Homework 1 Chapters 1 and 2 Econ 01

positive statements

claims that attempt to describe the world as it is

negative statements

claims that attempt to prescribe how the world should be

a) no other factors besides the frequency of service affect the number of passengers

Refer to figure 2-9 which of the following conclusions should not be drawn from observing this graph? a) no other factors besides the frequency of service affect the number of passengers b) more stops per hour is associated with more passengers per hour c) there is a positive correlation between the frequency of service and the number of passengers d) when there are five stops per hour, there are approximately 200 passengers

Answer: b) 1,000 bushels of corn and 2,200 bushels of wheat.

Refer to table 2-3 which of the following combinations of corn and wheat is not currently attainable but would be attainable if there was improvement in overall production technology? a) 1,200 bushels of corn and 800 bushels of wheat b) 1,000 bushels of corn and 2,200 bushels of wheat c) 400 bushels of corn and 1,800 bushels of wheat d) 1,600 bushels of corn and 300 bushels of wheat

Scarcity

The limited nature of society's resources

d) 20 units of eggs

if the economy is operating at point c, the opportunity cost of producing an additional 15 units of bacon is a) 30 units of eggs b) 50 units of eggs c) 10 units of eggs d) 20 units of eggs e) 40 units of eggs

production possibilities frontier (ppf)

a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology

market failure

a situation in which a market left on its own fails to allocate resources efficiently

marginal change

a small incremental adjustment to a plan of action

circular flow diagram

a visual model of the economy that shows how dollars flow through markets among households and firms

the opportunity cost of going to a movie is a) the total cash expenditure needed to go to the movie plus the value of your time b) the price of the ticket plus the cost of any soda and popcorn you buy at the theater c) zero, as long as you enjoy the movie and consider it a worthwhile use of time and money d) the price of the ticket

a) the total cash expenditure needed to go to the movie plus the value of your time

suppose the cost of flying a 200 seat plane for an airline is $100,000 and there are 10 empty seats on a flight. if the marginal cost of flying a passenger is $200 and a standby passengers willing to pay $300, the airline should: a) not sell the ticket because the marginal benefit is less than the average cost. b) sell the ticket because the marginal benefit exceeds the marginal cost. c) not sell the ticket because the marginal benefit is less than the marginal cost. d) sell the ticket because the marginal benefit exceeds the average cost.

b) sell the ticket because the marginal benefit exceeds the marginal cost.

which of the following statements about microeconomics and macroeconomics is not true a) macroeconomics is concerned with economy-wide phenomena b) the study of very large industries is a topic within macroeconomics c) microeconomics and macroeconomics cannot be entirely separated d) microeconomics is a building block for macroeconomics

b) the study of very large industries is a topic within macroeconomics

when Mateo and Sophia produce efficiently and make a mutually beneficial trade based on comparative advantage a) Mateo and Sophia both wash more b) Mateo washes more and Sophia mows more c) Mateo Mow's more and Sophia washes more d) Mateo and Sophia both mows more

c) Mateo mows more and Sofia washes more

an increase in the price of beef provides a) information that tells consumers to buy more beef b) information that tells consumers to buy less pork c) information that tells producers to produce more beef d) no information because prices and Market systems are managed by planning boards

c) information that tells producers to produce more beef

which of the following involve a trade-off? a) buying a new car b) going to college c) watching a football game on Saturday afternoon d) taking a nap e) all of the above involve trade-offs

e) all of the above involve trade-offs

the scientific method requires that a) scientists use precision equipment b) only incorrect theories are tested c) scientists use test tubes and have clean labs d) only correct theories are tested e) scientists be objective

e) scientists be objective

economics is the study of how a) to avoid having to make trade-offs b) to reduce our wants until we are satisfied c) society manages its unlimited resources d) to fully satisfy our unlimited wants e) society manages its scarce resources

e) society manages its scarce resources

business cycle

fluctuations in economic activity, such as employment and production

d) 20 additional units of eggs can be produced with no impact on bacon production

if the economy were operating at point e, a) the opportunity cost of 20 additional units of eggs is 20 units of bacon b) the opportunity cost of 20 additional units of eggs is 10 units of bacon c) the opportunity cost of 20 additional units of eggs is 30 units of bacon d) 20 additional units of eggs can be produced with no impact on bacon production

rational people

people who systemically and purposefully do the best they can to achieve their objectives

c) a combination of production that can be reached if there is a sufficient advance in technology

