MACROECONOMICS SS 141
Fashion Institute of Technology
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SS 1 41 MacroEconomics Professor Patrick Yanez Study Questions Production Possibility Curve Set 1 These questions are to facilitate your discussion groups andor tutoring sessions Answers are listed at the end of this file Since our class time is limited to introducing new topics we do not have time to review these questions in class please use your discussion group andor tutoring session to review these questions ear OU VV Q V N a b c d L U V b c d The production possibilities curve illustrates the basic principle that the production of more of any one good will in time require smaller and smaller sacri ces of other goods an economy will automatically obtain full employment of its resources if all the resources of an economy are in use more of one good can be produced only if less of another good is produced an economy39s capacity to produce increases in proportion to its population size Which of the following will not produce an outward shift of the production possibilities curve an upgrading of the quality of a nation s human resources the reduction of unemployment an increase in the quantity of a society39s labor force the improvement of a society s technological knowledge Unemployment and or productive inefficiencies cause the production possibilities curve to shift outward can exist at any point on a production possibilities curve are both illustrated by a point outside the production possibilities curve are both illustrated by a point inside the production possibilities curve If the production possibilities curve is a straight line the two products will sell at the same market prices economic resources are perfectly shiftable between the production of the two products the two products are equally important to consumers equal quantities of the two products will be produced at each possible point on the curve A production possibilities curve illustrates scarcity market prices consumer preferences the distribution of income Page 1 6 A production possibilities curve shows a that resources are unlimited b that people prefer one of the goods more than the other c the maximum amounts of two goods that can be produced assuming the full and efficient use of available resources d combinations of capital and labor necessary to produce specific levels of output 7 A nation39s production possibilities curve is bowed out from the origin because a resources are not equally efficient in producing every good b the originator of the idea drew it this way and modern economists follow this convention c resources are scarce d wants are virtually unlimited Use the following to answer guestions 812 Answer the next guestiong s on the basis of the data given in the following A quot possibilities table Production possibilities alternatives B IO Im l 14 LAO owln H A Capital goods 5 4 Consumer goods 0 5 MN 8 Refer to the above table If the economy is producing at production alternative C the opportunity cost of the tenth unit of consumer goods will be a 4 units of capital goods b 2 units of capital goods c 3 units of capital goods d 13 ofa unit of capital goods 9 Refer to the above table As compared to production alternative D the choice of alternative C would a tend to generate a more rapid growth rate b be unattainable c entail unemployment d tend to generate a slower growth rate 10 Refer to the above table Atotal output of 3 units of capital goods and 4 units of consumer goods a is irrelevant because the economy is capable of producing a larger total output b will result in the maximum rate of growth available to this economy c would involve an inefficient use of the economy39s scarce resources d is unobtainable in this economy Page 2 ll Refer to the above table For this economy to produce a total output of 3 units of capital goods and 13 units of consumer goods it must a achieve economic growth b use its resources more efficiently than the data in the table now indicate c allocate its available resources most efficiently among alternative uses d achieve the full employment of available resources 12 Refer to the above table For these data the law of increasing opportunity costs is re ected in the fact that a the amount of consumer goods that must be sacrificed to get more capital goods diminishes beyond a point b larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods c the production possibilities data would graph as a straight downsloping line d the economy s resources are presumed to be scarce 13 When an economy is operating with maximum efficiency the production of more of commodity A will mean the production of less of commodity B because a of the law of increasing opportunity costs b economic wants are insatiable c resources are limited d resources are specialized and only imperfectly shiftable l4 Assume that a change in government policy results in greater production of both consumer goods and investment goods We can conclude that a the economy was suffering from unemployment and or the inefficient use of resources before the policy change b the economy39s production possibilities curve has been shifted to the left as a result of the policy decision c this economy39s production possibilities curve is convex bowed inward to the origin d the law of increasing opportunity costs does not apply in this society 15 The production possibilities curve