Macro Exam 1
Which of the following is not a factor of production? A) $1,000 in cash B) the manager of the local tire shop C) a drill press in a machine shop D) an acre of farmland
A) $1,000 in cash
Pookie's Pinball Palace restores old Pinball machines. Pookie has just spent $300 purchasing and cleaning a 1960s-era machine which he expects to sell for $2,000 once he is finished with the restoration. After having spent $300, Pookie discovers that he will need to rewire the entire machine at a cost of $1,100 in order to finish the restoration. Alternatively, he can sell the machine "as is" now for $1,000. What should he do? A) He should sell the machine now to make the most profit. B) He should have never purchased the machine because he has already spent too much time on it and has not been paid for that time. C) It does not matter what he does; he is going to take a loss on his project. D) He should rewire the machine, complete the task and then sell the machine.
A) He should sell the machine now to make the most profit.
How are the fundamental economic decisions determined in Canada? A) Individuals, firms, and the government interact in a market to make these economic decisions. B) These decisions are made by the country's elders who have had much experience in answering these questions. C) The government decides because Canada is a centrally planned economy. D) The United Nations decides because Canada is a developing economy.
A) Individuals, firms, and the government interact in a market to make these economic decisions.
What is an economic model? A) It is a simplified version of some aspect of economic life used to analyze an economic issue. B) It is a description of an economic issue that includes all possible related information. C) It is a detailed version of some aspect of economic life used to analyze an economic issue. D) It is a description of an economic issue based on official government information.
A) It is a simplified version of some aspect of economic life used to analyze an economic issue.
One reason some manufacturing companies have moved production from overseas locations back to the United States is an increasing preference by U.S. consumers for products made in the United States. If buyers have increased their preference for domestically produced goods and manufacturers believe they can increase revenues by supplying more of these goods, firms are following which key economic idea when they return production to the United States? A) People respond to economic incentives. B) The market system relies on the principle of voluntary exchange. C) Optimal decisions are made at the margin. D) People are rational.
A) People respond to economic incentives.
Let D= demand, S = supply, P = equilibrium price, and Q= equilibrium quantity. What happens in the market for tropical hardwood trees if the governments restrict the amount of forest lands that can be logged? A) S decreases, D no change, P increases, Q decreases. B) D and S decrease, P and Q increase. C) D decreases, S no change, P and Q decrease. D) D no change, S decreases, P increases, Q increases.
A) S decreases, D no change, P increases, Q decreases.
For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries? A) Switzerland has the comparative advantage in watches. B) Germany has the comparative advantage in watches and chocolate. C) Switzerland has the comparative advantage in chocolate. D) Germany has the comparative advantage in watches.
A) Switzerland has the comparative advantage in watches.
The Internet has created a new category in the book selling market, namely, the "barely used" book. How does the availability of barely used books affect the market for new books? A) The demand curve for new books shifts to the left. B) The demand curve for new books shifts to the right. C) The supply curve for new books shifts to the right. D) The supply curve for new books shifts to the left.
A) The demand curve for new books shifts to the left.
Suppose a positive technological change in the production of disease-resistant corn caused the price of corn to fall. Holding everything else constant, how would this affect the market for wheat (a substitute for corn)? A) The demand for wheat would decrease and the equilibrium price of wheat would decrease. B) The demand for wheat would increase because consumers could afford to buy more wheat and corn. C) The demand for wheat would decrease and the equilibrium price of wheat would increase. D) The supply of wheat would increase and the equilibrium price of wheat would decrease.
A) The demand for wheat would decrease and the equilibrium price of wheat would decrease.
Suppose that in October, market analysts predict that the price of platinum will fall in November. What happens in the platinum market in October, holding everything else constant? A) The supply curve shifts to the right. B) The demand curve shifts to the right. C) The quantity of platinum demanded and the quantity of platinum supplied both increase. D) The supply curve shifts to the left.
A) The supply curve shifts to the right.
Which of the following describes a characteristic of a perfectly competitive market? A) There are many buyers and sellers. B) There are many sellers but few buyers. C) There are many buyers but few sellers. D) Equilibrium is achieved when demand for the product sold in the market equals the supply.
A) There are many buyers and sellers.
In 2004, hurricanes damaged a large portion of Florida's orange crop. As a result of this, many orange growers were not able to supply fruit to the market. If, following the hurricane, the price remained at its pre-hurricane level, we would expect to see A) a shortage of oranges. B) a surplus of oranges. C) the quantity demanded equal to the quantity supplied. D) an increase in the demand for oranges.
A) a shortage of oranges.
Which of the following is a factor of production? A) an oven in a bakery B) a credit card C) a $500 Treasury bond D) a share of General Motors' stock
A) an oven in a bakery
An outward shift of a nation's production possibilities frontier represents A) economic growth. B) an impossible situation. C) a situation in which a country produces more of one good and less of another. D) rising prices of the two goods on the production possibilities frontier model.
A) economic growth.
Microeconomics is the study of A) how households and firms make choices. B) the global economy. C) topics such as unemployment, inflation, and economic growth. D) the economy as a whole.
