MACROECONOMICS- C719 WESTERN GOVERNORS
UNIVERSITY.
Designed to boost confidence and grades!
Opportunity cost - Answer: The value of the best alternative that is sacrificed to obtain
something you want is a/an
What is a graph that shows the various combinations of choices an individual can make
with the resources available? - Answer: Choice curve
The assumption that all resources are alike will produce a - Answer: straight line curve
A curved production possibilities curve (PPC) changes the assumption that resources
are - Answer: alike
What explains how the production of larger amounts of one good leads to an increase in
the sacrifice of the alternative good? - Answer: the law of increasing opportunity costs
An outward shift of the production possibilities curve (PPC) increases the economy's
capacity to respond to - Answer: human wants
What is the most important assumption in economic models? - Answer: ceteris paribus
assumption
"all else being equal."
Economists assume people are - Answer: rational
This behavior consists of people trying to get the most of something they want (to
maximize some goal) out of available resources - Answer: self-interested behavior
1
APPHIA - Crafted with Care and Precision for Academic Excellence.
,The four factors of production are - Answer: land, labor, capital and entrepreneurship
Plants, equipment, and machinery are examples of - Answer: capital resources
Capital increases only when - Answer: physical or human capital increases
What is entrepreneurship? - Answer: the activity of combining the other productive
resources to produce goods and services, taking risks, and introducing new methods
and new products (innovation.)
What is profit? - Answer: the reward for innovation, risk taking, and organization
What are the three basic economic questions? - Answer: What to produce?
How to produce?
For whom to produce?
What are the three broad types of economies? - Answer: 1. Traditional economy
2. Command (or planned) economy
3. Market economy
Traditional economy - Answer: answers the basic economic questions by tradition, or
custom (Haiti banana farmers)
Command (or planned) economy - Answer: answers the basic economic questions
through central command and control (Soviet Union, China, North Korea and Cuba)
Market economy - Answer: relies on incentives and the self-interested behavior of
individuals to direct production and consumption through market exchanges (America)
Mixed economy - Answer: a blend of tradition, command, and market economies
(Most modern industrial countries have this)
2
APPHIA - Crafted with Care and Precision for Academic Excellence.
,A good that is nonrival in consumption and not subject to exclusion is called a(n) -
Answer: Public Goods
(Sunsets & Lighthouses)
What are negative effects that have an impact on everyone to some degree? - Answer:
Public Bads
(Pollution, Global Warming, Animal Extinction)
Goods that nonpayers, or free riders, *CAN* be kept from consuming - Answer:
Excludables
Spillover benefits to third parties are called - Answer: Positive Externalities
(Public Education)
What is an example of a negative externality? - Answer: Pollution. It's a negative
externality because it has spillover costs to third parties.
The goal of an economy is for the goods and services to go to the people - Answer:
who will value them the most
Which of the following is the most successful method to allocate sweaters in
Macroland? - Answer: Market prices
Getting a mandated vaccination that protects you, but also protects others, would be
considered - Answer: a pure public good
3
APPHIA - Crafted with Care and Precision for Academic Excellence.
, In the absence of government intervention, there will be both - Answer: too many public
bads and too few public goods.
Which of the following is an example of a transfer payment? - Answer: Veterans'
benefits. They are transfer payments because they are income and they are disbursed
without work being done.
In the United States, the redistributive function of the government is carried out mainly
by - Answer: The redistribution function is financed at the federal level and
implemented at the state and local levels.
What function of the government promotes price stability and full employment? -
Answer: Stabilization
(The Government cutting taxes to end a recession)
What is a visual picture of the relationships between the resource market, in which
income is earned, and the product market, in which income is used to purchase goods
and services? - Answer: A Circular Flow Model
(describes a mixed economy)
What is the most basic function of the government in a market economy? - Answer:
Defining and Enforcing property rights
The following are justifications for the allocation function of the government - Answer:
The existence of public bads
The presence of external effects
The existence of public goods
(NOT the basic instability of the economy)
4
APPHIA - Crafted with Care and Precision for Academic Excellence.
