question

Economists use economic models to:

answer

Predict economic behavior, Develop economic policies, & Better explain economic behavior

question

When an economy is producing efficiently, it is:

answer

Getting the most goods

question

Adam Smith's invisible hand is now called what?

answer

The market mechanism

question

A technological advance would best be represented by what kind of shift on the production possibilities curve?

answer

A shift outward of the production possibilities curve

question

What shape correctly characterizes the shape of a constant opportunity cost production possibilities curve?

answer

A straight line when there is constant opportunity costs

question

The market mechanism may best be defined as:

answer

The use of market prices and sales to signal desired output

question

What can be used to correct market failure?

answer

Laws and regulations

question

Give an example of an event that would allow the production possibilities curve to shift outward?

answer

More teenagers enter the labor force

question

What is an assumption under which the production possibilities curve is drawn?

answer

The supply of resources is fixed

question

The opportunity cost of studying for an economics test is:

answer

The best alternative use of your time

question

In a market economy, the people who receive the goods and services that are produced are those who:

answer

Are willing to pay the highest price

question

The "guns versus butter" dilemma that all nations confront is that:

answer

An increase in national defense implies more sacrifices of civilian goods and services

question

If North Korea is currently producing at efficiency, and it proceeds to increase the size of its military, then, as long as nothing else changes, what happens to production?

answer

Production of nonmilitary goods will decrease

question

What do the points on a production possibilities curve show?

answer

Potential output

question

According to the law of increasing opportunity costs,

answer

In order to produce additional units of a particular good, it is necessary for society to sacrifice increasingly larger amounts of alternative goods

question

The invisible hand refers to

answer

The allocation of resources by market forces

question

What is the role of the entrepreneur in an economy?

answer

To bring the factors of production together and assume the risk of production.

question

A mixed economy utilizes what?

answer

Utilizes both market and nonmarket signals to allocate goods and services.

question

When the invisible hand does not produce optimal outcomes for the economy, there is evidence of what?

answer

Market failure

question

Whenever technology advances, an economy can produce more output with ___ resources.

answer

Current

question

The United States has a larger real GDP than China because of what reason?

answer

The U.S. population is smaller but works in capital-intensive jobs

question

The best measure of how much output the average person would get if all output were divided evenly among the population would be:

answer

Per capita GDP

question

Why does the government regulate food additives?

answer

To prevent externalities

question

Differences in size of real GDP across countries are best explained by what?

answer

Human capital

question

True or False: The high productivity of the U.S. economy results from using highly educated workers in a capital-intensive production process.

answer

True

question

The term externalities refers to what?

answer

The costs or benefits of a market activity borne by a third party

question

How will an increase in the level of human capital, ceteris paribus, affect an economy's production possibilities curve?

answer

Shift the curve outward

question

A labor-intensive production process is one that has what kind of ratio?

answer

Has a low ratio of capital to labor

question

Per capita GDP will definitely rise if what happens?

answer

The population falls and GDP does not fall

question

If output growth exceeds population growth for a country, what happens to living standards?

answer

Average living standards will increase

question

As a nation's average education level increases, the nation's level of productivity, what happens to the production possibilities curve?

answer

Increases, and the production possibilities curve shifts to the right

question

What would an example of human capital be?

answer

Carpentry skills

question

True or False: The standard of living rises when population growth exceeds economic growth.

answer

False

question

When economists describe a production process as capital-intensive, what do they mean?

answer

Process uses a high ratio of machinery and other capital to labor

question

The best definition of GDP is:

answer

A dollar measure of final output produced during a given time period

question

When does a monopoly exist?

answer

One firm produces the entire market of a good or service

question

Which component(s) of U.S. real GDP increased in size relative to total U.S. real GDP from 1950 to 2000?

answer

Only services

question

True or False: Government intervention is sometimes used to reduce the external costs of production.

answer

True

question

In terms of an economy's production possibilities curve, a decrease in the level of human capital, ceteris paribus, will cause what?

answer

An inward shift of the curve

question

Per capita GDP will rise if GDP does what?

answer

Increases more rapidly than the population increases

question

An example of a positive externality is:

answer

Increased factory use of private sector robotics that came from government research

question

True or False: The GDP is a measure of the market value of all final goods and services produced in the economy in a given time period.

answer

True

question

What happens if population growth is less than output growth for a country?