A) how households and firms make choices.
In economics, the accumulated skills and training that workers have is known as A) human capital. B) physical capital. C) entrepreneurship. D) innovation.
A) human capital.
The production possibilities frontier model shows that A) if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good. B) economic growth can only be achieved by free market economies. C) if consumers decide to buy more of a product, its price will increase. D) a market economy is more efficient in producing goods and services than is a centrally planned economy.
A) if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.
As job opportunities for women and the wages those jobs pay have increased, the opportunity cost of doing housework has ________, so many families have chosen to hire specialists in households chores, such as cleaning services and lawn care services, because the cost of these specialists is ________ than the cost of the wife (or husband) performing those chores. A) increased; lower B) decreased; lower C) increased; higher D) decreased; higher
A) increased; lower
In a production possibilities frontier, a point ________ the frontier is productively inefficient. A) inside B) at either intercept of C) outside D) along
A) inside
The resource income earned by those who supply ________ is called wages. A) labor B) natural resources C) entrepreneurship D) capital
A) labor
The production possibilities frontier shows the ________ combinations of two products that can be produced in a particular time period with available resources. A) maximum attainable B) only C) minimum attainable D) equitable
A) maximum attainable
The machines that workers have to work with are considered A) physical capital. B) financial capital. C) human capital. D) entrepreneurship.
A) physical capital.
Which of the following is a flow in the circular flow model? A) the flow of revenue received by firms and the flow of payments to resource owners B) the flow of goods and services from households to firms C) the flow of profit and the flow of revenue D) the flow of income earned by firms and the flow of expenditures earned by households
A) the flow of revenue received by firms and the flow of payments to resource owners
A major factor contributing to the slow growth rate of less-developed economies is A) the lack of well-defined and enforceable property rights. B) the lack of workers. C) the high rate of illiteracy. D) the lack of natural resources.
A) the lack of well-defined and enforceable property rights.
If in the market for apples the supply has decreased, then A) the supply curve for apples has shifted to the left. B) there has been a movement downwards along the supply curve for apples. C) the supply curve for apples has shifted to the right. D) there has been a movement upwards along the supply curve for apples.
A) the supply curve for apples has shifted to the left.
Which of the following statements is correct? An increase in income will reduce the demand for a normal good. A decline in the price of X will increase the demand for substitute product Y. A decrease in income will decrease the demand for an inferior good. An increase in the price of C will decrease the demand for complementary product D.
An increase in the price of C will decrease the demand for complementary product D.
Pierre can produce either a combination of 20 bow ties and 30 neckties or a combination of 35 bow ties and 15 neckties. If he now produces 35 bow ties and 15 neckties, what is the opportunity cost of producing an additional 15 neckties? A) 2 bow ties B) 15 bow ties C) 20 bow ties D) 35 bow ties
B) 15 bow ties
If the price of milk was $2.50 a gallon and it is now $3.25 a gallon, what is the percentage change in price? A) 13 percent B) 30 percent C) 75 percent D) 77 percent
B) 30 percent
What is the difference between an "increase in supply" and an "increase in quantity supplied"? A) There is no difference between the two terms; they both refer to a movement along a given supply curve. B) An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price. C) There is no difference between the two terms; they both refer to a shift of the supply curve. D) An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" means at any given price supply has increased.
B) An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price.
Which of the following statements about an entrepreneur is false? A) An entrepreneur risks the personal funds provided. B) An entrepreneur sells his entrepreneurial services in the output market. C) An entrepreneur organizes the other factors of production into a working unit. D) An entrepreneur develops the vision for the firm and funds the producing unit.
B) An entrepreneur sells his entrepreneurial services in the output market.
Which of the following is an example of spending on factors of production in the circular flow model? A) Carolina has her nails done before her 20th high school class reunion. B) Arlisha purchases a cotton candy machine for her concession stand at the state fair. C) Stevie trades in his old cell phone for a newer model. D) Giorgio buys snow cones for his youth soccer team after each game.
B) Arlisha purchases a cotton candy machine for her concession stand at the state fair.
________ occurs when economic benefits are distributed fairly. A) Productive efficiency B) Equity C) Allocative efficiency D) Equality
B) Equity
What is the "omitted variable" problem in determining cause and effect? A) It is a problem that arises when a significant variable is not given enough weight in an economic experiment leading to skewed conclusions about cause and effect. B) It is a problem that arises when an economic variable that affects other variables is omitted from an analysis and its omission leads to false conclusions about cause and effect. C) It is a problem that arises when an insignificant variable is given too much weight in an economic analysis leading to skewed conclusions about cause and effect. D) It is a problem that arises when an insignificant economic variable that should have been omitted is included in an economic experiment leading to false conclusions about cause and effect.
B) It is a problem that arises when an economic variable that affects other variables is omitted from an analysis and its omission leads to false conclusions about cause and effect.