point f represents a) a combination of production that can be reached if we reduce the production of eggs by 20 units b) a combination of production that is inefficient because there are unemployed resources c) a combination of production that can be reached if there is a sufficient advance in technology d) none of the above

b) possible but inefficient

refer to figure 2-4, graph (a). production at point k is a) impossible but efficient b) possible but inefficient c) impossible and an inefficient d) possible and efficient

incentive

something that induces a person to act

market power

the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices

property rights

the ability of an individual to own an exercise control over scarce resources

equality

the property of distributing economic prosperity uniformly among the members of society

productivity

the quantity of goods and services produced from each unit of labor input

macroeconomics

the study of economy-wide phenomena including inflation, unemployment, and economic growth

microeconomics

the study of how households and firms make decisions and how they interact in markets

economics

the study of how society manages its scarce resources

externality

the uncompensated impact of one person's actions on the well-being of a bystander

inflation

an increase in the overall level of prices in the economy

c) C

refer to figure 2-3. it is not possible for this economy to produce at point a) D b) A c) C d) B

which of the following statements best represents the principle represented by the adage, "there ain't no such thing as a free lunch"? a) Dani must decide between going to Florida or Brazil for spring break b) Diego can attend the concert only if he takes his sister with him c) Justin is hungry and homeless d) Zebra must repair the tire on her bike before she can ride it to class.

a) Dani must decide between going to Florida or Brazil for spring break.

which of the following statements is true about a market economy? a) the market participants act as if guided by an invisible hand to produce outcomes that promote general economic well-being b) taxes help prices communicate costs and benefits to producers and consumers c) with a large enough computer, Central planners could guide production more efficiently than markets d) the strength of a market system is that it tends to distribute resources evenly across consumers

a) Market participants act as if guided by an invisible hand to produce outcomes that promote general economic well-being

in making which of the following statements is an economist acting more like a scientist? a) a reduction in unemployment benefits will reduce the unemployment rate b) the state should increase subsidies to universities because the future of our country depends on education c) the unemployment rate should be reduced because unemployment robs individuals of their dignity d) the rate of inflation should be reduced because it robs the elderly of their savings

a) a reduction in unemployment benefits will reduce the unemployment rate

economic growth is depicted by a) a shift in the production possibilities frontier outward b) a shift in the production possibilities frontier inward c) if movement from inside the curve toward the curve d) a movement along a production possibilities frontier toward capital goods

a) a shift in the production possibilities frontier outward

which of the following is most likely to produce scientific evidence about a theory? a) a tenured economist employed at a leading University analyzing the impact of Bank regulations on rural lending b) a lawyer employed by general Motors addressing the impact of airbags on passenger safety c) an economist employed by the afl/cio doing research on the impact of trade restrictions on workers wages d) a radio talk show host collecting data on how capital markets respond to taxation

a) a tenured economist employed at a leading University analyzing the impact of Bank regulations on rural lending

foreign trade a) allows the country to have a greater variety of products at a lower cost than if tried to produce everything at home b) allows a country to avoid trade-offs c) makes the members of a country more equal d) increases the scarcity of resources e) is none of the above

a) allows a country to have a greater variety of products at a lower cost than if tried to produce everything at home

economic models are a) built with assumptions b) useless if they are simple c) usually made of wood and plastic d) created to duplicate reality

a) built with assumptions

before Frank and Ruby engage in trade, each of them a) consumes at a point on his or her production possibilities frontier b) consumes at a point inside his or her production possibilities frontier c) consumes the same amounts of meat and potatoes as the other d) consumes at a point outside his or her production possibilities frontier

a) consumes at a point on his or her production possibilities frontier

after Frank and Ruby engage in trade, each of them a) consumes at a point outside his or her production possibilities frontier b) consumes the same amounts of meat and potatoes as the other c) consumes at a point on his or her production possibilities frontier d) consumes at a point inside his or her production possibilities frontier

a) consumes at a point outside his or her production possibilities frontier

Eva wants to create a graph containing the prices of concert tickets in the corresponding quantities of concert tickets demanded by customers. she should use a a) coordinate system b) pie chart c) bar graph d) time series graph

a) coordinate system

supposed to economists are arguing about policies that deal with unemployment. one economist says, the government could lower unemployment by 1% if it would just increase government spending by 50 billion dollars. the other economist responds, that's ridiculous the government spent an additional 50 billion dollars, it would reduce unemployment by only 1/10 of 1%, and that affect would only be temporary these economists a) disagree because they have different scientific judgments b) disagree because they have different values c) really don't disagree at all. it just looks that way d) do none of the above

