Chap 1-20

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made.

• Government

• Market

• Firm

• Business sector

Government

Which of the following is most likely a topic of discussion in macroeconomics?

• An increase in the price of a hamburger

• A decrease in the production of DVD players by a consumer electronics company

• An increase in the wage rate paid to automobile workers

• A decrease in the unemployment rate

A decrease in the unemployment rate

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.

• Division of labor

• Interconnected economy

• Task economy

• Modern economy

Division of labor

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of:

• All consumers.

• Buyers and sellers.

• Producers and input suppliers.

• Producers and government planning committees.

Buyers and sellers

In the ____________, households work and receive payment from firms.

• Financial investment market

• Financial capital market

• Labor market

• Savings market

Labor market

Which of the following statements most likely lies within the realm of macroeconomics?

• An increase in the price of automobiles will lead to a decrease in the quantity of automobiles demanded.

• Due to process innovations in computer chip manufacturing, the market supply of computers increased.

• Due to an economic recession, manufacturing firms began implementing layoffs of their workforces.

• Anticipating that the benefits would outweigh costs involved, an undergraduate student purchases the course textbook.

Due to an economic recession, manufacturing firms began implementing layoffs of their workforces.

Macroeconomics:

• Is concerned with the expansion of a small business into a large corporation.

• Is narrower in scope than microeconomics.

• Analyzes mergers and acquisitions between firms.

• Is concerned with the expansion and contraction of the overall economy.

Is concerned with the expansion and contraction of the overall economy.

The basic difference between macroeconomics and microeconomics is:

• Microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade.

• Microeconomics concentrates on the behaviour of individual consumers while macroeconomics focuses on the behaviour of firms.

• Microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

• Microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

Microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

Which of the following is generally accepted as a valid criticism of the production of useful goods and services?

• Government involvement

• The black market

• Environmental pollution

• Economic freedom

Environmental pollution

The circular flow diagram of economic activity is a model of the:

• Flow of goods, services, and payments between households and firms.

• Influence of government on business behaviour.

• Role of unions and government in the economy.

• Interaction among taxes, prices, and profits.

Flow of goods, services, and payments between households and firms.

Choose all correct answers in the question below.

In the circular flow diagram model:

• Households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses.

• Businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households.

• Households receive revenue for selling goods and services to businesses, and use that revenue to buy inputs from businesses.

• Businesses receive payments from households for the exchange in inputs to production and households receive payments from businesses in exchange for goods and services

• Households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses.

• Businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households.

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.

• Market-oriented economy

• Macroeconomy

• Microeconomy

• Command economy

Market-oriented economy

Which of the following best describes a fiscal policy tool?

• Government spending

• Bank lending

• Financial capital markets

• Household spending

Government spending

The two main tools of macroeconomic policy are monetary policy and fiscal policy. Fiscal policy involves __________ spending.

• Business

• Government

• Household

• Capital market

Government

Which of the following best characterizes the circular flow of income?

• Businesses buy resources from the government, and households buy goods and services from businesses.

• Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

• The government purchases resources from businesses and households and then sells goods and services to businesses and households.

• Households buy factors of production from businesses, and businesses buy goods and services from households.

Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

Macroeconomic topics do not usually include:

• The profit maximizing decisions of an individual manufacturer.

• The rate of inflation.

• The rate of unemployment.

• Economic growth.

The profit maximizing decisions of an individual manufacturer.

Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected __________ doesn't change.

• Market

• Economy

• Production

• Firm

Economy

_____________ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines.

• Skill

• Specialization

• Economies of scale

• Division of labor

Economies of scale

In which of the following countries will the national government have the greatest influence with respect to the nation's economy?

• China

• Cuba

• Canada

• Chile

Cuba

Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories.

• Financial capital market

• Circular flow diagram

• Financial investment market

• Specialization Model

Circular flow diagram

When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being:

• Balanced budget

• Prudent monetary policy

• Low inflation

• Assuring competition between firms

Low inflation

Which of the following lies primarily within the realm of macroeconomics?

• A study of the demand for gasoline

• A study of how tax cuts stimulate aggregate production

• An analysis of supply and demand conditions in the electricity market

• A study of the impact of "mad cow" disease on the price of beef worldwide

A study of how tax cuts stimulate aggregate production

Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?