In 18th century Europe, governments gave guilds legal authority to limit production of goods. How did this authority either obstruct or improve the market mechanism? A) It improved the market mechanism because the government's actions provided the correct set of signals to the market so that producers can adjust their output to better meet the needs of consumers. B) It obstructed the market mechanism because the guild's actions prevented the forces of demand and supply from coordinating the self-interested decisions of producers and consumers. C) It obstructed the market mechanism because with one more party having to coordinate activities (the guilds) there were delays in getting the products to consumers. D) It improved the market mechanism by making it more efficient because the guilds were able to quickly identify and rectify any market shortages and surpluses.
B) It obstructed the market mechanism because the guild's actions prevented the forces of demand and supply from coordinating the self-interested decisions of producers and consumers.
One reason some manufacturing companies have moved production from overseas locations back to the United States is rising foreign labor costs. Assuming that managers at these companies used all available information, including the rising cost of foreign labor, when making the decision to move production back to the United States exemplifies which key economic idea? A) Optimal decisions are made at the margin. B) People are rational. C) The market system relies on the principle of voluntary exchange. D) People respond to economic incentives.
B) People are rational.
Which of the following statements is true about profit? A) Profit is calculated by multiplying price and quantity sold. B) Profit is the difference between revenue and cost. C) Profit refers to the revenue received from the sale of a quantity of goods. D) The terms "accounting profit" and "economic profit" can be used interchangeably.
B) Profit is the difference between revenue and cost.
Assume that California Merlot is a normal good. Prices of California Merlot have risen steadily in recent years. Over this same period, prices for French oak barrels used for wine storage have dropped and consumer incomes have risen. Which of the following best explains the rising prices of California Merlots? A) The demand curve and the supply curve for Merlot have both shifted to the left. B) The demand curve for Merlot has shifted to the right more than the supply curve has shifted to the right. C) The supply curve for Merlot has shifted to the right more than the demand curve has shifted to the right. D) The supply curve for Merlot has shifted to the right while the demand curve for Merlot has shifted to the left.
B) The demand curve for Merlot has shifted to the right more than the supply curve has shifted to the right.
In September, buyers of silver expect that the price of silver will rise in October. What happens in the silver market in September, holding all else constant? A) The demand curve shifts to the left. B) The demand curve shifts to the right. C) The quantity demanded decreases. D) The quantity demanded increases.
B) The demand curve shifts to the right.
Which of the following has occurred as the millennial generation has come of age? A) The demand for "fast casual" food has decreased in the U.S. market. B) The demand for golf equipment has decreased in the U.S. market. C) The demand for traditional fast food has increased in the U.S. market. D) All of these
B) The demand for golf equipment has decreased in the U.S. market.
Assume that there is a surplus in the market for hybrid automobiles. Which of the following statements correctly describes this situation? A) The surplus will cause an increase in the equilibrium price of hybrid automobiles. B) The price of hybrid automobiles will fall in response to the surplus; as the price falls the quantity demanded will increase and the quantity supplied will decrease. C) Some consumers will be unable to obtain hybrid automobiles at the market price and will have an incentive to offer to buy the product at a higher price. D) The supply of hybrid automobiles is greater than the demand for hybrid automobiles.
B) The price of hybrid automobiles will fall in response to the surplus; as the price falls the quantity demanded will increase and the quantity supplied will decrease.
The decline in the popularity of clothing made from animal fur has enticed large department stores like J. C. Penney and Sears to discontinue sales of animal-fur products. How does discontinuing sales of these products by J.C. Penney and Sears affect the animal-fur clothing market? A) The demand curve for animal-fur clothing shifts to the left. B) The supply curve for animal-fur clothing shifts to the left. C) The supply curve for animal-fur clothing shifts to the right. D) The demand curve for animal-fur clothing shifts to the right.
B) The supply curve for animal-fur clothing shifts to the left.
Which of the following best describes an assumption economists make about human behavior? A) They assume that individuals act randomly. B) They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time. C) They assume that people take into account the question of fairness in all decisions they make. D) They assume that individuals act rationally all the time in all circumstances.
B) They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.
Which of the following is a microeconomic question? A) What determines the average price level and inflation? B) What factors determine the price of carrots? C) How much will be saved and how much will be produced in the entire economy? D) What will the level of economic growth be in the entire economy?
B) What factors determine the price of carrots?
An inward shift of a nation's production possibilities frontier can occur due to A) a reduction in unemployment. B) a natural disaster like a hurricane or bad earthquake. C) an increase in the labor force. D) a change in the amounts of one good desired.
B) a natural disaster like a hurricane or bad earthquake.
If a graph has a line that shows the amount of outsourcing in the last ten years, it is known as A) a pie chart. B) a time-series graph. C) a demand curve for outsourcing. D) a supply curve of outsourcing.
B) a time-series graph.
Which of the following would cause a decrease in the supply of milk? A) an increase in the number of firms that produce milk B) an increase the price of a product that producers sell instead of milk C) a decrease in the price of milk D) an increase in the price of cookies (assuming that milk and cookies are complements)
B) an increase the price of a product that producers sell instead of milk
Comparative advantage means the ability to produce a good or service A) at a higher profit level than any other producer. B) at a lower opportunity cost than any other producer. C) of a higher quality than any other producer. D) at a lower selling price than any other producer.
