econ exam with 100% correct answers 2024.

which statement best explains why countries must make tradeoffs - answer-National production is limited by the availability of scarce natural resources What is the primary incentive for business owners in a market economy - answer-Earning profits Suppose a new federal budget raises health care spending by 15 million what is the opportunity cost of that change - answer-The alternative uses of the additional money spent Zoe is deciding which of two posters to buy one is regularly priced at $12 and the other one is marked down from $20 to $12 which piece of advice should she consider most - answer-Ignore that one of the posters is marked down and consider them equally One store in marias town sells her preferred guitar strings much cheaper than all the other stores. Maria visisted the store but had a bad experience where would an economist suggest she buy guitar strings next time - answer-The same store because fairness should not be a factor in her decision Why is some government intervention most likely to be helpful in a market economy - answer-Incentives sometimes encourage producers to act in ways that are not beneficial to consumers How do budgets relate to opportunity costs - answer-Opportunity costs are a result of the decisions made using a budget Achieving economic growth and in the process using up resources faster than they become available puts the goal of economic growth in conflict with the goal of - answer-Sustainability The McCormick family is trying to decide whether to plant corn or soybeans on their farm. Which economic concept should they most consider in their decision - answer-Tradeoffs among goals Which of the following is true of economic models - answer-In order to be more useful they may become less realistic To calculate the net benefit of an action it would be correct to - answer-Subtract cost from benefit Which of the following is an economic goal that command economies do well in achieving - answer-Economic security Economic studies that are based on facts and cause and effect relationships are - answer-Positive Eugenia opened a bicycle store. Which of the following gives the best example of how Eugenia uses the scarce resource "labor" - answer-Eugenia hired an employee to do bicycle repairs A manufacturer who decides to use more labor and fewer machines to produce a given level of output is dealing with the economic question of - answer-How to produce Which of the following would most contribute to economic security within a society - answer-Companies produce a great deal of well paying jobs What is one likely effect of a lack of economic growth in a country with a growing population - answer-More people must divide the same number of goods and services among themselves A _____________ should not be a factor in decision making because it is paid no matter what you decide - answer-Sunk cost Which of the following questions would be explored in the study of macroeconomics - answer-What causes inflation and makes prices rise Which of the following transactions would take place in the product market - answer-Firms selling goods to households Which of the following topics would a micro-economist study - answer-How people decide to buy or sell a home under different economic conditions "My way of doing things has always worked in the past and I plan on continuing doing it that way in the future" is irrational decision making caused by - answer-Falling victim to the status quo bias Sometimes people let their emotions cloud their judgment about costs and benefits. When this happens they make: - answer-Irrational decisions "My new Investment strategy cannot fail" is irrational decision making caused by - answer-Being overconfident Which of the following correctly shows the relationship of scarcity, resources, and wants? - answer-Resource scarcity, Limited ability to produce goods and services, limited ability to satisfy wants Micah makes $50 per week at his part time job, and uses his earnings to buy movie downloads for $2 each. Suppose that the price of movie downloads increases to $4 each. According to the income effect, how does this change affect Micah? - answer-He feels as though his income has declined because his purchasing power decreases According to the substitution effect, how are consumers most likely to react if the price of movie tickets increases? - answer-They will purchase more lower priced DVD movie rentals Which of the following would decrease the demand for jelly (a normal good) - answer-An increase in the expectations that the price of jelly will fall in the near future If goods A and B are substitutes, a decrease in the price of good B will - answer-Decrease the demand for good A Debeers increased the demand for diamonds in Japan by characterizing them as modern and Western. This campaign mostly increased demand due to which factor? - answer-Changing tastes Which of the following is the best example of an inferior good? - answer-Processed cheese Which of the following pairs of goods are most likely substitutes? - answer-Pens and pencils Goods that people cannot do without have - answer-an inelastic demand Demand is typically _____________ over a shorter time span that over a longer one - answer-Less elastic The elasticity of demand can be found by - answer-Dividing the percentage change in quantity demanded by the percentage change in price If price increases and total revenue increases demand is - answer-Inelastic Which of the following goods would be least sensitive to price changes - answer-Eyeglasses When it