a shows all of those levels of production that are consistent with a stable price level b indicates that any combination of goods lying outside the curve is economically inefficient c is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced d shows all of those combinations of two goods that are most preferred by society Page 3 16 Assume an economy is operating at some point on its production possibilities curve which shows civilian and military goods If the output of military goods is increased the output of civilian goods a will remain unchanged b may be either increased or decreased c must be decreased d must also be increased 17 Any point inside the production possibilities curve indicates a the realization of allocative efficiency b that resources are imperfectly shiftable among alternative uses c the presence of in ationary pressures d that more output could be produced with available resources Use the following to answer guestions 1819 Capital goods 0 Consumer goods 18 Refer to the above diagram Other things equal this economy will achieve the most rapid rate of growth if a the ratio of capital to consumer goods is minimized b it chooses point C c it chooses point B d it chooses pointA l9 Refer to the above diagram This economy will experience unemployment if it produces at point a A b B c C d D Page 4 20 In drawing the production possibilities curve we assume that a technology is fixed b unemployment exists c economic resources are unlimited d wants are limited 21 Which of the following is assumed in constructing a typical production possibilities curve a the economy is using its resources inefficiently b resources are perfectly shiftable among alternative uses c production technology is fixed d the economy is engaging in international trade 22 If the production possibilities curve were a straight downsloping line this would suggest that a resources are perfectly shiftable between the production of these two goods b it is possible to produce more of both products c both products are equally capable of satisfying consumer wants d the two products have identical prices 23 The typical production possibilities curve is a an upsloping line that is concave to the origin b a downsloping line that is convex to the origin c a downsloping line that is concave to the origin d a straight upsloping line 24 Deltonia produces both consumer and capital goods Other things equal if Deltonia reduces the percentage of its output devoted to capital goods then a its rate of growth will decline b its production possibilities curve will shift to the left c it must also reduce the percentage of its output devoted to consumer goods d its rate of growth will increase 25 The slope of the typical production possibilities curve a is positive b increases as one moves southeast along the curve c is constant as one moves down the curve d decreases as one moves southeast along the curve 26 Assume an economy is incurring unemployment and failing to realize leastcost production The effect of resolving these problems will be to a move the level of actual output to the economy39s production possibilities curve b create a less equal distribution of income c shift its production possibilities curve to the left d shift its production possibilities curve to the right Page 5 Page 6 9089959 NU NONONCLCLCLOONOU NONCLNONU CLU O Answer for Study Questions Production Possibility Curve Set 1 Page 7 SS 1 41 MacroEconomics Professor Patrick Yanez Study Questions for Chapter 4 Set 2 These questions are to facilitate your discussion groups andor tutoring sessions Answers are listed at the end of this file Since our class time is limited to introducing new topics we do not have time to review these questions in class please use your discussion group andor tutoring session to review these questions Consumer sovereignty invisible hand x N F Je U l The market system39s answer to the fundamental question quotWhat will be producedquot is essentially quotGoods and services that are profitablequot quotLow cost goods and servicesquot quotGoods and service that can be produced using roundabout productionquot quotGoods and services that possess lasting valuequot QQQB The market system39s answer to the fundamental question quotHow will the goods and services be producedquot is essentially A quotWith as much machinery as possiblequot B quotUsing the latest technologyquot C quotBy exploiting laborquot D quotAt leastcost productionquot The market system39s answer to the fundamental question quotWho will get the goods and servicesquot is essentially A quotThose willing and able to pay for themquot B quotThose who physically produced themquot C quotThose who most need themquot D quotThose who get utility from themquot The market system39s answer to the fundamental question quotHow will the system accommodate changequot is essentially A quotThrough government leadership and directionquot B quotThrough the guiding function of prices and the incentive function of profitsquot C quotThrough training and retraining programsquot D quotThrough random trial and errorquot The advent of DVDs threatens to eventually demolish the market for Videocassettes This is an example of A creative destruction derived demand capital accumulation B C D the difference between normal and economic profits Page 1 t O F 00 50 x Consumer sovereignty refers to the A fact that resource prices are higher than product prices in