1st Macroeconomics Exam – Destin Economics

These Practice Exams cover the first Exam of your course and include the topics Economics and Society, The Circular Flow Model, the Production Possibilities Curve, Supply and Demand, and the Role of Government in the Economy.

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Created on August 15, 2020 By

Keith Burns

1st. Macroeconomics Exam (EASY)

This is the first Macroeconomics Exam. It is also the easiest. If you do well on this one, take the Macro 2 Exam. Good luck!

1 / 25

The law of demand states that the quantity of a good demanded, ceteris paribus, will

Decrease as its price rises.

Decrease as its price falls.

Increase as its price increases.

Never change.

2 / 25

In economics, an externality occurs when

A transaction between two parties has no effect on the utility of either of the parties.

A transaction between two parties has an effect on the utility of someone who is not part of that transaction.

A transaction between two parties has no effect on the utility of everyone who is not part of that transaction.

All of the above.

An externality is anything that affects a third party to a market transaction.

3 / 25

When a market is at the equilibrium price, we can say that:

Supply exists.

Shortages evens out.

The market clears.

Demand evens out.

Equilibrium occurs when buyers are ready, willing, and able to buy at the market price everything producers are ready, willing, and able to sell for the market price. It can, then, be said that the market ‘clears’.

4 / 25

Economic growth is

A function of central government planning.

Frequently used a measure of market failure.

Measured as an increase in output or real GDP.

All of the above.

5 / 25

The supply of a good is determined by which of the following?

The technology used to produce the good.

The tastes and preferences of potential buyers of the good.

The number of potential buyers of the good.

Buyer expectations about the price of the good in the near future.

6 / 25

Of the following, which is not a factor of production?

Labor

Capital

Income

Land

Factors of production include land, labor, and capital.

7 / 25

Economist believe that people are motivated by

Money alone.

Incentives based on their tastes and preferences.

Incentives set by government.

None of the above.

8 / 25

When a third party pays for or receives benefits from an economic transaction that s/he was not involved, we say that a(n) ________ has occurred.

Exchange.

Partial transaction.

Externality.

Bull market.

9 / 25

When economists speak of externalities, they are referring to

Actions that take place outside of normal economic conditions.

Actions that take place outside of the US.

The costs or benefits of a market transaction that are paid or received by a third party.

The costs or benefits of a market transaction that are paid or received in that transaction.

10 / 25

When government intervenes in a market economy

Society always benefits.

Society may benefit.

Society never benefits.

Society is always harmed.

11 / 25

Economists define opportunity cost as:

The monetary cost of a good or service, including inflation.

The monetary cost of a good or service, adjusted for inflation.

The value of the next-best alternative given up when something is chosen.

None of the above.

The opportunity cost of a good or service is the next-most desirable thing you could have selected, but didn’t. Recall the commercial that said, “Wow, I could have had a V-8!”

12 / 25

Ceteris paribus, a decrease in the number of sellers of a product will cause its equilibrium price to

Decrease and equilibrium quantity will increase.

Decrease and equilibrium quantity will decrease.

Increase and equilibrium quantity will increase.

Increase and equilibrium quantity will decrease.

13 / 25

Ceteris paribus means

Holding constant everything except for those variables that are explicitly changing inside the model

Let the buyer beware.

One before many.

Basically, the same thing as E Pluribus Unum.

Ceteris paribus means assuming that ‘all else is held constant’.

14 / 25

In economics, the term market mechanism refers to

The use of market prices, incentives, and sales to determine resource allocation.

The machinery used to produce goods and services.

The process by which the demand curve dictates prices.

Government laws and regulations that set market prices.

15 / 25

The total market value of all goods and services produced in a country during a one year period is

That country’s GDP.

That country’s tax base.

That country’s economic density.

That country’s retail sales.

GDP is the total market value of all final goods and services produced with a country in a given time period.

16 / 25

If an economy is producing a combination of goods inside the production possibilities curve,

Some resources are underemployed.

It is not operating as efficiently as it could

It is possible to produce more of one good without giving up some of the other good.

All of the above.

17 / 25

A mixed economy, like the one in the United States

Demonstrates why markets can’t be trusted to make the right allocation decisions.

Allows for both private and government intervention in economic allocation decisions

Demonstrates why government can’t be trusted to make the right allocation decisions.

Will never be repeated.

18 / 25

The country with the largest GDP is

China.

Russia.

United States.

France.

19 / 25

Economists define the most-desired good or service that one gives up when s/he makes a choice as its

Price.

Marginal value.

Unity value.

Opportunity cost.

The opportunity cost of a good or service is the next-most desirable thing you could have selected, but didn’t. Recall the commercial that said, “Wow, I could have had a V-8!”

20 / 25

In economics, opportunity cost is defined as

The price paid for a good or service.

The social cost of a good or service, including it price.

The replacement of one good with another.

The alternative that one must give up in order to get something.

21 / 25

To say that one is a 'rational utility maximizer' means that

When faced with a choice, that person generally chooses the alternative that s/he believes offers her/him the greatest utility.

