Macro Economics Ch. 1
Please select the economic term that is best described by each statement. Solved a. People have limited resources to satisfy unlimited wants. -business cycle entrepreneurship tradeoffs -recession -margins -scarcity b. Everything you do requires giving up something (time, money, etc.). -margins -recession -tradeoffs -budgeting -scarcity -financial capital
a. scarcity b. tradeoffs
Which statement describes the equity-efficiency trade-off? a. The least efficient economic outcome is the fairest outcome. b. Government intervention can increase efficiency in a market. c. There is always a more equitable outcome that is also more efficient. d. Actions intended to make economic outcomes fairer may cause efficiency to decrease.
d.
The day-to-day living conditions of modern Americans are very different from what they were in the 20th century. While doing È research for an economics project, Charlie discovers that more households today, as compared to households 100 years ago, E have electricity, air conditioning, and a car. a. Which of the following explains why modern Americans enjoy a higher standard of living than Americans 100 years ago? -Market failure has been nonexistent. -Americans have prospered and earned more money, due to absence of recessions. -There has been economic growth in our society. -The invisible hand has guided all nations around the world to prosperity. b. In which field do researchers focus on investigating the phenomena described? -Economics -Sociology -Business -Political Science
a. There has been economic growth in our society b. economics
As prices of computer games fall, consumers purchase more games, ceteris paribus. a. What does the term ceteris paribus mean in this context? -holding all else equal (unchanged) -allowing all economic variables to change -that the basic concepts of economics do not apply -that the statement is easy to understand and does not require complex analysis b. Why, if at all, is the ceteris paribus condition important in economic analysis? -It enables the analyst to isolate the role of one variable in producing a given outcome. -It is not important. -It enables the analyst to simultaneously ascertain the roles of all relevant variables in producing a given outcome.
a. holding all else equal (unchanged) b. It enables the analyst to isolate the role of one varaible in producing a given outcome
Each scenario illustrates a principle of economics. Classify each scenario according to the principle that best fits it. a. An educational software company wants to expand the number of economics questions that it offers and is considering hiring another economist. The company compares how much adding another worker will improve the product to the additional b. Ava finds that there is not enough time after work to have dinner, exercise, and watch TV, and she must make choices about how to use her limited time. c. On Black Friday, there are huge sales for electronics at many retailers. David must decide between buying a new iPhone or a new Apple watch.
a. marginal analysis b. resource scarcity c. opportunity cost
Determine which economic principle is illustrated by each scenario. a. The owner of a snow cone trailer realizes that the demand for snow cones is low during the winter and closes shop until the temperature warms back up near summertime. b. The local river has so much pollution that three-eyed fish are forming. Regulations are therefore enacted to limit the amount of chemicals dumped into the river. c. At a high-end restaurant, the restaurant owner has one chef at a meat station, one chef at a vegetable station, and one chef, who has an artistic eye, plate the food she is given. The result is increased service speed, enabling the kitchen to serve more customers in an evening. d. During the summer, a bumper crop of oranges in Florida causes a surplus in the supply of oranges nationwide. As a result, prices fall to compensate for the surplus, and consumers enjoy the fruits of the farmers' labor.
a. market efficiency b.government intervention c. specialization d. equilibrium
Suppose that the video game company Ultravision releases a new game called Call of Obligation: Modern Combat 3. This game can be analyzed using the tools of both microeconomics and macroeconomics. Classify each item below according to whether it represents an application of microeconomic or macroeconomic tools. a. Can Ultravision sell all the units of the Call of Obligation games it produces, or should it produce more units? b. How does Ultravision choose to market Call of Obligation? c. How much does Ultravision pay developers of the game? Microeconomics d. How much less economic output is produced nationwide because workers call in sick to play either Call of Obligation or another video game? e. How much will Ultravision charge for Call of Obligation? f. Have the millions of dollars that people have spent on video games worldwide affected the Gross Domestic Product (GDP) in their respective countries? g. Has the country's unemployment rate changed as Ultravision hired a huge team of workers to develop the game?
