Macro Test 1 (Possible Questions)

The basis for trade is absolute advantage, not comparative advantage A. True B. False

B. False

_____ occurs when economic benefits are distributed fairly A. Equity B. Equality C. Allocative efficiency D. Productive efficiency

A. Equity

How are the fundamental economic decisions determined in Canada? A. Individuals, firms, and the gov interact in a market to make these economic decisions B. The gov decides because Canada is a centrally planned economy C. These decisions are made by the country's elders who have had much experience in answering these questions D. The united nations decides because Canada is a developing economy

A. Individuals, firms, and the gov interact in a market to make these economic decisions

Let D= demand, S = supply, P = equilibrium price, Q= equilibrium quantity. What happens in the market for solar panels if the government offers tax breaks to encourage manufacturers to produce more solar panels? A. S increases, D no change, P decreases, Q increases B. D and S increases, P and Q decrease C. D no change, S increases, P decreases, Q decreases D. D increases, S no change, P and Q increase

A. S increases, D no change, P decreases, Q increases

Which of the following is a normative economic statement? A. Tobacco products should be banned in all public spaces. B. The increase in tobacco taxes has caused an increase in the price of cigarettes. C. Better awareness of health risks has decreased tobacco use. D. A reduction in tobacco subsidies has caused the price of tobacco to increase.

A. Tobacco products should be banned in all public spaces.

Examining the conditions that could lead to economic growth is an example of a macroeconomics topic. A. True B. False

A. True

If the demand for a product increases and the supply of the same product decreases, the equilibrium price will increase. A. True B. False

A. True

In a free market there virtually no restrictions, or at best few restrictions, on how a good or service can be produced or sold. A. True B. False

A. True

In the market for factors of production, households earn income by supplying factors of production to firms A. True B. False

A. True

More chief executive officers of Fortune 500 companies majored in economics than in any other subject A. True B. False

A. True

An increase in the equilibrium price for a product will result A. When there is a decrease in supply and an increase in demand for the product B. when the quantity of the product demanded exceeds the quantity supplied C. when there is an increase in demand and an increase in the number of firms producing the product D. when there is a decrease in supply and a decrease in demand for the product

A. When there is a decrease in supply and an increase in demand for the product

Voluntary exchange increases economic efficiency A. because neither the buyer nor the seller would agree to a trade unless they both benefit B. because it allows wealthy individuals to act altruistically and give to the poor C. because voluntary exchange takes place with government permission D. because it is free and consequently does not cost anything

A. because neither the buyer nor the seller would agree to a trade unless they both benefit

What would happen in the market for knee replacement surgery if insurance companies started to cover a smaller portion of the cost of the surgery, and fewer doctors decide to enter the field of the joint replacement surgery? A. demand and supply will both decrease B. demand will decrease and supply will increase C. supply will decrease, but this will not shift the demand curve D. demand will decrease, but this will not shift the supply curve

A. demand and supply will both decrease

Which of the following statements about an entrepreneur is true? A. develops the vision for the firm and funds the producing unit B. purchases other factors of production in the output market C. sells his entrepreneurs services in the output market D. does not face personal risk

A. develops the vision for the firm and funds the producing unit

A primary role of _______ is to describe how choices are made, analyze the results of those choices, and advise on how better decisions can be made. A. economists B. marginal analysis C. government policymakers D. a market economy

A. economists

Two economists from the University of Chicago estimated the benefit households received from subscribing to satellite television. The economists found that A. the consumer surplus from cable television exceeded the consumer surplus from satellite television B. the average consumer of satellite television received a marginal benefit to pay more then $81 a month C. most consumers of satellite television were not willing to pay more then $81 per month D. one years benefit to consumers who subscribe to satellite television in about $2 billion

A. the consumer surplus from cable television exceeded the consumer surplus from satellite television

Which of the following is NOT a flow in the circular flow model? A. the flow of profit and the flow of revenue B. the flow of goods and services and the flow of resources to produce goods and services C. the flow of income earned by households and the flow of expenditures incurred by households D. the flow of revenue received by producers and the flow of payments to resource owners

A. the flow of profit and the flow of revenue

Which of the following is a factor of production? A. the janitor at the local elementary school B. 20 shares of Microsoft stock C. $500 in cash D. a sofa produced by a furniture manufacturer

A. the janitor at the local elementary school

An economic model is a complex version of reality used to analyze real- world economic situations A. True B. False

B. False

An increase in population shifts the production possibilities frontier inwards over time. A. True B. False

B. False

Physical capital refers to stocks and bonds A. True B. False

B. False

George Jack Lawns Mowed 10 6 Gardens Cultivated 5 4 The table above shoes the output per day of the two gardeners, George and Jack. They can either devote their time to mowing lawns or cultivating gardens. Which of the following statements is true? A. Jack has a comparative advantage in both tasks B. Jack has a comparative advantage in garden cultivating and George in lawn mowing C. George has a comparative advantage in both tasks D. Jack has a comparative advantage in lawn mowing and George in garden cultivating.