capitalistic economies B idea that the pursuit of selfinterest is in the public interest C idea that the decisions of producers and resource suppliers with respect to the kinds and amounts of goods produced must be appropriate to consumer deman s D fact that a Federal agency exists to protect consumers from harmful and defective products The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy This statement best describes the concept of derived demand consumer sovereignty the invisible hand market failure QQQB Assume the demand for product Y increases and the market system responds by producing more Y This illustrates A that the concept of derived demand is inapplicable B that consumer sovereignty is inoperative in this economy C the scarcity function of prices D the directing or guiding function of prices Which ofthe following best describes the guiding function of competitive prices A Profitable industries contract and unprofitable industries expand B The market system will always generate economic profits for firms that use the least costly production technology C The market system can negotiate reallocations of resources that are appropriate to changes in consumer tastes technology and resource supplies D When prices are in equilibrium product shortages or surpluses cannot occur Which ofthe following best describes the invisiblehand concept A The desires of resource suppliers and producers to further their own selfinterest will automatically further the public interest B The nonsubstitutability of resources creates a conflict between private and public interests and calls for government intervention C The market system is the best system for overcoming the scarce resourcesunlimited wants roblem D Central direction by the government will improve resource allocation in a capitalistic economy The invisible hand refers to the N m fact that the US tax system redistributes income from rich to poor notion that under competition decisions motivated by selfinterest promote the social interest tendency of monopolistic sellers to raise prices above competitive levels fact that government controls the functioning of the market system Q m Page 2 x I x 0 t 01 The invisiblehand concept suggests that A market failures imply the need for a national economic plan B big businesses are inherently more efficient than small businesses C the competitiveness of a capitalistic market economy invariably diminishes over time D assuming competition private and public interests will coincide The invisiblehand concept suggests that A changes in product demands are only randomly reflected in changes in the demands for resources B profit maximization is inconsistent with an efficient allocation of resources C government action is necessary to correct for market failures D when firms maximize their profits society39s output will also be maximized Two major virtues of the market system are that it A allocates resources efficiently and allows economic freedom B results in an equitable personal distribution of income and always maintains full employment C results in price level stability and a fair personal distribution of income D eliminates discrimination and minimizes environmental pollution The market system A produces considerable inefficiency in the use of scarce resources B effectively harnesses the incentives of workers and entrepreneurs C is inconsistent with freedom of choice in the long run D has slowly lost ground to emerging command systems TrueFalse Questions 16 x 1 Market economies use capital goods because they improve productive efficiency A True B False Differences in opportunity costs are the basis for specialized production and trade A True B False Money functions as a medium of exchange in permitting the ready comparison of the relative worth of heterogeneous products A True B False Consumer sovereignty means that legislation now protects the rights of consumers to dispose of their incomes as they see fit True B False Page 3 O x N F A U G Programs by state governments to keep milk prices higher than marketdetermined prices to protect family dairy farms from bankruptcy promote the efficient allocation of resources True B False Specialization may expand total output even though the individuals involved may have identical abilities A True B False The wants of consumers are expressed on the demand side of the product market A True B False Costs can be defined as total payments made to workers land owners and capital suppliers less normal profits A True B False lf firms in any industry fail to earn normal profits firms will immediately or eventually leave the industry A True B False The guiding function of prices indicates that at equilibrium prices neither product surpluses nor shortages can occur A True B False The invisible hand refers to the many indirect controls that the Federal government imposes in a the market system True B False Page 4 Answer Key 9089959 wwagtwagtagtwwwagtagtwagtccwagtocwoagtwagtcagt Page 5 SS 1 41 MacroEconomics Professor Patrick Yanez Study Questions for Chapter 3 Set 2 These questions are to facilitate your discussion groups andor tutoring sessions Answers are listed at the end of this file Since our class time is limited to introducing new topics we do not have time to review these questions in class please use your discussion group andor tutoring session to review these questions Use the following to answer questions 12 