• Division of labour

• International trade

• Economies of scale

• Command economy

International trade

In countries like _____________ the command economy predominates.

• China and Vietnam

• Cuba and North Korea

• South Africa and Kenya

• Germany and France

Cuba and North Korea

In the ______________, households receive goods and services and pay firms for them.

• Labor market

• Financial capital market

• Goods and services market

• Savings market

Goods and services market

Suppose that the USA can make 15,000,000 cars or 20,000,000 bottles of wine with one year's worth of labor. France can make 10,000,000 cars or 18,000,000 bottles of wine with one year's worth of labor. From these numbers, we can conclude:

A. The USA has a comparative advantage in the production of wine.

B. France has a comparative advantage in the production of cars.

C. The USA has an absolute advantage in the production of cars.

D. France has an absolute advantage in the production of wine.

C. The USA has an absolute advantage in the production of cars.

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 24 units of food per year or 12 units of clothing. Which of the following is true?

A. Alland has an absolute advantage in producing food but will not trade with Georgeland.

B. Alland has a comparative advantage, but not an absolute advantage, in producing food.

C. Georgeland has both a comparative and absolute advantage in producing clothing.

D. Georgeland has a comparative advantage, but not an absolute advantage, in producing clothing.

A. Alland has an absolute advantage in producing food but will not trade with Georgeland.

The idea behind comparative advantage reflects the possibility that one party:

A. may be able to produce everything relatively more efficiently than another party.

B. may be able to produce something at a lower dollar cost than another party.

C. with an absolute advantage in producing two different may export goods both of those goods to the other party.

D. may be able to produce something at a lower opportunity cost than another party.

D. may be able to produce something at a lower opportunity cost than another party.

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If the terms of trade are established as 1 apple for 4 oranges, then:

A. there are no incentives for Beta to engage in international specialization and trade with Alpha.

B. it is in the interest of Beta to grow oranges and trade for apples.

C. it is in the interest of both countries to specialize and trade with one another.

D. there are no incentives for Alpha or Beta to specialize and trade with one another.

A. there are no incentives for Beta to engage in international specialization and trade with Alpha.

Colombia produces coffee with less labor and land than any other country therefore necessarily has:

A. a comparative advantage in coffee production.

B. both a comparative and absolute advantage in coffee production.

C. an absolute advantage and comparative disadvantage in coffee production.

D. an absolute advantage in coffee production

D. an absolute advantage in coffee production

International trade currently involves about **___ worth of goods and services thundering around the globe.

A. $200 trillion

B. $20 trillion

C. $2 trillion

D. $200 billion

B. $20 trillion

Suppose that Canada can produce 100,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek, while Germany can produce 90,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek. From these numbers, we can conclude:

A. Canada has a comparative advantage in the production of hockey sticks.

B. Germany has a comparative advantage in the production of hockey sticks.

C. Canada has an absolute advantage in the production of maple syrup.

D. Germany has an absolute advantage in the production of maple syrup.

A. Canada has a comparative advantage in the production of hockey sticks.

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. Which of the following terms of trade between apples and oranges would allow both Alpha and Beta to gain by specialization and exchange?

A. 1 orange for 0.2 apples

B. 2 apples for 3 oranges

C. 3 apples for 3 oranges

D. 1 apple for 3 oranges

D. 1 apple for 3 oranges

Alternate Outputs from One Day's Labor Input:

USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles.

From the data, the USA:

A. has an absolute advantage over India in the production of textiles.

B. has an absolute advantage over India in the production of wheat.

C. has a comparative advantage in the production of textiles.

D. should export textiles to India.

B. has an absolute advantage over India in the production of wheat.

According to international trade theory, a country should:

A. import goods in which it has an absolute advantage.

B. import goods in which it has a comparative disadvantage.

C. export goods in which it has an absolute advantage.

D. import goods in which it has an absolute disadvantage.

B. import goods in which it has a comparative disadvantage.

As measured in 2008, about *of U.S. trade and *of European trade is intra-industry trade.
A. 10%; 10% B. 30%; 30% C.¨NBSP; 60%; 60% D. 90%; 90%

60%; 60%

Which of the following is true?