B) at a lower opportunity cost than any other producer.
The ________ demonstrates the roles played by households and firms in the market system. A) business cycle B) circular flow model C) production possibilities frontier D) theory of comparative advantage
B) circular flow model
Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following? A) never have to engage in trade with other nations B) consume a combination of goods that lies outside its own production possibilities frontier C) produce a combination of goods that lies outside its own production possibilities frontier D) increase the variety of products that it can produce with a decrease in resources
B) consume a combination of goods that lies outside its own production possibilities frontier
The law of demand implies, holding everything else constant, that as the price of gelato A) decreases, the demand for gelato will increase. B) decreases, the quantity of gelato demanded will increase. C) increases, the demand for gelato will increase. D) increases, the quantity of gelato demanded will increase.
B) decreases, the quantity of gelato demanded will increase.
If a demand curve shifts to the right, then A) quantity demanded has decreased. B) demand has increased. C) quantity demanded has increased. D) demand has decreased.
B) demand has increased.
Tesla Motors manufactures its cars at a plant in Fremont, California. At this plant, Tesla is able to take advantage of the high level of technical training possessed by its American workers, but it also sacrifices the ability to pay lower wages had it chosen to open its plant in a low-wage country such as Mexico, India, or China. In deciding to open the Fremont plant, Tesla A) adopted a negative technological change because it chose high-skilled workers over low-paid workers. B) faced a trade-off between higher cost and less technical skill. C) faced no trade-offs because employing more technically-skilled workers increased efficiency. D) eroded some of its competitiveness in the luxury electric car market because of its increased cost of production.
B) faced a trade-off between higher cost and less technical skill.
If the amount of carbonated sodas consumed continues to decline as consumers continue to choose to buy healthier products, this will likely A) decrease the demand for premium water, because premium water is considered an inferior good and carbonated sodas are considered normal goods. B) increase the demand for premium water, because premium water and carbonated sodas are considered substitutes. C) decrease the demand for premium water, because premium water is considered a normal good and carbonated sodas are considered inferior goods. D) increase the demand for premium water, because premium water and carbonated sodas are considered complements.
B) increase the demand for premium water, because premium water and carbonated sodas are considered substitutes.
As women's wages have risen relative to men's wages, the opportunity cost to women of doing housework has ________ than has the opportunity cost to men. A) decreased less B) increased more C) decreased more D) increased less
B) increased more
When you purchase a new pair of jeans you do so in the A) resource market. B) product market. C) factor market. D) input market.
B) product market.
In economics, the difference between a firm's revenues and its costs is referred to as A) physical capital. B) profit. C) factor payments. D) capital gains.
B) profit.
If the best lawyer in town is also the best at operating a word processor, then according to the theory of comparative advantage, this person should A) should pursue the activity she enjoys more. B) specialize in being a lawyer because its opportunity cost is lower. C) split her time evenly between being a lawyer and a word processor. D) specialize in being a word processor because it is more capital-intensive.
B) specialize in being a lawyer because its opportunity cost is lower.
Scarcity A) can be overcome by discovering new resources. B) stems from the incompatibility between limited resources and unlimited wants. C) can be eliminated by rationing products. D) is a bigger problem in market economies than in socialist economies.
B) stems from the incompatibility between limited resources and unlimited wants.
Households ________ factors of production and ________ goods and services. A) supply; supply B) supply; demand C) demand; demand D) demand; supply
B) supply; demand
Which of the following are separate flows in the circular flow model? A) the flow of income received by households and the flow of tax revenues paid by households B) the flow of income earned from the sale of resources and the flow of expenditures on goods and services. C) the flow of costs and the flow of revenue D) the flow of goods and the flow of services
B) the flow of income earned from the sale of resources and the flow of expenditures on goods and services.
Consider the following economic agents: a. the government b. consumers c. producers Who, in a centrally planned economy, decides what goods and services will be produced with the scarce resources available in that economy? A) consumers B) the government C) the government, consumers, and producers D) producers E) consumers and producers
B) the government
The attainable production points on a production possibilities frontier are A) the points along the production possibilities frontier. B) the points along and inside the production possibility frontier. C) the horizontal and vertical intercepts. D) the points outside the area enclosed by the production possibilities frontier.
B) the points along and inside the production possibility frontier.
A firm has an incentive to decrease supply now and increase supply in the future if it expects that A) the price of its product will be lower in the future than it is today. B) the price of its product will be higher in the future than it is today. C) more firms will enter the market in the future. D) the prices of inputs used to produce the product will rise in the future.
B) the price of its product will be higher in the future than it is today.
Adam Smith's invisible hand refers to A) property ownership laws and the rule of the court system. B) the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole. C) the government's unobtrusive role in ensuring that the economy functions efficiently. D) the laws of nature that influence economics decisions.
B) the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole.
Technology is defined as A) the process of developing and revising models. B) the processes used to produce goods and services. C) new innovations and creations. D) the process of recycling products.
