macroeconomics chapter 1-5
"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:
$44
In 2010, Americans had about _____________ outstanding in credit card debts not paid on time
$900 billion
Which of the following statements most likely lies within the realm of microeconomics?
An increase in labor costs will increase the additional cost of producing another bus.
which of the following statements most likely lies within the realm of macroeconomics?
Due to an economic recession, manufacturing firms began implementing layoffs of their workforces.
After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is:
a shift of the demand curve for beef to the left.
The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________.
allocative efficiency
The nature of demand indicates that as the price of a good increases:
buyers desire to purchase less of it.
The law of ____________________________ explains why people and societies rarely make all-or-nothing choices.
diminishing marginal utility
The ___________ is the only price where quantity demanded is equal to quantity supplied.
equilibrium price
If the supply curve for housing is perfectly inelastic, then a reduction in demand will cause the equilibrium price to:
fall and the equilibrium quantity to stay the same.
The circular flow diagram of economic activity is a model of the:
flow of goods, services, and payments between households and firms.
The longer the time period considered, the more the elasticity of supply tends to:
increase
Improvements in the productivity of labor will tend to:
increase wages.
The opportunity cost of an action:
is a subjective valuation that can be determined only by the individual who chooses the action.
Macroeconomics:
is concerned with the expansion and contraction of the overall economy.
Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________.
law of demand
Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.
marginal analysis
The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern.
marginal benefit
As a person receives more of a good, the _______________ from each additional unit of the good declines.
marginal utility
In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.
market-oriented economy
The basic difference between macroeconomics and microeconomics is:
microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.
In many cases, it is reasonable to refer to the ________________ as the price.
opportunity cost
Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be.
positive statements
if the supply curve for aspirin is perfectly elastic, then a reduction in demand will cause the equilibrium price to:
stay the same and the equilibrium quantity to fall.
In a discussion of economics, which of the following would exert the most influence on an individual firm's decision to hire workers?
the macroeconomy
A report surfaced lately that President Obama has given the order to federal agents to "round up" farm workers that have illegally entered the U.S. and deport them. The impact of this order on the market for vegetables will be a leftward shift of:
the supply curve
According to the law of supply:
there is a direct relationship between price and the quantity supplied.
In economics, the demand for a good refers to the amount of the good that people:
will buy at various prices.
In the United States, a typical credit card interest rate ranges from ______________ per year.
12% to 18%
The United States has approximately ___________ credit card holders.
180 million
Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop?
3.0
Why is there scarcity?
Because our unlimited wants exceed our limited resources
In which of the following countries will the national government have the greatest influence with respect to the nation's economy?
Cuba
In countries like _____________ the command economy predominates.
Cuba and North Korea
If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:
Goods X and Y are complement goods.
Are markets always in equilibrium?
No, but if there is no outside interference, they tend to move toward equilibrium.
______________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.
Price floors
Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."
The statement is correct.
Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel?
There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.
How do apple growers react to the news of medical research findings that suggest that eating apples leads to greater health benefits than were previously known?
They increase the quantity of apples supplied.
A change in price of a good or service typically causes ___________________________ for that specific good or service.
a change along the supply curve
Which of the following best denotes the reason for the existence of substantial black markets?
a command economy
Which of the following would most likely shift the production possibilities curve inward?
a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time
which of the following is most likely a topic of discussion in macroeconomics?
a decrease in the unemployment rate
The supply curve of textbooks (which are produced using paper made from trees) will shift to the left in response to:
a sharp increase in the demand for and construction of wood-frame homes.
If Congress and President imposed a law that gas stations could not charge more than $1.00/gallon for gas what impact would this have on the gasoline market?
a shortage
The imposition of a price ceiling on a market often results in:
a shortage
Which of the following lies primarily within the realm of macroeconomics?
a study of how tax cuts stimulate aggregate production
Any given demand or supply curve is based on the ceteris paribus assumption that ___________________.
all else is held equal
The term "ceteris paribus" means that:
all variables except those specified are constant.
Which of the following results in a rightward shift of the market demand curve for labor?
an increase in demand for the firm's product
Which of the following will result in an upward left movement along the market demand curve for labor and cause a reduction in quantity demanded for labor?
an increase in the wage rate
Many cooks view butter and margarine to be substitutes. If the price of butter rises, then in the market for margarine:
both the equilibrium price and quantity will rise.
Macroeconomics primarily examines:
broad issues such as national output, employment and inflation.
The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible.
budget constraint
The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.
budget constraint
In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of:
buyers and sellers.
Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories.
circular flow diagram
specialization
can lead to an increase in overall production.
Marginal thinking is best demonstrated by:
choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.
The labor ____________ curve(s) will shift _______________ if there is an increase in productivity or an increase in the demand for the final product.
demand; right
In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.
division of labor
Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected __________ doesn't change.
economy
Demand is said to be ___________ when the quantity demanded is very responsive to changes in price.
elastic
Supply is said to be ____________ when the quantity supplied is very responsive to changes in price.
elastic
When economists are sketching examples of a demand or supply curve that is close to horizontal, they refer to that demand or supply curve as ____________.
elastic
Youth smoking seems to be more __________ than adult smoking—that is, the quantity of youth smoking will fall by a greater percentage than the quantity of adult smoking in response to a given percentage increase in price.
elastic
A price cut will increase the total revenue a firm receives if the demand for its product is:
elastic.
If the supply curve for a product is vertical, then the elasticity of supply is:
equal to zero.
