Principles of Macroeconomics, Chapters 1, 3, and 4

negative incentive.

The government places warnings on cigarette and liquor packages. These warnings serve as a(n) positive incentive. negative incentive. indirect incentive. opportunity cost. way to make cigarettes and liquor more scarce.

efficiently.

Think of the production possibilities frontier (PPF) model. When society is producing the largest possible output from its resources, it is operating inefficiently. efficiently. with no opportunity cost. inside (within) the PPF. beyond its opportunity cost.

price ceiling

Many states have laws that limit the maximum amount of interest that a lender can charge a borrower. Such a law is an example of a(n) equilibrium price. price ceiling. price floor. black market price. ration price.

individual decision-making units.

Microeconomics is the study of how government activities affect the economy. individual decision-making units. collective decision making. the operation of the economy as a whole. the interaction between the government and businesses.

The quantity demanded will always exceed the quantity supplied.

A binding price ceiling will have which of the following consequences? There will be downward pressure on prices until quantity demanded equals quantity supplied. There will be upward pressure on prices until quantity demanded equals quantity supplied. There are no consequences to a binding price ceiling. The quantity demanded will always exceed the quantity supplied. The quantity demanded will always be smaller than the quantity supplied.

positive

A parent that pays a child an allowance for doing chores is providing a(n) ________ incentive. positive negative neutral complementary unintended

lower

A person has a comparative advantage in the production of a good when she or he canproduce the product at a(n) ________ opportunity cost compared to another person. higher lower equal diminishing increasing

supply; right; decrease

A technological advancement for Good A will shift the ________ curve of Good A to the ________, making the equilibrium price ________. demand; left; decrease supply; right; increase demand; right; increase supply; left; increase supply; right; decrease

surplus; 15

According to the accompanying figure, if the price is $10, there is a ________ of ________ units. shortage; 15 surplus; 15 shortage; 30 surplus; 30 surplus; 22

threatening to fire those who do not perform well.

An example of a direct negative incentive is providing a commission for sales. awarding a promotion for hard work. threatening to fire those who do not perform well. providing an orientation for new employees. providing generous benefits and pay for employees.

other things being equal.

Ceteris paribus means in sets of two. constant opportunity cost. other things being equal. buyer beware. there is no reason to argue about people's tastes.

They would both decrease.

During the winter months, many elderly people leave their homes in northern New York and travel south to Florida or Arizona. What would we expect to happen to the equilibrium price and quantity of items most used by the elderly in northern New York? They would both increase. They would both decrease. One would increase and one would decrease, but we don't know which would do what. The price would increase and the quantity would decrease. The price would decrease and the quantity would increase.

the alternatives given up when making choices.

Economics is concerned with the trade-offs that emerge because of scarcity. The term "trade-offs" refers to the decision about whether households or businesses should bear the entire burden of the scarcity problem. the buying and selling that occur as unwanted goods are exchanged for goods that are desired. the alternatives given up when making choices. recycling and transforming old goods into new goods to reduce scarcity problems. forcing businesses to produce some goods and services and not others.

Solange should make pizzas and Jay-Z should make cheesesteaks.

Given an eight-hour workday, to experience gains from trade, Solange should make pizzas and Jay-Z should make cheesesteaks. Solange should make cheesesteaks and Jay-Z should make pizzas. each should make his or her own cheesesteaks and pizzas. Solange should produce both pizzas and cheesesteaks. Jay-Z should produce both pizzas and cheesesteaks.

Solange has an absolute advantage in the production of both foods.

Given an eight-hour workday, which statement best describes the absolute advantage evident in the table? Jay-Z has an absolute advantage in making pizzas, and Solange has an absolute advantage in making cheesesteaks. Solange has an absolute advantage in making pizzas, and Jay-Z has an absolute advantage in making cheesesteaks. Jay-Z has an absolute advantage in the production of both foods. Solange has an absolute advantage in the production of both foods. Neither party has an absolute advantage.

Lola; absolute

If Lola can produce more output from a set amount of resources than Kevin, ________ has a(n) ________ advantage. Lola; comparative Kevin; comparative Lola; absolute Kevin; absolute Lola; normative

There would be a movement to the left along the demand curve.

If the price of pants increases, what would you expect would happen in the market for pants? There would be a movement to the right along the demand curve. There would be a movement to the left along the demand curve. There would be a shift to the left of the demand curve. There would be a shift to the right of the demand curve. There is both a movement along and a shift of the demand curve.

The supply curve would shift to the left.