B) the processes used to produce goods and services.
At a product's equilibrium price A) the quantity of the product demanded is greater than the quantity of the product supplied. B) the product's demand curve crosses the product's supply curve. C) the quantity of the product demanded is less than the quantity of the product supplied. D) the product's demand curve is the same as the product's supply curve.
B) the product's demand curve crosses the product's supply curve.
The circular flow model demonstrates A) the role of the government in overseeing the market system. B) the roles played by households and firms in the market system. C) how shortages and surpluses are eliminated in a market. D) how demand and supply for goods and services are brought into equilibrium.
B) the roles played by households and firms in the market system.
Using Richard Tedlow's "three phases of marketing", the premium bottled water industry is probably in A) the first phase, where a very large number of firms are each producing a relatively small volume of premium bottled water. B) the second phase, where one or a few brands have attained high market shares by selling a large number of bottles of premium water at lower prices. C) the third phase, where the dominant firms have rapidly introduced a large number of premium bottled water varieties. D) The market for premium bottled water is too young to categorize using the "three phases of marketing".
B) the second phase, where one or a few brands have attained high market shares by selling a large number of bottles of premium water at lower prices.
Who receives the most of what is produced in a market economy? A) lawmakers and other politically favored groups B) those who are most willing and able to buy them C) everyone receives an equal amount D) people who earn the highest incomes
B) those who are most willing and able to buy them
Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves. If she now produces 60 silk roses and 80 silk leaves, what is the opportunity cost of producing an additional 10 silk roses? A) 2.5 silk leaves B) 10 silk leaves C) 25 silk leaves D) 55 silk leaves
C) 25 silk leaves
"An Inquiry into the Nature and Causes of the Wealth of Nations" published in 1776 was written by A) Alfred Marshall. B) Karl Marx. C) Adam Smith. D) John Maynard Keynes.
C) Adam Smith.
What is the difference between an "increase in demand" and an "increase in quantity demanded"? A) There is no difference between the two terms; they both refer to a movement downward along a given demand curve. B) There is no difference between the two terms; they both refer to a shift of the demand curve. C) An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve. D) An "increase in demand" is represented by a movement along a given demand curve, while an "increase in quantity demanded" is represented by a rightward shift of the demand curve.
C) An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.
Let D= demand, S = supply, P = equilibrium price, and Q= equilibrium quantity. What happens in the market for walnuts if the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower levels of bad cholesterol? A) D no change, S increases, P decreases, Q decreases. B) S increases, D no change, P decreases, Q increases. C) D increases, S no change, P and Q increase. D) D and S increase, P and Q decrease.
C) D increases, S no change, P and Q increase.
For each pound of salami that Hungary produces, it gives up the opportunity to make 10 bottles of beer. Slovakia gives up the opportunity to produce of 1 pound of salami for every 8 bottles of beer it produces. Which of the following is true about the comparative advantage between the two countries? A) Slovakia has the comparative advantage in beer. B) Slovakia has the comparative advantage in salami and beer. C) Hungary has the comparative advantage in beer. D) Hungary has the comparative advantage in salami.
C) Hungary has the comparative advantage in beer.
For each bottle of wine that Italy produces, it gives up the opportunity to make 10 pounds of cheese. France gives up the opportunity to produce of 1 bottle of wine for every 25 pounds of cheese it produces. Which of the following is true about the comparative advantage between the two countries? A) France has the comparative advantage in wine and cheese. B) Italy has the comparative advantage in cheese. C) Italy has the comparative advantage in wine. D) France has the comparative advantage in wine.
C) Italy has the comparative advantage in wine.
The production possibilities frontier model assumes which of the following? A) Production of any level of the two products that the economy produces is currently possible. B) Labor, capital, land, and natural resources are unlimited in quantity. C) The economy produces only two products. D) The level of technology is variable.
C) The economy produces only two products.
Which of the following is a normative economic statement? A) The current high price of gasoline is the result of strong worldwide demand. B) When the price of gasoline rises, transportation costs rise. C) The price of gasoline is too high. D) When the price of gasoline rises, the quantity of gasoline purchased falls.
C) The price of gasoline is too high.
Which of the following statements about positive economic analysis is false? A) Unlike normative economic analysis, positive economic analysis can be tested. B) Positive analysis uses an economic model to estimate the costs and benefits of different course of actions. C) There is much more disagreement among economists over positive economic analysis than over normative economic analysis. D) There is much more disagreement among economists over normative economic analysis than over positive economic analysis.
C) There is much more disagreement among economists over positive economic analysis than over normative economic analysis.
Which of the following is a macroeconomic question? A) What determines the production of DVDs? B) What determines the wage of auto workers? C) What determines the inflation rate? D) What factors determine the price of carrots?
C) What determines the inflation rate?
If, in response to an increase in the price of chocolate the quantity of chocolate demanded decreases, then economists would describe this as A) a change in consumer income. B) a decrease in demand. C) a decrease in quantity demanded. D) a decrease in consumers' taste for chocolate.
