market for running shoes. What is the equilibrium price of running shoes? A) $96 B) $104 C) $192 D) $208
B
The relationship between the unemployment rate and inflation is studied under ________. A) microeconomics B) macroeconomics C) behavioral economics D) international economics
B
Which of the following correctly defines the term "equilibrium"? A) It refers to a situation in which data are used to arrive at conclusions. B) It refers to a situation in which all economic agents are simultaneously optimizing. C) It refers to a situation in which an optimizing decision is made by an individual economic agent. D) It refers to a situation in which government intervention efficiently allocates scarce resources.
B
Which of the following factors is expected to cause the demand curve for coffee to shift to the right? A) A fall in the manufacturing cost of coffee B) A higher tax on the sale of tea, a substitute for coffee C) A higher personal tax on the income of all consumers D) An increase in the supply of coffee due to better weather
B
Which of the following graphical representations is ideal for comparing a single variable across different groups? A) A histogram B) A bar chart C) A scatter plot D) A time series graph
B
Which of the following is NOT a scarce resource? A) Gold B) Pollution C) Petroleum D) iPhones
B
Which of the following statements is TRUE? A) Gold is not a scarce resource. B) Both life-saving drugs and ice cream are examples of scarce goods. C) If a scarce resource is given away for free, everyone will be able to consume it. D) Scarcity means that there is an imbalance between unlimited resources and limited wants.
B
Why do trade-offs occur?
Because of scarcity
A seller's willingness to accept is the same as his ________ cost of production. A) total B) fixed C) average D) marginal
D
If a job pays a wage of $50 per hour, but has a non-wage cost valued at $20 per hour, the net benefit of taking the job equals ________. A) $2.5 per hour B) $20 per hour C) $30 per hour D) $70 per hour
C
If a particular choice that an individual faces gives him a benefit of $20 but costs $30, the net benefit from making this choice equals ________. A) $20 B) $10 C) −$10 D) −$30
C
John has to choose between two jobs: one that offers him $50 per hour and one that offers him $35 per hour. The opportunity cost of choosing the job that offers him $50 per hour is ________. A) $1.5 per hour B) $15 per hour C) $35 per hour D) $85 per hour
C
Which of the following best describes equilibrium? A) A situation where the government intervenes to allocate resources B) A situation where only one individual or firm makes an optimal decision C) A situation where no economic agent would benefit by changing his or her behavior D) A situation where economic agents do not optimize as they do not have perfect information
C
Which of the following is a topic studied by macroeconomists? A) The savings of a single household B) The productivity of an agricultural farm C) The total output of an economy D) Price determination in a market
C
Which of the following is an example of a positive economic statement? A) The pricing policies followed in single-producer markets should be strictly supervised. B) Unemployment is more harmful than inflation. C) Higher interest rates will encourage more savings. D) Pollution is one of the most serious economic problems.
C
Which of the following statements correctly highlights the difference between microeconomics and macroeconomics? A) Microeconomics is descriptive, whereas macroeconomics is advisory. B) Microeconomics primarily deals with positive analysis, whereas macroeconomics primarily deals with normative analysis. C) Microeconomics deals with a small part of the economy, whereas macroeconomics deals with aggregate economic performance. D) Microeconomics describes what economic agents actually do, whereas macroeconomics describes what economic agents ought to do.
C
Which of the following statements is TRUE? A) All economic agents are necessarily individuals. B) A worker who shirks work is not an economic agent. C) A government is an example of an economic agent. D) A street gang is not an economic agent.
C
Which of the following statements is TRUE? A) All rational economic agents attempt to maximize their income. B) A rational consumer makes his decisions depending on what the majority chooses. C) A budget constraint is an economic tool that quantifies the trade-off between the consumption of two goods. D) A trade-off refers to the exchange of goods between economic agents through the barter system or mutual exchange.
C
Which of the following statements is TRUE? A) Optimization requires individuals to foresee the future perfectly. B) An optimizing individual need not consider the risks involved in various choices. C) An optimizing individual is also likely to exhibit rationality. D) The less information that is available, the easier it is to make optimal decisions.
C
Which of the following statements is TRUE? A) Positive economics describes what people ought to do. B) Normative economics describes what people actually do. C) Positive economics generates objective descriptions that can be verified with data. D) Normative economics is free from the value judgments, tastes, and preferences of economic agents.
C
Why do economists study perfectly competitive markets even though few, if any, markets in the real world are perfectly competitive? A) Because insights we gain from studying the perfectly competitive market are directly applicable to real markets, even though they are not perfectly competitive B) Because the behavior of buyers and sellers can be studied theoretically only in the perfectly competitive market model C) Because the perfectly competitive market is a good approximation to many markets in the real world and helps us understand how real markets work D) Because the perfectly competitive market is the most relevant model for actual government economic policies
C
1) Which of the following statements is TRUE of equilibrium? A) Economic agents have an incentive to divert from equilibrium B) Each economic agent can reach equilibrium irrespective of the actions of others. C) In equilibrium, the opportunity cost of the choices made by each economic agent is zero. D) In equilibrium, all economic agents are choosing the best feasible option simultaneously.
D
5) Which of the following is a feature of a good theory? A) A good theory does not rely on data. B) A good theory cannot be tested with data. C) A good theory is free from approximations. D) A good theory closely predicts actual behavior.
D
If there is excess demand in a perfectly competitive market, does the government need to intervene to restore the equilibrium price and quantity? Why or why not?
No. In a perfectly competitive market, no government intervention is required to restore equilibrium, as equilibrium is automatically restored. A situation of excess demand occurs when the market price is below the equilibrium price. Because quantity demanded exceeds quantity supplied in the market, some consumers will be willing to pay higher prices to buy goods. This will act as an incentive for suppliers to supply more, eliminating the shortage in the market.
What are scarce resources? Why are economic agents concerned with the allocation of these resources?
Scarce resources are resources for which the quantity that agents want exceeds the quantity that is freely available. Economic agents need to satisfy their unlimited wants in a world of limited resources. This makes it important for them to understand how these scarce resources are to be used and distributed in order to optimize allocation.