answer

The per capita living standard will increase

question

Regarding increasing productivity, factor mobility is

answer

Important in that it helps to reallocate resources in a dynamic economy

question

The current U.S. economy is based primarily on the production of what?

answer

Services

question

Human capital is defined as what?

answer

Knowledge and skills a worker possesses

question

Productivity rises when what happens?

answer

When the ratio of output to input increases

question

Assume a series of forest fires reduces the supply of lumber, which is an input in the production of wooden bats. Baseballs and wooden bats are complements. If the price of wooden bats increases, we can expect the

answer

Demand for baseballs to decrease

question

When economists talk about "optimal outcomes" in the marketplace, what do they mean?

answer

The allocation of resources by the market is likely to be the best possible, given scarce resources and income constraints

question

What kind of event would cause a rightward shift in the market supply curve for automobiles?

answer

A technological improvement that reduces the cost of production

question

The law of supply implies what?

answer

Supply curves are upward-sloping to the right

question

Ceteris paribus, what is most likely to cause an increase in the quantity demanded of perfume?

answer

A decrease in the price of perfume

question

Ceteris paribus, if the subsidies given to corn syrup producers decrease, what can we expect?

answer

A decrease in the supply of corn syrup

question

The term opportunity cost refers to what?

answer

The most a consumer is willing to exchange to get an item, the height of the demand line for a consumer or height of the supply line for the supplier, and the minimum price that a producer will accept for a product.

question

What is an example of a determinant of market supply?

answer

Available technology

question

A market is said to be in equilibrium when what happens?

answer

The quantity demanded equals the quantity supplied

question

What factor is not held constant along a given demand curve for a good?

answer

Price

question

The term opportunity cost refers to what value?

answer

Value of the best alternative given up when a good or service is produced

question

An increase in the supply of gasoline, ceteris paribus, will cause equilibrium price to do what?

answer

To fall and equilibrium quantity to rise

question

A leftward shift of the market demand curve for HDTVs, ceteris paribus, causes equilibrium price to do what?

answer

Decrease and quantity to decrease

question

In a market economy, the people who receive the goods and services produced are those who:

answer

Are willing and able to pay the market price

question

When a surplus exists for a product,

answer

Producers reduce the level of output and reduce price

question

A rightward shift of the market demand curve for MP3 players, ceteris paribus, causes equilibrium price to __ and equilibrium quantity to ___.

answer

Price to increase and equilibrium quantity to increase

question

If there are only two airlines that fly between Dallas and New Orleans, what will happen in the market for one airline if the other one goes out of business?

answer

The demand curve will shift to the right

question

The goal of the consumer in a market economy is to use his or her limited income to buy what?

answer

The prices of the factors of production

question

If there is a shortage at a given price, then that price is __ equilibrium price.

answer

Less than

question

A decrease in the price of electricity can best be explained by what?

answer

A decrease in the population

question

In 2007 a company sold 35,000 MP3 players at $150 each. In 2008 the same company sold 40,000 MP3 players at $170 each. This information suggests what?

answer

The demand for MP3 players increased from 2007 to 2008

question

What can change without shifting either demand or supply, ceteris paribus?

answer

The price of the good itself

question

Ceteris paribus, if the opportunity cost of purchasing a good rises, then the maximum price a particular consumer is willing to pay for that good:

answer

Does not change since the demand curve does not change

question

Ceteris paribus, what scenario is most likely to cause an increase in the quantity supplied of perfume?

answer

An increase in the price of perfume

question

If bagels and doughnuts are substitutes, then a decrease in the price of doughnuts will result in what?

answer

A decrease in the demand for bagels

question

Disposable income is equal to what?

answer

Consumption + saving

question

What is the alternative combinations of final goods and services that can be produced with all available resources and technology?

answer

Production possibilities

question

Social Security payments to retired persons are included in what?

answer

Personal income and disposable income

question

What does an economy's production possibilities curve indicate?

answer

How much the economy can produce

question

What is an example of something directly included in the calculation of GDP?

answer

The final sale of a brand new cadillac

question

Why are transfer payments part of personal income but not national income?

answer

They are a payment for which no goods or services are exchanged

question

One In the News article titled "A Lot Going on Under the Table" reports that 83 percent of households make untaxed or unmeasured purchases. This is an example of what?

