ECON Test 1
Which of the following is correct? Factors of production are
the inputs used to produce goods and services.
The graph shows Brazil's PPF for ethanol and food crops. If Brazil increases production of food crops from 2 tons per day to 3 tons per day, the opportunity cost of the additional ton of food crops is 14 barrels of ethanol. If Brazil increases production of ethanol from 40 barrels per day to 54 barrels per day, the opportunity cost of the additional 14 barrels of ethanol is 1 ton of food crops. The opportunity cost of producing an additional ton of food crops is equal to ______.
the inverse of the opportunity cost of producing an additional barrel of ethanol
On the diagram shown above, a movement from A to C represents ________
an increase in demand
The new equilibrium is $___ per download
4
The U.S. GDP per capita in 2013 was approximately ______
$50,000
Your employer has asked you to start working overtime and has offered to pay $18 per hour for every hour you work beyond forty hours a week. The wage rate for each of the first forty hours will continue to be the usual $15 per hour. In terms of dollars, what is the marginal benefit of working each hour of overtime?
$18.00
Becky, an economics student, buys two cups of coffee a day, which costs her $7.00. She decides to buy one more cup each day and her expenditure on coffee increases to $10.50. The marginal cost to Becky of a cup of coffee is _______.
$3.40
In the above graph, which of the following formulas is the correct expression for the slope of the line between points a and b?
(Y2 - Y1) / (X2 - X1)
What is the value of the slope of this line?
-1 / 5
If Y = 800 - 4X, what is the slope of this line?
-4
______ earns ______.
. Bill Gates; profit
A typical business cycle can be described by the sequence ______.
. expansion, peak, recession, trough
What is the lowest possible price England will sell cloth for?
1.07
What is the highest possible price Portugal will pay for cloth?
1.57
The night before a midterm exam, you decide to go to the movies instead of studying for the exam. You score 60 percent on your exam. If you had studied the night before, you'd have scored 70 percent. What was the opportunity cost of your evening at the movies?
10 percent off your grade.
The table above indicates the demand schedules for four types of consumers: A, B, C, and D and the number of consumers in each group (top row). The quantity demanded by each type of consumer (QA, QB, QC, and QD) is shown for market prices ranging from $10 down to $4.
10,400
Using information in the previous table, what is country A's opportunity cost of producing 1 unit of clothing?
2 units of food
The previous table shows the marginal benefit that Ted earns from keeping his store open one more hour. Ted has a marginal cost of $90 per hour. How many hours should Ted stay open?
22 hours
When the quantity of food produced is tons a day, the marginal cost of producing a ton of food is barrels of ethanol.
3.5, 18
The money price of a pound of bananas is $0.20 and the money price of a pack of granola bars is $0.80. The opportunity cost of a pack of granola bars is _______.
4.00 pounds of bananas, which is the relative price of a pack granola bars
Real GDP in 2014 in terms of base-year prices is $
40
If they share the total gains equally, Kim gives Liam ______ and Liam gives Kim ______.
50 cakes; 15 pies
The new equilibrium quantity ____ downloads per day
650
In the previous graph, the solid line can be expressed algebraically as Y = a + bX. What causes the line to shift from the solid line to the dashed line?
A change in the value of a
When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of?
A market
Which of the following goods and services would be excluded from personal consumption expenditures in the Bureau of Economic Analysis (BEA) statistics?
A new house
Refer to the previous graph. What is the best descriptor of the relationship between disposable income and consumption spending?
A positive relationship
Which of the following will cause an outward (rightward) shift in supply?
A technological improvement.
For each news item below, indicate whether it involves a what, how, or for whom question. "Health dash care professionals and drug companies say Medicaid drug rebates should be available to everyone in need" involves a ______ question. "Kids learning business basics" involves a ______ question.
A.for whom; what
According to the graph, at what point does the economy begin a period of recession?
After the peak
Two countries, Alpha and Beta, have identical production possibilities frontiers. If Alpha produces at point A and Beta produces at point B, then _______.
Alpha consumes more than Beta today, but it will grow slower than Beta
Which of the following is consistent with the law of supply?
