Final Exam, Macroeconomics Chapter 1 What Is Economics? MULTIPLE CHOICE 1 ‘The three groups of decision makers in the economy are households, business firms, and banks households, business firms, and governments business firms, governments, and banks business firms, banks, and foreign traders households, governments, and banks paoee ANS: B 2. Macroeconomics is the study of how wages are determined in a specific labor market how to use the fewest natural resources to produce public goods what is happening in the economy as a whole how consumers and producers interact in individual markets the price and the quantity exchanged in a market EAC) Economics is the study of scarcity under conditions of democracy choice within a system of capitalism financial markets the role of government in a market system choice under conditions of scarcity ANS: E 4 Which of the following is the study of what "should be” rather than the study of what "is"? a. positive economics b. law and economics ¢. microeconomics . development economics ‘€. normative economics is a way of omitting extraneous details from an economic model. a. critical assumption b. theory ©. normative statement 4 e. simplifying assumption descriptive simplificationFinal Exam, Macroeconomics Chapter 2 Scarcity. Choice, and Economic Systems Figure 2-1 Hours Physies Geology Studying Score Score o 40 30 1 50 60 2 60 80 3 85 90 4 90 100 6. Grant has three hours of time to divide between studying for a physics exam and a geology exam. Figure 2-1 shows his estimates of the grades (on a scale of 0 to 100) that he could earn from studying a particular number of hours on each subject. If he plans on spending two hours studying Physies, what would be his opportunity cost of an additional hour studying physics? 30 points on his geology exam 60 points on his geology exam 80 points on his geology exam 10 points on his physies exam. 85 points on his physies exam ANS: A 7. The opportunity cost of an economic action is the value of the next best alternative, which must be sacrificed an issue_in normative economic theory the expense for the resources used plus the firm's profit the out-of-pocket cost the option to pay a reduced fee for the action A 8. Which of the following could lead to an inward shift of the production possibilities frontier? ‘an increase in the cost of one good ‘an increase in the utilization of resources a rise in the level of technology a law is passed whereby a mandatory retirement age of 60 is imposed 1 decrease in the utilization of resources papee ANS: DFinal Exam, Macroeconomics 9, Assume that society is operating on its concave production possibilities frontier. As more and more units of the good on the horizontal axis are produced, a. more and more total resources are employed in the two industries combined b. larger and larger amounts of the good on the vertical axis must be sacrificed c. fewer and fewer total resources are employed in the two industries combined 4. more and more units of the good on the vertical axis will be produced e. smaller and smaller amounts of the good on the vertical axis must be sacrificed ANS: B 10. Bill can cook dinner in 45 minutes and mow the lawn in 1.5 hours. Eileen ean cook dinner in 1.5 hours and mow the lawn in 2 hours. Bill's opportunity cost of mowing the lawn is a. U/2ofadinner b. 2dinners ©. 3/4 ofa dinner d. 1-1/3 dinners e. 2-2/3 dinners ANS: B Chapter 3 Supply and Demand. MULTIPLE CHOICE 11, Ina perfectly competitive market, 1. there can be few or many buyers and sellers b._ the price is driven upward when suppliers hold back on goods and services ‘c. each participant is too small to affect the market price 4. government intervention is needed to ensure that prices are fair for consumers €. resources are allocated by a central authority ANS: C 12. Which of the following items is most likely to bean inferior good? Housing Airline tickets Macaroni and cheese Stereo equipment Home computers ANS: C