a) disagree because they have different scientific judgments

points on the production possibilities frontier are a) efficient b) inefficient c) unattainable d) normative e) none of the above

a) efficient

high-end persistent inflation is caused by a) governments increasing the quantity of money too much b) unions increasing wages too much c) regulations raising the cost of production too much d) OPEC raising the price of oil too much

a) governments increasing the quantity of money too much

Emily and Betsey are economists. Emily thinks that the wealthiest 10% of the u.s population should be taxed a rate higher than the rest of society because they can afford it. betsy thinks that everyone should be taxed at the same rate because that is the fairest scenario and the wealthy should not be penalized for their success. in this example, emily and Betsey: a) have different normative views about tax policy b) disagree because they have access to contradicting positive statements c) disagree about the validity of a positive theory d) must both be incorrect because tax policy is never that simple

a) have different normative views about tax policy

the circular flow diagram illustrates that in markets for the factors of production a) households or sellers, and firms are buyers b) households are buyers and firms are sellers c) households and firms are both buyers d) households and firms are both sellers

a) households are sellers and firms are buyers

which of the following is a positive rather than a normative statement? a) law x will reduce national income b) la x is a good piece of legislation c) the President should veto law x d) Congress ought to pass law x

a) lot x will reduce national income

if a central bank uses the tools of monetary policy to reduce the demand for goods and services, the likely result is_______inflation and______unemployment in the short run a) lower, higher b) higher, higher c) lower, lower d) higher, lower

a) lower, higher

a nation will typically import those goods in which a) other nations have a comparative advantage b) the nation has an absolute advantage c) the Nations have an absolute advantage d) the nation has a comparative advantage

a) other nations have a comparative advantage

because people respond to incentives, we would expect that if the average salary of accountants increases by 50% while the average salary of teachers increases by 20%, a) students will shift majors from education to accounting b) students will shift majors from accounting to education c) fewer students will attend college d) none of the above is true

a) students will shift majors from education to accounting

Adam Smith's invisible hand refers to a) the ability of free markets to reach desirable outcomes, despite the self-interest of Market participants b) the subtle and often hidden methods that businesses use to profit at consumers expense c) the ability of government regulation to benefit consumers even if the consumers are unaware of the regulations d) the way in which producers or consumers in unregulated markets impose costs on innocent bystanders

a) the ability of free markets to reach desirable outcomes, despite the self-interest of Market participants

if a nation has high and persistent inflation, the most likely explanation is a) the central bank creating excessive amounts of money b) firms using their market power to enforce excessive price hikes c) unions bargaining for excessively high wages d) the government imposing excessive levels of taxation

a) the central bank creating excessive amounts of money

which of the following statements regarding the circular flow diagram is true? a) the factors of production are owned by households b) if Susan works for IBM and receives a paycheck, the transaction takes place in the market for goods and services c) if IBM sells a computer, the transaction takes place in the market for factors of production d) the factors of production are owned by firms e) none of the above is true

a) the factors of production are owned by households

market economy

an economy that allocates resources through the decentralized decisions of many firms and households as they interact and markets for goods and services

e) the opportunity cost of eggs in terms of bacon rises

as we move from point a to point d, a) the opportunity cost of eggs in terms of bacon Falls b) the economy becomes more efficient c) the economy becomes less efficient d) the opportunity cost of eggs in terms of bacon is constant e) the opportunity cost of eggs in terms of bacon rises

suppose that in the United States producing an aircraft takes 10,000 hours of labor and producing a shirt takes 2 hours of labor. in China producing an aircraft takes 40,000 hours of labor and producing a shirt takes 4 hours of labor what will these nations trade? a) China will export aircraft in the United States will export shirts b) China will export shirts in the United States will export aircraft c) both Nations will export shirts d) there are no games from trade in this situation

b) China will export shirts and the United States will export aircraft

which of the following will not shift a country's production possibilities frontier outward? a) an increase in the labor force b) a reduction in unemployment c) an advance and technology d) an increase in the capital stock

b) a reduction of unemployment

a typical society strives to get the most it can from its scarce resources. at the same time, society attempts to distribute the benefits of those resources to the members of society in a fair manner. however, redistributing income from Rich to poor reduces the reward for working hard. therefore, society faces a trade-off between a) guns and butter b) efficiency and equality c) work and leisure d) inflation and unemployment

b) efficiency and equality

a point inside the production possibilities frontier is a) efficient but not feasible b) feasible but not efficient c) both efficient and feasible d) neither efficient nor feasible