An increase in the market price of MP3 players causes an increase in the production of MP3 players.
Several things are necessary to make a decentralized, market economy work efficiently. Identify what is needed based on the following descriptions:
Anything accepted as a means of payment Makes trading efficient: money Facilitate trade Enable buyers/sellers to get info and do business with each other:markets (plural) Hire factors of production Organize factors of production to produce and sell goods and services: firms (plural) Govern ownership & use of things people value Provide incentive to specialize/produce:property rights (plural)
Why did nominal GDP have the faster growth
Because prices increased.
______ good is an item that is bought by its final user during a specified time period. ______ good is an item that is produced by one firm, bought by another firm, and used as a component of a final good or service.
A final; An intermediate
What kind of efficiency are we achieving when we are producing at a point of the PPF that we prefer above all other points:
allocative
How does the Bureau of Economic Analysis of the U.S. Department of Commerce measure GDP?
By adding the value in dollar terms of all the final goods and services produced domestically.
In what type of economy does the government decide how most economic resources will be allocated?
Centrally planned economy
According to the economic way of thinking, people:
Compare costs and benefits and make a choice to achieve the greatest benefit over the cost for the person making the choice.
In the above graph, which of the following combinations is unattainable with the current resources available in this country?
Combination G
Which is the largest component of GDP?
Consumption
In the graphs shown, which country has a comparative advantage in the production of shirts?
Country B
The graph shows the marginal cost of producing cookies and the marginal benefit from cookies in Oakdale. Oakdale achieves allocative efficiency if _______.
D. 4 batches of cookies an hour are produced
Ms. Boulware is the best lawyer and the best secretary in town. She has:
an absolute advantage in both jobs
Which of the following is TRUE regarding real GDP? I. Real GDP is the value of the total production of the country's farms, factories, shops, and offices. II. Real GDP rises whenever inflation occurs. III. Real GDP does not measure all that is produced.
I and III
In the above graph, which of the following combinations of pies and cakes is unattainable given the existing resources?
Four cakes and seven pies
Comparing the data for the fourth quarter of 2017 with that for the second quarter of 2012 in Table 21.1 LOADING... in your textbook, how has GDP changed?
GDP has increased.
In the circular flow model, which of the following refers to markets where goods such as computers or services such as medical treatment are offered?
Goods markets
In the previous series of graphs, which graph shows a negative and increasing relationship between X and Y?
Graph C
Draw a new PPF that illustrates the effect of a technological change that brings new and better ways of producing both ships and planes. Make the PPF that you draw show increasing opportunity cost. Label the curve.
HW 2: Q 21
A fire destroys some factories that produce gum and the quantity of gum supplied decreases by 40 million packs a week at each price. Draw a curve to show the effect of this event. Label it 1.
HW 3; Q 19
During Valentine's week, more people buy chocolates and chocolatiers offer their chocolates in special red boxes which cost more to produce than the everyday box. The graph shows the market for chocolates during an average week.
HW 3; Q 22
Who is Chairman of the Board of Governors of the Federal Reserve?
Janet Yellen
In the circular flow model, who supplies factors of production in exchange for income?
Households
Economic decisions are made at every level in society. When we try to decide which production method to use among several alternatives, which of the following key economic questions are we trying to answer?
How do we produce the products?
Assume the cost of aluminum used by soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft drinks? I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases.
II and III
Harry enjoys tennis but wants a high grade in his economics course. Figure 1 shows Harry's PPF. Figure 2 shows Harry's marginal benefit curve for tennis.
If Harry uses his time to achieve allocative efficiency, he plays 7 hours of tennis a week and his economics grade is 65 percent.
Which of the following is a positive economic statement?
If minimum wage rates rise, then unemployment will rise.
Which of the following are not counted as final goods and used in the GDP calculation?
Intermediate goods
Consider the previous figure and assume that it is the market for health-care services. When the "baby boomer" generation retires, the number of people who require health care increases by 30%, and, as a result, the number of health-care providers also increases, but by only 25%. What is the effect on the price of health-care services over time?
It increases because demand increased by more than supply.
Which of these is not a shortcoming of GDP as a measure of standard of living?
