MacroEconomics Ch1 and Ch2 Quiz

Sometimes the government varies its spending, depending on the needs of the country. Which economic principle does this statement BEST represent?

Government policies can change spending.

An economy is said to have a comparative advantage in the production of one good if it:

If it has the lowest opportunity cost of producing a particular good

Which statement demonstrates one of the three principles of economy-wide interactions?

In 2008, fearing a recession, Congress approved a White House proposal to rebate some taxes for 2007.

In most cases, economic efficiency is achieved through:

Incentives built into a market economy

A friend comes up to you and offers you a free ticket to a professional baseball game that night. You decide to attend the game. The game takes five hours and costs you $15 for transportation. If you had not attended the game, you would have worked at your part-time job for $8 an hour. What is the cost to you of attending the game?

$55

I know when I shop at the local grocery store, I am helping my community. Which economic principle does this statement BEST represent?

One person's spending is another person's income.

. In the figure (production possibility curve) below, the movement from curve 1 to curve 2 indicates: The vertical axis of the graph represents "Consumer goods, per period," while the horizontal axis of the graph represents "Capital goods, per period." It shows two downward sloping curves, Curve 1 and Curve 2 plotted on it. It shows the first curve producing consumer goods and capital goods at equilibrium points "x" and "y." The second curve shows a positive shift in the production of capital and consumer goods, when the market is operating at a point z.

Economic growth

When people in Brazil engage in trade with people in Germany, all citizens in both nations are necessarily made better off.

False

n the figure (production possibility curve) below, Eastland has a comparative advantage in producing: The graphs in the image is titled "Comparative Advantage." It shows a text at its bottom that reads "Eastland and Westland produce only two goods, boxes of peaches and boxes of oranges, and this figure shows each nation's production possibility frontier for the two goods. The first graph in the image shows the quantity of oranges and peaches produced in Eastland. The second graph in the image shows the quantity of oranges and peaches produced in Westland. The vertical axes of both the graphs are labeled as "Oranges" ranging from 0 to 100, in increments of 10. The horizontal axes of both the graphs are labeled as "peaches" ranging from 0 to 200, in increments of 20. The first graph plots a negative sloping linear curve, with coordinate points, (100, 0), (10, 80), (30, 60), (50, 40), and (80, 20). The second graph plots a negative sloping linear curve, with coordinate points, (50, 0), (40, 30), (30, 60), (20, 100), (10, 160), and (0, 200). All values are estimated.

Oranges Only

Florida schools offered cash bonuses to students who scored high on the state's standardized exams. The cash bonuses are motivated by which economic principle?

People usually respond to incentives, exploiting opportunities to make themselves better off.

Peter Pundit, an economics reporter in the United States, states that the European Union (EU) is increasing its productivity very rapidly in all industries. He claims that this productivity advance is so rapid that output from the EU in these industries will soon exceed that of the United States and, as a result, the United States will no longer benefit from trade with the EU.

Peter Pundit is not correct. He confuses absolute and comparative advantage. Correct! Peter Pundit is not correct. He confuses absolute and comparative advantage. Even if the EU had an absolute advantage over the United States in every product it produced, the United States would still have a comparative advantage in some products. And the United States should continue to produce those products: trade will still make both the EU and the United States better off. For more help, see Models in Economics: Some Important Examples.

The United States and Germany can produce both wheat and aluminum. The table shows the maximum annual output combinations of wheat and aluminum that can be produced. Based on the table: The table shown in the image is titled "Wheat and Aluminum." The maximum amount of wheat produced in the U.S. is represented as 100 and 0, while the amount of aluminum produced in the U.S. is 0 and 100. The maximum amount of wheat produced in Germany is represented as 50 and 0, while the amount of aluminum produced in the Germany is 0 and 100.

The United States has a comparative advantage in wheat and an absolute advantage in wheat

The United States and Germany can produce both wheat and aluminum. The table below shows, in tonnage, the maximum annual output combinations of wheat and aluminum that can be produced. Which choice represents a possible trade based on specialization and comparative advantage? The table shown in the image is titled "Wheat and Aluminum." The maximum amount of wheat produced in the U.S. is represented as 100 and 0, while the amount of aluminum produced in the U.S. is 0 and 100. The maximum amount of wheat produced in Germany is represented as 50 and 0, while the amount of aluminum produced in the Germany is 0 and 100.

