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Unit 1 Review
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Questions in this quiz (59)
1Economics is the
- AStudy of how we make choices under scarcity
- BLess of a good freely available from nature than people would like
2Concept of scarcity
- AResources are scarce, so decision-makers must make tradeoffs
- BThat there is less of a good freely available from nature than people would like
3Incentives matter
- AAbility to predict
- BPeople respond in predictable ways to changes in costs and benefits
4Concept of opportunity cost
- AResources are scarce, so decision-makers must make tradeoffs
- BThat there is less of a good freely available from nature than people would like
5The test of a theory is its
- AAbility to predict
- BPositive economic statements are testable, normative economic statements are not.
6The difference between positive and normative economic statements
- APositive economic statements are testable, normative economic statements are not.
- BPositive economic statements are not testable, normative economic statements are.
7The characteristics of private property rights and four incentives they provide:
- A- Use resources in ways that other people value
- Care for and manage what you own
- Conserve for the future
- Make sure your property does not damage anybody else’s property - B- Fixed amount of productive resources
- Given amount of technical knowledge
- Full and efficient use of resources
- A- Use resources in ways that other people value
8The PPC outlines all possible combinations of total output that could be produced, assuming a:
- A- A change in the economy’s resource base
- A change in technology
- A change in the rules under which an economy functions
- A change in work habits - B- Fixed amount of productive resources
- Given amount of technical knowledge
- Full and efficient use of resources
- A- A change in the economy’s resource base
9The four factors that shift the production possibilities curve inward and outward:
- A- Use resources in ways that other people value
- Care for and manage what you own
- Conserve for the future
- Make sure your property does not damage anybody else’s property - B- A change in the economy’s resource base
- A change in technology
- A change in the rules under which an economy functions
- A change in work habits
- A- Use resources in ways that other people value
10The 3 questions that every economy faces:
- A- What will be produced
- How will it be produced
- For whom will it be produced - B- What is economics?
- How does scarcity affect us psychologically?
- What will be produced?
- A- What will be produced
11Socialism
- AA system of economic organization where:
- Ownership and control of the means of production rest with the state
- Resource allocation is determined by centralized planning - BA system of economic organization where:
- Productive resources are owned privately
- Goods and resources are allocated through market prices
- AA system of economic organization where:
12Capitalism
- AA system of economic organization where:
- Ownership and control of the means of production rest with the state
- Resource allocation is determined by centralized planning - BA system of economic organization where:
- Productive resources are owned privately
- Goods and resources are allocated through market prices
- AA system of economic organization where:
13How voluntary trade creates value and leads to economic progress
- ABecause the value of a good is subjective
- B- Use resources in ways that other people value
- Care for and manage what you own
- Conserve for the future
- Make sure your property does not damage anybody else’s property
14Transaction Cost
- AThe time, effort, and other resources needed to search out and complete an exchange
- BThere is an inverse (negative) relationship between the price of a good and the quantity that buyers are willing to purchase
15Middleman
- AA person who buys and sells goods or services or arranges trades. Reduces transaction costs
- BThe time, effort, and other resources needed to search out and complete an exchange
16Law of Demand
- AA shift of the curve caused by anything other than the change in price of the good in question
- BThere is an inverse (negative) relationship between the price of a good and the quantity that buyers are willing to purchase
17Why demand curves are downward sloping
- AA movement along the curve caused by a change in the price of the good in question
- BAs price increases, quantity demanded decreases and vice versa
18The height of the demand curve is the maximum price consumers are
- AWilling to pay for an additional unit
- BSellers are willing to accept to supply an additional unit.
