Macroeconomics Chapter 1-6 exam 1

4.15. What is the result of a binding quota restriction on quantity?

a. The market-clearing price will be higher than the equilibrium price.

4.11. If a price ceiling is imposed above the equilibrium price, what is the effect?

a. There is no visible effect on the market outcome.

7. Exchanges taking place in a market system:

a. are voluntary.

4.2. Why did Venezuela experience a shortage of basic food in 2006?

a. because the price of basic food was legally prevented from rising to its equilibrium level

3.13. The downward slope of the demand curve indicates that, all else equal:

a. consumers will buy more of a good when its price decreases.

2.8. Which of the following is a normative statement?

c. A camera makes a good wedding gift.

4.5. What is the name given to the wedge that occurs between the supply price and the demand price of the transacted quantity, when a good is subject to quantity restrictions?

a. quota rent

3.7. A price above the equilibrium price will:

a. result in quantity supplied being greater than quantity demanded.

2.2 Economists typically depict the PPF as a bowed-out curve rather than as a straight line in order to show that:

a. the opportunity cost of producing a good rises as more is produced.

4. Most individuals choose careers in which they specialize in producing only one type of good or service, yet as consumers they have access to a wide variety of goods and services. What principle allows for this?

a. trade

3.4. If air travel to Hawaii becomes less expensive, what is likely to happen in the market for hotel rooms in Hawaii?

b. The demand curve for hotel rooms will shift to the right.

3.1. What best describes the competitive market?

b. There are many buyers and sellers of the same good.

3.11. If the demand curve shifts to the left, and the supply curve does NOT change, then the equilibrium price:

b. and quantity both will decrease.

3. Economists generally agree that people are most likely to change their behavior when they:

b. are given incentives to do so.

14. Adam Smith used the idea of the invisible hand to refer to the ability of market economies to:

c. harness the power of individual self-interest for the good of society as a whole.

8. The condition of scarcity means that:

b. choices must be made in the allocation of productive resources.

3.8. Which of the following changes would cause a decrease in the demand for DVD rentals?

b. decrease in the price of movie admissions

4.1. Which of the following is not a predictable result of a price ceiling?

b. exorbitant profits for producers of the good

2.3. If a country specializes according to its own comparative advantage and then trades with other nations:

b. it can consume at a higher level than the domestic production possibility frontier.

4.16. A binding price ceiling is presented graphically as a(n):

b. price below equilibrium.

4.10. A binding minimum wage is a type of:

b. price floor.

4.8. A binding price floor is designed to:

b. raise the price above the equilibrium price.

4.7. Which group would be most likely to benefit from a binding price floor imposed on wheat?

b. sellers of wheat that are seeking higher prices

5. In his book The Wealth of Nations, Adam Smith used the example of pin-making to illustrate the advantages of:

b. specialization.

12. Economic theory asserts that people will behave in ways that:

b. will enhance their own overall well-being.

13. Which one of the following statements is not true of a market economy?

c. A central planning authority makes decisions about production and consumption.

4.12. If a price floor is imposed above the equilibrium price in a market, what is the effect?

c. A surplus results.

2.5. Suppose you hear an economist make an assertion that, between the two countries, France has a comparative advantage in the production of chocolate and that Italy has a comparative advantage in the production of wine. Which of the following statements is another way of stating the same idea expressed in the assertion?

c. France can produce chocolate at a lower opportunity cost than Italy can.

2.9. If an economist argues that all countries gain from trade, what reasoning is most likely underlying her argument?

c. Production according to the principle of comparative advantage lowers overall costs and therefore allows both countries to have a higher standard of living.

3.9. Which of the following would cause a surplus of newsprint?

c. The demand for newsprint decreases, and the price does not change.

4.14. Why do minimum wage laws in Italy and Spain result in a greater prevalence of workers being hired in unreported jobs "off the books" than do minimum wage laws in the United States?

c. The minimum wages in these countries are so far above the equilibrium wage that they have generated significant unemployment.

3.6. How would an increase in the price of cotton affect the market for cotton T-shirts at your university bookstore?

c. The supply curve for cotton T-shirts will shift to the left.

9. The purpose of an economic system is to:

c. allocate scarce resources.

3.3. If coffee is a normal good, then an increase in consumer income will:

c. increase the demand for coffee.

10. The focal point of economic inquiry is:

c. individual choice.

4.9. A binding price ceiling is designed to:

c. keep the price below the equilibrium price.

4.17. A binding price floor is presented graphically as a(n):

c. price above equilibrium.

3. 12. The upward slope of the supply curve indicates that:

c. producers supply more of a good when its price increases.

4.4. The medallion system used to license taxicabs in New York City is an example of a(n):

c. quota.

3.10. If the supply curve shifts to the left, and the demand curve does not change then the equilibrium price:

c. will increase, and the quantity will decrease.

27. Which of the following statements is true?

d. All countries can gain from trade if they all specialize in production according to comparative advantage.

4.3. Which of the following statements regarding price floors is TRUE?

d. Price floors are intended to help certain people, but they have side effects that may harm others in predictable ways.

1. Economists would most likely disagree with which of the following statements?

d. Resources and inputs used in production are unlimited.

3.5. Consider the market for kayaks. What happens when the process of manufacturing kayaks becomes less costly through the use of new technology?

d. The supply curve for kayaks will shift to the right.

4.6. Which of the following is not a likely result of a quantity control in the form of a binding quota?

d. a surplus of the good or service

11. An economic system is in __________ when no individual would be better off by making a different choice.

d. equilibrium

2. Macroeconomics is the branch of economics studying:

d. fluctuations in the overall level of business activity.

2.4. The result of free trade between nations is that:

d. goods can be produced in the location where their opportunity cost is the lowest.

3.2. If the price of a bale of cotton increases from $0.80 to $1.20, and a pound of Kenyan coffee decreases from $12 a pound to $10 a pound, we can expect a(n):

d. increase in the quantity demanded of Kenyan coffee.

2.6. What is traded in factor markets?

d. land, labor, capital, and human capital

3.15. Consider gas stations. As a result of an economic recession and a decrease in consumer incomes, there will be a:

d. leftward shift in the station's demand curve and lower gas prices.

4.13. Which of the following would enhance the level of efficiency in a market?

d. removing a binding price floor, allowing the price to return to its equilibrium level

3.14. A shortage is the result of when:

d. the price of a good is held below the equilibrium price.

chapter 2. 1. When economists want to describe how much an economy can produce with a given amount of resources, they use a model known as:

d. the production possibility frontier.

6. An opportunity cost arises:

d. whenever any choice is made.