MACRO exam 1

In a competitive market, each seller has limited control over the price of his product because a) other sellers are offering similar products. b) buyers exert more control over the price than do sellers. c) these markets are highly regulated by the government. d) sellers usually agree to set a common price that will allow each seller to earn a comfortable profit.

a

Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, while Sandy can make 6 tables or 18 chairs. Given this, we know that a) Mike has an absolute advantage in chairs. b) Mike has a comparative advantage in tables. c) Sandy has an absolute advantage in chairs. d) Sandy has a comparative advantage in chairs.

a

Regan grows flowers and makes ceramic vases. Jayson also grows flowers and makes ceramic vases, but Regan is better at producing both goods. In this case, trade could a) benefit both Jayson and Regan. b) benefit Jayson, but not Regan. c) benefit Regan, but not Jayson. d) benefit neither Jayson nor Regan.

a

The demand for a good or service is determined by a) those who buy the good or service. b) the government. c) those who sell the good or service. d) both those who buy and those who sell the good or service.

a

The market demand curve a) is the sum of all individual demand curves. b) is the demand curve for every product in an industry. c) shows the average quantity demanded by individual demanders at each price. d) is always flatter than an individual demand curve.

a

What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell? a) Price would fall, and the effect on quantity would be ambiguous. b) Price would rise, and the effect on quantity would be ambiguous. c) Quantity would fall, and the effect on price would be ambiguous. d) Quantity would rise, and the effect on price would be ambiguous.

a

"Prices rise when the quantity of money rises rapidly" is an example of a a) negative economic statement. b) positive economic statement. c) normative economic statement. d) statement that contradicts one of the basic principles of economics.

b

Economists believe that production possibilities frontiers are often bowed because a) trade-offs inevitably create unemployment. b) resources are not completely adaptable. c) opportunity costs are constant. d) of improvements in technology.

b

Economists face an obstacle that many other scientists do not face. What is that obstacle? a) It is often difficult to formulate theories in economics. b) It is often difficult and sometimes impossible to perform experiments in economics. c) Economics cannot be addressed objectively; it must be addressed subjectively. d) The scientific method cannot be applied to the study of economics.

b

Figure 2-10 Refer to Figure 2-10. Which of the following events would explain the shift of the production possibilities frontier from A to B? a) The economy's citizens developed an enhanced taste for books. b) The economy experienced a technological advance in the production of books. c) More capital became available in the economy. d) More labor became available in the economy.

b

Figure 2-5 Refer to Figure 2-5. The opportunity cost of this economy moving from point A to point C is a) 75 soccer balls. b) 125 soccer balls. c) 125 soccer balls and 240 sweaters. d) 240 sweaters.

b

Figure 4-15 Refer to Figure 4-15. At a price of $35, there would be a: a) surplus of 200 units. b) surplus of 400 units. c) surplus of 600 units. d) shortage of 400 units.

b

Figure 4-21 Refer to Figure 4-21. Which of the following movements would illustrate the effect in the market for orange juice of an announcement by the American Dental Association that orange juice erodes tooth enamel? a) Point A to Point B b) Point C to Point B c) Point C to Point D d) Point A to Point D

b

The most obvious benefit of specialization and trade is that they allow us to a) work more hours per week than we otherwise would be able to work. b) consume more goods than we otherwise would be able to consume. c) spend more money on goods that are beneficial to society, and less money on goods that are harmful to society. d) consume more goods by forcing people in other countries to consume fewer goods.

b

Which of the following statements is an example of a positive, as opposed to normative, statement? a) Americans deserve a cleaner environment. b) Reducing emissions reduces days missed from school due to asthma. c) All Americans are entitled to quality health care. d) Economic policies should focus on improving equality.

b

Years ago, thousands of country music fans risked their lives by rushing to buy tickets for a Willie Nelson concert at Carnegie Hall. This behavior indicates a) the ticket price was above the equilibrium price. b) the ticket price was below the equilibrium price. c) the ticket price was at the equilibrium price. d) nothing about the equilibrium price.

b

Figure 2-2 Refer to Figure 2-2. If households are buyers in the markets represented by Box C of this circular-flow diagram, then a) Box C must represent the markets for the factors of production. b) Box D must represent the markets for goods and services. c) firms are sellers in the markets represented by Box C. d) All of the above are correct.

