Macroeconomics Chapter 1: Economics: The Core Issue

question

Capital, as economist use the term, refers to
answer

Final goods that are used to produce other goods and services.
question

The role of the entrepreneur in an economy is to
answer

Bring the factors of production together and assume the risk of production.
question

Opportunity cost may be defined as the
answer

Goods or services that are forgone in order to obtain something else.
question

A production possibilities curve indicates the
answer

maximum combinations of goods and services an economy can produce given its available resources and technology.
question

A point of a nation’s production possibilities curve represents
answer

The full employment of resources to achieve a particular combination of goods and services.
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 points on a production possibilities curve show
answer

Potential output.
question

Which the following events would allow the production possibilities curve to shift outward?
answer

More teenagers enter the labor force.
question

Which of the following will cause the production possibilities curve to shift inward?
answer

A decrease in the size of the labor force.
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. It IS NOT those who need or want the goods or services the most or those who have the most political power.
question

Adam Smith’s invisible hand is now called
answer

The market mechanism.
question

The doctrine of laissez faire is based on the belief that
answer

Markets are likely to do a better job of allocating resources than government directives.
question

Which of the following can be used to correct market failure?
answer

Laws and regulations. Market failure IS NOT corrected by the market mechanism, laissez faire price polices, or government failure.
question

If market signal result in pollution beyond the optimal level, then
answer

The market mechanism has failed to achieve social efficiency.
question

Which of the following is not a macroeconomic statement?
answer

Jenny’s wage rate rose, and in response, she decided to work more hours. This is a microeconomic statement. Macroeconomic statements would be: The unemployment rate for the United States rose to 5 percent in the last quarter, the Federal Reserve lowered interest rates at its last meeting, and congress increased the minimum wage rate in January.
question

Using Figure 1.3 and PP1, an increase in the capacity to produce can be represented by a movement from
answer

Point C to Point F.
question

Using Figure 1.3 and PP1 at Point A,
answer

There is inefficient use of available resources.
question

Which of the following is true about the combination of mops and brooms represented by point E ing Figure 1.3 and using PP1?
answer

Point E is attainable only if more resources become available or technological advances are made.
question

An increase in the proportion of the population that is unemployed above the normal rate is best represented in Figure 1.3 and using PP1 by a movement from Point
answer

C to Point A.
question

A movement from point F to point D in Figure 1.3 results in
answer

A reallocation of resources from broom production to mop production.
question

In Figure 1.3, a shift of the production possibilities curve from PP1 to PP2 could be caused by
answer

The use of improved production technology.

Get instant access to
all materials

Become a Member