It only counts final goods and services and not intermediate goods.
Kelly is an architect, and she is trying to decide whether to hire Mike, a draftsman, to assist with her work. Kelly could hire Mike at $20 per hour, but it would take him three times as long to complete a task as it takes Kelly. Kelly is able to earn $90 per hour and has more architectural jobs than she is able to handle. Which of the following is true?
Mike should be hired at the $20 per hour wage rate.
Refer to the previous graph. Which of the following best represents the situation in which BMW must face a trade-off between producing SUVs and producing hybrids?
Moving from point B to point C
Suppose Sam and Amy agree to specialize and trade. Which of the following would be a trade price that would benefit both of them?
None of these would be acceptable to both of them.
Which of the following countries has an economy where most of the resource allocation is determined by a central planning authority?
North Korea
Refer to images A, B, & C. These represent what type of graphs?
One variable graphs
What is the name given to the highest-valued alternative that must be given up to engage in any activity?
Opportunity cost
Pasta and pizza are ______. A video game and a laptop are ______.
Pasta and pizza are ______. A video game and a laptop are ______.
According to the graph, which point represents an efficient use of resources?
Point C
According to the graph, which point represents an inefficient use of the resources?
Point F
In a market system, which of the following provides the information that individuals need to make decisions about resource allocation?
Prices
What are copyrights designed to accomplish?
Protect intellectual property rights
Which measure of GDP represents changes in the quantity of goods and services produced in the economy, holding prices constant?
Real GDP
Which phase of the business cycle is characterized by decreasing levels of real GDP?
Recession
Choose the option that is an example of government expenditure.
Secret service
Choose the correct statements about competitive markets. 1. Upper A single buyer in a competitive market cannot influence the price. 2. Upper A competitive market has many buyers. 3. Upper A competitive market is a market for services but not for goods. 4. Upper A competitive market is a market for goods but not for services.
Statements 1 and 2 are correct
1. The marginal benefit from a good or service is the benefit received from consuming one more unit of it. nothing 2. We measure the marginal benefit from a good or service by the most that people are willing to pay for an additional unit of it. 3. We measure the marginal benefit from a good or service by the least that people are willing to pay for all the units they consume. 4. We measure the marginal benefit from a good or service by the least that people are willing to pay for an additional unit of it.
Statements 1 and 2 are correct.
Choose the correct statements. a. There is no relationship between the opportunity cost of producing an additional good measured on the x dash axis and the opportunity cost of producing an additional good measured on the y dash axis. nothing b. Opportunity cost of a good is the increase in the quantity produced of one good divided by the decrease in the quantity produced of another good as we move along the PPF . nothing c. The opportunity cost of producing more x comma illustrated as a movement between two points on the PPF is equal to the inverse of the opportunity cost of producing more y comma illustrated as a movement between the same two points in the nbsp opposite direction. d. The opportunity cost of an action is the highest dash valued alternative forgone. nothing nothing
Statements c and d are correct
Which of the following is not a possible opportunity cost of attending college?
The cost of housing
In his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations," Adam Smith notes that specialization increases productivity. Which of the following was the cause of this phenomenon?
The division of labor
Which of the graphs represents a relationship between two variables?
The graph on the left
When most economists wake up in the morning, their first decision is whether or not to hit the snooze alarm. What statement best represents their thought process as a rational decision maker? (How does an economist approach analyzing a situation like this?)
The marginal benefit of sleeping 10 more minutes is greater than the marginal benefit of 10 more minutes of work
Every week, Bob plays tennis for four hours, and his grade on each psych test is 90 percent. Last week, after playing tennis for four hours, Bob considered playing for another hour. He decided to play for another hour and cut his study time by one hour. But last week, his psych grade fell to 80 percent. Given that Bob spent a fifth hour playing tennis, what can you conclude about the marginal benefit and marginal cost of the fourth hour of playing tennis?
The marginal benefit of the fourth hour of playing tennis exceeded its marginal cost.
In the above graph, what move describes the impact of an increase in income on consumption?