B. Jack has a comparative advantage in garden cultivating and George in lawn mowing

Which of the following statements about positive economic analysis is true? A. There is much less disagreement among economists over normative economic analysis than over positive economic analysis B. Positive analysis uses and economic model to estimate the costs and benefits of different course of actions C. Unlike positive economic analysis, normative economic analysis can be tested D. There is much more disagreement among economists over positive economic analysis than over normative economic analysis

B. Positive analysis uses and economic model to estimate the costs and benefits of different course of actions

___________ shows that if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good. A. Comparative advantage B. The production possibilities frontier model C. The mixed market system D. Absolute advantage

B. The production possibilities frontier model

If you can produce more of something than others with the same resources, you have A. a free- market economy B. an absolute advantage C. a comparative advantage D. an efficient production system

B. an absolute advantage

In a market economy, who decides what goods and services will be produced? A. only consumers B. consumers and producers C. only the producers D. the government

B. consumers and producers

Which of the following is part of an economic model? A. preferences of economic agents B. data C. opinions D. norms

B. data

In the circular flow model, households supply resources such as labor services in the product market A. True B. False

B. false

In economics, tangible merchandise is referred to as A. services B. goods C. human capital D. invention

B. goods

Izzy Amador is a highly talented tattoo artist. She has chosen to specialize in tattoo art because of all the following EXCEPT A. she obviously has a comparative advantage in tattoo art B. her opportunity cost of pursuing another career is very low C. for her, this is the most lucrative way to purchase the products that she wants to consume D. her tattoos are highly esteemed by tattoo lovers who are willing to pay very high prices.

B. her opportunity cost of pursuing another career is very low

The ability to exercise control over ones own resources within the confines of the law refers to A. the free market B. ones property rights C. entrepreneurship D. having an absolute advantage

B. ones property rights

At market equilibrium, A. shortages are greater than surpluses B. quantity demanded equals quantity supplied C. surpluses are greater than shortages D. demand equals supply

B. quantity demanded equals quantity supplied

Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states. In the market for gasoline, A. the demand curve shifted to the right resulting in an increase in the equilibrium price B. the supply curve shifted to the left resulting in an increase in the equilibrium price C. the demand curve shifted to the left resulting in a decrease in the equilibrium price D. the supply curve shifted to the right resulting in an increase in the equilibrium price

B. the supply curve shifted to the left resulting in an increase in the equilibrium price

Which of the following is an example of an economic trade- off that a firm has to make? A. deciding what profit margin it desires for its products B. whether it's cheaper to produce with more machines or with more workers C. deciding why consumers want its products D. whether or not consumers will buy its products

B. whether it's cheaper to produce with more machines or with more workers

Carmelita can perform either a combination of 35 manicures and 70 pedicures or a combination of 50 manicures and 45 pedicures. If she now performs 35 manicures and 70 pedicures, what is the opportunity cost of performing an additional 15 manicures? A. 5 pedicures B. 20 pedicures C. 25 pedicures D. 45 pedicures

C. 25 pedicures

Suppose there is some unemployment in the economy and society decided that it wants more of one good. Which of the following statements is true? A. It will have to increase resource supplies B. It is not possible to achieve this unless technology advances C. It can increase output without giving up another good by employing more resources D. It will have to give up production and consumption of some other good

C. It can increase output without giving up another good by employing more resources

Increases in the minimum wage are intended to raise the incomes of low-income workers. Many economists favor a different policy to achieve this goal, a policy that avoids the deadweight losses that result from the minimum wage. What is this policy? A. distribution of food stamps to low-income workers B. distribution of vouchers that can be used for rent or mortgage payments C. The Alternative Minimum Tax D. the earned income tax credit

C. The Alternative Minimum Tax

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 group of buyers and sellers of a product and the arrangement by which they come together to trade D. a place where money changes hands

C. a group of buyers and sellers of a product and the arrangement by which they come together to trade

An increase in the demand for peanuts due to changes in consumer tastes, accompanied by an increase in the supply of peanuts as a result of favorable growing conditions, will result in A. an increase in the equilibrium price of peanuts; the equilibrium quantity may increase or decrease B. an increase in the equilibrium quantity of peanuts and no change in the equilibrium price C. an increase in the equilibrium quantity of peanuts; the equilibrium price may increase or decrease D. an increase in the equilibrium price of peanuts and no change in the equilibrium quantity