19How to find and calculate consumer surplus involving one or more individuals, or on a graph (the area below the demand curve, but above price)
- AUse the width of a triangle
- BUse the area of a triangle: ½ base(height)
20Quantity demanded
- AA movement along the curve caused by a change in the price of the good in question
- BA shift of the curve caused by anything other than the change in price of the good in question
21Change in Demand
- AA shift of the curve caused by anything other than the change in the price of the good in question
- BA movement along the curve caused by a change in the price of the good in question
22Change in Consumer Income
- A- Substitutes: Psubstitute ↑ → D ↑
- Compliments: Pcompliments ↑ → D↓ - B- Normal Goods: I↑ → DNormal ↑
- Inferior Goods: I↑ → DInferior ↓
- A- Substitutes: Psubstitute ↑ → D ↑
23Change in the Number of Consumers:
- ATastes and Preferences↑ → D↑
- B# Consumers ↑ → D↑
24Change in the Price of a Related Good:
- A- Substitutes: Psubstitute ↑ → D ↑
- Compliments: Pcompliments ↑ → D↓ - B- Expected Price: Pfuture ↑ → D↑
- Expected Income: Ifuture ↑ → D↑
- A- Substitutes: Psubstitute ↑ → D ↑
25Change in Expectations
- A- Normal Goods: I↑ → DNormal ↑
- Inferior Goods: I↑ → DInferior ↓ - B- Expected Price: Pfuture ↑ → D↑
- Expected Income: Ifuture ↑ → D↑
- A- Normal Goods: I↑ → DNormal ↑
26Law of Supply
- AThere is a direct (positive) relationship between the price of a good or service and the amount that suppliers are willing to produce
- BThere is an inverse (negative) relationship between the price of a good and the quantity that buyers are willing to purchase
27Change in Consumer Tastes and Preferences
- A# Consumers↑ → D↑
- BTastes and Preferences↑ → D↑
28The height of the supply curve is the minimum price that
- AThe tendency for people, while pursuing their own interests, to promote the economic well-being of society.
- BSellers are willing to accept to supply an additional unit.
29Why supply curves are upward sloping
- ACompanies are willing to supply more for a higher price. Higher price = more supply
- BAs price increases, quantity demanded decreases and vice versa
30How to find and calculate producer surplus involving one or more individuals, or on a graph (the area above the supply curve, but below price)
- AUse the area of a triangle: ½ base(height)
- BUse the width of the triangle
31Change in quantity supplied
- AA movement along the curve caused by a change in the price of the good in question
- BA shift of the curve caused by anything other than the change in price of the good in question
32A change in resource price:
- APresource ↑→ S↓
- BTechnology ↑ → S↑
33Change in Supply
- AA movement along the curve caused by a change in the price of the good in question
- BA shift of the curve caused by anything other than the change in price of the good in question
34A change in technology
- APresource ↑→ S↓
- BTechnology ↑ → S↑
35A change in Nature or Politics
- ADepends on Change
- BPresource ↑→ S↓
36A change in taxes
- ATaxes ↑ → S↓
- B# Consumers↑ → D↑
37Inelastic
- ANot as responsive to a change in price (steeper curves)
- BMore responsive to a change in price (flatter curves)
38Everything there is to know about market equilibrium
- A- All trades generating more benefits than costs are undertaken
- No trades generating more costs than benefits are undertaken
- The combined area of producer and consumer surplus is maximized
- There is no excess supply or excess demand - BTotal market value of all final goods and services produced by the citizens of a country
- Counts the income Americans earn abroad
- Ignores the income foreigners earn in the US
- A- All trades generating more benefits than costs are undertaken
39Elastic
- AMore responsive to a change in price (flatter curves)
- BNot as responsive to a change in price (steeper curves)
40The invisible hand principle.
- AThe market value of all final goods and services produced within a country during a specific period (usually a year)
- BThe tendency for people, while pursuing their own interests, to promote the economic well-being of society.
41Gross Domestic Product (GDP)
- AThe market value of all final goods and services produced within a country during a specific period (usually a year)
- BTotal market value of all final goods and services produced by the citizens of a country
- Counts the income Americans earn abroad
- Ignores the income foreigners earn in the US
42What is not included in gross domestic product
- AValues expressed in current dollars
- B- Items made in another country
- Sales of illegal goods (underground markets)
- Used goods
43Gross National Product (GNP)
- ATotal market value of all final goods and services produced by the citizens of a country
- Counts the income Americans earn abroad
- Ignores the income foreigners earn in the US - BThe market value of all final goods and services produced within a country during a specific period (usually a year)
- ATotal market value of all final goods and services produced by the citizens of a country
44Nominal values
- AValues expressed in current dollars
- BValues that have been adjusted for the effects of inflation
45The limitations to using GDP as a measure of productivity
- A- Opportunity costs will always be incurred when scarce resources are used to produce a good.
- When the cost of an option increases, individuals will be less likely to choose it.
- In addition to their immediate direct effects, economic actions often generate secondary effects that are observable only after the passage of time. - B- Excludes non-market production
- Excludes the underground economy
- Excludes leisure and human costs
- Difficult measuring quality variation and introduction of new goods
- Excludes the costs of harmful side effects.
- A- Opportunity costs will always be incurred when scarce resources are used to produce a good.
