Macroeconomics Exam 1

The pie chart to the right illustrates hypothetical data for the market share for the United States automobile market. the percentage of the US market that US auto firms control is ____%

60%

Trade-offs force society to make choices, particularly when answering the following three fundamental questions:

One, what goods and services will be produced? Two, how will the goods and services be produced? Three, who will receive the goods and services produced?

Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational?

When we assume the managers at Microsoft have used all available information and have weighed all known benefits and costs, we are assuming rationality.

The diagram to the right is an example of a) pie chart b) a time series graph c) a bar graph d) an economic map

a time-series map

The primary difference between absolute and comparative advantage is

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

When we graph the relationship between two variables, we often want to draw conclusions about whether changes in one variable are causing changes in the other variable. Doing so, however, can lead to incorrect conclusions. Reasons for drawing incorrect conclusions about cause and effect include

an omitted variable reverse causality

The production possibilities frontiers depicted in the diagram to the right illustrate

both the labor and capital stock increasing

____ is the study of the choices people make to attain their goals, given their scarce resources.

economics

A ____ is someone who operates a business, bringing together the factors of production--labor capital, and natural resources--to produce goods and services.

entrepreneur

Microeconomics is the study of

how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices

On the diagram to the right, movement along the curve from points A to B to C illustrates

increasing marginal opportunity costs

Economics is a social science because

it is based on studying the actions of individuals it applies the scientific method to the study of the interactions among individuals it considers human behavior

Which of the following covers the study topics such as inflation or unemployment?

macroeconomics

____is concerned with what is, and ____is concerned with what ought to be. Economics is about ____, which measures the costs and benefits of different courses of action.

positive analysis normative analysis positive analysis

____occurs when a good or service is produced at the lowest possible cost. ____occurs when production is in accordance with consumer preferences.

productive efficiency allocative efficiency

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from reality an economist calls

scarcity

Equity is

the fair distribution of economic benefits.

Opportunity cost is

the highest-valued alternative that must be given up to engage in an activity.

When the federal government crafts environmental policies that make it less expensive for firms to follow green initiatives,

the policies are consistent with economic incentives

Property rights are

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 shows the following shows a negative nonlinear relationship? (assume values of x>0)

y=50/x