Price Quantity A decrease in supply is depicted by a A move from point X to point y B shift from S1 to 82 C shift from 82 to S1 D move from point yto point X An increase in quantity supplied as distinct from an increase in supply is depicted by a A move from point yto point X B shift from S1 to 82 C shift from 82 to S1 D move from point X to point y The law of supply indicates that A producers will offer more of a product at high prices than they will at low prices B the product supply curve is downsloping C consumers will purchase less of a good at high prices than they will at low prices D producers will offer more of a product at low prices than they will at high prices The law of supply A reflects the amounts that producers will want to offer at each price in a series of prices B is reflected in a downsloping supply curve C shows that the relationship between producer revenue and quantity supplied is negative Page 1 D reflects the income and substitution effects of a price change A firm39s supply curve is upsloping because A the expansion of production necessitates the use of qualitatively inferior inputs B mass production economies are associated with larger levels of output C consumers envision a positive relationship between price and quality D beyond some point the production costs of additional units of output will rise The location ofthe product supply curve depends on A production technology B the number of buyers in the market C the tastes of buyers D the location ofthe demand curve An improvement in production technology will A increase equilibrium price B shift the supply curve to the left C shift the supply curve to the right D shift the demand curve to the left Because of unseasonably cold weather the supply of oranges has substantially decreased This statement indicates that A the demand for oranges will necessarily rise B the equilibrium quantity of oranges will rise C the amount of oranges that will be available at various prices has declined D the price of oranges will fall In moving along a stable supply curve which of the following is not held constant A the number of firms producing this good B expectations about the future price ofthe product C techniques used in producing this product D the price of the product for which the supply curve is relevant The location ofthe supply curve of a product depends on A the technology used to produce 39t B the prices of resources used in its production C the number of sellers in the market D all of the above Other things equal ifthe price of a key resource used to produce product Xfalls the A product supply curve of Xwill shift to the right B product demand curve of Xwill shift to the right C product supply curve of Xwill shift to the left D product demand curve of Xwill shift to the right A government subsidy to the producers of a product A reduces product supply B increases product supply Page 2 C D reduces product demand increases product demand Use the following to answer questions 1315 Price Supply 160 Demand Quantity Referto the above diagram The equilibrium price and quantity in this market will be A 100 and 200 B 160 and 130 C 50 and 130 D 160 and 290 Refer to the above diagram A surplus of 160 units would be encountered if price was Referto the above diagram A shortage of 160 units would be encountered if price was A 110 that is 160 minus 50 B 160 C 100 D If a product is in surplus supply its price A is below the equilibrium level B is above the equilibrium level C will rise in the nearfuture D is in equilibrium A market is in equilibrium provided there is no surplus of the product at all prices above that shown by the intersection ofthe supply and demand curves if the amount producers want to sell is equal to the amount consumers want to buy wheneverthe demand curve is downsloping and the supply curve is upsloping Page 3 18 lfthe demand and supply curves for productX are stable a governmentmandated increase in the price ofX will A increase the supply ofX and decrease the demand for X B increase the demand for X and decrease the supply of X C increase the quantity supplied and decrease the quantity demanded of X D decrease the quantity supplied of X and increase the quantity demanded of X 19 At the equilibrium price A quantity supplied may exceed quantity demanded or vice versa B there are no pressures on price to either rise or fall C there are forces that cause price to rise D there are forces that cause price to fall Use the following to answer questions 2023 Supply 60 3 40 E 20 Demand 0 Quantity 20 Refer to the above diagram A price of 60 in this market will result in A equilibrium B a shortage of 50 units C a surplus of 50 units D a surplus of 100 units 21 Refer to the above diagram A price of 20 in this market will result in A a shortage of 50 units B a surplus of 50 units C a surplus of 100 units D a shortage of 100 units 22 Refer to the above diagram The highest price that buyers will be willing and able to pay for 100 units of this product is A 30 B 60 0 40 D 20 Page 4 23 24 25 26 27 28 29 30 Refer to the above diagram lfthis is a competitive market price and quantity will move toward A 60 and 100 respectively B 60 and 200 respectively C 40 and 150 respectively D 20 and 150 respectively At the point where the demand and supply curves for a product intersect A the selling price and the buying price need not be equal B the market may or may not be in equilibrium