The move from b to c
The market for corn is initially in equilibrium. Suppose that the production of biofuels, which use corn as an input, increase, and at the same time, increases in the price of oil cause farm production costs to rise. Which of the following explains the effect on equilibrium price and quantity in the corn market?
The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information.
Which of the following is included in the economist's definition of investment?
The purchase of new machines, factories, or houses
Washington state had a bumper apple crop this year, significantly increasing the supply of apples in the U.S. Given this information, choose the statement that correctly describes the effect on the U.S. apple market.
The quantity of apples demanded will increase as the price of apples falls.
Which of these is a macroeconomic study?
The study of how fast prices in general are rising.
The graph above shows the market for laptop computers. Suppose the price of memory chips used in laptop computers decreases. How will this event impact on the equilibrium quantity and the market price?
The supply increases, causing the equilibrium quantity to rise and the market price to fall.
Assume there are three variables involved in the previous graph: (1) price, (2) quantity, and (3) a third variable. Which of these variables cause a move from Point C to Point D in the graph?
The third variable
Which of the following statements is true about the value of the slope of this line?
The value of the slope is the same between points a and b and points c and d.
Which of the following is critical to the success of the market system?
To allow individuals or firms to have exclusive use of their property
Macroeconomics focuses on which of the following topics?
Unemployment, inflation, growth, and trade
Which of the following represents an inferior good?
When consumer income increases, the demand for bologna decreases.
You and your neighbor pick apples and cherries. If you can pick apples at a lower opportunity cost than your neighbor can, which of the following is true?
You have a comparative advantage in picking apples.
You plan to travel in Europe this summer. If you do, you won't be able to take your usual summer job that pays $4,000 for the summer, and you won't be able to live at home for free. The cost of transportation is $2,000, visas cost $200, and living expenses are $1,100. What is the opportunity cost of your plan to travel in Europe?
Your opportunity cost is $7300.
You plan to go to school this summer. If you do, you won't be able to take your usual summer job that pays $10 comma 000 for the summer. The cost of tuition is $3 comma 000 and textbooks cost $100. You live with your family, which covers your living expenses of $1 comma 200. What is your opportunity cost of going to school this summer?
Your opportunity cost of going to summer school is $13100.
______ is an example of U.S. consumption expenditure.
Your purchase of a model car kit
In what type of economy does the government decide how economic resources will be allocated?
a centrally planned economy
All of the following will change the demand for DVD players except ___________
a change in the price of a DVD player
We know that there have been shifts of both the demand curve for and the supply curve of a good. We also know that one end result of the changes in this market was that the equilibrium price of the good fell. Given this information, which combination of supply and demand changes could NOT have possibly occurred?
a decrease in supply and an increase in demand
You predict that the market for tea was most likely influenced by _______.
a rise in household income and a rise in the number of plantations
Which of the following --- by itself --- causes a decrease in demand for a certain good?
a rise in the price of some item that is a complement of the good
Other things remaining equal, the law of demand says that higher prices will lead to:
a smaller quantity demanded and lower prices to a larger quantity demanded.
All of the following are examples of investment except ______
a student increasing his human capital by attending college
The condition that exists when quantity supplied exceeds quantity demanded at the current price is known as __________.
a surplus or excess supply
The outward shift of the production possibilities frontier from point A to point B in the above graph would most likely be caused by:
a technological advance that affects both the production of automobiles and aircraft carriers
All of the following will decrease the supply of airline flights except:
a technological change that makes airplanes safer and more fuel-efficient.
The use of purchasing power parity prices
accounts for differences in the prices of the same goods in different countries when measuring real GDP.
Potential GDP is
achieved when all factors of production are fully employed.
If Nike, an American corporation, produces sneakers in Thailand this would
add to Thailand's GDP but not to U.S. GDP.
Economists assume that when there is a change in demand and/or supply, that prices reach a new equilibrium:
after an adjustment period that varies.
According to the graph, which period of time is the economy generally considered to be in an expansion phase of the business cycle?
between points A and C.