The ____________ is the quantity where quantity demanded and quantity supplied are equal at a certain price.
equilibrium quantity
If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ___________________
excess demand
In the ______________, households receive goods and services and pay firms for them.
goods and services market
The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves __________ spending.
government
Which of the following best describes a fiscal policy tool?
government spending
Which of the following would reduce the supply of microcomputers?
higher wage rates for the workers that assemble the computers
A perfectly elastic supply curve is:
horizontal.
In the circular flow diagram model:
households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses.
If the demand curve is perfectly elastic, then an increase in supply will:
increase the quantity exchanged but result in no change in the price.
If the demand for software engineers __________ slower than does supply, then wages of software engineers will __________.
increases; fall
The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket revenues, an economist would advise:
increasing the price of game tickets because demand is inelastic.
The demand schedule for a good:
indicates the quantities that will be purchased at alternative market prices.
Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price.
inelastic
When economists are sketching examples of demand and supply, it is common to sketch a demand or supply curve that is close to vertical, and then to refer to that curve as _________.
inelastic
the evidence on the supply curve of financial capital is controversial, but at least in the short run, the elasticity of savings with respect to the interest rate appears to be __________.
inelastic
Taxes on goods with __________ demand curves will tend to raise more tax revenue for the government than taxes on goods with __________ demand curves.
inelastic; elastic
A demand or supply curve with ______________ would be horizontal in appearance.
infinite elasticity
Which of the following best describes a monetary policy tool?
interest rates
Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?
international trade
Scarcity implies that:
it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.
In the ____________, households work and receive payment from firms.
labor market
Other things being equal, a __________ supply of workers tends to __________ real wages.
larger; decrease
Economists refer to this pattern, the ___________________________________, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines.
law of diminishing marginal utility
Since Baltimore passed the first _______________ in 1994, several dozen cities enacted similar laws in the late 1990s and into the 2000s.
living wage law
When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being:
low inflation
If a firm faces ________________________, while the prices for the output the firm produces remain unchanged, a firm's profits will increase.
lower costs of production
Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.
marginal analysis
The marginal benefit of a slice of pizza is the:
maximum amount that a consumer is willing to pay for the slice.
The basic difference between macroeconomics and microeconomics is:
microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).
The demand curve for a typical good has a(n):
negative slope because some consumers switch to other goods as the price rises.
Many economists believe that the trend toward greater wage inequality across the U.S. economy was primarily caused by _____________.
new technologies
Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.
normative statement
Attending college is a case where the ________________ exceeds the monetary cost.
opportunity cost
The model that economists use for illustrating the process of individual choice in a situation of scarcity is the budget constraint, sometimes also called the _______________, a diagram which shows what choices are possible.
opportunity set
The elasticity of supply is defined as the ________ change in quantity supplied divided by the _______ change in price.
percentage; percentage
in contrast to goods and services markets, _____________ are rare in labor markets, because rules that prevent people from earning income are not politically popular.
price ceilings
The downward slope of the demand curve again illustrates the pattern that as _____________ rises, _________________ decreases.
price, quantity demanded
the downward slope of the demand curve again illustrates the pattern that as _____________ rises, _________________ decreases.
price, quantity demanded
A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and ____________, shown on the horizontal axis.
quantity
A demand curve shows the relationship between price and _________________ on a graph.
quantity demanded
_________________ refers to the total number of units that are purchased at that price.
quantity demanded
When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _________________.
quantity supplied
A straightforward example of a _______________, often used for simplicity, is the interest rate.
rate of return
The price elasticity of demand measures the:
responsiveness of quantity demanded to a change in price.
If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to:
rise and the equilibrium quantity to stay the same.
A more efficient means of processing algae to produce an anticancer drug is discovered. As a result, the supply curve for the drug will:
shift to the right, decreasing the price of the drug
The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options.
sunk costs
A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the __________________ .
supply curve to the right
As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.
technology
As the _____________ complement for high-skill labor becomes cheaper, the demand curve for high-skill labor will shift to the right.
technology
Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:
the benefit to his grades from studying for an hour
The opportunity cost of attending university is likely to include all except which of the following?
the cost of haircuts received during the school term
Price elasticity of demand is defined as:
the percentage change in quantity demanded divided by the percentage change in price.
As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good.
the production possibilities frontier
Macroeconomic topics do not usually include:
the profit maximizing decisions of an individual manufacturer.
Whenever there is a surplus at a particular price, the quantity sold at that price will equal:
the quantity demanded at that price.
Whenever there is a shortage at a particular price, the quantity sold at that price will equal:
the quantity supplied at that price.
A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:
the supply curve
If new manufacturers enter the computer industry, then (ceteris paribus):
the supply curve shifts to the right.
When quantity demanded decreases in response to a change in price:
there is a movement up along the demand curve.
A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result:
total revenue will decrease.
If macroeconomics looks at the economy as a whole, it focuses on which of the following?
unemployed people
Scarcity exists because of:
unlimited wants and limited resources.
But nearly all supply curves share a basic similarity: they slope _______________
up from left to right
Many states do have ____________, which impose an upper limit on the interest rate that lenders can charge.
usury laws
In deciding how many hours to work, Beulah will make a choice that maximizes her _______; that is, she will choose according to her preferences for leisure time and income.
utility
The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern.
utility
If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages __________.
will increase
The elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in __________.
price
When demand is inelastic:
consumers are not very responsive to changes in price.
Which of the following best characterizes the circular flow of income?
Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.
- a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines.
Economies of scale
The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied.
price
When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right.
costs of production fall