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Principle of Macroeconomics

Terms in this set (22)

In economics, the term "scarcity" means that there is less of a good available than people wish to have.
True
In economics, the cost of something is
what you give up to get it.
Your cousin asks you why prices determined by the market are better than prices determined by the government. Because you have taken this "Principles of Economics" class, you explain that market-determined prices are better because they generally reflect
both the value of a good to society and the cost of making it
Causes of market failure include
externalities and market power.
Guns and butter are used to represent the classic societal tradeoff between spending on
national defense and consumer goods.
Imagine that after graduating from college you get a job working at a bank earning $45,000 per year. After two years of working at the bank earning the same salary, you have an opportunity to enroll in a one-year graduate program that would require you to quit your job at the bank. Which of the following should not be included in a calculation of your opportunity cost?
the $50,000 salary that you will be able to earn after having completed your graduate program
According to an economist, a rational decisionmaker
takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.
A marginal change is a
small, incremental adjustment.
A bagel shop sells fresh baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has 8 dozen bagels left at 6:30 p.m. on a particular day, which of the following alternatives is most attractive?
Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen.
In a particular country in 1998, the average worker needed to work 25 hours to produce 40 units of output. In that same country in 2008, the average worker needed to work 40 hours to produce 68 units of output. In that country, the productivity of the average worker
increased by 6.25 percent between 1998 and 2008.

-> To answer this question you need to express the average worker productivity in terms of the number of units produced in 1h.
1998: 25h = 40 units
This means that in 1h, the average worker produced 40/25 or 1.6 units.

2008: 40h=68 units
This means that in 1h, the average worker produced 68/40 or 1.7 units.

So the productivity increased from 1.6 to 1.7 units per hour which is a 6.25% increase because ((1.7-1.6)/1.6)*100=6.25.
One advantage market economies have over centrally-planned economies is that market economies
are more efficient.
Which of the following statements best characterizes a basic difference between market economies and centrally-planned economies?
None of the given options are correct.
Which of these activities will most likely impose an external cost?
A secretary smokes a cigarette in a crowded break room.
Which of the following firms is likely to have the greatest market power?
an electric company
The invisible hand ensures that economic prosperity is distributed equally.
False
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