An U.S. firm buys a new industrial sewing machine from a company located in France. Which of the following is true? I. U.S. net exports decrease. II. U.S. investment increases.
both I and II
The price of food increased during the past year. The law of demand applies to food because when the price of food rises, there is ______.
both a substitution effect and an income effect
Market price is determined by _________.
both supply and demand
Suppose that the United States and Cuba decide to open up trade. If each country specializes in the good in which it has a comparative advantage, ______ will gain from that trade because ______.
both countries; consumption possibilities in both Cuba and the United States will lie outside their PPFs
The line (demand curve) shifts to the right due to a:
change in a third variable other than price or quantity of pizza
Graphs are often used in economics because they:
can simplify complex topics
Marginal benefit from food crops _______.
cannot be calculated from the table
A power generating plant is an example of the factor of production _______.
capital
What kind of economic system relies on private ownership of resources, direct incentives and decisions made via markets and the price mechanism?
capitalism
On the diagram shown above, a movement from A to B represents a:
change in quantity supplied.
A cellphone and a phone call are ______. A text message and an email are ______.
complements; substitutes
Pizza and sausage are ______. Wheat and rye are ______.
complements; substitutes
The expenditure approach to measuring GDP sums together ______, and the largest component is ______
consumption expenditure, investment, government expenditure on goods and services, and net exports; consumption expenditure
The news clip illustrates a change in the supply of flights when it reports that American Airlines is _______.
cutting the number of flights with no mention of a change in the airfare
Making a choice at the margin means ________.
deciding to do a little bit more or a little bit less of an activity
Comparing the data for the fourth quarter of 2017 with that for the second quarter of 2012 in Table 21.1 LOADING... in your textbook, how has consumption expenditure changed as a percentage of GDP? Consumption expenditure as a percentage of GDP has _______.
decreased
An increase in the price of a DVD player _______.
decreases the quantity of DVD players demanded and results in a movement up along the demand curve for a DVD player
A rise in the price of cream ______ the supply of low-fat milk.
decreases; increases
In measuring changes in the standard of living of a country, economists rely heavily on comparisons over time of real GDP per capita because:
despite its well-known flaws, it is the best means we have of comparing the performance of an economy over time
As the value of a country's real GDP increases, the country is likely to:
devote more resources to pollution reduction
a rise in the price of low-fat milk
does not change
Real GDP ______.
does not include
With the period of low rainfall extending, dairies raise their expected price of low-fat milk next year. The supply of low-fat milk ______ today. With advice from health-care experts, dairy farmers decide to switch from producing full-cream milk to growing vegetables. The supply of low-fat milk ______.
does not change; decreases
Harry's PPF ______and his MB curve ______.
does not change; shifts rightward
What are the four goals of any economic system? (Order does not matter but spelling does! Separate them with a comma.)
efficiency comma equity comma stability comma growth
Understanding economics can help policymakers devise strategies to do all of the following except:
eliminate climate change
One of the first steps in deciding whether to complete your education is to:
evaluate the marginal cost and marginal benefit of that decision.
As a result --- assuming all other relevant factors remain unchanged --- the price of airline tickets _____________, and the price of hotel rooms _______________.
falls; rises
"As more people buy bicycles, the demand for bicycle helmets will increase and the price of a helmet will decrease. The fall in the price of a bicycle helmet will decrease the supply of bicycle helmets." This statement is ______ because ______.
false; an increase in demand for bicycle helmets does not decrease the price of a bicycle helmet and a decrease in the price of a bicycle helmet does not decrease the supply of bicycle helmets
The factor market can best be described as where
firms buy the services of labor, land and capital.
Which of the following is a final good?
flour purchased at the store to bake cookies
In the previous graph, the value of the slope is:
greater between points g and h than between points i and j
If we compare the four sources of spending in the economy we see that
household consumption is the largest.