If the price of rubber were to increase by 20 percent over the fiscal year and if all else were held constant, what would we expect to happen to the supply curve of tires that are sold separately from automobiles? The supply curve would shift to the right. The quantity supplied would increase. The supply curve would shift to the left. The supply curve would shift down. Nothing; the cost of rubber has no impact on the supply of tires.

There will not be a shortage.

If there is a $180 price ceiling imposed on a textbook, what will be the disequilibrium amount? There will be a shortage of 1,500,000 units. There will be a shortage of 800,000 units. There will not be a shortage. There will be a shortage of 3,000,000 units. There will be a shortage of 450,000 units.

There will be a shortage of 800,000 textbooks.

If there is a $60 price ceiling imposed on a textbook, what will be the disequilibrium amount? There will be a shortage of 800,000 textbooks. There will be a surplus of 800,000 textbooks. There will be neither a shortage nor a surplus. There will be a shortage of 2,600,000 textbooks. There will be a shortage of 400,000 textbooks.

the demand curve for Coke shift to the right.

Pepsi and Coke are considered substitute goods. Because of this, one would predict that, holding all else constant, if the price of Pepsi increases, we would see the demand curve for Coke shift to the right. the demand curve for Coke shift to the left. no change in the demand for Coke. the demand curve for Pepsi shift to the right. the demand curve for Pepsi shift to the left.

There will be a shortage of 200 generators.

Refer to the accompanying figure. If there is a $700 government-imposed price antigouging law imposed on generators, how will the market be affected in the short run? There will be a shortage of 200 generators. There will be a shortage of 100 generators. The government will intervene and order a surplus of 100 generators. Price gougers will enter the market and provide a surplus of 100 generators. No changes will occur in the market, since anti-price-gouging laws are now in effect.

specialization and trade

Suppose that Solange and Jay-Z could each make either New York-style pizza or Philly cheesesteaks. Given an eight-hour workday, which of the following would permit them to produce outside their respective production possibilities frontiers (PPFs)? a decrease in technology a decrease in resources specialization and trade efficient use of all their productive resources an "Empire State" of mind

Graph C

Suppose the plow is invented and agricultural productivity greatly increases. Which of the following graphs best depicts how this would affect the PPF? Graph A Graph B Graph C Graph D

Graph B

Suppose the printing press is invented. Which graph best depicts how this would affect the PPF? Graph A Graph B Graph C Graph D

There would be neither a shortage nor a surplus.

The accompanying figure describes the market for gasoline in a local community. If the government were to place a price floor at P1, predict the resulting surplus or shortage. There would be a shortage of 75,000 units. There would be a surplus of 75,000 units. There would be neither a shortage nor a surplus. There would be a shortage of 150,000 units. There would be a surplus of 150,000 units.

There would be a surplus of 75,000 units.

The accompanying figure describes the market for gasoline in a local community. If the government were to place a price floor at P3, what would be the resulting surplus or shortage? There would be a shortage of 75,000 units. There would be a surplus of 75,000 units. There would be neither a shortage nor a surplus. There would be a shortage of 150,000 units. There would be a surplus of 150,000 units.

increases; decreases; decreases; increases

The difference between a tax and a subsidy is that when the government places a tax on a good, it ________ the equilibrium price and ________ the equilibrium quantity, whereas when the government places a subsidy on a good, it ________ the equilibrium price and ________ the equilibrium quantity. increases; decreases; decreases; increases increases; increases; decreases; decreases decreases; decreases; increases; increases decreases; increases; increases; decreases increases; does not change; does not change; increases

It would increase by 12,000 units.

The market is currently at market equilibrium. If a binding price ceiling of P1 is imposed, by how much would the quantity demanded change? It would increase by 12,000 units. It would decrease by 30,500 units. It would decrease by 12,000 units. It would increase by 30,500 units. It would increase by 30,000 units.

there were enough resources to produce all the goods and services people would like to obtain.

The need to study economics would cease to exist if the government stopped controlling people's actions. people were free to make decisions on their own. people put forth the effort required to attain the goods and services they wanted. people earned more than they spent. there were enough resources to produce all the goods and services people would like to obtain.

7 blueberry

The opportunity cost of increasing production of apple pies from 14 to 16 pies is ________ pies. 2 blueberry 14 apple 7 blueberry 4 blueberry 16 blueberry

trade-offs.

The presence of scarcity means that no choices come without shortages. trade-offs. regret. incentives. consumption.

new technology that makes the storage and transport of both rice and pasta more efficient.

This society could reach point F when there is a(n) increase in the monetary price of white rice. credible new study that shows eating pasta reduces the risk of heart attacks. new technology that makes the storage and transport of both rice and pasta more efficient. new tax on the sale of both rice and pasta. increase in the monetary price of macaroni.

endogenous factors.