C) a decrease in quantity demanded.
Last year, the Pottery Palace supplied 8,000 ceramic pots at $40 each. This year, the company supplied the same quantity of ceramic pots at $55 each. Based on this evidence, The Pottery Palace has experienced A) an increase in the quantity supplied. B) a decrease in the quantity supplied. C) a decrease in supply. D) an increase in supply.
C) a decrease in supply.
Which of the following would cause the equilibrium price of white bread to decrease and the equilibrium quantity of white bread to increase? A) an increase in the price of flour B) an increase in the price of butter, a complement for white bread C) a decrease in the price of flour D) an increase in the price of rye bread, a substitute for white bread
C) a decrease in the price of flour
An example of a factor of production for Dell is A) the computers exported by Dell. B) stock issued by Dell. C) a worker hired by Dell. D) corporate bonds sold by Dell.
C) a worker hired by Dell.
Assume that potatoes are an inferior good. Which of the following would cause both the equilibrium price and equilibrium quantity of potatoes to decrease? A) a freeze that sharply reduces potato output B) a decrease in consumer income C) an increase in consumer income D) a technological advancement that results in a bumper crop of potatoes
C) an increase in consumer income
Farmers can raise either goats or ostriches on their land. Which of the following would cause the supply of goats to decrease? A) an increase in the demand for goats B) an increase in the price of ostrich feed C) an increase in the price of ostriches D) a decrease in the price of goats
C) an increase in the price of ostriches
Individuals who have never been the best at doing anything A) perform all tasks at a higher opportunity cost than others. B) cannot have a comparative advantage in producing any product. C) can still have a comparative advantage in producing some product. D) must have an absolute advantage in at least ones task.
C) can still have a comparative advantage in producing some product.
Economics is the study of the ________ people make to attain their goals, given their ________ resources. A) decisions; household B) purchases; unlimited C) choices; scarce D) income; available
C) choices; scarce
Economists spend much of their time A) using normative analysis to develop economic models. B) arguing that optimal decisions are rarely made at the margin. C) describing how choices are made and analyzing the results of those choices. D) telling businesses what goods and services to produce and how to produce them.
C) describing how choices are made and analyzing the results of those choices.
The natural resources used in production are made available in the A) government market. B) product market. C) factor market. D) goods and services market.
C) factor market.
In economics, tangible merchandise is referred to as A) human capital. B) invention. C) goods. D) services.
C) goods.
Billie's Billiard Barn has seen its business slow down ever since Patti's Ping Pong Parlour opened up across the street. Since the opening of Patti's Ping Pong Parlour, the opportunity cost of shooting pool at Billie's Billiard Barn has ________ for Billie's customers who also like to play ping pong. A) fallen to zero. B) not changed. C) increased. D) decreased.
C) increased.
The demand by all the consumers of a given good or service is the ________ for the good or service. A) scheduled demand B) quantity demanded C) market demand D) law of demand
C) market demand
The primary purpose of ________ is to encourage the expenditure of funds on research and development to create new products. A) centrally planned economies B) government-run health care C) patents and copyrights D) nationalizing oil companies
C) patents and copyrights
Economic models do all of the following except A) answer economic questions. B) make economic ideas explicit and concrete for use by decision makers. C) portray reality in all its minute details. D) simplify some aspect of economic life.
C) portray reality in all its minute details.
If the best surgeon in town is also the best at cleaning swimming pools, then according to the theory of comparative advantage, this person should A) split his time evenly between being a surgeon and cleaning swimming pools. B) pursue the activity he enjoys more. C) specialize in being a surgeon because its opportunity cost is lower. D) specialize in cleaning swimming pools because it is more labor-intensive.
C) specialize in being a surgeon because its opportunity cost is lower.
Which of the following is an example of an activity undertaken by an entrepreneur? A) washing and ironing your own shirts instead of taking them to the cleaners B) running for the president of the United States C) starting your own pet sitting business D) holding a position as the president of a liberal arts college
C) starting your own pet sitting business
The term "property rights" refers to A) the right of a business not to have its assets confiscated by the government in the event that the business is accused of committing fraud. B) the government's right to appropriate land from wealthy land owners to redistribute to peasants. C) the ability to exercise control over one's own resources within the confines of the law. D) the physical possession of a house or any other property which the owner legally purchased.
C) the ability to exercise control over one's own resources within the confines of the law.
Adam Smith's behavioral assumption about humans was that people A) are consistently greedy. B) typically act randomly. C) usually act in a rational, self-interested way. D) typically act irrationally.
C) usually act in a rational, self-interested way.
Professor Bloodworth decreased his consumption of grape jelly when the price of peanut butter increased. For Professor Bloodworth, peanut butter and grape jelly are Complements Inferior goods Substitutes Luxury goods
Complements
In economics, an organization that produces a good or service is called a A) firm. B) company. C) business. D) All of these are correct.
D) All of these are correct.
Which of the following statements about economic resources is true? A) All economic resources are man-made. B) Economic resources are used only by businesses. C) Economic resources include financial capital and money. D) Economic resources are also called factors of production.