In the figure, flow B represents ________.
household purchases of goods and services
Macroeconomics can be used to understand all of the topics listed below, except:
how a consumer decides between the purchase of two different cars
Scarcity - be it in time, talent, or money - forces all of us to make choices. But according to economists, those choices can be influenced. What do choices respond to?
incentives
A new technology lowers the cost of producing ice cream. The supply of low-fat milk
increases
Isobel currently produces at point A in the figure. If Isobel moves from point A to point C, her opportunity cost of a brownie _______.
increases
Harry's efficient time allocation
increases
In the previous graph, the relationship between output produced and cost of production can best be described as the cost of production:
increases at a decreasing rate up to point a, then it increases at an increasing rate
Why does the PPF bow outward and what does that imply about the relationship between opportunity cost and the quantity produced? The PPF bows outward because as we move from point A to point B to point C, the opportunity cost of producing a pair of blue jeans ______.
increases. Resources are not equally productive in all activities
Before starring as Tony Stark in Iron Man, Robert Downey Jr. had played in 45 movies that had average first-weekend box office revenues of a bit less than $5 million. Iron Man grossed $102 million in its first weekend. The success of Iron Man ______ the opportunity cost of hiring Robert Downey Jr. Movie producers now have ______ incentive to hire Robert Downey Jr.
increases; more
A demand curve ________.
is a marginal benefit curve
A supply curve _______.
is a minimum-supply price curve
Economics:
is concerned with how people respond to incentives
The substitution effect influences food purchases because when the price of a certain food rises, other things remaining the same, ______. Consumers ______.
its relative price rises; purchase more of a different food that is less expensive
The resources provided by nature and used to produce goods and services are also known as:
land
Which of these covers the study of topics such as inflation and unemployment?
macro
Gross domestic product (GDP) is best defined as the __________.
market value of the final goods and services produced within a country in a given time period
The GDP is a measure of the __________.
market value of the final goods and services produced within a country in a given time period
A decrease in the demand for computers together with a decrease in the supply of computers ______ create a surplus or a shortage of computers at the original price. The price of computers _
might; might fall, rise, or not change
__________ is the study of how households and businesses make choices, how they interact in markets, and how government influences their choices.
mircro
Factors of production include all of the following EXCEPT ________
money
When Apple Inc. hires a student intern during the summer, the flows are a ______ from firms to households and a ______ from households to firms.
money flow; real flow
When you buy an iPad from the Apple Store, the flows are a ______ from households to firms and a ______ from firms to households.
money flow; real flow
If the price of a sundae rises, a ______ the demand curve occurs. If any factor that influences buying plans other than the price changes, then a ______ the demand curve occurs.
movement up along; shift of
Second-hand blue jeans is an example of ______ good. Lumber purchased by the Table and Chair Manufacturing Company is an example of ______ good.
neither a final nor a intermediate; an alternative
Which had the faster growth rate, nominal GDP or real GDP?
nominal
If the president announced that "we should do something to stimulate economic growth" this is an example of a __________.
normative statement
How many variables are involved in explaining the movement from Point A to Point C on this graph?
one
The table shows Brazil's production possibilities for ethanol and food crops. Marginal benefit from a good or service is the benefit received from consuming ______. It is measured by the most that people are willing to pay for ______.
one more unit of it; an additional unit of it
In 2011, Ozzie purchased a 2008 Ford Escort from his neighbor for his son, purchased a 2007 "one owner" Camry from Larchmont Toyota for his wife, bought a 2011 new Ford for himself, and sold his 2000 Dodge Caravan to his teenage nephew. Which, if any, of these transactions will be included in GDP in 2011?
only the purchase of the Ford
Mario's, a pizza and pasta producer, experiences increasing opportunity cost. Draw a production possibilities frontier for Mario's that illustrates this fact. Label it PPF. Draw a point that is attainable. Label it Attainable. Draw a point that is not attainable. Label it Unattainable.
outside the PPF
The equilibrium price is the best deal available for both buyers and sellers because buyers ______ and sellers ______.
pay the highest price they are willing to pay; receive the lowest price at which they are willing to sell
The stock of computers, factory buildings and machine tools used to produce goods is known as:
physical capital
Macroeconomics is concerned with all of the following except:
political party affiliation
A shortage in the market for oil implies that ______.
price adjustments are being prevented from playing their role as the regulator of buying and selling plans
A change in price ________causes movement along a demand curve and a change in____________
price; change demanded
Absolute advantage is the ability of an individual, firm, or country to:
produce more of a good or service than competitors using the same amount of resources
Harry produces 10 balloon rides and 9 boat rides an hour. Harry could produce more balloon rides without producing fewer boat rides. Harry is ______ his production possibilities frontier.
producing inside
What kind of efficiency do we achieve when we produce goods and services at the lowest possible cost?
production
Jobs alone are not the measure of economic well-being. If this were the case, then we could increase the well-being of an economy by giving highway workers spoons rather than backhoes and garment workers needles and thread instead of computerized sewing machines. What does provide the source of high living standards?
production of goods and services people value
At the market equilibrium price:
quantity demanded equals quantity supplied.
