Macro Practice Midterm

Adam Smith advocated the benefits of:

international trade.

(Figure: Demand and Supply) Refer to the figure. Which statement is TRUE?

Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit.

The sale of sugar will contribute to GDP when the buyer is:

a mother who is baking cookies at home.

One key fact about economic growth around the world is that:

all countries used to be poor.

Wealthier nations tend to have:

better educational opportunities.

According to the theory of comparative advantage, the reason wages are lower in China than in the United States is:

lower productivity in China.

Refer to the figure. What is the maximum price per book that buyers are willing to pay for 2,500 books?

$45

David sells his car, which he considers worthless, to Cameron for $200. Which of the following statements is true?

David and Cameron must have different preferences for the car.

Suppose the figure illustrates the United States PPF for the production of corn and TVs. Which of the following statements is TRUE?

For each TV that the United States produces, it gives up 25 units of corn.

(Table: Equilibrium Price, Quantity) Refer to the table. If the demand curve for the product shifted to the right such that 10 more units of the good are demanded at every price, what is the new equilibrium price?

$16

If a country's real GDP per capita in 1950 was $10,000, and it grew to $20,000 by year 2000, then the country's annual growth rate during this period would have been approximately:

1.4%.

The market value of all finished goods and services produced by a country's residents in a year, whether at home or abroad, is called:

GNP.

Adam Smith coined the term "invisible hand" to mean:

a metaphorical hand that leads individuals to promote social interest by pursuing self-interest.

(Figure: Price Ceiling of Ps) Refer to the figure. Suppose a price ceiling of Ps is imposed. As a result:

All of the answers are correct.

A price ceiling is a legal maximum on the price of the good or service.

True

America was so poor in past centuries that even George Washington caught malaria.

True

Evidence from history shows that when the extent of trade expands, the result is prosperity.

True

A legal maximum price at which a good can be sold is a price:

ceiling

A farmer can grow soy or sorghum. If the price of soy increases, the opportunity cost of growing sorghum ______, shifting the supply curve of sorghum ______.

increases; up and to the left

If U.S. per capita GDP is $50,000 and grows at 2% per year, what will U.S. per capita GDP be in 70 years?

$200,000

Consider the following production function: Y = F(K) = √K. When the capital stock is 144, output is:

12

What makes a bigger contribution to GDP, 12 million cars sold at $28,000 each or 20 million computers sold at $1,000 each?

12 million cars

Imagine an economy with production function Y = F(K) = √4kand 400 units of capital. If the fraction of output invested in new capital is y= 0.2 and the depreciation rate is = 0.05, what is the steady-state amount of capital?

16 units

(Figure: Equilibrium) Refer to the figure. The equilibrium quantity (in units) is:

16.

In 2010, U.S. GDP per capita grew by approximately:

2.2%.

An economy with production function Y = F(K) = √K that has 400 units of capital will produce _____ units of output.

20

An increase in quantity demanded is a shift in the entire demand curve.

False

Gross domestic product (GDP) is the market value of:

all finished goods and services produced within a country in a year.

(Figure: Price Ceiling of Ps) Refer to the figure. Suppose a price ceiling of Ps is imposed. The shaded area may likely represent all of the following EXCEPT:

consumer surplus.

A decrease in income causes demand for a normal good to ________, and an increase in income causes demand for an inferior good to ________.

decrease; decrease

A market with price ceilings fails to maximize all of the following EXCEPT:

excess supply.

The marginal product of capital is the increase in:

output when one more unit of capital is added.

A tractor built in 2001 and still in operation today is:

part of today's national wealth but not part of today's GDP.

Relative to the United States, Argentina was _____ in 1950 and _____ in 2000.

poor; poor

A change in which factor would shift the supply curve?

production technology

Among the most powerful institutions for supporting good incentives are:

property rights.

According to economists, when the Food and Drug Administration raises the approval requirements for new drugs:

society potentially loses a new drug approval.

(Table: Equilibrium Adjustment) Refer to the table. If the price in the free market is $8, then a:

surplus of 25 units would exist, and price would tend to fall.

Refer to the figure. Calculate the dollar amount of consumer surplus being earned in this market when the price is $30 and there are 300 units consumed.

$4,500

Fluctuations in graduate school enrollment correlate positively with fluctuations in unemployment. What is the most likely reason why?

The opportunity cost of going to graduate school is low when jobs are hard to find.