macroeconomics

The economic way of thinking will help you

- Make decisions in financing your home - Decide whether the US government should encourage or discourage immigration - Make better decisions concerning your education

Which of the following is NOT an example of an externality?

A firm lays off 100 workers

Which is NOT true about the use of economic models?

Economists are employed to explain economic phenomena but are never used to predict what might happen next.

Ceteris Paribus Assumption

Holding all variables constant but one and assessing the impact of the one variable that has changed is an example of using

With reference to the difference between a change in demand and a change in quantity demanded, which of the following is TRUE?

If a good's price goes down, then quantity demanded will increase.

Which of the following statements about a supply curve is FALSE?

It typically slopes downward to the right.

Which of the following statements is a normative as opposed to a positive economic statement?

Labor unions should be allowed to organize in every industry.

Macroeconomics is best defined by which of the following statements?

Macroeconomics is the study of the behavior of the economy as a whole.

When two variables have an inverse relationship, the slope is

Negative

Other things being equal, the relationship between price and quantity supplied is

Positive

"If event X occurs then event Y will follow" is a

Positive statement

In economics, items that are used to produce goods and services are known as

Resources

Which of the following is an example of a negative externality?

There is an increase in injuries to pedestrians caused by accidents resulting from electronic billboards distracting drivers.

Which of the following statements is TRUE?

Transfer payments are money payments made by the government for which no goods or services are currently received.

An externality can best be defined as

a consequence of a transaction that spills over to affect third parties.

A negative externality is a situation in which

a cost associated with an economic activity is borne by a third party.

In graphical form,the effect of imposing a tax on a good is shown as

a leftward shift of the market supply curve.

An inverse relationship will be graphed as

a line that is downward sloping

Which of the following is an example of a positive externality?

a neighbor's flower garden that you enjoy seeing

A tax rate system characterized by higher marginal tax rates as income increases is known as

a progressive tax system

A "flat tax" on personal income, in which the same tax rate is applied to every dollar of income earned by each taxpayer, is an example of

a proportional tax

The production possibilities curve represents

all possible combinations of total output that can be produced.

Which of the following will cause a rightward shift of the demand curve?

an increase in the expected future price of the good

All of the following will cause the supply curve of good A to shift rightward EXCEPT

an increase in the market price of good A.

Market failure occurs when

an unrestrained market economy leads to too few or too many resources going to a specific economic activity.

To protect the competitive economic system by restricting the formation of monopolies, the government has passed and enforced

antitrust laws

The law of supply states that other things being equal

as price increases, quantity supplied increases.

One characteristic of a public good is that it

can be consumed simultaneously by many individuals

A person has a comparative advantage in an activity whenever she

can perform the activity at a lower opportunity cost than another person can.

Economics is the study of how people make

choices

When the price of tablet devices decreased in the 2010s, there was an increase in the demand for computing apps because tablet devices and computing apps are

complementary good

The principal feature of private goods is that

consumption by one person reduces the quantity available to others.

Normative economic statements

contain value judgments

If the price of hot dogs increases, the demand for hot dog buns will

decrease.

An inferior good is one for which

demand decreases as income increases.

One topic of study for a microeconomist would be the

effects of a gasoline price increase on consumer behavior.

Market failures occur when

externalities exist

Social Security and Medicare are examples of

governmental interventions

Comparative advantage implies choosing the activity that

has the lowest opportunity cost.

Which of the following is NOT a focus of the study of economics?

how individual preferences are formed

Economics

how individuals allocate scarce resources to satisfy unlimited human wants.

According to your text, which of the following represents the largest source of tax receipts for the Federal government?

individual income taxes

When studying individuals' economic behavior, economists assume that

individuals act as if they were rational.

Which of the following often involves positive external benefits?

inoculation programs

The U.S. legal system mainly engages in activities that

involve defining and protecting property rights.

Macroeconomics

is the study of aggregate economic variables

In a proportional income tax system

marginal tax rates are the same regardless of the level of taxable income.

The United States is best known as a

mixed economic system

In order to be effective, a price ceiling

must be set below equilibrium price

Many beach-goers leave plastic bottles on beaches instead of putting them in trash cans. This is an example of a

negative externality

The demand curve shows the relationship between quantity demanded and

price

The federal income tax code of the United States is

progressive

The legal system in the United States tends

promote competition

In the absence of government

public goods are likely to be underprovided

A tax system that applies a lower marginal tax rate at higher levels of income is

regressive

Scarcity arises because

resources are limited and are inadequate to meet all human wants.

Price ceilings set below the equilibrium price cause

shortages

An example of a regressive tax is the

social security tax

Microeconomics is defined as that part of economic analysis that

studies individual decision making by households and firms.

Which of the following is a determinant of supply?

technology

Behavioral economics is an approach to the study of consumer behavior

that emphasizes psychological limitations and complications that potentially interfere with rational decision making.

A bowed Production Possibilities Curve (PPC) indicates

that the trade-off between the 2 goods is not constant.

A microeconomist would study all of the following issues EXCEPT

the effect of a change in income taxes on the nation's rate of unemployment.

The marginal tax rate shows

the extra tax due on an extra dollar of income

When market failures occur

the government can step in to correct the market failure

Price ceilings are adopted in most cases because

the government views the current equilibrium price as too high for consumers.

If production of an item results in negative external costs, then

the market price is below the socially preferred price that reflects the external costs.

The production possibilities curve represents

the maximum combination of goods and services that can be produced with fixed resources and technology, given efficient use of the resources.

A result of a positive externality in the production of a good is that

the price system will under-allocate resources to the production of that good or service.

If opportunity costs are constant, then

the production possibilities curve is a negatively sloped straight line.

The discovery of new natural resources will cause

the production possibilities curve to shift up and to the right.

Other things being equal, an increase in wages paid to workers in firms making portable power banks will cause

the supply of portable power banks to decrease.

Markets tend to overallocate resources to the production of a good when

there are negative externalities.

Markets tend to underallocate resources to the production of a good when

there are positive externalities.

Fashion trends are a nonprice determinant for demand because

they influence people's tastes and preferences in clothing.

Over the long run, a government's fundamental source of revenues is

user fees and taxes

Comparative advantage is

when a country can produce a good at a lower opportunity cost compared to other countries.

When the text refers to rational self-interest, it means

your looking out for what is best for you as an individual.

The opportunity cost of providing a public good to an additional individual is

zero.