answer

The underground economy

question

Suppose a friend claims he is helping the economy by throwing trash on the street rather than in trash cans because the extra expenditures necessary to clean up the streets will increase GDP. Is your friend right or wrong, why?

answer

Right. GDP will increase, ceteris paribus.

question

Why is real GDP more accurate than nominal GDP in making comparisons of output over time?

answer

Nominal GDP can increase simply because of price increases over time

question

Suppose the total market value of all the final goods and services produced in the country of Rushya was $8 billion in 2008 (measured in 2008 prices) and $9 billion in 2009 (measured in 2009 prices). What statement could definitely correct?

answer

Whether real GDP increased cannot be determined with the information given

question

Suppose you volunteer to help clean up your neighborhood, and the only payment you receive is the sense of goodwill that develops with your neighbors. Your efforts cause the GDP of the economy to do what?

answer

Remain unchanged

question

National income accounts assist who and in what?

answer

Economic policy makers in formulating policies and evaluating performance

question

What best measures the household sector's contribution to the support of the public sector?

answer

The difference between personal income and disposable income

question

If real GDP falls from one period to another and the price level stays the same, what can we conclude?

answer

Nominal GDP decreased

question

In periods of rising prices, percentage increases in nominal GDP will do what?

answer

The value of lawn mowing provided by a teenager for his own family

question

A cartoon in the text shows two people watching television. On the screen are the words "Economic growth indicators are up, led by car repairs, divorce costs, open-heart surgeries, and toxic waste cleanups." What does the cartoon illustrate?

answer

Difference between economic welfare and social welfare

question

If the price level is increasing at 4% and output is increasing at 5%, then

answer

Nominal GDP is increasing faster than real GDP

question

What falls into the largest unemployment category during a recession?

answer

A factory worker who is laid off because of a temporary plant closing

question

After a fruitless two-year search for a job, a former executive gives up and decides to live off the land in the Rocky Mountains. This former executive is considered what?

answer

A discouraged worker

question

After being fired from a job, some people find that it may take several months to find a new job in the same type of work. This is an example of which of the following types of unemployment?

answer

Frictional unemployment

question

Frictional unemployment can be distinguished from other types of unemployment in that we don't assume what?

answer

The skills of the frictionally unemployed are no longer in demand

question

The production possibilities curve tends to increase as what happens?

answer

Tends to increase as the population grows.

question

If a nation experiences a year of unusually high immigration that increases the size of the labor force, what can we conclude?

answer

Nation's production possibilities curve will shift outward

question

According to an In the News article "Carpentry Work Crashing Down," Labor demand for carpenters remains low as the economy climbs out of the recent recession due to what?

answer

Structural unemployment due to a mismatch between workforce skills and employer needs

question

What group typically has the highest unemployment rate?

answer

Black teenagers

question

The lowest level of unemployment compatible with price stability is referred to as:

answer

Full employment

question

During an economic downturn, consumers spend considerably less on goods and services. This results in layoffs that are classified as what?

answer

Cyclical

question

What government program would be most appropriate to counteract cyclical unemployment?

answer

Greater government expenditures to increase GDP

question

The type of unemployment that increases most when teenagers look for temporary summer jobs is what?

answer

Seasonal Unemployment

question

When an economy enters a recession, the

answer

Duration of unemployment rises

question

For the labor force to definitely increase, what must happen?

answer

People must turn from being discouraged workers into people actively seeking employment

question

There is a/an ___ relationship between educational level and the unemployment rate.

answer

Inverse relationship

question

An unemployed worker who wants a job but has given up in the search for a new job is referred to as what?

answer

Discouraged worker

question

Part-time workers who desire full-time employment are

answer

Underemployed but do not contribute to the unemployment statistic

question

According to The New Yorker cartoon, one restaurant patron states that since he has recently stopped looking for a job, he has helped to lower the unemployment rate. He is:

answer

Right in that he became a discouraged worker

question

The phantom unemployed are people who do what?

answer

People who report that they are actively seeking a job even when they have little or no intention of finding one.

question

If there is a prolonged recession and technological advances change the skill sets of some jobs and eliminate others, what type of unemployment gets larger?

answer

Structural

question

Give an example of someone included in the labor force.

answer

A part-time store clerk who is looking for another job

question

If an economy experiences increasing opportunity costs with respect to two goods, then the production possibilities curve between the two goods will be what?

