United States Business Opportunity – Macroeconomics
This exam covers united states business opportunity of macroeconomics.
People often clean cabinet doors, but do not regularly clean inside the cabinet. The insides of cabinets aren’t visible and require the removal of contents in order to clean. This is an example of ________ thinking.
marginal – correct
Macroeconomics is the study of
the economic motives of voters and elected officials.
the interaction between the government and businesses.
the operation of the economy as a whole. – correct
individual decision-making units such as households and businesses.
how government purchases affect specific markets.
If the United States creates a trade agreement with Vietnam, we know that
Vietnam can get no benefit, since its workers are not as productive as the United States’.
Vietnam will benefit, but trade with a less developed, Third World country will not help the United States.
physical and cultural differences between the two countries are too great to benefit from trade.
Vietnam and the United States can both benefit. – correct
Vietnam can get no benefit, since its businesses have less capital than the United States’.
A new tax on gasoline causes a reduction in the purchase of new vehicles with poor fuel economy. This is an example of what type of incentive?
The tax does not provide an incentive.
negative indirect – correct
Decision makers engage in marginal thinking by
ignoring benefits, which are a subjective determination.
comparing the sum of the cost and benefit of all units produced.
comparing the average cost and benefit of all units produced.
comparing the benefit of one additional unit with its cost to produce. – correct
focusing on mass production, which often keeps costs down.
Shoppers at supermarkets often abandon their empty shopping carts at various locations in the parking lot, despite the risk of damage to vehicles or the additional labor cost of retrieving those carts. How might an economist explain this behavior?
The perceived potential benefit of going to a cart return location is less than the time and energy cost to the shopper.
People are generally lazy and gravitate toward any decision with the lowest cost.
Once a shopper leaves the parking lot, the abandoned cart becomes someone else’s problem.
People go to the supermarket when they have the energy to shop only, without considering the cost of returning their carts.
Because food prices are always subsidized by the government, shoppers are ignorant of additional costs.
Nicole asked her neighbor to rake the leaves on his lawn because they were blowing into her yard. It takes an hour to rake the yard, regardless of who performs the task. He responded that it wouldn’t be rational for him to do so, but he would be willing to hire someone else to rake. Why would this be the case?
Her neighbor is a high school teacher and values his time at $15 an hour, and he knows that he can hire one of his students to rake leaves for $20 an hour.
Her neighbor lacks the equipment to rake leaves and thinks it would take too long to do the job.
Her neighbor is a lawyer who values his time at $200 an hour and knows that he can hire a high school kid to rake leaves for $20 an hour. – correct
Her neighbor is getting revenge on her because Nicole didn’t rake the leaves on her lawn last year.
Her neighbor is a busy person and doesn’t have time to rake leaves.
When Lucy chose a major, she likely thought about her skills. Let’s say Lucy doesn’t enjoy dealing with numbers. How could she explain to her parents, using logic from economics, why she chose to major in English instead of mathematics?
The expected value of a major in mathematics after graduation is high.
The opportunity cost of learning mathematics is too high. – correct
The opportunity cost of going to college is too low.
The opportunity cost of learning to appreciate literature is too high.
The expected value of a major in English after graduation is low.
Rodrigo operates a dry-cleaning service and charges customers $5 per article of clothing. Based on his knowledge of operations, the 1,000 th piece of clothing costs him $4.95 to dry-clean. If he takes additional business, however, the 1,001st piece will cost $5 for the service. Does he take the additional business?
Yes, if he turns away business, his service will be forced to close.
Yes. At a $5 cost, he breaks even and is indifferent. He necessarily turns away business when the cost of the additional unit exceeds the income. – correct
No, he has hidden costs that far exceed his estimate of $5, so he loses money.
Maybe. If a competitor is accepting that many customers, he must at least equal that amount.
No, taking on additional business doesn’t earn him any money.
According to economic thinking, the presence of scarcity requires
choices. – correct
a dismal outlook.
The process of examining a change in one variable in a model while assuming that all the other variables remain constant is called
ceteris paribus. – correct
Refer to the following table to answer the following questions.
|New York Pizzas||Philly Cheesesteaks|
Suppose that Solange and Jay-Z could each make either New York–style pizza or Philly cheesesteaks. Given an eight-hour workday, which of the following would permit them to consume outside their respective production possibilities frontiers (PPFs)?
specialization and trade – correct
a decrease in technology
an “Empire State” of mind
a decrease in resources
efficient use of all their productive resources
Greater investment in capital goods today leads to
less opportunity cost.
greater growth in the production possibilities frontier (PPF) in the future. – correct
the end of scarcity.
greater consumption today.