Variables that are controlled for in a model are called normative statements. positive statements. endogenous factors. exogenous factors. the scientific method.

the slope of the production possibilities frontier (PPF) is different in each of the two segments.

We can see that the opportunity cost of moving from point D to point E is different from the opportunity cost of moving from point D to point C because growing rice requires more water than growing wheat for pasta does. the slope of the production possibilities frontier (PPF) is different in each of the two segments. they are all efficient points. they are all attainable points. the opportunity cost is constant along the PPF.

20 solved crimes

What is DiNozzo's opportunity cost of making a wooden boat? 20 solved crimes 30 solved crimes 10 solved crimes 1/20 of a boat 1/10 of a boat

can produce a good at a lower opportunity cost than someone else.

When one producer has a comparative advantage in production, he or she can produce more output than someone else using the same quantity of resources. can produce a good at a lower opportunity cost than someone else. does not benefit from trade with other producers. is unable to reach his or her production possibilities frontier (PPF). trades only with others who have the same comparative advantage.

falls; falls

When the demand curve shifts to the left and all else is held constant, the equilibrium price ________ and the equilibrium quantity ________. falls; rises rises; falls falls; falls rises; rises falls; remains constant

Rent control is an illustration of a price ceiling and the minimum wage is an illustration of a price floor.

Which of the following is a correct statement? Rent control and the minimum wage are both illustrations of price floors. Rent control is an illustration of a price floor and the minimum wage is an illustration of a price ceiling. Rent control and the minimum wage are neither illustrations of price floors nor price ceilings. Rent control is an illustration of a price ceiling and the minimum wage is an illustration of a price floor. Rent control and the minimum wage are both illustrations of price ceilings.

One should wear a helmet when cycling.

Which of the following is a normative statement? One should wear a helmet when cycling. The sky is blue. A bicycle has two wheels. A unicycle has five wheels. Electricity follows the path of least resistance.

We should strive to push the production possibilities frontier (PPF) outward.

Which of the following is a normative statement? The sky is blue. The sky is green with pink polka dots. Points on the production possibilities frontier (PPF) are efficient. Points outside the production possibilities frontier (PPF) are unattainable with current resources. We should strive to push the production possibilities frontier (PPF) outward.!

Legally requiring dogs to have rabies shots will reduce the number of rabid dogs.

Which of the following is a positive statement? Nelly's dog should lose some weight. Legally requiring dogs to have rabies shots will reduce the number of rabid dogs. Nelly should take her dog to the veterinarian once a year for a checkup. Chihuahuas are cuter than bulldogs. All dogs should be required to wear leashes at all times

Binding price ceilings encourage the formation of a black market.

Which of the following is an accurate statement about the consequence of a binding price ceiling? Binding price ceilings do not allow consumers to pay a lower price for the product in the legal market. Binding price ceilings encourage the formation of a black market. Binding price ceilings discourage the formation of a black market. Binding price ceilings create a surplus of the product. Binding price ceilings cause consumers to purchase more of the product in the legal market.

expectations of future prices

Which of the following is both a shift in supply and a shift in demand? the number of firms in an industry tastes and preferences income changes expectations of future prices the number of buyers

point F

Which of the following represents a point that is unattainable with current resources and technology? point B point C point D point E point F

a decrease in the number of buyers in a market

Which of the following scenarios would explain the change in equilibrium shown in the accompanying figure? an increase in an input price a decrease in the number of buyers in a market an increase in the price of a substitute good an increase in the expected future price a negative technological change

Income decreases.

Which of the following would cause a normal good's demand curve to shift to the left? Income decreases. Income increases. The price increases. The price decreases. The input prices increase.

Gibbs has an absolute advantage in both.

Which statement best describes absolute advantage? DiNozzo has an absolute advantage in the production of wooden boats. DiNozzo has an absolute advantage in both. Gibbs has an absolute advantage in solving crimes, whereas DiNozzo has an absolute advantage in making wooden boats. Gibbs has an absolute advantage in both. Gibbs has an absolute advantage in making wooden boats, whereas DiNozzo has an absolute advantage in solving crimes.

It would decrease because of a demand shift.

Wine and cheese are complement goods because they are consumed together. What would we expect to happen to the equilibrium quantity of cheese if the price of wine increased and all else is held constant? It would increase because of a supply shift. It would increase because of a demand shift. It would stay the same because of both a demand and a supply shift. It would decrease because of a supply shift. It would decrease because of a demand shift.

economics

Without scarcity, the study of ________ would be unnecessary. positive incentives negative incentives resource allocation economics productivity