** Review **
For Final Test
1. / The minimum wage is the most well-known kind of price floor .A) / True
B) / False
2. / Diminishing returns to physical capital implies that, when human capital per worker and the state of technology remain fixed, each successive increase in physical capital leads to:
A) / negative productivity.
B) / a decrease in productivity.
C) / a smaller increase in productivity.
D) / a larger increase in productivity.
3. / Fiscal policy refers to:
A) / the control of government spending and taxation.
B) / the control of interest rates and of government spending.
C) / the control of interest rates.
D) / the control of the quantity of money.
4. / A business cycle is:
A) / a period in which output and employment are rising.
B) / a period in which output and employment are falling.
C) / a short-run alternation between economic upturns and downturns.
D) / a very deep and prolonged economic downturn.
5. / Which of the following would not be classified as a macroeconomic question?
A) / What determines the cost to a university or college of offering a new course?
B) / What determines the overall trade in goods, services, and financial assets between the United States and the rest of the world?
C) / How many people are employed in the economy as a whole?
D) / What determines the overall level of prices in the economy as a whole?
6. / If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment, then its labor force is:
A) / 150 million.
B) / 155 million.
C) / 335 million.
D) / 200 million.
7. / The process of lowering the inflation rate is known as:
A) / disinflation.
B) / deflation.
C) / the shoe-leather cost.
D) / hyperinflation.
8. / If the price of chocolate-covered peanuts decreases from $1.05 to $0.95 and the quantity demanded increases from 180 bags to 220 bags, this indicates that, if other things are unchanged, the absolute value of the price elasticity of demand using the midpoint method is:
A) / greater than 2.
B) / 2.
C) / 0.5.
D) / 1.
Use the following to answer questions 9-10:
Figure: Supply of Coconuts
9. / (Figure: Supply of Coconuts) If the price of coconuts decreases, then the movement that would take place in the model could be:A) / C to A.
B) / E to B.
C) / B to A.
D) / A to B.
10. / (Figure: Supply of Coconuts) If there is an improvement in the technology used to harvest coconuts (e.g., a faster, less expensive coconut picker), then the movement in the model could be:
A) / C to A.
B) / B to E.
C) / B to A.
D) / A to C.
11. / The value added is equal to:
A) / the sum of payments to labor and capital.
B) / the value of intermediate goods.
C) / the value of sales by a company.
D) / the value of sales minus the value of intermediate goods used by a company.
12. / An attorney supplies 40 hours of work per week when her fee is $100 per hour, but supplies 60 hours of work per week when her fee rises to $120 per hour. Using the midpoint formula, her elasticity of supply is equal to ______.
A) / 2.2
B) / 0.45
C) / 0.8
D) / 1
13. / The circular-flow diagram illustrates how households ______goods and services and ______factors of production.
A) / own; buy
B) / buy; sell
C) / own; sell
D) / buy; buy
14. / Suppose the cross-price elasticity of demand for butter and margarine is equal to 0.96 while the cross-price elasticity for water and lemon is –0.13. This means that butter and margarine are ______while water and lemons are ______.
A) / elastic goods; complements
B) / complements; substitutes
C) / substitutes; complements
D) / inelastic goods; elastic goods
Use the following to answer questions 15-17:
Scenario: Real GDP
Suppose that in Year 1 an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each.
15. / (Scenario: Real GDP) The growth rate of nominal GDP from Year 1 to Year 2 is:A) / 7.8%.
B) / 19.7%.
C) / 8.8%.
D) / 10%.
16. / (Scenario: Real GDP) The value of nominal GDP in Years 1 and 2 respectively is:
A) / $180,000; $257,400.
B) / $1,000; $1,005.
C) / $900; $990.
D) / $900; $1,077.50.
17. / (Scenario: Real GDP) Using Year 1 as the base year, real GDP in Year 2 is:
A) / $1,077.50.
B) / $900.
C) / $970.
D) / $1,000.
18. / Supply curves tend to be more ______the greater the time period facing the producer.
A) / inflexible
B) / price-inelastic
C) / price-elastic
D) / steeply sloped
19. / Consider the following data for a perfectly competitive firm: price is $9, output is 30 units, and average total cost is $7. The firm's profits are equal to:
A) / $2.