46Real Values
- AValues that have been adjusted for the effects of inflation
- BValues expressed in current dollars
47How to calculate GDP per capita and understand that it is used as a broad indicator of general living standards.
- AGDP/Population
- BC+I+G+Nx (Consumption + Gross Private investment + Government Spending and Investment + Net Exports: exports – imports)
48Finding GDP
- AC+I+G+Nx (Consumption + Gross Private investment + Government Spending and Investment + Net Exports: exports – imports)
- BUse the area of a triangle: ½ base(height)
49The economic way of thinking?
- A- Opportunity costs will always be incurred when scarce resources are used to produce a good.
- When the cost of an option increases, individuals will be less likely to choose it.
- In addition to their immediate direct effects, economic actions often generate secondary effects that are observable only after the passage of time. - B- Excludes non-market production
- Excludes the underground economy
- Excludes leisure and human costs
- Difficult measuring quality variation and introduction of new goods
- Excludes the costs of harmful side effects.
- A- Opportunity costs will always be incurred when scarce resources are used to produce a good.
50Which of the following is part of the economic way of thinking?
- AAll of the above
- BIn addition to their immediate direct effects, economic actions often generate secondary effects that are observable only after the passage of time.
- CWhen the cost of an option increases, individuals will be less likely to choose it.
- DOpportunity costs will always be incurred when scarce resources are used to produce a good.
51Which of the following is a
- AReducing unemployment should be the highest priority of the federal government.
- BAn increase in unemployment benefits will increase the unemployment rate.
- CCorporations should be prohibited from laying off workers during a recession.
- DCongress should increase unemployment benefits during a recession.
52A student noted that the football team won by a larger margin when the third-string played more minutes. Therefore, he recommended that the third-stringers become the first team. His conclusion was probably erroneous because he
- AConfused positive and normative analysis.
- BCommitted the fallacy of composition.
- CFailed to recognize that association is not causation.
- DConfused macroeconomics with microeconomics.
53Refer to Figure 2-9. If the economy moves from point A to point D, the opportunity cost is
- A10 toasters.
- B20 toasters.
- C30 toasters
- D40 toasters
54Refer to Figure 2-9. The opportunity cost of obtaining 10 additional toasters by moving from point B to point A is
- A10 toothbrushes.
- B20 toothbrushes.
- C30 toothbrushes.
- DZero, since the economy has the additional resources to produce 10 additional toasters.
55Don can produce 10 pens or 20 pencils in one hour while Bob can produce 10 pens or 10 pencils in one hour. Which of the following statements is correct?
- ABob has a comparative advantage over Don in the production of pencils
- BBob has a comparative advantage over Don in the production of pens
- CDon has a comparative advantage over Bob in the production of pens
- DBob and Don cannot gain from specialization and exchange.
56Chuck Norris is willing to fight crime for a minimum of $500 a week. He is, however, paid $650 for the same service by the Texas Ranger Division. This is an example of
- AConsumer surplus.
- BEmployment discrimination.
- CProducer surplus.
- DThe derivation of accounting profit.
57A freeze in Florida devastates the orange crop at the same time a new study is released showing the health benefits of vitamin C (leading consumers to want to buy more orange juice). How will the equilibrium price and quantity of orange juice change in response to the combination of these two events?
- AEquilibrium quantity will decrease, equilibrium price will increase.
- BEquilibrium price will decrease, the effect on quantity is ambiguous.
- CEquilibrium price will increase, the effect on quantity is ambiguous.
- DEquilibrium quantity will increase, the effect on price is ambiguous.
58Assuming Chinese food and Thai food are substitutes, if Lucy Ho's Chinese restaurant reduces its prices,
- AThe demand for food at Lucy Ho's will increase.
- BThe quantity demanded for food at Lucy Ho's will increase.
- CThe demand facing the nearby Bahn Thai restaurant will decrease.
- DBoth the quantity demanded for food at Lucy Ho's will increase and the demand facing the nearby Bahn Thai restaurant will decrease.
59(I) People in low income countries should not be allowed to work at jobs that pay less than$5 an hour.
(II) Internet music swapping software reduces the number of new CDs purchased at full
price.- AI is a positive economic statement; II is a normative statement.
- BI is a normative economic statement; II is a positive statement.
- CBoth I and II are positive statements.
- DBoth I and II are normative economic statements.
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- College Macroeconomic Quiz on Unit 1 Review, created by Alex Fernandez on 19/09/2022.
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- Alex Fernandez
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