Macroeconomics Exam — Dec

(Figure: Interpreting Supply Shifts 2) A shift to the right of the supply curve could be caused by a(n):

improvement in production technology.

(Figure: Understanding Surplus and Efficiency) In the graph above, efficiency in this market is achieved at a price of:

$10

(Figure: Determining Surplus and Loss) In the graph, which price would NOT allow for an effective price floor?

$6

In general terms, which item is an example of an inferior good?

A city bus

(Figure: Interpreting Demand Curves) In the demand curve shown, an increase in price from $1 to $2 will:

Cause quantity demanded to fall from 30 units to 20 units

A theory composed of a number of assumptions and facts boiled down to their basic relevant elements is called a:

Model

Because of scarcity:

We face tradeoffs in nearly every choice we make

Consumer surplus is defined as the:

gap between the demand curve and the market price.

Other factors held constant, as the price of an iPad rises, the:

quantity demanded for iPads falls.

Suppose that a customer's willingness to pay for a product is $79, and the seller's willingness to sell is $64. If the negotiated price is $68, how much is consumer surplus?

$11

(Figure: Interpreting Supply Shifts 3) When the Supply Shifts from from S0 to S1 (a leftward shift of the supply curve), the equilibrium quantity changes from:

20 units to 15 units

When a scarce good or resource is consumed by a person who does not value it most, economists refer to the situation as

A misallocation of resources

(Figure: Predicting Demand Shifts 2) What would cause a shift from D1 to D2?

A new study that shows that honey cures cancer

Paying a salesperson more for increased sales is an example of:

An incentive

Which of these is NOT an example of market failure?

Competition leads firms to provide products at the lowest possible price

A production possibilities frontier that is a straight line is the result of:

Constant opportunity costs

(Figure: Determining Surplus and Loss) Consider the graph. If the price is raised from $8 to $12, consumer surplus:

Decreases by $120 and deadweight loss increases by $70

The limits of international trade include all of the following EXCEPT: •transportation and communication costs •decreasing opportunity costs and increasing returns •increasing opportunity costs and diminishing returns •trade may hurt some industries and individuals within each country

Decreasing opportunity costs and increasing returns

Scarcity:

Is faced by all individuals and societies

People use __ to determine how many hours to work, and businesses use __ to determine how much of their product they are willing to supply to the market.

Marginal analysis; marginal analysis

When goods are produced at the lowest possible cost, an economy is said to have achieved:

Production efficiency

Which is NOT a source of of economic growth?

Reducing the level of international trade

The measure of society's benefits due to a market transaction is called:

Total surplus

Markets tend to provide too little of products with external benefits.

True

Macroeconomics is concerned with issues such as:

Unemployment

(Figure: Supply and Demand for Shoes) If the price of shoes is $60 then we:

have a surplus of shoes.

Which type of payment would NOT be a market transaction?

payment made to a disaster victim

A market exists when:

people exchange money for goods and services

A good example of a government-imposed price ceiling is:

rent controls

When the quantity demanded in a market equals quantity supplied, then the:

the market is in equilibrium

(Table) According to the table, the equilibrium price is __, and the equilibrium output is __ units.

$10; 60

A lawyer can argue a case in court for one hour and make $300. She could alternatively use that hour of time to type a legal brief in her office. What is the opportunity cost of her typing the legal brief?

$300, since that is the amount she could have made by arguing a case in court

Suppose that a customer's willingness to pay for a product is $79, and the sellers willingness to sell is $64. If the negotiated price is $68, how much is the producer surplus?

$4

Jonathan purchased coffee for $5 at Jennifer's coffee shop; however, he was willing to pay $9. Jennifer was willing to accept $3 for the coffee. The results of this transaction are a consumer surplus of:

$4 and a producer surplus of $2.

(Figure: Determining Surplus and Loss) In the graph, how much is deadweight loss at a price of $12?

$70

(Figure: Determining Surplus and Loss) In the graph, which price would not allow for an effective price floor?

$8

Paolo can walk three dogs or mow two lawns in two hours. Ashanti can walk six dogs or mow three lawns in two hours. Ashanti's opportunity cost for each additional dog walked is:

0.5 lawn mowed

When the government chooses to use resources to build tourist centers, the selected resources are no longer available to build highways. This BEST illustrates the concept of:

Opportunity cost

Rational behavior requires thinking at the margin. Which example represents this type of thinking? •deciding whether a second burger is worth the extra $2 •deciding whether the overtime pay is worth working on your off day •deciding whether to pay a fine for polluting the local harbor or installing antipollution machinery

All of these examples represent thinking at the margin

If the government of Spain decides to spend less on the military and more on health care, the forgone spending on military items represents the:

Opportunity cost of the extra health care

Economics is BEST defined as the study of how:

People make rational decisions

The demand for gasoline is rising. Which statement describes a possible cause?

Consumers expect prices to rise in the near future.

"Price gouging" law are types of __ and often result in __.

Price ceilings; shortages of a scarce good

Suppose a price floor is set on cane sugar that is approximately three times the equilibrium price. One of the effects is a(n):

Drop in the quantity of sugar consumed

Investment in human capital refers to:

Education, on-the-job training, and professional training activities

Which graph shows an increase in quantity supplied?

Graph that has "a" at the bottom, "b" in the middle, and "s0" at the top; line parallel pointing up

Which is NOT considered a basic economic question?

How will the system accommodate change?

Which situation(s) may require government intervention? • I: a local business has made a profit in each of the last ten years •II: students are having difficulty deciding whether to go to the beach or to go hiking for their class trip •III: a manufacturing firm on a river is dumping production run off into the water

III only

Supply and demand analysis is used:

In both microeconomics and macroeconomics

In the study of economics, the goals of efficiency and equity are often:

In conflict with one another

Which statement is a key idea in economic thinking?

Incentives matter

In a __ economy, individuals and firms own most resources, and in a __ economy, the government controls most resources.

Market; planned

The economics of uranium mining would be studied in:

Microeconomics

__ occurs when goods and services are produced with as few resources as possible, while __ occurs when the mix of goods and services produced is the most desired by society

Production efficiency; allocative efficiency

The theory of comparative advantage says that countries:

Should export those goods they can produce at a lower opportunity cost than another country

The opportunity costs of attending college do NOT include:

The expenditures of food

(Figure: Interpreting a Market Graph) The graph represents:

The law of supply

Which is an example of capital in the production process of an amusement park?

The roller coaster

Which statement is TRUE about specialization and exchange between two individuals?

They generally benefit the poorer individual as well as the richer individual

If an economy is operating at a point that is inside of its production possibilities frontier, then it can be assumed that its resources are:

Underutilized

There are two sellers in the DVD market, Wen and Ahmed. If the market were $5 per DVD, Wen would be willing to sell 10 DVDs and Ahmed would want to sell 15 DVDs. If the market price were to rise to $7, then:

We can confidently say that market quantity supplied is at least 25 DVDs

Producer Surplus is defined as the:

gap between the supply curve and the market price.

Which of these circumstances would NOT affect the supply of new automobiles?

higher interest rates for new car financing

A good example of a government-imposed price floor is:

minimum wage

Supply is defined as:

the maximum amount of a product that sellers are willing and able to provide for sale over a particular time period at various prices, holding all other relevant factors constant.

At any price below the equilibrium price:

the quantity demanded exceeds the quantity supplied in the market.

Flu vaccination shots provide external benefits. Thus:

too few flu vaccination shots are given.