a. micro b. micro c. micro d. macro e. micro f. macro g. macro
Indicate whether each event described falls mainly in the field of microeconomics or that of macroeconomics. a. A tax on tires increases the price of tires paid by car owners. -microeconomics -macroeconomics b. As a result of a severe recession, the total output, or gross domestic product, of a nation falls by 4 percent. -microeconomics -macroeconomics c. Increased consumer spending causes the national unemployment rate to fall. -microeconomics -macroeconomics d. Increased consumer spending causes the rate of inflation to rise. -microeconomics -macroeconomics e. Optimism about future car sales leads General Motors to hire more auto workers. -microeconomics -macroeconomics f. Robotic technology reduces the demand for auto workers. -microeconomics -macroeconomics
a. micro b. macro c. macro d. macro e. micro f. micro
Determine whether each statement reflects positive analysis or normative analysis. a. The richest 1% of Americans should pay more taxes than the remaining 99%. -positive analysis -normative analysis b. A decrease in the supply of coconut will increase the price of German chocolate cake, a good that requires coconut shavings as a key ingredient -positive analysis -normative analysis c. As the minimum wage increases, the prices of all goods and services also tend to increase -positive analysis -normative analvsis d. Social welfare spending in Sweden occupies too large a portion of the national budget. -positive analysis -normative analysis
a. normative b. positive c. positive d. normative
Indicate whether each item describes a primary goal of macroeconomic policy. a. Low unemployment -primary macroeconomic policy goal -not a primary macroeconomic policy goal b. Eliminating political conflict -primary macroeconomic policy goal -not a primary macroeconomic policy goal c. To set the optimal price for a pound of peaches -primary macroeconomic policy goal -not a primary macroeconomic policy goal d. Low inflation -primary macroeconomic policy goal -not a primary macroeconomic policy goal e. To calculate how much urban residents are willing to pay to protect biodiversity -primary macroeconomic policy goal -not a primary macroeconomic policy goal f. Rising living standards -primary macroeconomic policy goal -not a primary macroeconomic policy goal
a. primary b. not c. not d. primary e. not f. primary
a. Suppose the University Health Center receives flu vaccinations at the beginning of each flu season and offers these vaccines to students tile market price of $20.00 each. Of course college students have varying budgets-some have money to spare, while others have difficulty meeting basic needs. Additionally, some students have pre-existing conditions, such as asthma or diabetes, that place them at high risk for the fu. Who will receive the vaccines if the University Health Center sells them at the $20.00 market price? -the students who pay $20.00 for them -the students who most want them -the students who most need them b. Suppose the school sells all of its vaccines at the market price of $20.00. What does the school maximize? -fairness -efficiency c. Suppose now that the school wishes to ensure that no students with diabetes or asthma go without the drug, owing to an inability to pay for it. Because the Health Center does not know the budget of each student, it decides to offer vaccines free to students who can provide a doctor's note stating that they have a pre-existing condition. The school is now seeking a greater degree of -self interest -efficiency -fairness
a. the students who pay $20.00 for them b. efficiency c. fairness
In which scenario is an individual's behavior least likely to change? a. The country of Ravamolk enacts a policy to fine companies 20% of their earnings if the safety standards in their factories do not reach acceptable work conditions. b. In an effort to make people eat healthier, the city of Bakersville tells its residents to eat wheat bread instead of white bread. c. A basketball team manages to sign a trio of famous basketball stars who then clamor for other players to come join their team to win a guaranteed championship. d. The city of Saskatoon chooses to give its residents a penny for each soda can they recycle in an effort to promote environmental awareness.
b.
Megan has a 1 hr gap in her course load for the fall semester. There are two courses available for her to take at that time: reading piano sheet music and beginning rock climbing. She does not have any experience with piano or rock climbing. In the end, she decides to enroll in the rock climbing course, despite her fear of heights. Identify which activity exhibits a potential trade-off with enrolling in rock climbing. a. learning rock climbing skills b. learning to read piano sheet music c. overcoming her fear of heights d. none of the above
b.
Thom, Juliana, Colin, and Danny are trying to form a band. They each have some basic skills on most instruments, so their current plan is for each of them to rotate among vocals, guitar, bass, and drums. After a year of practice and rehearsals the band still sounds awful. Thom cannot keep a steady beat when on bass or drums, Colin sounds terrible on everything except the bass, nobody except Juliana can remember all the chords on guitar, and even Danny's mom thinks his singing sounds like a dying cow. At their current rate, the expect it will be several years until they are good enough to land their first paid performance. None of them have enough money saved up to last that long. They all know you are taking economics and ask your advice. What would you say to them? a. Invest their remaining savings in new instruments, as they are at a point where the marginal product of capital exceeds the marginal product of labor. b. Continue with the current plan, as economies of scale should eventually kick in. c. Abandon the band, as continued practice is doomed to suffer diminishing marginal returns. d. Change the rotation to be random rather than equal to take advantage of heteroskedasticity. e.
e.
Which of the following scenarios involves no opportunity cost? a. It's Friday night and you stay up late talking and hanging out with your friends. b. You eat lunch with the chemistry club, which is giving out free pizza for lunch to all who come to their table to get it. c. Naomi, age 8, is at a bookstore and chooses to buy a book about a young wizard instead of buying a math textbook that she would probably never open. d. Chez Moi and Chez Nous, two premiere French restaurants with three Michelin stars, both offer you a full-time sous chef job at the same salary. You are ecstatic because you know it is a win-win scenario and choose to work for Chez Nous. e. All of these scenarios have an opportunity cost.
e.