Use these production possibilities frontier (PPF) curves, which compare the ancient production of agricultural products to art and literature, to answer the following questions.
Suppose the plow is invented and agricultural productivity greatly increases. Which of the following graphs best depicts how this would affect the PPF?
Graph C – correct
Refer to the following figure to answer the following questions.
Which of the following represents an inefficient point?
point A – correct
Mikhail and Stefan are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. Use this table to answer the following questions.
What is Mikhail’s opportunity cost of a painting?
2 sculptures – correct
Car companies build wind tunnels to test the aerodynamics and the handling capabilities of their car designs. The many variables that can be precisely controlled inside the wind tunnel are considered ________ factors.
Goods that are produced now so that they can be used to produce other goods in the future are called ________ goods.
Which faulty assumption by banks led to the Great Recession that began in 2007?
that real estate prices would always rise correct
that inflation would always remain low
that stock prices would never drop
that the dollar would always be strong against other currencies
that the U.S. government would always pay its debts
Over the last 20 years, countries such as India and China have
invested heavily and enjoyed significant economic growth. correct
consumed heavily with little regard for the future.
produced wholly for current consumption.
eliminated the problem of scarcity.
produced outside their production possibilities frontiers (PPFs).
Kimberly’s sister would like to start a business with her brother selling simple T-shirts that are green in color at all stores in the area. Her brother disagrees and thinks that the shirts should have a special logo on them and should be sold only at specific stores. As the deciding vote, what should Kimberly choose and why?
selling green T-shirts because prices will be higher as the number of stores increases
selling shirts with a special logo because prices will be higher as the shirts are sold in fewer stores
both C and D
selling green T-shirts because prices will be higher as the shirt becomes more commonplace
selling shirts with a special logo because prices will be higher as the shirts becomes more unique
Firm A notices that Firm B is making a profit by producing footballs. There is nothing stopping Firm A from entering the football market, so it does. Holding all else constant, the number of firms in the market will
increase, causing demand to increase.
increase, causing the supply to shift down.
decrease, causing the supply to decrease.
decrease, causing the supply to increase.
increase, causing the supply to increase. correct
The change in equilibrium shown in the accompanying figure would be explained by a(n) ________ in the price of an input and a(n) ________ in the price of a ________.
increase; increase; complement – correct
increase; decrease; complement
decrease; increase; substitute
decrease; increase; complement
increase; increase; substitute
According to a supply and demand model for apples, if the average household income decreases at the same time 10 apple orchards go out of business, one would expect the equilibrium
quantity of apples in the market to decrease and the equilibrium price of apples to be indeterminate.– correct
quantity of apples in the market to be indeterminate and the equilibrium price of apples to increase.
price of apples to increase and the equilibrium quantity of apples in the market to decrease.
quantity of apples in the market to decrease and the equilibrium price of apples to stay the same.
price of apples to be indeterminate and the equilibrium quantity of apples in the market to increase.
If the cost of flour increases from $3 to $5 a bag, we could predict the supply curve for bagels to
shift to the right.
shift to the left. – correct
Two goods that are used together are called
complements. – correct
If the number of buyers in a market increases from 50 to 100, you would expect the equilibrium price to ________ and the equilibrium quantity to ________, holding all else constant.
increase; increase – correct
remain the same; remain the same
What is market supply?
the division of the total sales by an individual seller with the price paid for the product
the addition of the individual quantities supplied by each seller in a market at each price – correct
the subtraction of the individual quantities supplied by each seller in a market at each price
the multiplication of the price of each product by the individual quantities supplied by each supplier in a market
the addition of the individual prices of the product at each level of quantity
After a new technology is introduced, the price typically falls. What is a possible explanation for this?
Fewer people purchase the product.
More people purchase the product and more firms produce the product.
More people purchase the product.
More firms produce the product. – correct
Fewer people purchase the product and fewer firms produce the product.
Something is a normal good if the demand for the good
increases if the price of a complement good increases.
decreases as the income of the consumer increases.
increases as the consumer’s income increases. – correct
increases as the consumer’s income decreases.
decreases if the price of a substitute good increases.
What happens to the equilibrium price and equilibrium quantity of a good if both the producers and the consumers of that good expect its price to be higher in the future?