A. A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage.

B. A nation can have a comparative advantage in the production of every good, but not an absolute advantage.

C. A nation cannot have an absolute advantage in the production of every good.

D. A nation cannot have a comparative advantage in the production of every good.

D. A nation cannot have a comparative advantage in the production of every good.

If a nation has a comparative disadvantage in the production of some commodity:

A. it cannot gain from international trade unless it has an absolute advantage in every other commodity.

B. it cannot gain from international trade in the commodity.

C. it can still gain from international trade in that commodity, by getting it at a lower opportunity cost than if it produced it domestically.

D. it can gain from international trade in that commodity only if it has an absolute advantage in that commodity.

C. it can still gain from international trade in that commodity, by getting it at a lower opportunity cost than if it produced it domestically.

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 16 units of food per year or 8 units of clothing. Which of the following is true?

A. Alland has an absolute advantage in producing food and clothing.

B. Georgeland has both a comparative and absolute advantage in producing clothing.

C. Alland has a comparative advantage, but not an absolute advantage, in producing food.

D. Alland has an absolute advantage and comparative advantage in producing food.

A. Alland has an absolute advantage in producing food and clothing.

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. Which of the following statements is true?

A. Alpha should export to Beta, but Beta should not export to Alpha.

B. Since Alpha has an absolute advantage in both goods, no mutual gains from trade are possible.

C. If Alpha specializes in growing oranges and Beta specializes in growing apples, they could both gain by specialization and trade.

D. If Alpha specializes in growing apples and Beta specializes in growing oranges, they could both gain by specialization and trade.

D. If Alpha specializes in growing apples and Beta specializes in growing oranges, they could both gain by specialization and trade.

When one nation can produce a product at lower cost relative to another nation, it is said to have a(n)in producing that product.

A. relative advantage

B. absolute advantage

C. economy of scale

D. production efficiency

B. absolute advantage

Intra-industry trade between similar trading partners allows the gains from **__ that arise when firms and workers specialize in the production of a certain product.

A. comparative advantage

B. learning and innovation

C. creating the value chain

D. relative advantage

B. learning and innovation

Alternate Outputs from One Day's Labor Input:

USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles.

The opportunity cost of one bushel of wheat in India is:

A. 1 yard of textiles.

B. 3 yards of textiles.

C. 4 yards of textiles.

D. 12 yards of textiles.

C. 4 yards of textiles.

The underlying reason why trade benefits both sides of a trading arrangement is rooted in the concept of .

A. opportunity cost

B. specialization

C. absolute advantage

D. maximum production

A. opportunity cost

When nations increase production in their area of _____________________ and trade with each other, both sides can benefit.

A. relative advantage

B. absolute advantage

C. comparative advantage

D. opportunity cost

C. comparative advantage

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 24 units of food per year or 12 units of clothing. Which of the following is true?

A. Alland has both a comparative and absolute advantage in producing food.

B. Alland has comparative advantage, but not an absolute advantage, in producing food.

C. Georgeland has both a comparative and absolute disadvantage in producing clothing.

D. Georgeland has an absolute disadvantage, but not a comparative disadvantage, in producing clothing.

D. Georgeland has an absolute disadvantage, but not a comparative disadvantage, in producing clothing.

Some nations that seek to produce all of their own needs face the problem that:

A. some industries are too small to be efficient if restricted to their domestic markets alone.

B. they can deplete their natural resources as a result.

C. the opportunity cost of producing some of their own goods is lower than that of trading with others for them.

D. they will not be able to satisfy the wants of all of their citizens.

A. some industries are too small to be efficient if restricted to their domestic markets alone.

Jethro has a(n) ____________________ in all aspects of camping: he is faster at carrying a backpack, gathering firewood, paddling a canoe, setting up tents, making a meal, and washing up.

A. relative advantage

B. opportunity cost

C. absolute advantage

D. comparative advantage

C. absolute advantage

__________________ identifies the area where a producer's absolute advantage is relatively greatest, or where the producer's absolute disadvantage in productivity is relatively least.

A. relative advantage

B. opportunity cost

C. productivity advantage

D. comparative advantage

D. comparative advantage

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If the terms of trade are established as 1 apple for 2 oranges, then:

A. there are no incentives for Alpha to specialize and trade with Beta.

B. it is in the interest of both countries to specialize and trade with one another.

C. it is in the interest of Alpha to grow oranges and trade for apples.

D. there are no incentives for Beta to engage in international specialization and trade of apples and oranges.

A. there are no incentives for Alpha to specialize and trade with Beta.

In India, one person can produce 330 pounds of rice or 110 shirts in one year. In China, one person can produce 400 pounds of rice or 200 shirts in one year. Which of the following statements is true?