D) Economic resources are also called factors of production.
Which of the following statements about a circular flow model is false? A) Producers are buyers in the factor market and sellers in the product market. B) Households are buyers in the product market. C) Producers are buyers in the factor market. D) Households are neither buyers nor sellers in the input market.
D) Households are neither buyers nor sellers in the input market.
Which of the following statements is true? A) Individuals who have never been the best at doing anything cannot have a comparative advantage in producing any product. B) Individuals who have never been the best at doing anything must have an absolute advantage in at least ones task. C) Individuals who have never been the best at doing anything perform all tasks at a higher opportunity cost than others. D) Individuals who have never been the best at doing anything can still have a comparative advantage in producing some product.
D) Individuals who have never been the best at doing anything can still have a comparative advantage in producing some product.
Which of the following is an example of spending on goods and services in the circular flow model? A) Timmy purchases a new examination table for use in his veterinary clinic. B) Belinda purchases a new computer for her tax-preparation business. C) Celeste buys fresh herbs at the farmers' market to use in her restaurant. D) Javier buys 800 square feet of wood flooring for his vacation home.
D) Javier buys 800 square feet of wood flooring for his vacation home.
Which of the following statements is true about revenue? A) The terms "revenue" and "profit" can be used interchangeably. B) A firm's revenue will increase as its costs increase. C) Revenue is calculated by dividing the price per unit by the number of units sold. D) Revenue is the total amount received for selling a good or service.
D) Revenue is the total amount received for selling a good or service.
The prevalence of Alzheimer's dementia is very high among residents living in nursing homes. A student concludes that it is likely that living in a nursing home causes Alzheimer's dementia. What is the flaw in the student's reasoning? A) The student is drawing a false conclusion by making the mistake of omitting critical variables such as the age and gender of the residents. B) The student has failed to take into account other causes of Alzheimer's disease. C) The student is using an inadequate sample size. D) The student is drawing a false conclusion; he is confusing cause and effect.
D) The student is drawing a false conclusion; he is confusing cause and effect.
The town of Harmonia gives away all 500 tickets to its annual Founder's Day Free Concert-in-the-Park to local residents. Each year, more than 500 people wish to attend the concert, so some of the residents who receive the free tickets sell them for as much as $75 each. Is a transaction where someone pays a resident $75 for a "free ticket" economically efficient? A) Yes, but it is efficient only from the perspective of the seller and not from the perspective of the buyer. B) No, people should never be allowed to sell items they received for free. C) No, the buyer paid too much for the ticket. D) Yes, it was a voluntary exchange that benefited both parties.
D) Yes, it was a voluntary exchange that benefited both parties.
Which of the following would shift the supply curve for smartphones to the right? A) an increase in the price of a substitute in production B) a decrease in the number of firms that produce smartphones C) an increase in consumer income (assuming that all smartphones are normal goods) D) a decrease in the price of an input used to produce smartphones
D) a decrease in the price of an input used to produce smartphones
If the price of beef jerky rises, then the substitution effect due to the price change will cause A) an increase in the demand for hot sauce, a complement for beef jerky. B) an increase in the demand for beef jerky. C) an increase in the quantity of beef jerky demanded. D) a decrease in the quantity of beef jerky demanded.
D) a decrease in the quantity of beef jerky demanded.
The term "market" in economics refers to A) an organization which sells goods and services. B) a legal institution where exchange can take place. C) a place where money changes hands. D) a group of buyers and sellers of a product and the arrangement by which they come together to trade.
D) a group of buyers and sellers of a product and the arrangement by which they come together to trade.
The development of a new good or a new process for making a good is called A) a service. B) a factor of production. C) an innovation. D) an invention.
D) an invention.
You have an absolute advantage whenever you A) can produce something at a lower opportunity cost than others. B) are better educated than someone else. C) prefer to do one particular activity. D) can produce more of something than others with the same resources.
D) can produce more of something than others with the same resources.
A(n) ________ is represented by a leftward shift of the demand curve while a(n) ________ is represented by a movement along a given demand curve. A) decrease in quantity demanded; decrease in demand B) increase in demand; decrease in quantity demanded C) decrease in demand; increase in demand D) decrease in demand; increase in quantity demanded
D) decrease in demand; increase in quantity demanded
All of the following are critical functions of the government in facilitating the operation of a market economy except A) enforcing contracts. B) protecting private property. C) enforcing property rights. D) ensuring an equal distribution of income to all citizens.
D) ensuring an equal distribution of income to all citizens.
If a commercial dairy farm wants to raise funds to purchase feeding troughs, it does so in the A) dairy products market. B) product market. C) output market. D) factor market.
D) factor market.
All centrally planned economies A) started out as market economies. B) have become mixed economies. C) began as mixed economies. D) have been political dictatorships.
D) have been political dictatorships.
In economics, the practical application of an invention is known as A) physical capital. B) technology. C) entrepreneurship. D) innovation.
D) innovation.