The equilibrium price will go down and equilibrium quantity will be indeterminate.
The equilibrium price will go up and equilibrium quantity will go up.
The equilibrium price will be indeterminate and equilibrium quantity will go up.
The equilibrium price will be indeterminate and equilibrium quantity will go down.
The equilibrium price will go up and equilibrium quantity will be indeterminate. – correct
If nominal gross domestic product (GDP) is declining but production is rising, then it must be the case that
prices must be increasing more rapidly than production.
production is rising at a greater rate than prices are falling.
prices must be lower on average.
fewer goods and services are being produced.
prices are falling at a greater rate than production is rising. – correct
Real gross domestic product (GDP) is equal to
current output / base year prices.
base year prices × current output. – correct
base year prices × base year output.
current prices × base year output.
current prices × current output.
Consider the following data that identifies real gross domestic product (GDP) in comparison to the long-run trend of real GDP to answer the following questions:
(billions of dollars)
|Long-Run Trend of Real GDP (billions of dollars)|
On average, what percentage does real gross domestic product (GDP) grow over the long run?
Consider the following figure to answer the following questions:
In which year was it most likely the most difficult to find a job?
2005 – correct
Which country has seen a decline in per capita gross domestic product (GDP) since the 1970s?
To determine living standards for the average person, we calculate
the length of time the average person is unemployed.
the average level of prices in the country.
per capita GDP. – correct
the growth rate of GDP.
The consumption category of gross domestic product (GDP) includes all purchases of final goods and services by households EXCEPT
new houses. – correct
The consumption category includes all purchases
of final goods and services made by consumers except new houses and new cars.
of final goods and services made by consumers except new houses. – correct
of final goods and services made by consumers.
made by consumers.
of goods and services made by consumers.
When gross domestic product (GDP) increases, national income ________ and national output ________.
increases; increases – correct
increases; is unaffected
is unaffected; is unaffected
is unaffected; decreases
Which of the following individuals would NOT be considered part of the labor force?
Lisa, who is working part-time but wants to be working full-time
Aileen, who is a full-time student working part-time
Thomas, who is unemployed but has given up searching for a job because he believes there are no jobs available for him – correct
Kimberly, who has retired from the military and now works at the post office
Charles, who is in the Marines and is currently deployed to Iraq
The difference between the official unemployment rate and the alternate measure of unemployment that includes discouraged workers and underemployed workers
grows when the economy enters a recession. – correct
grows when the economy enters an expansion.
equals zero when there is no cyclical unemployment.
shows that there are no shortcomings with the official unemployment rate.
shows short-term and long-term unemployment spells.
Refer to the following scenario to answer the following questions.
A government worker surveys a number of households and comes up with the following information: there were a total of 90 people in the households, 10 of the people were children under 16, 10 of the people were retired but still capable of working, 35 people had full-time jobs, 5 had part-time jobs, 5 were stay-at-home parents, 5 were full-time students over the age of 16, 5 were disabled people who could not work, 10 people had no job but were looking for jobs, and there were 5 people who wanted a job but were not looking for a job.
According to the information in the survey, the number of people in the work-eligible population is
|Group||# in Millions|
|Not in labor force||95|
According to the table, the unemployment rate in this economy is equal to
Natural unemployment is the
sum of frictional and cyclical unemployment.
average of frictional, structural, and cyclical unemployment.
sum of frictional, structural, and cyclical unemployment.
sum of structural and frictional unemployment. – correct
sum of structural and cyclical unemployment.
Unemployment caused by delays in matching available jobs and workers is called ________ unemployment.
frictional – correct
Which of the following equations represents the labor force?
(number of unemployed / labor force) × 100
(number of employed / labor force) × 100
(labor force / relevant population) × 100
(number of unemployed / relevant population) × 100
(unemployed + employed)
What are the two types of unemployment that are consistent with a dynamic, growing economy?
frictional and structural – correct
real and nominal
frictional and cyclical
natural and cyclical
cyclical and structural
Which of the following conditions might cause the unemployment rate to be less than the natural rate of unemployment?
Demand for products is so high that firms keep their factories open for additional hours of production and pay their workers overtime. – correct
Demand for products starts to decrease, so firms keep their factories open for additional hours of production to make up the difference.
Demand for products is so high that firms raise their prices to take advantage of extra profits.
The government decreases unemployment benefits.
The economy enters a recession, so firms start to produce more to help boost the economy.