C either a shortage or a surplus ofthe product might exist depending on the degree of competition D the quantity that consumers want to purchase and the amount producers choose to sell are the same The rationing function of prices refers to the A tendency of supply and demand to shift in opposite directions B fact that ration coupons are needed to alleviate wartime shortages of goods C capacity of a competitive market to equate the quantity demanded and the quantity supplied D ability of the market system to generate an equitable distribution of income A competitive market will A achieve an equilibrium price B produce shortages C produce surpluses D create disorder lfthere is a shortage of product X A fewer resources will be allocated to the production of this good B the price of the product will rise the price of the product will decline the supply curve will shift to the left and the demand curve to the right eliminating the shortage 00 At the point where the demand and supply curves intersect A the buying and selling decisions of consumers and producers are inconsistent with one another B the market is in disequilibrium C there is neither a surplus nor a shortage of the product D quantity demanded exceeds quantity supplied In a competitive market the equilibrium price and quantity occur where A the downsloping demand curve intersects the upsloping supply curve B the upsloping demand curve intersects the downsloping supply curve C consumers and suppliers bargain to a mutually acceptable price D quantity demanded exceeds quantity supplied or vice versa If price is above the equilibrium level competition among sellers to reduce the resulting Page 5 31 32 33 34 35 36 A surplus will increase quantity demanded and decrease quantity supplied B shortage will decrease quantity demanded and increase quantity supplied C surplus will decrease quantity demanded and increase quantity supplied D shortage will increase quantity demanded and decrease quantity supplied If we say that a price is too high to clearthe market we mean that A quantity demanded exceeds quantity supplied B the equilibrium price is above the current price C quantity supplied exceeds quantity demanded D the price of the good is likely to rise There will be a surplus of a product when A price is below the equilibrium level B the supply curve is downward sloping and the demand curve is upward sloping C the demand and supply curves fail to intersect D consumers want to buy less than producers offer for sale Assuming conventional supply and demand curves changes in the determinants of supply and demand will A in all likelihood alter both equilibrium price and quantity B alter equilibrium quantity but not equilibrium price C alter equilibrium price but not equilibrium quantity D have no effect on equilibrium price or quantity Which ofthe following will cause a decrease in market equilibrium price and an increase in equilibrium quantity A an increase in supply B an increase in demand C a decrease in supply D a decrease in demand Suppose in each of four successive years producers sell more oftheir product and at lower prices This could be explained by small annual increases in supply accompanied by large annual increases in demand in terms of a stable supply curve and increasing demand C in terms of a stable demand curve and increasing supply D as an exception to the law of supply Other things equal the provision of a per unit subsidy for a product will increase its supply increase its price C decrease the quantity sold D decrease its demand Use the following to answer questions 3741 Page 6 Price Quantity Refer to the above diagram which shows demand and supply conditions in the competitive market for product X lfthe initial demand and supply curves are Do and So equilibrium price and quantity will be A 0F and 00 respectively B 0G and OB respectively C 0F and 0A respectively D 0E and OB respectively Refer to the above diagram which shows demand and supply conditions in the competitive market for product X Given Do ifthe supply curve moved from So to 81 then A supply has increased and equilibrium quantity has decreased B supply has decreased and equilibrium quantity has decreased C there has been an increase in the quantity supplied D supply has increased and price has risen to GO Refer to the above diagram which shows demand and supply conditions in the competitive market for product X If supply is 81 and demand D0 then A at any price above 0G a shortage would occur B 0F represents a price that would result in a surplus of AC C a surplus of GH would occur D 0F represents a price that would result in a shortage of AC Refer to the above diagram which shows demand and supply conditions in the competitive market for product X A shift in the demand curve from Do to D1 might be caused by an A decrease in income ifX is an inferior good B increase in the price of complementary good Y C increase in money incomes ifX is a normal good D increase in the price of substitute product Y Refer to the above diagram which shows demand and supply conditions in the competitive market for product X Other things equal a shift ofthe supply curve from So to 81 might be caused by an A increase in the wage rates paid to laborers employed in the production of X B government subsidy per unit of output paid to firms producing X C decline in the price ofthe basic raw material used in producing X Page 7 D increase