In the United States, GDP is typically measured
quarterly.
The GDP per capita is computed by dividing a country's:
real GDP by its population
The relationship between real GDP and potential GDP is that
real GDP fluctuates about potential GDP.
In a price system:
relative prices change constantly to reflect changes in supply and demand.
Producers of electric guitars expect the population to increase and the number of firms producing and selling electric guitars to decrease. You predict that the price of an electric guitar will ______ and the quantity of electric guitars bought will ______.
rise; increase
When the increase in demand is less than the decrease in supply, the equilibrium price _____ and the equilibrium quantity ____
rises; decreases
Economics is the study of choice under conditions of:
scarcity
The principle of opportunity cost evolves from the concept of:
scarcity
A decrease in the price of a raw material of production. The price of a complement in production falls. The price of a good rises and other influences stay the same. The price of a good is expected to rise in the future. The number of suppliers of a good increases. Advances in technology lower the cost of producing existing products. The weather that year is particularly perfect for agriculture.
shift right shift left movement up shift left shift right shift right shift right
In the previous diagram, when supply decreases, a __________ develops at the original price. Equilibrium price will __________ and equilibrium quantity will __________ as a new equilibrium is established.
shortage; rise; fall
The principle of increasing opportunity cost states that the more resources devoted to any activity, the __________ the payoff to devoting additional resources to that activity.
smaller
If, as the price of soup decreases, the quantity of chili that people buy decreases, then soup and chili are _______
substitutes
Coal and oil are ______. A skateboard and an iPod are ______.
substitutes; complements
Suppose that there is a substantial fall in the price of apples. Apples are (obviously) the major ingredient in apple juice. As a result of this event, the market for apple juice changes in this way: ________________.
supply increases and price falls
In the previous diagram when the price is $65 per player, there is a _________ of _________ million players per month.
surplus; 40
The role of the entrepreneur always involves:
taking risks
If Americans still worked sixty hour weeks, as they did in 1890, __________.
the GDP would be much higher than it is but the well-being of the typical person would not necessarily be higher
According to the expenditure approach for calculating China's GDP, "each one percent drop in the U.S. economy will shave 1.3 percent off China's growth" because as the U.S. economy shrinks, ______. China's ______ and China's real GDP decreases.
the United States imports less from China; exports decrease
The quantity demanded of a good or service is ______
the amount that consumers plan to buy during a given time period at a particular price
The cycle of short-term ups and downs in the economy is called:
the business cycle
Events in the market for a particular good are such that the market (equilibrium) price and market (equilibrium) quantity of the good move opposite direction (i.e., price falls as quantity rises, and\or price rises as quantity falls). It must therefore be true that _________.
the decisive event in the marketplace is a shifting supply curve
Given linear demand curves, if demand and supply both increase but demand increases by a greater amount than supply, then:
the equilibrium price and quantity both increase.
Given linear demand curves, if demand and supply increase by identical amounts, then:
the equilibrium price stays the same and the equilibrium quantity rises.
Given linear demand curves, if demand increases and supply decreases, then __________.
the equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous
The opportunity cost of any action is
the highest-valued alternative given up.
Leigh has two bowls of soup for lunch. The marginal benefit that Leigh receives from the second bowl of soup is ____
the maximum amount that she is willing to pay for the second bowl of soup
The table shows some of Brazil's production possibilities for ethanol and food crops. Marginal cost of a good is _______.
the opportunity cost of producing one more unit of it
All of the following scenarios depict the characteristics of substitutes except:
the price of bacon increases and the demand for eggs decreases.