UNIVERSITY.
Designed to boost confidence and grades!
Opportunity cost - Answer: The value of the best alternative that is sacrificed to obtain
something you want is a/an
What is a graph that shows the various combinations of choices an individual can make
with the resources available? - Answer: Choice curve
The assumption that all resources are alike will produce a - Answer: straight line curve
A curved production possibilities curve (PPC) changes the assumption that resources
are - Answer: alike
What explains how the production of larger amounts of one good leads to an increase in
the sacrifice of the alternative good? - Answer: the law of increasing opportunity costs
An outward shift of the production possibilities curve (PPC) increases the economy's
capacity to respond to - Answer: human wants
What is the most important assumption in economic models? - Answer: ceteris paribus
assumption
"all else being equal."
Economists assume people are - Answer: rational
This behavior consists of people trying to get the most of something they want (to
maximize some goal) out of available resources - Answer: self-interested behavior
1
APPHIA - Crafted with Care and Precision for Academic Excellence.
,The four factors of production are - Answer: land, labor, capital and entrepreneurship
Plants, equipment, and machinery are examples of - Answer: capital resources
Capital increases only when - Answer: physical or human capital increases
What is entrepreneurship? - Answer: the activity of combining the other productive
resources to produce goods and services, taking risks, and introducing new methods
and new products (innovation.)
What is profit? - Answer: the reward for innovation, risk taking, and organization
What are the three basic economic questions? - Answer: What to produce?
How to produce?
For whom to produce?
What are the three broad types of economies? - Answer: 1. Traditional economy
2. Command (or planned) economy
3. Market economy
Traditional economy - Answer: answers the basic economic questions by tradition, or
custom (Haiti banana farmers)
Command (or planned) economy - Answer: answers the basic economic questions
through central command and control (Soviet Union, China, North Korea and Cuba)
Market economy - Answer: relies on incentives and the self-interested behavior of
individuals to direct production and consumption through market exchanges (America)
Mixed economy - Answer: a blend of tradition, command, and market economies
(Most modern industrial countries have this)
2
APPHIA - Crafted with Care and Precision for Academic Excellence.
,A good that is nonrival in consumption and not subject to exclusion is called a(n) -
Answer: Public Goods
(Sunsets & Lighthouses)
What are negative effects that have an impact on everyone to some degree? - Answer:
Public Bads
(Pollution, Global Warming, Animal Extinction)
Goods that nonpayers, or free riders, *CAN* be kept from consuming - Answer:
Excludables
Spillover benefits to third parties are called - Answer: Positive Externalities
(Public Education)
What is an example of a negative externality? - Answer: Pollution. It's a negative
externality because it has spillover costs to third parties.
The goal of an economy is for the goods and services to go to the people - Answer:
who will value them the most
Which of the following is the most successful method to allocate sweaters in
Macroland? - Answer: Market prices
Getting a mandated vaccination that protects you, but also protects others, would be
considered - Answer: a pure public good
3
APPHIA - Crafted with Care and Precision for Academic Excellence.
, In the absence of government intervention, there will be both - Answer: too many public
bads and too few public goods.
Which of the following is an example of a transfer payment? - Answer: Veterans'
benefits. They are transfer payments because they are income and they are disbursed
without work being done.
In the United States, the redistributive function of the government is carried out mainly
by - Answer: The redistribution function is financed at the federal level and
implemented at the state and local levels.
What function of the government promotes price stability and full employment? -
Answer: Stabilization
(The Government cutting taxes to end a recession)
What is a visual picture of the relationships between the resource market, in which
income is earned, and the product market, in which income is used to purchase goods
and services? - Answer: A Circular Flow Model
(describes a mixed economy)
What is the most basic function of the government in a market economy? - Answer:
Defining and Enforcing property rights
The following are justifications for the allocation function of the government - Answer:
The existence of public bads
The presence of external effects
The existence of public goods
(NOT the basic instability of the economy)
4
APPHIA - Crafted with Care and Precision for Academic Excellence.
