Macroeconomics chapter 2

What do economists mean by​ scarcity? A. Economists mean that unlimited wants exceed limited resources. B. Economists mean that the economy is unable to produce increasing quantities of goods and services. C. Economists mean that people are not employed. D. Economists mean that trade is not possible. E. Economists mean that production is inefficient.

A. Economists mean that unlimited wants exceed limited resources.

The primary difference between product markets and factor markets is that A. product markets are markets for​ goods, while factor markets are markets for factors of production—​labor, ​capital, natural​ resources, and entrepreneurial ability. B. product markets produce goods for final sale while the output of factor markets is included in the purchase price of the good itself—factors are not sold. C. product markets are markets for factors of production—​labor, ​capital, natural​ resources, and entrepreneurial​ ability, while factor markets are markets for goods and services. D. product markets are generally after factor markets in the distribution chain.

A. product markets are markets for​ goods, while factor markets are markets for factors of production—​labor, ​capital, natural​ resources, and entrepreneurial ability.

One of the great benefits of trade is A. that it makes it possible for society to become better off by increasing its consumption. B. that it makes it possible for society to become better off if​ individuals, firms, and countries specialize in producing goods and services for which they have an absolute advantage. C. that it makes it possible for society to become better off by increasing its production but not its consumption. D. that it provides society what it desires most in life even if it does not enhance the means for achieving its goals.

A. that it makes it possible for society to become better off by increasing its consumption.

A free market exists A. when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed. B. only in fiction. There are no markets or economies which even come close to approaching the status of a free market. C. when the government places significant restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed. D. when the government places absolutely no restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed.

A. when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed.

If you and your neighbor both grow oranges and grapefruits and you are better than your neighbor at picking both oranges and​ grapefruits, there can be no advantage to you in specializing in growing only one type of fruit and trading with your neighbor for the other. A. True B. False

B. False

A production possibilities frontier​ (PPF) is A. a curve that shows the potential productive capabilities of the frontier​ (defined as the area outside of​ cities) of a developing economy. B. a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology. C. a curve that illustrates the demand of two goods for the average consumer. D. a curve showing the generally attainable combinations of two products that may be produced with all planned or​ potential, yet undeveloped technology.

B. a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.

In the​ circular-flow diagram showing how a market system​ works, A. households purchase output produced by firms in product and factor markets. B. income flows to firms through product markets product markets. C. households are demanders and firms are suppliers in factor markets. D. firms and households are both suppliers in product markets. E. income flows to households and the government through product markets.

B. income flows to firms through product markets product markets.

Is it possible for a country to have a comparative advantage in producing a good without also having an absolute​ advantage? A country without an absolute advantage in producing a good A. will have a comparative advantage if it is able to produce that good at a low total cost. B. will have a comparative advantage if it has a lower opportunity cost of producing that good. C. will not have a comparative advantage because it has fewer resources. D. will have a comparative advantage if it devotes more resources toward that​ good's production. E. will have a comparative advantage if it produces more efficiently.

B. will have a comparative advantage if it has a lower opportunity cost of producing that good.

In a simple​ circular-flow model, there are flows of​ _________ and flows of​ _________. A. funds received from the sale of factors of​ production; spending on final goods and services B. factors of​ production; goods and services C. Both​ (a) and​ (b) are correct. D. None of the​ above; there are no flows in the circular flow of income.

C. Both​ (a) and​ (b) are correct.

What is comparative​ advantage? A. The ability to produce more of a good or service than competitors using the same amount of resources. B. The gain from selling a product for more than it costs to produce that product. C. The ability to produce a good or service at a lower opportunity cost than other producers. D. The gain from consuming a product whose benefit is greater than its cost. E. The ability to use all available resources to produce output.

C. The ability to produce a good or service at a lower opportunity cost than other producers.

What is absolute​ advantage? A. The ability to use all available resources to produce output. B. The gain from consuming a product whose benefit is greater than its cost. C. The ability to produce more of a good or service than competitors using the same amount of resources. D. The ability to produce a good or service at a lower opportunity cost than other producers. E. The gain from selling a product for more than it costs to produce that product.

C. The ability to produce more of a good or service than competitors using the same amount of resources.

The primary difference between absolute and comparative advantage is A. absolute advantage is a concept that was utilized in communist countries and comparative advantage is a capitalist idea. B. absolute advantage refers to the ability to produce a good or service at a lower opportunity cost and comparative advantage refers to the ability to produce more of a good or service using the same amount of resources. C. absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost. D. absolute advantage can never change while comparative advantage depends on the relative cost of a​ good's resources.

C. absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.

The production possibilities frontiers depicted in the diagram to the right illustrate A. technological advances in the tank industry. B. the likely result of a ground war. C. both the labor force and capital stock increasing. D. both the labor force and capital stock decreasing.

C. both the labor force and capital stock increasing.

Which of the following are the two key groups of participants in the circular flow of​ income? A. domestic residents and foreign residents B. savers and borrowers C. government and financial institutions D. households and firms

D. households and firms

The Scottish philosopher Adam Smith argued in 1776 that A. guilds would do a better job of coordinating the activities of buyers and sellers than prices could. B. unions would do a better job of coordinating the activities of buyers and sellers than prices could. C. prices would do a better job of coordinating the activities of buyers and sellers than markets could. D. prices would do a better job of coordinating the activities of buyers and sellers than guilds could.

D. prices would do a better job of coordinating the activities of buyers and sellers than guilds could.

Property rights are A. the rights government has to the exclusive use of all​ property, including the right to buy or sell it. B. the rights individuals or firms have to the exclusive use of their property within individual culturally defined norms which are inconsistent in each area of the United States. C. the rights individuals or firms have to the exclusive use of their​ property, excluding the right to buy or sell it. D. the rights individuals or firms have to the exclusive use of their​ property, including the right to buy or sell it.

D. the rights individuals or firms have to the exclusive use of their​ property, including the right to buy or sell it.

Which of the following is not scarce according to the economic​ definition? A. Cars B. Time. C. Workers D. Coal E. None of the above.

E. None of the above.

A(n) _____________ is someone who operates a​ business, bringing together the factors of production—​labor, capital, and natural resources—to produce goods and services.

entrepreneur

George sells land he owns to​ McDonald's so it can build a new restaurant. This takes place in the ________ market. The household ________ the factor of production and the firm _______ the factor of production.

factor, supplies, demands

George works 20 hours per week at​ McDonald's. This takes place in the ______ market. The household ________ the labor and the firm __________ the labor.

factor, supplies, demands

Tesla increases employment at its Fremont plant. This takes place in the _______ market. The households _______ the labor and the firm ________ the labor.

factor, supply, demands

Two key groups participate in markets. A _________ consists of all the individuals in a home. _______ are suppliers of goods and services. We can use a simple economic model called the _____________ to see how participants in markets are linked.

household, firms, circular-flow diagram

George buys a Tesla Model S. This takes place in the _________ market. The household ______ the good and the firm ______ the good.

product, demands, supplies