A. India has a comparative advantage in the production of rice.

B. China has a comparative advantage in the production of rice.

C. China has both an absolute and comparative advantage in the production of rice.

D. India has an absolute advantage in the production of rice.

A. India has a comparative advantage in the production of rice.

The slope of the production possibility frontier is determined by the _________ of expanding production of one good, measured by how much of the other good would be lost.

A. absolute advantage

B. opportunity cost

C. relative advantage

D. specialization

B. opportunity cost

16 cloths

D. 8 wine

Trade allows each country to take advantage of ______________ in the other country.

A. economies of scale

B. lower opportunity costs

C. specialization

D. worker productivity

B. lower opportunity cost

_** are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.

A. Rent controls

B. Price ceilings

C. Price floors

D. Subsidies

C. Price floors

Refer to Table 3-1. Suppose that D1 and S1 are the prevailing demand and supply curves for a product. If the demand schedule changes from D1 to D2, then:

A. equilibrium price decreases from $6 to $4.

B. equilibrium quantity decreases from 15 to 13.

C. equilibrium quantity increases from 13 to 18.

D. equilibrium price increases from $6 to $8

D. equilibrium price increases from $6 to $8

Refer to Figure 3-3. A change from Point A to Point E represents a(n):

A. increase in supply.

B. decrease in supply.

C. increase in quantity supplied.

D. decrease in quantity supplied.

B. decrease in supply.

Which of the following would reduce the supply of microcomputers?

A. a technological improvement that lowers the cost of producing the computers

B. higher wage rates for the workers that assemble the computers

C. a reduction in the price of computer chips used to produce the computers

D. a reduction in the price of computers.

B. higher wage rates for the workers that assemble the computers

A demand curve shows the relationship between price and ** on a graph.

A. quantity demanded

B. quantity produced

C. economies of scale

D. costs

A. quantity demanded

A change in price of a good or service typically causes **__ for that specific good or service.

A. a new equilibrium price

B. a change along the supply curve

C. the supply curve to shift

D. a decreased demand

B. a change along the supply curve

If a firm faces **_, while the prices for the output the firm produces remain unchanged, a firm's profits will increase.

A. higher demand

B. lower costs of production

C. equilibrium

D. a shift in demand

B. lower costs of production

When economists talk about supply, they are referring to a relationship between price received for each unit sold and the **__.

A. demand schedule

B. market price

C. quantity supplied

D. demand curve

C. quantity supplied

Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."

A. The statement is correct.

B. The statement would be correct if "quantity of wheat demanded" were substituted for "quantity of wheat supplied."

C. The statement is incorrect because it confuses a change in quantity supplied with a change in supply.

D. The statement would be correct if it read that a "decrease in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."

A. The statement is correct.

Refer to Table 3-1. If D2 and S1 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are _ and _, respectively.

A. $8; 15

B. $10; 17

C. $12; 9

D. $12; 10

A. $8; 15

If new manufacturers enter the computer industry, then (ceteris paribus):

A. the supply curve shifts to the left.

B. the supply curve shifts to the right.

C. the demand curve shifts to the left.

D. some established manufacturers must exit the industry.

B. the supply curve shifts to the right.

Refer to Figure 3-2. A change from Point A to Point B represents a(n):

A. increase in demand.

B. decrease in demand.

C. decrease in quantity demanded.

D. increase in quantity demanded.

C. decrease in quantity demanded.

A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and _________________, shown on the horizontal axis.

A. demand

B. quantity

C. quantity supplied

D. quantity demanded

B. quantity

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:

A. Andy's demand for pizza to increase.

B. Andy's demand for pizza to decrease.

C. Andy's quantity of pizza demanded to decrease.

D. Andy's demand for beer to increase.

D. Andy's demand for beer to increase.

In economics, the demand for a good refers to the amount of the good that people:

A. would like to have if the good were free.

B. will buy at various prices.

C. need to achieve a minimum standard of living.

D. will buy at alternative income levels.

B. will buy at various prices.

The slope of the production possibility frontier is determined by the _________ of expanding production of one good, measured by how much of the other good would be lost.

A. absolute advantage

B. opportunity cost

C. relative advantage

D. specialization

B. equilibrium quantity