C. an increase in the equilibrium quantity of peanuts; the equilibrium price may increase or decrease

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. increase the variety of products that it can produce with a decrease in resources B. never have to engage in trade with other nations C. consume a combination of goods that lies outside its own production possibilities frontier D. produce a combination of goods that lies outside its own production possibilities frontier

C. consume a combination of goods that lies outside its own production possibilities frontier

Which of the following statements is true? A. consumer surplus measures the total benefit from participating in a market B. when a market is equilibrium consumer surplus equals producer analysis C. consumer surplus measures the net benefit from participating in a market D. producer surplus measures the total benefit received by producers from participating in a market

C. consumer surplus measures the net benefit from participating in a market

A worker is hired in a A. product market B. government market C. factor market D. goods and services market

C. factor market

The study of economics arises due to A. greed B. money C. scarcity D. resources

C. scarcity

The processes used to produce goods and services describes A. capital B. entrepreneurship C. technology D. innovation

C. technology

Human capital refers to A. the machines that workers have to work with B. the wealth people have C. the accumulated skills and training that workers have D. the money people have

C. the accumulated skills and training that workers have

Which of the following is an ex of spending on goods and services in the circular flow model? A. Toby buys a new lawn mower to use in his lawn care business B. Micah purchases a new wrench for his auto repair business C. Lily purchases a new massage table for use in her therapy center D. Chester buys a first-class ticket from Atlanta to London for his long-awaited vacation.

D. Chester buys a first-class ticket from Atlanta to London for his long-awaited vacation.

Which of the following countries does not come close to the free market benchmark? A. Japan B. the United States C. France D. Cuba

D. Cuba

Which of the following would cause the equilibrium price of apple juice to decrease and the equilibrium quantity of apple juice to increase? A. an increase in the price of apples B. an increase in the price of orange juice, a substitute for apple juice C. a decrease in the price of granola bars, a complement for apple juice D. a decrease in the price of apples

D. a decrease in the price of apples

Electric car manufacturers want to sell more electric cars at a higher price. Which of the following events would have this effect? A. a decrease in the price of lithium, which is used in the electric car batteries B. technological advancement in the production of electric car batteries C. an increase in the number of manufacturers of electric cars D. an increase in the price of gasoline

D. an increase in the price of gasoline

If the marginal cost of producing a television is constant at $200, then a firm should produce this item A. until the marginal benefit it receives reaches zero B. only if the marginal benefit it receives is greater then $200 plus an acceptable profit margin C. as long as its marginal cost does not rise D. as long as the marginal benefit it receives is just equal to or greater than $200

D. as long as the marginal benefit it receives is just equal to or greater than $200

Ted quits his $60,000-a-year job to be a stay at home dad. what is the opportunity cost of his decision? A. depends on the "going rate" for stay at home dads B. the value he attributes to the joy of parenting C. zero since he will no longer be earning a salary D. at least $60,000

D. at least $60,000

The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called A. public economics B. normative economics C. microeconomics D. macroeconomics

D. macroeconomics

George Jack Lawns Mowed 10 6 Gardens Cultivated 5 4 The table above shows the output per day of two gardeners, George and Jack. They can either devote their time to mowing lawns or cultivating gardens. What is Jacks opportunity cost of cultivating a garden? A. one-half of a garden cultivated B. two lawns mowed C. two-thirds of a garden cultivated D. one and a half lawns mowed

D. one and a half lawns mowed

which of the following contributed a downfall of the Soviet Union in 1991? A. Producing higher - quality goods that were desired by consumers B. the rapidly increasing standard of living C. the lack of a strong dictator who could coordinate economic activities D. public dissatisfaction with low living standards and political repression

D. public dissatisfaction with low living standards and political repression

Consumer surplus in a market for a product would be equal to the area under the demand curve if A. producer surplus was equal to zero B. marginal cost was equal to the marked price C. the product was produced in a perfectly competitive market D. the market price was zero

D. the market price was zero

If, in a competitive market, marginal benefit is greater than marginal cost A. the net benefit is consumers from participating in the market is greater then the next benefit to producers B. the government must force producers to lower price in order to achieve economic efficiency C. the quantity sold is greater then the equilibrium quantity D. the quantity sold is less then the equilibrium quantity

D. the quantity sold is less then the equilibrium quantity