answer

Bowed outward or concave from below

question

Government intervention may achieve a more optimal outcome than the market mechanism when addressing what?

answer

Consumption of cigarettes

question

A line that slopes downward from left to right has a ___.

answer

Negative slope

question

If the United States decides to convert automobile factories to tank production, as it did during World War II, but finds that some auto manufacturing facilities are not well suited to tank production, then...

answer

Increasing opportunity costs will occur with greater tank production

question

The WHAT question can best be answered using data about what?

answer

The distribution of output among manufacturing, services, and agricultural sectors

question

High U.S. incomes have led to the transformation of the United States into primarily what kind of industry?

answer

Service

question

True or False: On average over the last century, the U.S. population has grown three times as fast as the U.S. real GDP.

answer

False; Real GDP has grown three times as fast as the US population

question

If the market wage for fast-food restaurants is $4 and the government enforces a minimum wage of $7, the unemployment rate will do what?

answer

Increase as quantity of labor supply increases and quantity of labor demand decreases

question

The price ceiling that the federal government placed on human organs caused what?

answer

A shortage

question

Suppose a hurricane hits Florida, causing widespread damage to houses and businesses. The governor of Florida places price ceilings on all building materials to keep the prices reasonable. Which of the following is the most likely result?

answer

Shortages of building materials and a slower recovery from the storm

question

A ballet performance had many empty seats. What does this imply?

answer

Price of the tickets must have been above the equilibrium price

question

Assume two goods are substitutes. Ceteris paribus, a decrease in the price of one good will cause the equilibrium price of the other good to what?

answer

Decrease and the equilibrium quantity of the other good to decrease

question

If the government places a binding or effective price ceiling on cancer-treating drugs, then what will happen?

answer

More people will die from cancer

question

How do we calculate market supply?

answer

Add the quantities supplied for each individual supply schedule horizontally

question

If corn and wheat are alternative pursuits for a farmer, a change in the supply of corn will take place when, ceteris paribus, ....

answer

The price of wheat changes

question

If the wages of corn farmers decrease, then the supply curve will ...

answer

Shift right

question

To calculate real GDP, we do what?

answer

Adjust the market value of goods and services for changing prices

question

If real GDP in 2005 is $8,000 billion and the price level is 125, what is nominal GDP in 2005?

answer

Nominal GDP is equal to real GDP multiplied by the price index and divided by 100: (8,000 × 125)/100.

question

One In the News article states that the underground economy includes transactions that are untaxed or unaccounted for in GDP. According to this article, the underground economy does what?

answer

Impacts the amount of tax dollars collected

question

When the labor force participation rate is declining, the

answer

Percentage of the working-age population that is willing and able to work is declining

question

Tom worked at NASA for 13 years. In the 14th year, his job was automated, resulting in him losing his job. He looked for a new job for 18 months before finding a job in a different line of work that paid less. During his 18-month job search, Tom was considered to be:

answer

Structurally unemployed

question

If more teenagers stay in school longer rather than dropping out and entering the labor force, the production possibilities curve will do what?

answer

Shift inward

question

The most widely used measure of the unemployment rate is found by the:

answer

U.S. Census Bureau in monthly surveys that examine whether people are working or are willing to work

question

Frictional unemployment can be distinguished from other types of unemployment in that we assume all of the following except:

answer

The skills of the frictionally unemployed are no longer in demand

question

The phantom unemployed are:

answer

Unemployed and cause the unemployment statistic to overstate the level of unemployment

question

A U.S. worker who loses his or her job in an import industry because product demand decreases would be classified as, ceteris paribus,:

answer

Structurally Unemployed

question

Suppose a country has 1 billion people. 75 percent of its citizens are in the labor force, with 90 million unemployed. Full employment occurs at 2 percent. Based on this information, by what percentage has real output failed to reach its potential according to the revised Okun's Law?

answer

20%. Okun's Law tells us the amount in percentage terms by which GDP falls for every 1 percent increase in unemployment. In this case, unemployment is 12 percent, which is 10 percent higher than full employment. Therefore, the GDP is twice that percentage short of potential GDP, or 20 percent.

question

From 1950 until 2000, the labor force participation rate has __ for men and __ for women.

answer

Decreased for men and increased for women

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