If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced. A) non-linear B) bowed in C) bowed out D) linear
D) linear
An office supply store sells a ream of printer paper at a fixed price of $4.50. Which of the following is a term used by economists to describe the money received from the sale of an additional ream of paper? A) net benefit B) pure profit C) marginal costs D) marginal revenue E) gross earnings
D) marginal revenue
If a straight line passes through the point x = 14 and y = 3 and also through the point x = 4 and y = 10, the slope of this line is A) 6 divided by 11. B) negative 11 divided by 6. C) seven-tenths. D) negative seven-tenths.
D) negative seven-tenths.
Households ________ final goods and services in the ________ market. A) purchase; factor B) sell; product C) sell; factor D) purchase; product
D) purchase; product
It is necessary for all economic systems to provide people with goods and services and also restrict them from getting as much of these goods and services as they wish, because failure to do this could ________ the efficiency of the system by producing some goods and services that are ________. A) increase; valued more than others B) increase; not as highly valued as others C) reduce; valued more than others D) reduce; not as highly valued as others
D) reduce; not as highly valued as others
Households A) sell goods in the product market. B) purchase resources in the factor market. C) have no involvement in the circular flow in a market economy. D) sell resources in the factor market.
D) sell resources in the factor market.
The concept of opportunity cost is that A) in a market economy, taking advantage of profitable opportunities involves some money cost. B) taking advantage of investment opportunities involves costs. C) the cost of production varies depending on the opportunity for technological application. D) the economic cost of using a factor of production is the alternative use of that factor that is given up.
D) the economic cost of using a factor of production is the alternative use of that factor that is given up.
Macroeconomics is the study of A) how households make choices. B) how households and firms make choices. C) how firms make choices. D) the economy as a whole.
D) the economy as a whole.
The income effect of a price change refers to the impact of a change in A) income on the price of a good. B) the quantity demanded when income changes. C) demand when income changes. D) the price of a good on a consumer's purchasing power.
D) the price of a good on a consumer's purchasing power.
Suppose when the price of laptops fall, college students buy more laptops. This implies that A) there is a direct relationship between laptop prices and quantities purchased by college students. B) there is a positive relationship between laptop prices and quantities purchased by college students. C) there is a one-to-one relationship between laptop prices and quantities purchased by college students. D) there is a negative relationship between laptop prices and quantities purchased by college students.
D) there is a negative relationship between laptop prices and quantities purchased by college students.
The points outside the production possibilities frontier are A) efficient. B) inefficient. C) attainable. D) unattainable.
D) unattainable.
Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This statement is most consistent with which explanation for the law of demand? The income effect The substitution effect The rationing function of prices Diminishing marginal utility
Diminishing marginal utility
The simple circular flow model shows that Households are on the buying side of both product and resource markets. Households are on the selling side of the resource market and on the buying side of the product market. Businesses are on the buying side of the product market and on the selling side of the resource market. Businesses are on the selling side of both product and resource markets.
Households are on the selling side of the resource market and on the buying side of the product market.
Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to Increase the demand for tacos and decrease the demand for soda Decrease the demand for tacos and increase the demand for soda Increase the demand for both soda and tacos. Decrease the demand for both soda and tacos.
Increase the demand for tacos and decrease the demand for soda
Joe sold gold coins for $1,000 that he bought a year ago for $1,000. He says, at least I didn't lose any money on my financial investment. His economist friend points out that in effect he did lose money because he could have received a 3 percent return on the $1,000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of Imperfect information Opportunity costs Normative economics Marginal benefits that exceed marginal costs
Opportunity costs
The law of demand states that, other things equal Consumers will buy more of a product at high prices than at low prices. Price and quantity demanded are inversely relate Price and quantity demanded are directly relate The larger the number of buyers in a market, the lower the product price will b
Price and quantity demanded are inversely relate
Which of the following is a fundamental characteristic of the market system? Unselfish behavior Property rights Government set wages and prices Central planning by the government
Property rights
Macroeconomics is mostly focused on Why specific businesses fail. The individual markets within an economy. The economy as a whole Only the largest industries in the economy.
The economy as a whole
Which of the following is a microeconomic statement? The real domestic output increased by 1.6 percent last year. The general price lever increased by 1.1 percent last year. The price of smartphones declined 2.8 percent last year. Unemployment was 5.2 percent of the labor force last year.
The price of smartphones declined 2.8 percent last year.
Competition means that Sellers can manipulate market price by causing product scarcities. There are independently acting buyers and sellers in each market. There is more than one seller in a market. A product can be purchased at a number of different prices.
There are independently acting buyers and sellers in each market.
Which of the following most closely relates to the idea of opportunity costs? Trade-offs Capitalism Technological change Economic growth
Trade-offs
In economics, the pleasure, happiness, or satisfaction received from a product is called Utility Fulfillment. Outcome Cost
Utility
The slope of Supply and Demand are inversely related in regards to _____ and _______. profit; cost price; cost price; quantity cost; quantity
price; quantity
In economics, choices must be made because we live in a world of unlimited resources scarcity greed unemployment
scarcity