question

The study of a single firm and how it determines prices would fall under

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microeconomics

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Macroeconomics deals with

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the working of the entire economy or large sectors of it

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If resources are "scarce" it means that they

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cannot provide enough goods or services to satisfy all human material wants and needs

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A choice made ________ is a choice whether to do a little more or a little less of something

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at the margin

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You can either spend $100 on a new economics textbook or a new CD player. If you choose to buy the new economics textbook, the opportunity cost is

answer

the new CD player

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A college student is faced with a difficult decision of how to spend one hour tonight. She could babysit her professor's child at an hourly wage of $7, she could work at the college library at a wage of $6, or she could finish her economics homework assignment. If she chooses to complete her homework assignment, she has incurred an opportunity cost equal to

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$7

question

The best example of making a choice at the margin is

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eating another slice of pizza

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You make a trade-off when you compare the ________and ________ of doing something.

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costs; benefits

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Which of the following methods of encouraging recycling is likely to be most effective?

answer

imposing a tax per unit of garbage generated

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If the price of gasoline falls and stays low for an extended period of time, we expect people to

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buy larger and less fuel-efficient cars

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If an economy has used up all opportunities to make someone better off (without making someone else worse off) then it has achieved ________.

answer

efficiency

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Gains from trade arise because of

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specialization in production

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Economists say an economy is efficient when

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all opportunities to make some people better off without making other people worse off have been taken

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Equity means that

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everyone gets his or her fair share of the goods and services produced

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When markets fail

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government intervention may help

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Market failure may occur because

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individual actions have side effects that are not properly taken into account by the market

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When a local factory closes, why does it spell bad news for the local restaurants?

answer

Unemployed factory workers have lower incomes and are less likely to dine out.

question

During the Great Depression, consumers and producers in the United States dramatically reduced their spending as compared to the quantity of goods and services available at the time. This statement best represents the economic concept of

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overall spending sometimes gets out of line with the economy's productive capacity

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People who live in households decide to spend less in their day-to-day activities. As a result, this will most likely lead to

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less income for other people in the economy

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When building a model, economists

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simplify reality in order to highlight what really matters

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The production possibility frontier illustrates that

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if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced

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If the production possibility frontier were a straight line sloping down from left to right, this would suggest that

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the opportunity costs of the products are constant

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If an economy has to sacrifice increasing amounts of good X for each unit of good Y produced, then its production possibility frontier is

answer

bowed out from the origin

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As long as people have different ________, everyone has a comparative advantage in something.

answer

opportunity costs

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Economists generally believe that a country should specialize in the production of a good or service if

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the country can produce the product while forgoing fewer alternative products than any other country

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Trade can be beneficial to an economy because

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more goods and services can be obtained at lower opportunity cost

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Dr. Colgate is a dentist who employs an assistant, Ms. Crest. If Dr. Colgate worked all day at the front desk, she could answer 40 phone calls. If she worked all day with patients, she could clean the teeth of 40 patients. If Ms. Crest worked all day at the front desk, she could answer 60 phone calls. If she worked all day with patients, she could clean the teeth of 20 patients. Which of the following is true?

answer

Ms. Crest has a comparative advantage in answering phones.

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Assume that Columbia gives up 3 motorcycles for each ton of coffee it produces, while Bolivia gives up 7 motorcycles for each ton of coffee it produces.

answer

Columbia has a comparative advantage in coffee production and should specialize in coffee production

question

The circular-flow diagram illustrates how households ________ goods and services and ________ factors of production.

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buy; sell

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Which are the two markets represented in the circular-flow diagram?

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The market for goods and services and the market for factors.

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Example of a normative statement?

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We would all be better off if we could reduce our dependence on oil imports.

question

Example of the following would be a positive economic statement?

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There has been an increase in the rate of inflation.

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Which of the following factors cause a movement along the demand curve?

answer

change in the price of the good

question

A newspaper story recently reported that the price of new cars has decreased, and the quantity of new cars sold has dropped. The price and quantity changes were probably caused by

answer

a decrease in buyers' incomes

question

The primary difference between a change in demand and a change in the quantity demanded is

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a change in quantity demanded is a movement along the demand curve and a change in demand is a shift in the demand curve.

question

Consider the supply curve for cotton shirts. An increase in the price of cotton will

answer

decrease the supply of cotton shirts

question

A technological advance in the production of automobiles will

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increase the supply of automobiles

question

In the market for beef, what would cause a price increase?

answer

The prices of grass and corn increase

question

A new wonder diet that results in a dramatic loss of weight sweeps through America. The key to the diet is to eat unlimited amounts of red meat (beef) but no poultry or carbohydrate-rich foods. As millions of Americans switch to the new diet, we can expect

answer

a decrease in the demand for poultry, leading to a shift to the left in the demand curve for poultry and lower poultry prices

question

An increase in demand, with no change in supply, will lead to ________ in equilibrium quantity and ________ in equilibrium price.

answer

an increase; an increase

question

A binding price ceiling is designed to

answer

keep prices low.

question

The persistent unwanted surplus that results from a price floor creates inefficiencies that include all of the following

answer

inefficient allocation of sales among sellers. wasted resources. the temptation to break the law by selling below the legal price.