b) feasible but not efficient

which of the following products would be least capable of producing an externality? a) inoculations against disease b) food c) stereo equipment d) cigarettes e) education

b) food

productivity can be increased by a) raising union wages b) improving the education of workers c) raising minimum wages d) restricting trade with foreign countries

b) improving the education of workers

an economies production of two goods is efficient if a) all members of society consume equal portions of the goods b) it is impossible to produce more of one good without producing less of the other c) the opportunity cost of producing more of one good is zero d) the goods are produced using only some of societies available resources

b) it is impossible to produce more of one good without producing less of the other

trade-offs are required because once are unlimited and resources are a) unlimited b) scarce c) marginal d) economical

b) scarce

fundamentally, economic deals with a) money b) scarcity c) banking d) poverty

b) scarcity

in which of the following cases is the assumption most reasonable? a) to estimate the speed at which a beach ball falls, a physicist assumes that it falls in a vacuum b) to address the benefits of trade, an economist assumes that there are two people and two goods c) to address the impact of money growth on inflation, an economist assumes that money is strictly coins d) to address the impact of taxes on income distribution, an economist assumes that everyone earns the same income

b) to address the benefits of trade, an economist assumes that there are two people and two goods

you have spent $1,000 building a hot dog stand based on estimates of sales of $2,000. the hot dog stand is nearly completed, but now you estimate total sales to be only $800. you can complete the hot dog stand for another $300. should you complete the hot dog stand? (assume that the hot dogs cost you nothing). a) no b) yes c) there is not enough information to answer this question

b) yes

between Mateo and Sophia who has the comparative advantage in car washing and who has the comparative advantage in lawn mowing? a) Mateo in washing neither in mowing b) Mateo in washing Sophia in mowing c) Sophia in washing Mateo in mowing d) Sophia in washing neither in mowing

c) Sophia in washing Mateo in mowing

in an hour, Mateo can wash two cars or mow one lawn, and Sophia can wash three cars or mow one lawn who has the absolute advantage and car washing, and who has the absolute advantage in lawn mowing a) Sophia and washing, Mateo in mowing b) Mateo in washing, Sofia in mowing c) Sophia in washing neither in mowing d) Mateo in washing neither in mowing

c) Sophia in washing neither in mowing

an economic model is a) a mechanical machine that replicates the functioning of the economy b) the computer program that predicts the future of the economy c) a simplified representation of some aspect of the economy d) a fully detailed realistic description of the economy

c) a simplified representation of some aspect of the economy

international trade benefits a nation when a) it's trading partners experience reduced economic well-being b) it's revenue from selling a broad exceeds its outlays from buying abroad c) only nations are specializing in producing what they do best d) no domestic jobs are lost because of trade

c) all nations are specializing in producing what they do best

which of the following claims is consistent with the views of mainstream economists? a) if we increase the rate of inflation from 3% to 6%, then the rate of unemployment will temporarily rise b) if we increase the rate of inflation from 3% to 6%, then the rate of unemployment will permanently fall c) if we increase the rate of inflation from 3% to 6%, then the rate of unemployment will temporarily fall d) if we increase the rate of inflation from 3% to 6%, then the rate of unemployment will permanently rise

c) if we increase the rate of inflation from 3% to 6%, then the rate of unemployment will temporarily fall

in a particular country in 1998, the average worker needed to work 25 hours to produce 40 units of output in the same country in 2008, the average worker needed to work 40 hours to produce 68 units of output. in that country, the productivity of the average worker a) remained unchanged between 1998 and 2008 b) increased by 4.75% between 1998 and 2008 c) increased by 6.25% between 1998 and 2008 d) decreased by 1.7% between 1998 and 2008.

c) increased by 6.25% between 1998 and 2008

in a circular flow diagram, which of the following is not a factor of production? a) labor b) land c) money d) capital

c) money

the production possibilities frontier provides an illustration of the principle that a) people respond to incentives b) trade can make everyone better off c) people face trade-offs d) governments can sometimes improve market outcomes

c) people face trade-offs

in the market economy, economic activity is guided by a) public interest groups b) the government c) self-interest and prices d) Central planners

c) self-interest and prices

if a nation has high and persistent inflation, the most likely explanation is a) unions bargaining for excessively high wages b) the government imposing excessive levels of taxation c) the Central Bank creating excessive amounts of money d) firms using the market power to enforce excessive price hikes