in the number of firms producing X Use the following to answer questions 4246 Price 42 43 44 45 46 Refer to the above diagram A governmentset price floor is best illustrated by A price A B quantity E C price C D price B Refer to the above diagram A governmentset price ceiling is best illustrated by A price A B quantity E C price C D price B Refer to the above diagram Rent controls are best illustrated by 39 e A A pric B quantity E C price C D price B Refer to the above diagram A government price support program to aid farmers is best illustrated b y A quantity E B price C C price A D price B Refer to the above diagram A governmentset maximum permissible interest rate is best illustrated by A price B Page 8 47 48 49 50 51 B quantity E C price C D price A Price floors and ceiling prices A both cause shortages B both cause surpluses C cause the supply and demand curves to shift until equilibrium is established D interfere with the rationing function of prices A price floor means that A inflation is severe in this particular market B sellers are artificially restricting supply to raise price C government is imposing a legal price that is below the equilibrium price D government is imposing a legal price that is above the equilibrium price An effective ceiling price will A induce new firms to enter the industry B result in a product surplus C result in a product shortage D clear the market An effective price floor will A force some firms in this industry to go out of business B result in a product surplus C result in a product shortage D clear the market Black markets are associated with price floors and the resulting product surpluses price floors and the resulting product shortages ceiling prices and the resulting product shortages ceiling prices and the resulting product surpluses QQQB Page 9 Answer Key 9089959 gt0Uowccwoowcwgtwgtccoogtcgtgtgto Page 10 ODSOUUUUJDgtDgtODgtUJUUJDgtDgtODgtDgtUODgtDgtOUJ The Model of Demand amp Supply pm Faman mm mm Wm PuI Capt 1 armquot Market System A case ofGovernmem Intervention Price Ceilings A use f50vemmem lnhervemim Prim Ceilings CONTROL P35 5 Ps5 s a a 1 J 2 2 Legaanu 1 1 D D Oinznanwsnsnmnnu 01n2n1n6n5nsn1nan A case of Government Intervention Price Floor A case of Government Intervention Price Floors MILKPRICE P35 3 P35 5 19mm a a 2 2 1 1 D D o n Zn an a 5n an m in Q 0 1n Zn In 6n 5n 5n 1quot in Q Nine Foundations of Capitalism 1 PVFP P39PP PRIVATE PROPERTY FREEDOM OF ENTERPRISE amp CHOICE ROLE OF SELFINTEREST COMPETITION MARKETS amp PRICES AACTIVE BUT LIMITED GOVERNMENT EXTENSIVE USE OF CAPITAL GOODS SPECIALIZATION AND EFFICIENCY USE OF MONEY N Equot P The Market System at Work Four Fundamental Questions What output will be produced 2 i e Ecanamlc profit total revenue e to a cost m t proicondexoon men n a and declining industries cmomer sovereignty and louver vote d demand How will output be produced tenamioemnenn and techniques or production Who will get output Minna so abimy to Day How will the system change ecoidinofomian ef ones 7 capital assumption The Invisible hand The Case for the Market System 1 Efficiency 2 Incentives 3 Freedom KEY TERMS private property Five Fundamental Questions freedom of enterprise e onomi c freedom of choic normal pro t self intere economic profit cornp ll n panding industry sumer sovereignty division of labor dollar vote medium of exchange derived demand barter guiding function of prices money invisible hand SS 1 41 MacroEconomics Professor Patrick Yanez Study Questions Economic Resources Set 1 These questions are to facilitate your discussion groups andor tutoring sessions Answers are listed at the end of this file Since our class time is limited to introducing new topics we do not have time to review these questions in class please use your discussion group andor tutoring session to review these questions 1 N E 5 V39 The economizing problem is one of deciding how to make the best use of virtually unlimited resources to satisfy virtually unlimited wants limited resources to satisfy virtually unlimited wants unlimited resources to satisfy limited wants limited resources to satisfy limited wants The concept of economic ef ciency is primarily concerned with A B C D the limited wantsunlimited resources dilemma considerations of equity in the distribution of wealth obtaining the maximum output from available resources the conservation of irreplaceable natural resources When the economist says that economic wants are insatiable this means that A B C D economic resources are valuable only because they can be used to produce consumer goods economic resourcesland labor capital and entrepreneurial abilityare scarce these wants are virtually unlimited and therefore incapable of complete satisfaction the structure of consumer demand varies from time to time and from country to country The fundamental problem of economics is 3 B V C D to establish a democratic political framework for the provision of social goods and services the establishment of prices that accurately re ect the relative scarcities of products and resources the scarcity of productive resources relative to economic wants to achieve a more equitable distribution of money income in order to mitigate poverty The science of economics stems from the fact that the production possibilities curve is bowed inward to the origin resources are scarce relative to people s demand for goods and services individuals and institutions