c

Table 3-15 The following table contains some production possibilities for an economy for a given month. Bagels Donuts 40 150 60 ? 80 50 Refer to Table 3-15. If the production possibilities frontier is a straight line, then "?" must be a) 50. b) 75. c) 100. d) 125.

c

Table 3-6 Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. Hours Needed To Make 1 Amount Produced in 40 Hours mixer toaster mixers toasters Maya 8 5 5 8 Miguel 20 10 2 4 Refer to Table 3-6. The opportunity cost of 1 mixer for Miguel is: a) 1/2 toaster. b) 1/2 hour of labor. c) 2 toasters. d) 8 hours of labor.

c

There is no shortage of scarce resources in a market economy because a) the government makes shortages illegal. b) resources are abundant in market economies. c) prices adjust to eliminate shortages. d) quantity supplied is always greater than quantity demanded in market economies.

c

Which of the following events could shift the demand curve for gasoline to the left? a) The income of gasoline buyers rises, and gasoline is a normal good. b) The income of gasoline buyers falls, and gasoline is an inferior good. c) Public service announcements run on television encourage people to walk or ride bicycles instead of driving cars. d) The price of gasoline rises.

c

Which of these statements best represents the law of demand? a) When buyers' tastes for a good increase, they purchase more of the good. b) When income levels increase, buyers purchase more of most goods. c) When the price of a good decreases, buyers purchase more of the good. d) When buyers' demands for a good increase, the price of the good increases.

c

A competitive market is a market in which a) an auctioneer helps set prices and arrange sales. b) there are only a few sellers. c) the forces of supply and demand do not apply. d) no individual buyer or seller has any significant impact on the market price.

d

A production possibilities frontier is bowed outward when a) the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. b) an economy is self-sufficient instead of interdependent and engaged in trade. c) the rate of tradeoff between the two goods being produced is constant. d) the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

d

An early frost in the vineyards of Napa Valley would cause a(n) a) increase in the demand for wine, increasing price. b) increase in the supply of wine, decreasing price. c) decrease in the demand for wine, decreasing price. d) decrease in the supply of wine, increasing price.

d

Figure 2-5 Refer to Figure 2-5. If this economy moves from point A to point B, then which of the following statements is correct? a) This economy has moved from a point of inefficient production to a point of efficient production. b) This economy has experienced economic growth. c) This economy has experienced an increase in employment. d) None of the above is correct.

d

Suppose Jim and Tom can both produce two goods: baseball bats and hockey sticks. Which of the following is not possible? a) Jim has an absolute advantage in the production of baseball bats and in the production of hockey sticks. b) Jim has an absolute advantage in the production of baseball bats and a comparative advantage in the production of hockey sticks. c) Jim has an absolute advantage in the production of hockey sticks and a comparative advantage in the production of baseball bats. d) Jim has a comparative advantage in the production of baseball bats and in the production of hockey sticks.

d

Table 3-15 The following table contains some production possibilities for an economy for a given month. Bagels Donuts 40 150 60 ? 80 50 Refer to Table 3-15. If the production possibilities frontier is bowed outward, then "?" could be a) 50. b) 75. c) 100. d) 125.

d

Table 3-6 Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. Hours Needed To Make 1 Amount Produced in 40 Hours mixer toaster mixers toasters Maya 8 5 5 8 Miguel 20 10 2 4 Refer to Table 3-6. Miguel has an absolute advantage in the production of a) both goods and a comparative advantage in the production of mixers. b) both goods and a comparative advantage in the production of toasters. c) neither good and a comparative advantage in the production of mixers. d) neither good and a comparative advantage in the production of toasters.

d

The following table contains a supply schedule for a good. Price Quantity Supplied $10 100 $20 Q1 If the law of supply applies to this good, then Q1 could be a) 0. b) 50. c) 100. d) 150.

d

When the price of a good or service changes, a) the supply curve shifts in the opposite direction. b) the demand curve shifts in the opposite direction. c) the demand curve shifts in the same direction. d) there is a movement along a given demand curve.

d

Which of the following statements is not correct? a) Trade allows for specialization. b) Trade has the potential to benefit all nations. c) Trade allows nations to consume outside of their production possibilities curves. d) Absolute advantage is the driving force of specialization.

d