ECON 1000 Study Guide - Midterm Guide: Aggregate Demand, Longrun, Potential Output

1. Which of the following groups of countries are all advanced economies?

QUESTION 2

1. The most people live in ________ economies and the fewest people live in ________ economies.

QUESTION 3

1. Households and firms in the U.S. economy interact with those in the rest of the world in the ________ market and the ________ market.

QUESTION 4

1. As a factor of production, oil reserves are counted as

QUESTION 5

1. ________ the owners of the factors of production, while ________ what amounts of those factors to hire.

QUESTION 6

1. The emerging market economies are

QUESTION 7

1. In the United States, the productive factor that, as a group, receives the largest fraction of the nation's total income was

QUESTION 8

1. Items bought by individuals to provide personal enjoyment are termed

QUESTION 9

1. In the advanced economies, ________ of the factories use advanced capital equipment and in the developing economies ________ of the factories use advanced capital equipment

QUESTION 10

1. The productive resource that includes all the "gifts of nature" is called

QUESTION 11

1. What would be an example of government good?

QUESTION 12

1. The world population is approximately ________ people.

QUESTION 13

1. Computers and insurance coverage produced in the United States and sold to people in other nations are categorized as

QUESTION 14

1. Of the following, the federal government obtains most revenue from

QUESTION 15

1. Items bought by businesses to help produce other goods and services are called

QUESTION 16

1. The majority of the income earned in the United States is paid in

QUESTION 17

1. Dan missed class the day the professor covered the circular flow model. Dan asked his friend Joan to explain markets to him. Joan correctly stated that a market

QUESTION 18

1. The United States possesses a large amount of human capital. As a result of this fact, in the United States, there is a

QUESTION 19

1. Which of the following correctly lists the categories of factors of production?

QUESTION 20

1. Which of the following correctly lists the categories of factors of production?

QUESTION 21

1. In the United States, the poorest 20 percent of households receive roughly ________ percent of total income.

QUESTION 22

1. What would be an example of a consumption service?

QUESTION 23

1. The total value of capital in the United States is around

QUESTION 24

1. An export good is a good produced

QUESTION 25

1. ________ paid for the use of land; ________ paid for the services of labor; and ________ paid for the use of capital.

1. Which of the following groups of countries are all advanced economies?

QUESTION 2

1. The most people live in ________ economies and the fewest people live in ________ economies.

QUESTION 3

1. Households and firms in the U.S. economy interact with those in the rest of the world in the ________ market and the ________ market.

QUESTION 4

1. As a factor of production, oil reserves are counted as

QUESTION 5

1. ________ the owners of the factors of production, while ________ what amounts of those factors to hire.

QUESTION 6

1. The emerging market economies are

QUESTION 7

1. In the United States, the productive factor that, as a group, receives the largest fraction of the nation's total income was

QUESTION 8

1. Items bought by individuals to provide personal enjoyment are termed

QUESTION 9

1. In the advanced economies, ________ of the factories use advanced capital equipment and in the developing economies ________ of the factories use advanced capital equipment

QUESTION 10

1. The productive resource that includes all the "gifts of nature" is called

QUESTION 11

1. What would be an example of government good?

QUESTION 12

1. The world population is approximately ________ people.

QUESTION 13

1. Computers and insurance coverage produced in the United States and sold to people in other nations are categorized as

QUESTION 14

1. Of the following, the federal government obtains most revenue from

QUESTION 15

1. Items bought by businesses to help produce other goods and services are called

QUESTION 16

1. The majority of the income earned in the United States is paid in

QUESTION 17

1. Dan missed class the day the professor covered the circular flow model. Dan asked his friend Joan to explain markets to him. Joan correctly stated that a market

QUESTION 18

1. The United States possesses a large amount of human capital. As a result of this fact, in the United States, there is a

QUESTION 19

1. Which of the following correctly lists the categories of factors of production?

QUESTION 20

1. Which of the following correctly lists the categories of factors of production?

QUESTION 21

1. In the United States, the poorest 20 percent of households receive roughly ________ percent of total income.

QUESTION 22

1. What would be an example of a consumption service?

QUESTION 23

1. The total value of capital in the United States is around

QUESTION 24

1. An export good is a good produced

QUESTION 25

1. ________ paid for the use of land; ________ paid for the services of labor; and ________ paid for the use of capital.

