Macro Economics Exam 1 Questions
and Answers
A production possibilities frontier with a _______________ shape indicates increasing
opportunity costs as more and more of one good is produced - Answer-bowed outward
Increasing opportunity cost along a bowed out production possibilities frontier occurs
because - Answer-some factors of production are not equally suited to producing both
goods and services
Economic growth is represented on a production possibilities frontier model by the
production possibility frontier - Answer-shifting outward
Figure 2-4. A movement from ________ could occur because of an influx of immigrant
labor. - Answer-X to Y
Figure 2-4. A movement from ___________ is the result of advancements in plastic
production technology. - Answer-Y to Z
Figure 2-5. IF the economy is currently producing at point X, what is the opportunity cost
of moving to point W? - Answer-3 million tons of steel
Suppose your expenses for this term are as follows: tuition:$5000, room and board:
$3000, books and other educational supplies: $500. Further during the term , you can
only part-time and earn $4000 instead of your full-time salary of $10000. What is the
opportunity cost of going to college this term, assuming that your room and board
expenses would be the same even if you did not go to college? - Answer-$11,500
Comparative advantage means - Answer-the ability to produce a good or service at a
lower opportunity cost than any other producer.
For each watch that Switzerland produces, it gives up the opportunity to make 50
pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate
it produces. Which of the following is true about the comparative advantage between
the two countries? - Answer-Switzerland has the comparative advantages in watches
Table 2-5. IF the two countries specialize and trade, who should export lumber? -
Answer-Estonia
, If the best lawyer in town is also the best at operating a word processor, then according
to economic reasoning, this person should - Answer-specialize in being a lawyer
because its opportunity cost is lower.
Let D=Demand, S=Supply, P=Equilibrium price, Q=Equilibrium Quantity. What happens
in the market for sushi if the Surgeon General announces that a majority of the raw fish
that is imported to make sushi contains high levels of toxic mercury? - Answer-D
Decreases, S no change, P and Q decreases
Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the
gulf coast states. In the market for gasoline... - Answer-The supply curve shifted to the
left resulting in an increase in the equilibrium price
Electric car manufacturers want to sell more electric cars at a higher price. Which of the
following events would have this effect - Answer-an increase in the price of gasoline
Which of the following would cause the equilibrium price of ketchup to increase and the
equilibrium quantity of ketchup to decrease - Answer-an increase in the price of
tomatoes
Prices of smartphones (normal good) have fallen in recent years. Over this same
period, the price of the components used to produce smartphones has also fallen and
consumer incomes have risen. Which of the following best explains the falling prices of
smartphones? - Answer-The supply curve for smartphones has shifted to the right more
than the demand curve has shifted to the right
Assume in recent years the cost of producing microbrew beer in the US has decreased
largely due to technological improvements. At the same time, more ans more
Americans prefer microbrew beer over wine. Which of the following best explains the
effect of these events in the microbrew beer market? - Answer-Both supply and demand
curves have shifted to the right. As a result, there has been an increase in the
equilibrium quantity and in uncertani effect on the equilibrium price
Studies have shown that drinking one glass of red wine per day may help prevent heart
disease. Assume this is true, and a fungal disease destroys a large portion of the grape
harvest of California vineyards. In the market for red wine, these two developments
would.... - Answer-Increase demand and decrease supply, resulting in an increase in
the equilibrium price and an uncertain effect on the equilibrium quantity of red wine
An increase in the demand for peanuts due to changes in consumer tastes,
accompanied by an increase in the supply of peanuts as a result of favorable growing
conditions, will result in - Answer-an increase in the equilibrium quantity of peanuts; the
equilibrium price may increase or decrease
and Answers
A production possibilities frontier with a _______________ shape indicates increasing
opportunity costs as more and more of one good is produced - Answer-bowed outward
Increasing opportunity cost along a bowed out production possibilities frontier occurs
because - Answer-some factors of production are not equally suited to producing both
goods and services
Economic growth is represented on a production possibilities frontier model by the
production possibility frontier - Answer-shifting outward
Figure 2-4. A movement from ________ could occur because of an influx of immigrant
labor. - Answer-X to Y
Figure 2-4. A movement from ___________ is the result of advancements in plastic
production technology. - Answer-Y to Z
Figure 2-5. IF the economy is currently producing at point X, what is the opportunity cost
of moving to point W? - Answer-3 million tons of steel
Suppose your expenses for this term are as follows: tuition:$5000, room and board:
$3000, books and other educational supplies: $500. Further during the term , you can
only part-time and earn $4000 instead of your full-time salary of $10000. What is the
opportunity cost of going to college this term, assuming that your room and board
expenses would be the same even if you did not go to college? - Answer-$11,500
Comparative advantage means - Answer-the ability to produce a good or service at a
lower opportunity cost than any other producer.
For each watch that Switzerland produces, it gives up the opportunity to make 50
pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate
it produces. Which of the following is true about the comparative advantage between
the two countries? - Answer-Switzerland has the comparative advantages in watches
Table 2-5. IF the two countries specialize and trade, who should export lumber? -
Answer-Estonia
, If the best lawyer in town is also the best at operating a word processor, then according
to economic reasoning, this person should - Answer-specialize in being a lawyer
because its opportunity cost is lower.
Let D=Demand, S=Supply, P=Equilibrium price, Q=Equilibrium Quantity. What happens
in the market for sushi if the Surgeon General announces that a majority of the raw fish
that is imported to make sushi contains high levels of toxic mercury? - Answer-D
Decreases, S no change, P and Q decreases
Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the
gulf coast states. In the market for gasoline... - Answer-The supply curve shifted to the
left resulting in an increase in the equilibrium price
Electric car manufacturers want to sell more electric cars at a higher price. Which of the
following events would have this effect - Answer-an increase in the price of gasoline
Which of the following would cause the equilibrium price of ketchup to increase and the
equilibrium quantity of ketchup to decrease - Answer-an increase in the price of
tomatoes
Prices of smartphones (normal good) have fallen in recent years. Over this same
period, the price of the components used to produce smartphones has also fallen and
consumer incomes have risen. Which of the following best explains the falling prices of
smartphones? - Answer-The supply curve for smartphones has shifted to the right more
than the demand curve has shifted to the right
Assume in recent years the cost of producing microbrew beer in the US has decreased
largely due to technological improvements. At the same time, more ans more
Americans prefer microbrew beer over wine. Which of the following best explains the
effect of these events in the microbrew beer market? - Answer-Both supply and demand
curves have shifted to the right. As a result, there has been an increase in the
equilibrium quantity and in uncertani effect on the equilibrium price
Studies have shown that drinking one glass of red wine per day may help prevent heart
disease. Assume this is true, and a fungal disease destroys a large portion of the grape
harvest of California vineyards. In the market for red wine, these two developments
would.... - Answer-Increase demand and decrease supply, resulting in an increase in
the equilibrium price and an uncertain effect on the equilibrium quantity of red wine
An increase in the demand for peanuts due to changes in consumer tastes,
accompanied by an increase in the supply of peanuts as a result of favorable growing
conditions, will result in - Answer-an increase in the equilibrium quantity of peanuts; the
equilibrium price may increase or decrease