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To be binding, a price floor must be set at a price

answer

higher than the equilibrium price

question

Macroeconomics involves the study of the

answer

overall behavior of the economy

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If all the households and businesses in the economy start saving more during economic hard times, that results in a fall in aggregate income hurting everyone in the economy. This is known as

answer

the paradox of thrift

question

The concept that the whole is greater than the sum of its parts best characterizes which of the following?

answer

macroeconomics

question

In the "paradox of thrift"

answer

increased saving by individuals increases their chances of becoming unemployed

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Economic theory in 1936 changed dramatically with the publication of

answer

The General Theory of Employment, Interest and Money by John Maynard Keynes

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Fiscal policy attempts to affect the level of overall spending in the economy by changes in

answer

taxes and spending

question

Monetary policy attempts to affect the overall level of spending in the economy by changes in

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interest rates and the quantity of money

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Keynesian economics propagates the economic ideas

answer

that argue that the government can help a depressed economy through fiscal and monetary policies

question

Recessions are periods when

answer

output and employment are falling

question

The short-run alternation between economic downturns, recessions, and economic upturns and expansions is known as the

answer

business cycle

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The point at which a recession ends and the expansion begins is called the

answer

business cycle trough

question

The point on a business cycle when real GDP stops rising and begins falling is a(n)

answer

peak

question

Long-run growth is the sustained upward trend in

answer

aggregate output per person over several decades

question

Inflation

answer

is an increase in the overall level of prices

question

Price stability refers to a situation where

answer

the overall cost of living is changing very slowly

question

Most households derive the bulk of their income from which of the following sources?

answer

wages

question

An example of a government transfer is a(n)

answer

Social Security payment

question

Goods that are produced domestically but sold abroad are

answer

exports

question

An example of investment spending would be

answer

purchase of a new productive machine

question

If we add up all the values added at every stage of production for a good, we will get

answer

the final value of the good

question

Gross domestic product or GDP is

answer

the total dollar value of final goods and services produced in the economy in a given time period

question

Which one of the following equations correctly measures GDP?

answer

C + I + G + X - IM

question

Which one of the following transactions will be included in the official measurement of GDP?

answer

Sean bought a new iPhone

question

Which of the following would be an example of an intermediate good?

answer

tires purchased from Goodyear by General Motors for newly produced electric cars

question

Real GDP is nominal GDP adjusted for

answer

changes in prices.

question

Nominal GDP may be used to compare

answer

the dollar amount of final goods produced in different years

question

If the price level in the economy and the nominal wages both doubled, then the real wages would

answer

remain unchanged

question

Economists frequently use GDP per capita to better reflect

answer

differences in living standards across countries

question

The ______ is the most widely used measure of inflation in the United States.

answer

consumer price index

question

If the CPI is 120 in Year 1 and 150 in Year 2, then the rate of inflation from Year 1 to Year 2 is _____.

answer

25%

question

If the Consumer Price Index (CPI) for 2007 was 148.3 and 152.5 in 2008, what was the inflation rate between the two years?

answer

2.83%

question

The GDP deflator is equal to

answer

nominal GDP/real GDP x 100

question

Many economists believe that the CPI overstates inflation because

answer

the CPI market basket doesn't reflect the fact that consumers shift consumption away from more expensive goods

question

Increases in total output realized when individuals specialize in particular tasks and trade are known as:

answer

the gains from trade.

question

The law of demand states that, other things equal:

answer

as the price increases, the quantity demanded will decrease.

question

Resources are being used efficiently when:

answer

every opportunity to make people better off has been utilized.

question

People who live in households decide to spend less in their day-to-day activities. As a result, this will most likely lead to:

answer

less income for other people in the economy.

question

You can either spend $100 on a new economics textbook or a new CD player. If you choose to buy the new economics textbook, the opportunity cost is:

answer

the new CD player.

question

Given that chicken and beef are substitute goods, if the price of chicken decreases substantially, there would be:

answer

a decrease in the demand for beef.

question

When building a model, economists:

answer

simplify reality in order to highlight what really matters.

question

In one day, Kessy can bake 10 cookies or mix 15 glasses of lemonade. His friend, Ava, can make 10 cookies or 10 glasses of lemonade. His other friend, Ian, can make 10 cookies or 20 glasses of lemonade. Who has the lowest opportunity cost in cookie production?

answer

Ava

question

Which of the following is not a factor of production?

answer

money

question

Over the past few years the technology associated with producing flat-panel televisions has improved. This has led to a(n) ________ in ________ flat-panel televisions.

answer

increase; the supply of

question

following would be classified as a macroeconomic question?

answer

How many people are employed in the economy as a whole? What determines the overall level of prices in the economy as a whole? What determines the overall trade in goods, services, and financial assets between the United States and the rest of the world?

question

A(n) ________ market is a market in which goods or services are bought and sold illegally.

answer

black

question

The sequence of business cycle phases is:

answer

business cycle peak, recession, business cycle trough, expansion.

question

The economic policy of changing the quantity of money to change the interest rate that affects the overall spending in the economy, is known as:

answer

the monetary policy.

question

The difference between the demand price and the supply price at the quota limit is:

answer

the quota rent.

question

One role for government policy is:

answer

to attempt to manage short-run macroeconomic fluctuations

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