Q3. The assumption of rational self-interest implies that people will choose to enrich themselves even if doing so violates the rights or property of others.

a. true

b. false

Q4. If you can earn $10 an hour as a retail clerk, $12 an hour as an office assistant, $16 an hour as a house painter, and $20 an hour repairing bicycles, what is your opportunity cost of working to repair bicycles?

a. $12 an hour

b. $10 an hour

c. $20 an hour

d. $16 an hour

Q5. In the graph of a production possibilities curve, both the horizontal and vertical axes measure the annual quantities of goods produced.

a. true

b. false

Q6. Scarcity arises because

a. international companies are slow to explore for new resources.

b. resources are finite and unable to meet all human wants and needs.

c. many countries waste goods because of inefficient political systems.

d. import taxes retard production.

Q7. A production possibilities curve with clothing and food on the axes shows which of the following?

I. A society cannot have an unlimited amount of each good.

II. For an efficient society, an increase in clothing production will necessitate a decrease in food production.

III. A society will always produce the maximum amount of both clothing and food.

a. II only

b. I only

c. III only

d. both I and II

Q8. All points on the production possibilities curve are efficient.

a. true

b. false

Q9. Economic growth can be pictured in a production possibilities curve diagram by

a. shifting the production possibilities curve out.

b. moving from right to left along the curve.

c. moving from left to right along the curve.

d. shifting the production possibilities curve in.

Q10. Suppose the current unemployment rate is 15 percent. If it rises to 20 percent,

a. the production possibilities curve will shift inward.

b. the economy will move closer to the production possibilities curve.

c. the economy will operate further inside the production possibilities curve.

d. the economy will move up along the production possibilities curve.

Q11. Clean air is a scarce resource.

a. true

b. false

Q12. Which of the following statements is FALSE?

a. A good is anything that gives satisfaction or happiness to individuals.

b. Wants may include humanitarian and altruistic goals.

c. Wants are unlimited and include all material and nonmaterial desires.

d. Economic goods are available in desired quantities at a zero price.

Q13. The current size of the U.S. labor force is less than 100 million workers.

a. true

b. false

Q14. The factors of production are

a. never as useful as people expect them to be.

b. valuable only because they are owned by corporations seeking to make a profit from them.

c. scarce resources.

d. abundant without limit on the planet.

Q15. Why do firms seek to use the least-cost combination of inputs?

a. because they won't be able to stay in business if they don't

b. because that is the combination that their employees prefer

c. because managers and supervisors find their jobs are easiest when the least-cost combination is used

d. because they want to keep costs low in order to appear to the media as a well-run business

Q16. Which one of the following best describes how economists view prices?

a. Low prices are good; high prices are bad.

b. High prices are good; low prices are bad.

c. The best price is a fair price.

d. Prices are signals of relative scarcity.

Q17. The person who creates a product innovation and brings it to market is providing the resource of

a. labor.

b. land.

c. entrepreneurship.

d. capital.

Q18. Gifts of nature used in the production process are considered

a. entrepreneurship.

b. labor.

c. land.

d. capital.

Q19. In a free market economy,

a. government decides what is produced, and producers decide who gets to consume it.

b. as a good becomes relatively more scarce, its price declines.

c. firms choose only to produce the most fashionable goods, regardless of the cost of production.

d. goods and services are allocated by a price system.

Q20. Resources are also known as

a. stocks, bonds, and other financial instruments.

b. minerals.

c. factors of production.

d. factories.

Q21. The size of the U.S. labor force has declined over the past 20 years as many jobs have been outsourced from the United States to other countries.

a. true

b. false

Q22. Which one of the following is TRUE?

a. The growth of the U.S. population over the next several decades will come from immigration.

b. Population growth makes a country poorer, because there are more mouths to feed.

c. Real per capita GDP can increase only if there is inflation.

d. Real per capita GDP can increase only if there is no inflation.

Q23. Which one of the following is FALSE?

a. The U.S. labor force will continue to grow through immigration.

b. Inflation stops economic growth.

c. Increased availability of reliable communication channels at lower and lower costs have led to companies relocating their manufacturing operations offshore.

d. The size of the U.S. labor force continues to grow despite many jobs being moved off-shore.

Q24. What is the purpose of a market system?

a. to facilitate efficient exchange

b. to encourage consumers to buy goods on credit

c. to ensure an equal distribution of income

d. to ensure that everyone is treated fairly

Q25. The market system is also called the price system because

a. people pay money in markets.

b. everything has a price tag.

c. rising prices are the signal to producers to make more of a particular good.

d. inflation is a disturbing problem.

Q26. Production refers to

a. any activity that causes a material conversion of an object.

b. any activity that results in the conversion of resources into goods and services that can be consumed.

c. any activity carried on by a firm, whether a corporation, partnership, or sole proprietorship.

d. physically producing material goods only.

Q27. An increase in the price of coffee, holding other things constant, will

a. decrease the demand for coffee.

b. increase the demand for coffee.

c. decrease the quantity of coffee demanded.

d. decrease the supply of coffee.