All of the following scenarios depict the characteristics of complements except:
the price of coffee increases and the demand for cream increases
The income effect influences food purchases because when the price of a certain food rises, other things remaining the same, ______. Consumers ______.
the price rises relative to income; cannot afford to buy all the things they previously bought, so they normally buy less of the food that has experienced the price rise
Suppose the price of a bag of chips is 60 cents. To return to equilibrium, ______.
the quantity demanded decreases and the quantity supplied increases
The relative price of a pack of granola bars is an opportunity cost because ______
the relative price tells us how many pounds of bananas we must give up to get a pack of granola bars
The point where economic activity bottoms out in a full business cycle is known as:
the trough
Real GDP is __________.
the value of final goods and services produced in a given year when valued at the prices of a reference base year
The slope of a straight line equals the change in the value on the __________ axis __________ by the change in the value of the other axis measured between any two points on the line.
vertical, divided
All economic questions arise because we
want more than we can get.
Allocative efficiency occurs when ______.
we are producing at a point on the PPF that we prefer above all other points
The what, how, and for whom questions in economics are questions about ______.
what goods and services do we produce, how do we use the factors of production to produce these goods, and who consumes the goods and services that are produced
The vertical axis on a graph is also known as the:
y-axis
The slope at a line tangential to the maximum or minimum of a nonlinear curve will always be equal to:
zero
When Kim and Liam move from spending 30 minutes of each hour producing pies and 30 minutes producing cakes to specializing in the good in which they have a comparative advantage, the total gains from trade are ______ pies and ______ cakes.
30; 100
Which of the following best defines capital as a factor of production?
Instruments, machines, and buildings used in production.
So ______ has a comparative advantage in producing ______.
James ; bass
______ has a comparative advantage in quilts. ______ has a comparative advantage in chocolate chip cookies
Martha ; Jane
The waste basket you bought when you moved into residence is an example of ______ good. Concrete purchased by Your Swimming Pool Inc. is an example of ______ good.
a final; an intermediate
In 2017 comma Upper Q 4, the U.S. economy was in ______ because real GDP ______.
an expansion; did not decrease for two successive quarters
The figure shows the production possibilities frontier for a firm that produces pet food. Point A is ______ and point B is ______.
attainable; unattainable
This PPF ______ illustrate scarcity because ______.
does; the firm cannot produce points outside the frontier and as the firm moves along the PPF, it cannot produce more dog biscuits without producing less cat food
I calculated real GDP by summing the components of aggregate _____, so I used the _____ approach.
expenditure; expenditure
The first sentence is completed by inserting the word ___________. The manner in which recent weather conditions have affected the supply curve for corn is shown in the movement of supply from S to S' in the _________ diagram.
fallen; first
With this new technology, the opportunity cost of producing a ton of ice cream ______ and the dairy is ______ efficient.
increases; equally
The opportunity cost of catching a pound of bass is ______ for James than for Zeb, and the opportunity cost of picking a pound of cherries is ______ for James than for Zeb.
lower; higher
When a shortage arises, the price ______ to its equilibrium, which _______.
rises; decreases the quantity demanded and increases the quantity supplied
When the increase in demand is greater than the decrease in supply, the equilibrium price _____ and the equilibrium quantity _____.
rises; increases
When the increase in demand equals the decrease in supply, the equilibrium price _____ and the equilibrium quantity _____.
rises; remains unchanged
In 1998, the price of a barrel of oil was $20. In 2012, the price of a barrel of oil was $106. In 1998, the price of a loaf of bread was $0.86. In 2012, the price of a loaf of bread was $2.32. Between 1998 and 2012, the relative price of a barrel of oil with respect to a loaf of bread _______ and the relative price of a loaf of bread with respect to a barrel of oil _______.
rose; fell
Nominal GDP is ______. Real GDP is ______
the value of the final goods and services produced in a given year valued at the prices of that year; the value of final goods and services produced in a given year when valued at the prices of a reference base year
Harry would be ______ off getting a higher grade in economics because ______
worse; his marginal benefit from tennis would exceed his marginal cost