is difficult or expensive to make more of something the _________________ - answer-Demand is inelastic A decrease in supply means - answer-A shift to the left of the entire supply curve Suppose the price of eggs rises. What would be the most likely result of this change? - answer-The quantity supplied would decrease Firms will continue to produce additional units if - answer-The marginal revenue of producing an additional unit is greater than the marginal cost of producing an additional unit If a firm sells 30 units of output at a price of $10 each, its marginal revenue is - answer-$10 If a market finds itself in a temporary situation in which at a price of $10 the quantity demanded is 100 and the quantity supplied is 50, we would expect to see - answer-The price eventually rise A leftward shift of demand and a leftward shift of supply will - answer-Decrease equilibrium quantity Which of the following will cause the equilibrium price to fall and the equilibrium quantity to rise? - answer-An increase in supply and no change in demand What is the most likely reason that a movie theatre would charge the same price for a popular movie with high demand and an unpopular movie with low demand? - answer-The theaters consumers expect the prices to remain consistent with its custom Prices mostly determine production levels because - answer-Rational buyers and sellers only make mutually beneficial voluntary exchanges A central bank is most likely to use inflation targeting when - answer-Inflation rates are very high The federal reserves initial goal in intervening in the economy of 2007 and early 2008 was to - answer-End the credit crisis to help stabilize the economy Which of the following is considered a federal entitlement program? - answer-Social security, Medicare, children's health insurance (all of the above) Beginning at Ms1 if the federal reserve pursues an easy money policy - answer-The money supply will increase and interest rates will fall The shape of the money supply curve indicates that - answer-The money supply is fixed A movement from Ms1 to Ms3 would be caused by - answer-a tight money policy A tight money policy results in - answer-higher interest rates and less spending on physical capital Which part of the federal reserve system does the federal governments day to day banking? - answer-District banks The limits of fiscal policy would include - answer-Mandatory spending programs, inside lag time, outside lag time, (all of the above) The largest source of federal government revenue is - answer-Income taxes What is the purpose of most entitlement programs? - answer-To provide direct financial support to citizens who may need it Some programs funded by the federal government are _________________, meaning that eligibility for benefits depends on the prospective recipients income - answer-Means-tested What is the main job of the federal open market committee? - answer-To create monetary policy What is the largest component of aggregate demand? - answer-Consumer demand Recessions and wars tend to - answer-Make a budget deficit larger Monetary policy primarily involves the management of - answer-Interest rates and the money supply What caused the U.S. credit crisis in 2007? - answer-Increasing mortgage defaults The federal reserve was created because - answer-Numerous recessions and depressions showed the need for a central bank A shortcoming of monetary policy is - answer-The time lags between the implementation of a policy and the effect it has on the economy Suppose the federal government continues to use deficit spending each year. Which of these effects is most likely? - answer-The government will have to spend much more money servicing the debt Expansionary fiscal policy tends to encourage - answer-Higher prices and lower unemployment The federal budget tends to move toward ________________ as the economy ______________ - answer-A deficit, contracts Current spending by the federal government in excess of current revenues can - answer-Make a budget surplus smaller Over time, the responsibilities of the federal reserve have generally - answer-Been expanded The federal government decided that American International Group's (AIG) size and the global scope of its investors made it ________________ - answer-Too big to fail Which of the following is an example of a negative externality - answer-Second hand smoke Activities that generate negative externalities will likely be carried out at levels that _____________ the level that would be efficient - answer-Exceed When julie bought a hamburger at McDonald's, her hamburger purchase was __________ in consumption because other people ___________ able to eat her hamburger - answer-Rival; were not How does the problem of the tragedy of the commons affect producers and consumers in the long run? - answer-It greatly hurts both groups because the resource is used up A tax on income reduces workers take home pay and therefore reduces the ________________ for people to join the workforce - answer-Incentive Lobbying mostly contributes to economic inefficiency because it encourages - answer-Rent seeking How would a tax on buyers affect the equilibrium quantity of a good or service - answer-It would fall Which inference is best supported by the table? - answer-Wealthy americans pay more of their incomes in taxes than others What type of tax rates does this table show? - answer-Marginal taxes, because it shows the additional taxes paid on higher incomes Which of the following is an example of an activity that generates a positive externality - answer-Karens