Q28. The supply curve shifts when the firm experiences a change in its production technology.

a. true

b. false

Q29. A surplus results when the quantity supplied exceeds the quantity demanded.

a. true

b. false

Q30. Table 3.1

Price per Constant-Quality Unit Quantity Demanded of Constant-Quality Units per Year Quantity Supplied of Constant-Quality Units per Year

$1.00 1,000 200

2.00 800 400

3.00 600 600

4.00 400 800

5.00 200 1,000

What condition characterizes a surplus?

a. Quantity supplied exceeds quantity demanded.

b. Quantity demanded exceeds quantity supplied.

c. Consumers are unhappy with the price.

d. Producers are unhappy with the price.

Q31. An increase in quantity demanded is caused by

a. an increase in income.

b. a decrease in the price of a complement.

c. a change in expectations about price in the future.

d. a decrease in the price of the good.

Q32. The demand curve is downward sloping because

a. price and quantity have a direct relationship.

b. price is always constant.

c. demand is based on supply.

d. price and quantity have an inverse relationship.

Q33. An increase in the price of one good will decrease the demand for a substitute good.

a. true

b. false

Q34. The market demand curve is the vertical summation of the demand curves of all the individuals in the market.

a. true

b. false

Q35. The equilibrium price of a good is a price that everyone is happy with.

a. true

b. false

Q36. Which one of the following would cause a rightward shift of the supply curve?

a. A new tax is imposed on production of the good.

b. Some firms that have been producing the good go out of business.

c. Firms producing the good find ways of lowering their production costs.

d. There is an increase in demand for the good.

Q37. Which of the following is a determinant of demand?

a. cost of production

b. number of suppliers

c. technology of production

d. income

Q38. The market demand curve for a particular good

a. will not be affected by any of the determinants of individual demand.

b. is the horizontal sum of each individual demand curve for the good.

c. will show a direct relationship between price and quantity demanded.

d. may be less than an individual demand curve for the good.

Q39. Table 4.4

Quantity of CDs Purchased Total Utility Marginal Utility

1 75

2 135

3 185

4 35

5 25

6 15

According to Table 4.4, what is the total utility when six CDs are purchased?

a. 65

b. 260

c. 120

d. 220

Q40. A rational consumer will never purchase a product when its

a. marginal utility is decreasing.

b. total utility is decreasing.

c. marginal utility is slightly positive.

d. marginal utility is negative.

Q41. The price elasticity of demand becomes relatively greater as more substitutes are easily available.

a. true

b. false

Q42. Which of the following statements is true with respect to total utility and marginal utility?

a. Marginal utility is always equal to total utility.

b. Total utility will always be negative when marginal utility is positive.

c. Total utility is minimized when marginal utility is zero.

d. Marginal utility can decline as total utility rises.

Q43. Table 4.3

Quantityof Soda Marginal Utility of Soda Quantityof Pizza Marginal Utility of Pizza

1 50 1 100

2 25 2 80

3 0 3 60

4 -25 4 40

After consuming what quantity of soda does the consumer in Table 4.3 experience diminishing marginal utility?

a. 2

b. 3

c. 1

d. 4

Q44. If the price elasticity of demand is 0.5, a 10 percent increase in the price will cause

a. the quantity demanded to decrease by 20 percent.

b. the quantity demanded to decrease by 50 percent.

c. the quantity demanded to increase by 50 percent.

d. the quantity demanded to decrease by 5 percent.

Q45. Which one of the following would make the demand for satellite subscription TV relatively less elastic?

a. The cost of administering the satellite service is lowered.

b. Cable TV service becomes less widely available.

c. Other networks of wireless entertainment become more widely available.

d. The cost of transmitting satellite signals is lowered.

Q46. A price increase will cause a relatively large drop in quantity demanded when

a. demand is perfectly inelastic.

b. the price elasticity of demand is 0.

c. there is very little time allowed for consumers to react.

d. the consumer has easy access to a number of substitute goods.

Q47. Table 4.6

Price Quantity Demanded

$20 90

$16 110

$12 130

$ 8 150

According to the data in Table 4.6, what is the elasticity of demand between a price of $20 and a price of $16?

a. 0.60

b. 0.75

c. 0.90

d. 1.25

Q48. Price elasticity of demand is the responsiveness

a. of the quantity demanded to changes in supply.

b. of the quantity demanded to changes in income.

c. of the quantity demanded to changes in price.

d. of the quantity demanded to changes in quantity.

Q49. Everyone who views the latest adventure movie in theaters will derive the same utility from seeing it.

a. true

b. false

Q50. The law of diminishing marginal utility asserts that total utility becomes negative when marginal utility begins to diminish.

a. true

b. false