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The study of a single firm and how it determines prices would fall under

microeconomics

Macroeconomics deals with

the working of the entire economy or large sectors of it

If resources are "scarce" it means that they

cannot provide enough goods or services to satisfy all human material wants and needs

A choice made ________ is a choice whether to do a little more or a little less of something

at the margin

You can either spend $100 on a new economics textbook or a new CD player. If you choose to buy the new economics textbook, the opportunity cost is

the new CD player

A college student is faced with a difficult decision of how to spend one hour tonight. She could babysit her professor's child at an hourly wage of $7, she could work at the college library at a wage of $6, or she could finish her economics homework assignment. If she chooses to complete her homework assignment, she has incurred an opportunity cost equal to

$7

The best example of making a choice at the margin is

eating another slice of pizza

You make a trade-off when you compare the ________and ________ of doing something.

costs; benefits

Which of the following methods of encouraging recycling is likely to be most effective?

imposing a tax per unit of garbage generated

If the price of gasoline falls and stays low for an extended period of time, we expect people to

buy larger and less fuel-efficient cars

If an economy has used up all opportunities to make someone better off (without making someone else worse off) then it has achieved ________.

efficiency

Gains from trade arise because of

specialization in production

Economists say an economy is efficient when

all opportunities to make some people better off without making other people worse off have been taken

Equity means that

everyone gets his or her fair share of the goods and services produced

When markets fail

government intervention may help

Market failure may occur because

individual actions have side effects that are not properly taken into account by the market

When a local factory closes, why does it spell bad news for the local restaurants?

Unemployed factory workers have lower incomes and are less likely to dine out.

During the Great Depression, consumers and producers in the United States dramatically reduced their spending as compared to the quantity of goods and services available at the time. This statement best represents the economic concept of

overall spending sometimes gets out of line with the economy's productive capacity

People who live in households decide to spend less in their day-to-day activities. As a result, this will most likely lead to

less income for other people in the economy

When building a model, economists

simplify reality in order to highlight what really matters

The production possibility frontier illustrates that

if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced

If the production possibility frontier were a straight line sloping down from left to right, this would suggest that

the opportunity costs of the products are constant

If an economy has to sacrifice increasing amounts of good X for each unit of good Y produced, then its production possibility frontier is

bowed out from the origin

As long as people have different ________, everyone has a comparative advantage in something.

opportunity costs

Economists generally believe that a country should specialize in the production of a good or service if

the country can produce the product while forgoing fewer alternative products than any other country

Trade can be beneficial to an economy because

more goods and services can be obtained at lower opportunity cost

Dr. Colgate is a dentist who employs an assistant, Ms. Crest. If Dr. Colgate worked all day at the front desk, she could answer 40 phone calls. If she worked all day with patients, she could clean the teeth of 40 patients. If Ms. Crest worked all day at the front desk, she could answer 60 phone calls. If she worked all day with patients, she could clean the teeth of 20 patients. Which of the following is true?

Ms. Crest has a comparative advantage in answering phones.

Assume that Columbia gives up 3 motorcycles for each ton of coffee it produces, while Bolivia gives up 7 motorcycles for each ton of coffee it produces.

Columbia has a comparative advantage in coffee production and should specialize in coffee production

The circular-flow diagram illustrates how households ________ goods and services and ________ factors of production.

buy; sell

Which are the two markets represented in the circular-flow diagram?

The market for goods and services and the market for factors.

Example of a normative statement?

We would all be better off if we could reduce our dependence on oil imports.

Example of the following would be a positive economic statement?

There has been an increase in the rate of inflation.

Which of the following factors cause a movement along the demand curve?

change in the price of the good

A newspaper story recently reported that the price of new cars has decreased, and the quantity of new cars sold has dropped. The price and quantity changes were probably caused by

a decrease in buyers' incomes

The primary difference between a change in demand and a change in the quantity demanded is

a change in quantity demanded is a movement along the demand curve and a change in demand is a shift in the demand curve.

Consider the supply curve for cotton shirts. An increase in the price of cotton will

decrease the supply of cotton shirts

A technological advance in the production of automobiles will

increase the supply of automobiles

In the market for beef, what would cause a price increase?

The prices of grass and corn increase

A new wonder diet that results in a dramatic loss of weight sweeps through America. The key to the diet is to eat unlimited amounts of red meat (beef) but no poultry or carbohydrate-rich foods. As millions of Americans switch to the new diet, we can expect

a decrease in the demand for poultry, leading to a shift to the left in the demand curve for poultry and lower poultry prices

An increase in demand, with no change in supply, will lead to ________ in equilibrium quantity and ________ in equilibrium price.

an increase; an increase

A binding price ceiling is designed to

keep prices low.

