Macro Economics Test 1 Answers – Flashcards
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As recently as 2000, _____ % of doctors were in private practice and by 2013, ___ % were in private practice
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nearly 60; less than 40
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The study of economics arises due to...
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scarcity
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Scarcity refers to the situation in which
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unlimited wants exceed limited resources
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The basic economic problem of scarcity
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has always existed and will continue to exist
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Economics is the study of the ____ people make to attain their goals, given their ___
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choices; scarce
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What is an economic model?
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It is a simplified version of some aspect of economic life used to analyze an economic issue
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The term "market" in economics refers to
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a group of buyers and sellers of a product and the arrangement by which they come
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Economists assume that
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optimal decisions are made at the margin
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Which of the following best describes an assumption economists make about human behavior?
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They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time
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Economists assume that rational people
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Respond to economic incentives
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What does economics study?
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Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave rationally, meaning they make the best decisions given their knowledge of the cost and benefits.
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Holding all other personal characteristics - such as age, gender, and income-constant, economists would expect that
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people without health insurance will be less likely to be overweight than people with health insurance.
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According to the Centers for Disease Control and Prevention, ___ in 2013 in which less than 20% of the population was considered obese
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there were no states
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What does the term, "marginal" mean in economics?
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an additional or extra
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What is a term used by economist to describe the money received from the sale of an additional item?
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marginal revenue
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Economics promotes which of the following as the way to make the best decision?
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Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost
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____ involves undertaking an activity until its marginal benefits equal marginal costs.
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Marginal analysis
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The revenue received from the sale of an additional unit of a product?
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is a marginal benefit to the firm
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Before a doctor decides to keep her office open on Saturdays, she should
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weigh the cost and benefits of staying open on Saturdays before deciding if she should go through with the idea.
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Trade offs ask what three fundamental questions?
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What goods and services to produce; how will these be produced; and who receives them
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Every society faces economic trade offs. This means
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producing more of one good means less of another good can be produced
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What is true about trade-offs?
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Anytime you have to decide what to do you are facing an economic trade off; Every person is faced with trade offs; Economics is a social science that studies the trade-offs we are forced to make because of scarcity
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What is an example of an economic trade-off that a firm has to make?
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Whether it is cheaper to produce with more machines or with more workers
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Opportunity Cost is defined as
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the highest valued alternative that must be given up to engage in an activity
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Who receives the goods and services produced in the US depends largely on
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how income is distributed
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What fundamental economic question are fast food restaurants addressing by offering this range of items?
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What to produce?
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In a market economy, who decides what goods and services will be produced?
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Consumers and Producers
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Which of the following is correct about the economic decisions consumers, firms, and the government has to make?
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Each faces the problem of scarcity which necessitates trade-offs in making economic decisions
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It is necessary for all economic systems to provide people with goods and services and also restrict them from getting as much of these goods and services as they wish, because failure to do this could _____ the efficiency of the system by producing some goods and services that are _____.
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Reduce; not as highly valued as others
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How does a market system prevent people from getting as many goods and services as they wish?
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The market system allocates goods and services to those who are able to pay for those products and therefore income is a limiting factor.
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In a market economy, those who are willing and able to buy what is produced
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receive the most of what is produced
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All _______ economies have been political dictatorships?
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Centrally planned
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Which of the following generates allocative efficiency in a market economy?
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Voluntary exchange between buyers and sellers
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Competition among sellers generates
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Productive efficiency
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There is often a trade-off between
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Economic efficiency and economic equity
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Economic models
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Are simplified versions of reality
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Which of the following is part of an economic model?
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Assumptions, Data
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Which of the following statements about positive economic analysis is true?
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Positive analysis uses an economic model to estimate the costs and benefits of different course of actions
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Which of the following is a positive economic statement?
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if something happens, something else will as well
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Which of the following is a normative economic statement?
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something is too expensive, or you should be able to do something; opinionated
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_____ exists because unlimited wants to exceed the limited resources available to fulfill those wants.
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Scarcity
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The principle of _____ is that the economic cost of using a factor of production is the alternative use of that factor that is given up.
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Opportunity cost
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The production possibilities frontier model assumes all of the following.
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labor, capital. land and natural resources are fixed in quantity; the economy produces only 2 products; the level of technology is fixed and unchanging
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The _____ production points on a production possibility curve are the points along and inside the production possibility frontier
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attainable
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The unattainable points in a production possibilities diagram are
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The points outside the production possibilities fronteir
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_____ a nation's production possibilities frontier represents economic growth.
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An outward shift of
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Economic growth is represented on a production possibilities frontier model by the production possibility frontier _____
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Shifting outward
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Without technological advancement, how can a nation achieve economic growth?
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through an increase in supplies of factors of production
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Suppose there is some unemployment in the economy and society decides that it wants more of one good. Which of the following statements is true?
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It can increase output without giving up another good by employing more recourses
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If society decides it wants more of one good and ____, then it has to give up some of another good and incur some opportunity costs.
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all resources are fully utilized
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According to the production possibility model, if more resources are allocated to the production of physical and human capital, then all of the following are likely to happen...
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fewer goods will be produced for consumption today; the production possibilities frontier will be shifted outward in the future; future economic growth is enhanced
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If you can produce more of something than others with the same resources, you have?
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an absolute advantage
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Comparative advantage means?
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the ability to produce a good or service at a lower opportunity cost than any other producer
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Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?
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consume a combination of goods that lies outside its own production possibilities frontier
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Individuals who have never been the best at doing anything...
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can still have a comparative advantage in producing some product
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If the best lawyer in town is also the best at operating a word processor, then according to economic reasoning, this person should...
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specialize in being a lawyer, because its opportunity cost is more
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Which of the following is a factor of production?
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the janitor at the local elementary school
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An example of a factor of production is
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a worker hired by an auto manufacturer
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If a vineyard wants to raise funds to purchase a new bottling machine, it does so in the
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factor market
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A worker is hired in a
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factor market
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When you purchase a new surfboard, you do so in the
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product market
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The resource income earned by those who supply labor services is called
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wages and salaries
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Which of the following statements about an entrepreneur is true?
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develops the vision for the firm and the funds in the producing unit
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The circular flow model demonstrates
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the roles played by households and firms in the market system
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Firms...
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sell goods in the product market
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Households...
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purchase final goods and services in the product market
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In the circular flow model, households...
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spend earnings from resource sales on goods and services in the product market
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Which of the following is a flow in the circular flow model?
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the flow of goods and services and their recourses; the flow of income and expenditures earned by households; the flow of revenue and payments to producers and recourse owners
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Which of the following are represented by the same flow in the circular flow model?
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the flow of cost and revenue