B) / $210.
C) / $270.
D) / $60.
Use the following to answer question 20:
Figure: Revenues, Costs, and Profits
20. / (Figure: Revenues, Costs, and Profits) In the figure, if the market price is $14, the profit-maximizing quantity of output is:A) / 3.
B) / 5.
C) / 2.
D) / 4.
Use the following to answer questions 21-22:
Figure: Demand and Supply of Wheat
21. / (Figure: Demand and Supply of Wheat) What is the equilibrium price in this wheat market?A) / $4
B) / $2
C) / $8
D) / $6
22. / (Figure: Demand and Supply of Wheat) If a price of $10 temporarily exists in this market, a:
A) / shortage of 8,000 bushels will result.
B) / surplus of 4,000 bushels will result.
C) / shortage of 10,000 bushels will result.
D) / surplus of 8,000 bushels will result.
23. / Water is considered a scarce good because:
A) / there is not enough clean water available to meet all of society's wants and it is also less expensive.
B) / scarce goods are less expensive.
C) / not enough clean water is available for all of society's wants.
D) / it does not have any uses.
24. / Discouraged workers are those individuals:
A) / who have given up looking for a job.
B) / who are working part time but are looking for a full-time job.
C) / who are getting paid too little.
D) / who do not like their jobs.
25. / If coffee and tea are viewed as substitutes in consumption, then an increase in the price of coffee will increase the demand for tea.
A) / True
B) / False
26. / Which of the following is a chief measure of economic growth over time?
A) / increases in the available labor supply
B) / decline in real interest rates
C) / inflation
D) / increases in real per capita GDP
27. / An example of a positive statement is:
A) / everyone in the country needs to be covered by national health insurance.
B) / the rate of unemployment is 4%.
C) / baseball players should not be paid higher salaries than the president of the United States.
D) / a high rate of economic growth is good for the country.
Use the following to answer question 28:
Table: Johnson's Income and Expenditures
28. / (Table: Johnson's Income and Expenditures) For Johnson, pizzas are a(n):A) / positive good.
B) / normal good.
C) / inferior good.
D) / neutral good.
29. / A necessary condition of perfect competition is:
A) / cooperation and interdependence between sellers.
B) / few buyers and sellers.
C) / standardized product.
D) / difficult entry and exit.
30. / GDP is the:
A) / volume of all dollar transactions made in an economy in one year.
B) / dollar amount of all sales made in the economy in one year.
C) / total accumulated wealth of an economy.
D) / total market value of all final goods and services produced in one year.
31. / If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when your income increases from $19,000 to $21,000 a year, other things equal, then, for you, shoes are considered a(n):
A) / substitute good.
B) / complementary good.
C) / normal good.
D) / inferior good.
32. / If they spend all night writing computer programs, Laurence can write 10 programs while Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 while Carrie Anne can make 4. Given this information and supposing Laurence and Carrie Anne have constant opportunity costs, we know that:
A) / Carrie Anne has an absolute advantage in programs but not in sunglasses.
B) / Carrie Anne has an absolute advantage in both programs and sunglasses.
C) / Laurence has an absolute advantage in both programs and sunglasses.
D) / Laurence has an absolute advantage in programs but not in sunglasses.
33. / The primary difference between a change in demand and a change in the quantity demanded is:
A) / both a change in quantity demanded and a change in demand are shifts in the demand curve, only in different directions.
B) / both a change in quantity demanded and a change in demand are movements along the demand curve, only in different directions.
C) / a change in quantity demanded is a movement along the demand curve and a change in demand is a shift in the demand curve.
D) / a change in demand is a movement along the demand curve and a change in quantity demanded is a shift in the demand curve.
34. / If steak and potatoes are complements, when the price of steak goes up, the demand curve for potatoes:
A) / stays the same.
B) / shifts to the right and then moves back to its original position.
C) / shifts to the left.
D) / shifts to the right.
35. / Long-run economic growth depends almost entirely on:
A) / population growth.
B) / agricultural production growth.
C) / number of hours worked.