The United States would trade 1 ton of wheat to Germany for 1.5 tons of aluminum

Which principle underlies the interaction of individual choices?

There are gains from trade.

All children have to be immunized against polio, measles, mumps, and other diseases. If you don't have enough money to pay for the immunizations, they will be provided free at the county health clinic. Which economic principle does this statement BEST represent?

When markets don't achieve efficiency, government intervention can improve society's welfare.

Marginal analysis:

analysis that involves comparing marginal benefits and marginal costs is used primarily when deciding how much of an activity should be done.

Because of international trade, a country may

consume outside its production possibility frontier

Which decision is the BEST example of making a choice at the margin?

drinking another cup of coffee

Which method of encouraging recycling is likely to be MOST effective given that people usually exploit opportunities to make themselves better off?

imposing a tax per unit of garbage generated

Increases in a nation's standard of living are largely driven by

increases in labor productivity

In the figure (production possibility curve) below, points A, B, E, and F: The vertical axis of the graph is labeled as "Guns, per period" ranging from 0 to 18, in increments of 4. The horizontal axis of the graph is labeled as "Butter, per period" ranging from 0 to 20, in increments of 4. The graph plots a downward sloping curve, with four points, A, B, E, and F marked on it denoting equilibrium points. The curve is marked as "Production possibility frontier." At Point A, the quantity of guns and butter produced per period are 18 and 0 respectively. At Point B, the quantity of guns and butter produced per period are 16 and 12 respectively. At Point E, the quantity of guns and butter produced per period are 8 and 18 respectively. At Point F, the quantity of guns and butter produced per period are 0 and 20 respectively. The graph marks the economy operating at point H, when the point of equilibrium is at E.

indicate combinations of guns and butter that society can produce using all of its factors efficiently.

If every individual were required to be self-sufficient:

living standards would fall

If an economy has NOT achieved efficiency, there must be ways to:

make some people better off without making others worse off

The economic way of thinking entails:

making choices at the margin.

If the state government allocates additional spending on education programs, the opportunity cost is:

measured in terms of the best alternative uses for that money.

11. As long as people have different _____, everyone has a comparative advantage in something

opportunity cost

The concept of comparative advantage is based on:

relative opportunity cost

Which resource is NOT one that pertains to the production of rice?

rice

n the figure (production possibility curve) below, as the economy moves from point A toward point D, it will find that the opportunity cost of each additional submarine: The vertical axis of the graph is labeled as "Millions of tons of strawberries, per month" marking the point 550, 800, 950, and 1,000 on it, from bottom to top. The horizontal axis of the graph is labeled as "Submarines, per month" ranging from 0 to 4, in increments of 1. The graph plots a downward sloping curve, with five points, A, B, C, D, and E, marked on it denoting equilibrium points. At Point A, the quantity of strawberries and submarines produced per month are 1,000 and 0 respectively. At Point B, the quantity of strawberries and submarines produced per month are 950 and 1 respectively. At Point C, the quantity of strawberries and submarines produced per month are 800 and 2 respectively. At Point D, the quantity of strawberries and submarines produced per month are 550 and 3 respectively. At Point E, the quantity of strawberries and submarines produced per month are 0 and 4 respectively. The graph marks the economy operating at point G, when the point of equilibrium is at D and at point F, when the point of equilibrium is at B.

rises

Gains from trade arise because of:

specialization in production

. Specialization and trade usually lead to:

the exchange of goods and services in the markets

If a market is in disequilibrium:

there are opportunities to make some people better off

If equilibrium exists:

there will be no remaining opportunities for individuals to make themselves better off.

Because people usually exploit opportunities to make themselves better off, if the price of gasoline rises and stays high for an extended period, we expect people to:

use more public transportation

Marla will make $10 by tutoring for an additional hour, but she will lose an hour of studying for her economics test. Marla decides to study, rather than tutor. Marla's choice indicates that she:

values an additional hour of studying more than the $10 she would earn tutoring.

For an economist, the cost of something is:

what you gave up to get it.

Margo spends $30,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is:

whatever she would have purchased with the $30,000 plus whatever she would have earned had she not been in college.