The persistent unwanted surplus that results from a price floor creates inefficiencies that include all of the following

inefficient allocation of sales among sellers.
wasted resources.
the temptation to break the law by selling below the legal price.

To be binding, a price floor must be set at a price

higher than the equilibrium price

Macroeconomics involves the study of the

overall behavior of the economy

If all the households and businesses in the economy start saving more during economic hard times, that results in a fall in aggregate income hurting everyone in the economy. This is known as

the paradox of thrift

The concept that the whole is greater than the sum of its parts best characterizes which of the following?

macroeconomics

In the "paradox of thrift"

increased saving by individuals increases their chances of becoming unemployed

Economic theory in 1936 changed dramatically with the publication of

The General Theory of Employment, Interest and Money by John Maynard Keynes

Fiscal policy attempts to affect the level of overall spending in the economy by changes in

taxes and spending

Monetary policy attempts to affect the overall level of spending in the economy by changes in

interest rates and the quantity of money

Keynesian economics propagates the economic ideas

that argue that the government can help a depressed economy through fiscal and monetary policies

Recessions are periods when

output and employment are falling

The short-run alternation between economic downturns, recessions, and economic upturns and expansions is known as the

business cycle

The point at which a recession ends and the expansion begins is called the

business cycle trough

The point on a business cycle when real GDP stops rising and begins falling is a(n)

peak

Long-run growth is the sustained upward trend in

aggregate output per person over several decades

Inflation

is an increase in the overall level of prices

Price stability refers to a situation where

the overall cost of living is changing very slowly

Most households derive the bulk of their income from which of the following sources?

wages

An example of a government transfer is a(n)

Social Security payment

Goods that are produced domestically but sold abroad are

exports

An example of investment spending would be

purchase of a new productive machine

If we add up all the values added at every stage of production for a good, we will get

the final value of the good

Gross domestic product or GDP is

the total dollar value of final goods and services produced in the economy in a given time period

Which one of the following equations correctly measures GDP?

C + I + G + X - IM

Which one of the following transactions will be included in the official measurement of GDP?

Sean bought a new iPhone

Which of the following would be an example of an intermediate good?

tires purchased from Goodyear by General Motors for newly produced electric cars

Real GDP is nominal GDP adjusted for

changes in prices.

Nominal GDP may be used to compare

the dollar amount of final goods produced in different years

If the price level in the economy and the nominal wages both doubled, then the real wages would

remain unchanged

Economists frequently use GDP per capita to better reflect

differences in living standards across countries

The ______ is the most widely used measure of inflation in the United States.

consumer price index

If the CPI is 120 in Year 1 and 150 in Year 2, then the rate of inflation from Year 1 to Year 2 is _____.

25%

If the Consumer Price Index (CPI) for 2007 was 148.3 and 152.5 in 2008, what was the inflation rate between the two years?

2.83%

The GDP deflator is equal to

nominal GDP/real GDP x 100

Many economists believe that the CPI overstates inflation because

the CPI market basket doesn't reflect the fact that consumers shift consumption away from more expensive goods

Increases in total output realized when individuals specialize in particular tasks and trade are known as:

the gains from trade.

The law of demand states that, other things equal:

as the price increases, the quantity demanded will decrease.

Resources are being used efficiently when:

every opportunity to make people better off has been utilized.

People who live in households decide to spend less in their day-to-day activities. As a
result, this will most likely lead to:

less income for other people in the economy.

You can either spend $100 on a new economics textbook or a new CD player. If you
choose to buy the new economics textbook, the opportunity cost is:

the new CD player.

Given that chicken and beef are substitute goods, if the price of chicken decreases
substantially, there would be:

a decrease in the demand for beef.

When building a model, economists:

simplify reality in order to highlight what really matters.

In one day, Kessy can bake 10 cookies or mix 15 glasses of lemonade. His friend, Ava,
can make 10 cookies or 10 glasses of lemonade. His other friend, Ian, can make 10
cookies or 20 glasses of lemonade. Who has the lowest opportunity cost in cookie
production?

Ava

Which of the following is not a factor of production?

money

Over the past few years the technology associated with producing flat-panel
televisions has improved. This has led to a(n) ________ in ________ flat-panel
televisions.

increase; the supply of

following would be classified as a macroeconomic question?

How many people are employed in the economy as a whole?
What determines the overall level of prices in the economy as a whole?
What determines the overall trade in goods, services, and financial assets
between the United States and the rest of the world?

A(n) ________ market is a market in which goods or services are bought and sold
illegally.

black

The sequence of business cycle phases is:

business cycle peak, recession, business cycle trough, expansion.

The economic policy of changing the quantity of money to change the interest rate
that affects the overall spending in the economy, is known as:

the monetary policy.

The difference between the demand price and the supply price at the quota limit is:

the quota rent.

One role for government policy is:

to attempt to manage short-run macroeconomic fluctuations

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