D) / labor productivity growth.
36. / According to the Rule of 70, if a country experiences an average growth rate of 7%, its real GDP per capita will double in:
A) / 14 years.
B) / 7 years.
C) / 2 years.
D) / 10 years.
37. / The “invisible hand” concept refers to:
A) / how individuals who pursue their self-interest can end up bettering society.
B) / how individuals make decisions.
C) / the question of how a business unit should operate profitably.
D) / bits and pieces of the economy.
38. / Which is not an example of a resource?
A) / capital
B) / production
C) / labor
D) / land
Use the following to answer questions 39-41:
Figure: Tom's Production Possibilities
39. / (Figure: Tom's Production Possibilities) In the figure, which point or points would represent (an) efficient combination(s) of coconuts and fish that Tom could choose to produce?A) / A only
B) / A and B
C) / B and C
D) / D only
40. / (Figure: Tom's Production Possibilities) In the figure, the opportunity cost for Tom to move from point A on the curve to point B is:
A) / 5 coconuts.
B) / 5 fish.
C) / 10 fish.
D) / 10 coconuts.
41. / (Figure: Tom's Production Possibilities) In the figure, which point or points would represent (an) inefficient combination(s) of coconuts and fish if Tom made that choice?
A) / A only
B) / A and B
C) / C only
D) / D and B
42. / The point at which a recession ends and the expansion begins is called the:
A) / downturn.
B) / business cycle peak.
C) / lag.
D) / business cycle trough.
Use the following to answer question 43:
Figure: Market for Sandwiches
43. / (Figure: Market for Sandwiches) The market for sandwiches during the lunch hour at a local deli is illustrated in the graph. At the competitive price of $5, 10 sandwiches are exchanged during the lunch hour. At this competitive price, consumer surplus equals ______and producer surplus equals ______.A) / $50; $25
B) / $50; $50
C) / $100; $25
D) / $100; $50
Use the following to answer question 44:
Figure: Market for DVD Rentals
44. / (Figure: Market for DVD Rentals) Four possible outcomes in the market for rentals of DVDs are shown in the figure provided. An increase in the price of DVD players would result in a change illustrated by:A) / the move from j to k in panel C.
B) / the move from f to g in panel A.
C) / the move from l to m in panel D.
D) / the move from h to i in panel B.
45. / When a nation experiences economic growth:
A) / its production possibility frontier shifts inward.
B) / it has moved to a more consumer-oriented position on its production possibility frontier.
C) / its production possibility frontier shifts outward.
D) / it has been able to reach full employment.
Use the following to answer question 46:
Table: Price Index
46. / (Table: Price Index) Consider the information in table provided. What is the inflation rate between the years 2007 and 2008?A) / –1%
B) / 6%
C) / 4%
D) / 6.8%
47. / Yovanka has diabetes and she will pay any amount of money to buy the insulin she needs to stay alive. Yovanka's price elasticity of demand for insulin is:
A) / perfectly elastic.
B) / perfectly inelastic.
C) / inelastic.
D) / elastic.
48. / If the actual unemployment rate is 7% and the natural rate of unemployment is 5%, then the cyclical unemployment rate is:
A) / 5%.
B) / 9%.
C) / 2%.
D) / 7%.
49. / Deadweight loss is the loss society faces when a policy action reduces the transacted quantity below market equilibrium.
A) / True
B) / False
50. / Quotas are limits on quantities that can be bought or sold, and are usually imposed by government.
A) / True
B) / False
GOOD LUCK
Answer Key
1. / A2. / C
3. / A
4. / C
5. / A
6. / A
7. / A
8. / B
9. / D
10. / D
11. / D
12. / A
13. / B
14. / C
15. / B
16. / D
17. / C
18. / C
19. / D
20. / D
21. / D
22. / D
23. / C
24. / A
25. / A
26. / D
27. / B
28. / C
29. / C
30. / D
31. / D
32. / C
33. / C
34. / C
35. / D
36. / D
37. / A
38. / B
39. / B
40. / A
41. / C
42. / D
43. / A
44. / B
45. / C
46. / D
47. / B
48. / C
49. / A
50. / A
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