behave only in their selfinterest historically the production possibilities curve has been shifting toward the origin Page 1 9 l 00 0 N The study of economics exists because A government interferes with the ef cient allocation of scarce resources resources are scarce in relation to economic wants the market system is an obstacle to the ef cient use of plentiful resources to satisfy constrained wants resources are overly abundant as compared to wants thus an allocation problem exists B C D V The scarcity problem A persists only because countries have failed to achieve continuous full employment B persists because economic wants exceed available productive resources C has been solved in all industrialized nations D has been eliminated in af uent societies such as the United States and Canada Because oftheir scarcity the efficient use of resources is A an important issue in all economies B an important issue only in centrally planned economies C an important issue only in market economies D not an important issue An increase in ef ciency suggests that an economy A has moved from a point outside of to a point on its production possibilities curve B has decided to produce more consumer goods and fewer capital goods C has moved from a point on to a point inside its production possibilities curve D is able to get more output from a given amount of inputs Economics can best be described as the study of A how to pro tably invest one s income in stocks and bonds B how to use scarce productive resources ef ciently C how government policies affect businesses and labor D managing business enterprises for pro t As used in economics the idea of scarce resources means that A mineral deposits are only available in finite amounts B resources are not so plentiful that all economic wants can be ful lled C some resources are free while others have price tags on them D the quantities available of some resources exceed the demand for them Which of the following is a land resource A a computer programmer a computer silicon sand used to make computer chips a piece of software used by a rm 13 C D Page 2 LA 4 V39 ON l Which of the following is a labor resource A a computer programmer B C D a computer silicon sand used to make computer chips a piece of software used by a rm Which of the following is a capital resource A B C D a computer programmer a corporate bond issued by a computer manufacturer silicone sand used to make computer chips a piece of software used by a firm The four factors of production are A land labor capital and money B land labor capital and entrepreneurial ability C labor capital technology and entrepreneurial ability D labor capital entrepreneurial ability and money Which of the following is a land resource A B C D a farmer an oil drilling rig a machine for detecting earthquakes natural gas Which of the following lists includes only capital resources and therefore no labor or land resources A an ice arena a professional hockey player hockey uniforms B the owner of a new startup rm a chemistry lab a researcher C a hydroelectric dam water behind the dam power lines D autos owned by a car rental firm computers at the car rental agency the vans that shuf e rental customers to and from the airport Money is not an economic resource because A money as such is not productive B idle money balances do not earn interest income C the terms of trade can be determined in nonmonetary terms D money is not a free gift of nature The money payments made to owners of land labor capital and entrepreneurial ability are A B C D interest wages rent and profits respectively rent wages dividends and interest respectively rent profits wages and interest respectively rent wages interest and profits respectively Page 3 20 2 22 2 2 4 2 VI 2 O E Economic resources are also called A free gifts of nature B consumption goods C units of money capital D factors of production Which of the following is real capital A a pair of stockings B a construction crane C a savings account D a share of IBM stock The main function of the entrepreneur is to A make routine pricing decisions B innovate C purchase capital D create market demand Assuming an economy has xed quantities of resources that economy A is more ef cient the larger the amount of goods and services it produces B is able to satisfy all consumer wants C will produce the same output whether or not resources are used ef ciently D is able to produce the same amount of output regardless of the production technologies it chooses Productive ef ciency refers to A the use of the leastcost method of production B the production of the productmix most wanted by society C the full employment of all available resources D production at some point inside of the production possibilities curve If an economy produces its most wanted goods but uses outdated production methods it is A achieving productive ef ciency but not allocative ef ciency B not achieving productive ef ciency C achieving both productive and allocative ef ciency D engaged in roundabout production To realize full production a society must achieve A income inequality B productive efficiency only C both allocative and productive ef ciency D any output lying inside of its production possibilities curve Page 4 9089959 GUJDgtDgtUIJUJUUDgtUUUJUDgtOUJUJUDgtUJUUUJOOO Answers for Study Questions Economic Resources Set 1 B Page 5
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