c) the Central Bank creating excessive amounts of money

which of the following statements is normative? a) printing too much money causes inflation b) large government deficits cause an economy to grow more slowly c) the unemployment rate should be lower d) people work harder if the wage is higher

c) the unemployment rate should be lower

which of the following activities is most likely to produce an externality? a) a student sits at home and watches television b) a student reads a novel for pleasure c) a student eats a hamburger and the student Union d) a student has a party in her dorm room

d) a student has a party in her dorm room

because people respond to incentives, a) policymakers can alter outcomes by changing punishments or rewards b) policies can have unattended consequences c) society faces a trade-off between efficiency and equality d) all of the above

d) all of the above

governments May intervene in a market economy in order to a) protect property rights b) correct a market failure due to externalities c) achieve a more equal distribution of income d) all of the above

d) all of the above

the following parts of government regularly rely on the advice of economists a) department of Treasury b) office of Management and budget c) department of Justice d) all of the above

d) all of the above

when society gets the most it can from its scarce resources, then the outcome is called a) marginal b) normal c) equitable d) efficient

d) efficient

raising taxes and increasing welfare payments a) proves that there is such thing as a free lunch b) reduces Market power c) improves efficiency at the expense of equality d) improves equality at the expense of efficiency e) does none of the above

d) improves equality at the expense of efficiency

a marginal change is one that a) makes an outcome inefficient b) is not important for public policy c) does not influence incentives d) incrementally alters an existing plan

d) incrementally alters an existing plan

which of the following is not a factor of production? a) land b) labor c) capital d) money e) all of the above are factors of production

d) money

sometimes economists disagree because their scientific judgments differ. which of the following instances best reflexes source of disagreement. a) one economist believes that manufacturing firms should face greater regulation to preserve the environment; another economist believes the government should not intervene in free markets. b) one economist believes that equality should be valued over efficiency and policy decisions; another economist believes that efficiency should be valued over equality in policy decisions. c) one economist believes everyone should pay the same percentage of their income in taxes; another economist believes that wealthier citizens should pay a higher percentage of their income in taxes. d) one economist believes the government should tax a households income; another economist believes the government should tax a household's consumption because it will cause households to save more.

d) one economist believes the government should tax a households income; another economist believes the government should tax a household's consumption because it will cause households to save more.

the main reason that some Nations have higher average living standards than others is that a) some Nations have stronger laws protecting worker rights b) the central banks of some Nations have created more money c) the Richer Nations have exploited the poorer ones d) some Nations have higher levels of productivity

d) some Nations have higher levels of productivity

positive statements are a) statements of prescription that involve value judgments b) macroeconomic c) microeconomic d) statements of description that can be tested

d) statements of description that can be tested

a rational person does not act unless a) the action makes money for the person b) the action is ethical c) the action produces marginal cost that exceed marginal benefits d) the action produces marginal benefits that exceed marginal costs e) none of the above is true

d) the action produces marginal benefits that exceed marginal costs

which of the following is related to microeconomics? a) the impact of the deficit on saving b) the impact of money on inflation c) the impact of technology on economic growth d) the impact of oil prices on auto production

d) the impact of oil prices on auto production

all of the following topics fall within the study of microeconomics except a) the effectiveness of anti-poverty programs and reducing homelessness b) the role of Microsoft's Market power in the pricing of software c) the impact of cigarette taxes on the smoking behavior of teenagers d) the influence of the government budget deficit on economic growth

d) the influence of the government budget deficit on economic growth

which of the following is not part of the opportunity cost of going on vacation? a) the money you could have made if you had stayed home and worked b) the money you spent on airline tickets c) the money you spent on a Broadway show d) the money you spent on food

d) the money you spent on food

in the ordered pair (20, 30), 20 is the a) the y coordinate and the vertical location of the point b) the y coordinate and the horizontal location of the point c) the x coordinate and the vertical location of the point d) the x coordinate and the horizontal location of the point

d) the x coordinate and the horizontal location of the point

what is the most accurate statement about trade? a) trade makes some Nations better off and others worse off b) trade helps Rich Nations and hurts poor Nations c) trading for a good can make a nation better off only if the nation cannot produce the good itself d) trade can make every nation better off

d) trade can make every nation better off

workers in the United States enjoy a high standard of living because a) unions in the United States keep the wage high b) we have protected our industry from foreign competition c) the United States has a high minimum wage d)workers in the United States are highly productive e) none of the above is true

d) workers in the United States are highly productive

opportunity cost

whatever must be given up to obtain some item