carpentry adopts a section of the highway on which to do voluntary litter removal Why might politicians agree to logrolling? - answer-To receive benefits that help their voters A tax on sellers would most like cause the equilibrium price to - answer-Rise A regressive tax is in place - answer-Country C only A proportional tax is in place in - answer-Country B only Which of the following is a possible unintended consequence of a very high progressive tax rate - answer-People have a disincentive to earn more income A $0.50 tax on the producers of hot dogs would cause - answer-The supply curve for hot dogs to shift upward by $0.50 Sales tax mostly affect - answer-The demand curve because they are paid mostly by buyers A tax that would charge every resident of a town $150 per year for recycling collection would be an example of a - answer-A regressive tax Which statement best summarizes the need for U.S. tax reform? - answer-The federal government spends more money than it takes in The inability to achieve an efficient market outcome without government intervention is known as: - answer-Market failure Which of the following is an example of a nonexcludable good? - answer-National defense If the government imposes a $1.50 tax on muffin producers, the price consumers pay for muffins will be _____________, and the after tax price producers receive for muffins will be ______________. - answer-$2.50, $1.00 When no market exists for an activity, like pollution abatement, it is difficult for the government to accurately calculate the worth of the activity. This problem is known as: - answer-Missing valuations Suppose that a government agency approves a medication that actually harms the health of those who take it. Which piece of evidence would most suggest that the approval resulted from regulatory capture? - answer-The regulators once worked for the company that made the medication What is one possible disadvantage of a nationwide sales tax in the united states - answer-It is a highly regressive tax A country that has experienced some inflation would find its nominal GDP _______________ that its real GDP - answer-Higher A broader goal than increasing real GDP is to improve _____________ - answer-The quality of life Suppose a consumer buys a frozen dinner at the grocery store of $10. The frozen dinner manufactures sold the frozen dinner to the store for $5. The frozen dinner company purchased the ingredients from a feed processing company for $2 and bought the box to put the dinner in for $1. How much has GDP increased? - answer-$10 Carlos lost his job at the local auto parts store due to the economic slow down in his state. Bob is experiencing? - answer-Cyclical unemployment If intermediate goods and final goods were both counted in calculating GDP, the final number for GDP would be - answer-Overstated If Marie receives a 5% wage increase at work during a time when there is a 4% inflation rate, she is: - answer-1% better off One possible opportunity cost of economic growth is: - answer-Environmental degradation The foundation for the development of human capital is: - answer-Education Savings mostly urge economic growth because they: - answer-Provide funds for loans Which of the following is an example of frictional unemployment - answer-Steve left his job to look for a better one Investment and the expansion of the capital stock are enhanced by: - answer-High savings rate Which of the following would be classified as consumption by the final user - answer-A new car purchased by an employee of H&R block for personal use Discouraged and underemployed workers cause: - answer-The unemployment rate to understate the unemployment problem Which factor caused the recession of ? - answer-Decline in aggregate demand as housing prices fell, Steep drop in stock prices as investors sought to sell, loss of financial confidence as news media covered financial problems (all of the above) If a country has a civilian, non institutional population of 16 years or older of 200 million, 135 million people with jobs, and 15 million unemployed and seeking employment, then its labor force is: - answer-150 million You read in the newspaper that the CPI is 120, You should conclude that a typical market basket costs: - answer-20% more than the base year Which of the following is included in GDP for this year - answer-The purchase of tickets to the final four in men's college basketball Which of the following would occur in an economy experiencing deflation - answer-Consumer income and expenditures would fall Aggregate supply will increase if - answer-Productivity increases The total amount of domestic output purchased by all sectors of the countrys economy, contingent on the price level is called: - answer-Aggregate demand ___________________ is the total output of the country firms are willing and able to produce, contingent on the price level - answer-Aggregate supply James, who is 65 years old and has been working in a hat making factory for 45 years, is unemployed because the hat making factory in her town closed and moved to Taiwan. James is experiencing - answer-Structural unemployment Which statement best explains one reason that people in countries with high GDP per capita tend to have higher standards of living than people in poor countries - answer-The people and government can afford better food and medical care Uncontrollable events or decisions made in other countries that have an influence of aggregate supply are called: - answer-External shocks Deflation is most closely linked to: - answer-A decline in aggregate demand