When faced with a choice, that person generally chooses the alternative that s/he believes offers her/him some minimum amount of utility.

When faced with a choice, that person generally chooses the alternative that costs the most.

When faced with a choice, that person generally chooses the alternative that costs the least.

22 / 25

Which two of the following economic principles are illustrated by the Production Possibilities Curve?

Prices and resource costs.

The scarcity of resources and opportunity costs.

Capital and entrepreneurship

Resource allocation and markets.

23 / 25

Of the following, which is a factor market?

A grocery store.

A fast-food restaurant.

A jobs website.

None of the above.

A factor market is any place where the factors of production (land, labor, or capital) are bought and sold.

24 / 25

_______ countries tend to experience the greatest levels of income inequality.

Poor.

Middle-income.

Rich.

None of the above.

25 / 25

Economists argue that 'utility' is:

Agreed upon by everyone.

Unique to luxury goods.

Based on an individual's tastes and preferences.

Unattainable.

Your score is

The average score is 72%

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114

Created on September 17, 2020 By

Dennis Burns

1st. Macroeconomics Exam (MODERATE)

This is the second version of the First Macroeconomics Exam. It is a little tougher than the first. If you do well on this one, take the 1st. Macroeconomics 3 Exam. Good luck!

1 / 25

The invisible hand refers to

Laws and practices enforced by government bureaucrats who are rarely seen; but, influence the real economy.

The set of laws and practices under which the economy operates.

The movement of resources, labor, and capital brought about by market forces.

None of the above.

2 / 25

The best measure for comparing the economic well-being of people across countries is

Population growth rate.

Per capita GDP.

GDP.

Per worker GDP.

Because GDP per capita is an average, it is commonly used to compare economic well-being across countries.

3 / 25

If an industry has a highly capital-intensive production process, we would expect its

Ratio of labor to capital to be high.

Profits to be low.

Worker productivity to be high.

None of the above.

4 / 25

The definition of an entrepreneur is that s/he is one who

Combines the factors of production and assumes the risk of production.

Works with government to decide what goods are most-needed.

Provides capital for those planning to start new businesses.

Invents new machinery to be used in production.

5 / 25

The law of supply tells us that

The supply curve of a good will ne upward sloping to the right.

The supply curve of a good will be downward-sloping to the right.

The supply curve of a good will be horizontal to the right.

Supply is proportional to demand.

The law of supply tells us that higher prices give firms an incentive to increase their output of a good. Therefore, its supply curve will be upward-sloping to the right.

6 / 25

A municipal government limit on commercial development in a geographic area is an example of

Individual economic decisionmakers’ self-interested behavior.

Market forces making allocation decisions.

Market failure.

Government intervention.

7 / 25

Of the following, which is likely to cause a decrease in the supply of lumber, ceteris paribus?

An improvement in transportation technology.

An increase in the price of finished lumber.

An increase in the wages of lumberjacks.

A decrease in the demand for lumber

A change in the costs of production will shift the supply curve—to the left, in this case.

8 / 25

In the event of a market failure, we often rely on __________ for corrective action.

The invisible hand

The laws and regulations set forth by government

Market forces

Government central planning.

9 / 25

Inputs are sold to firms in ________ and finished goods are sold in ________.

Factor markets; product markets

Asset markets; factor markets

Product markets; factor markets

Factor markets; capital markets

10 / 25

Of the following, which can change without shifting demand, ceteris paribus?

The price of a substitute good.

The price of the good.

Consumer incomes.

Consumer tastes and preferences.

11 / 25

The definition of an opportunity cost is that it is the

The alternative goods or services that are forgone when a choice is made.

Money prices that are paid for goods and services.

The resource cost of producing one unit of a product.

Differences in prices between actual and suggested prices.

12 / 25

In 2018 Bigg, Inc. sold 100,000 of its GoofiBalz at $8.50 each and in 2019, the company sold 120,000 at $9.50 each. This suggests that

The supply of GoofiBalz increased between 2018 and 2019.

The supply of GoofiBalz decreased between 2018 and 2019.

The demand for GoofiBalz increased between 2018 and 2019.

The demand for GoofiBalz decreased between 2018 and 2019.

13 / 25

In economics, the four factors of production include:

Land, labor, capital, and entrepreneurship.

Land, labor, money, and people.

Land, capital, investors, and government.

Labor, money, land, and government.

14 / 25

The equilibrium price and quantity in a market are found where

The market supply and the market demand curves intersect.

The market supply curve reaches its highest point.

The market demand curve reaches its highest point.

The market supply curve becomes vertical.

15 / 25

Economists believe that the goal of business firms in a market economy is to maximize

The sales of their products.

Their utility.

Their profits.

Social welfare.

Economists believe that the vast majority of businesses are motivated by profit.

16 / 25

With regard to income inequality, which of the following statements is true?

Rich countries always have higher degrees of income inequality.

Income inequality is an issue that is easy to resolve.

Socialism is the best solution to income inequality.

Because they require individual initiative prompted by incentives, free markets generally produce unequal distribution of income.

17 / 25

When there is a shortage in a market at a given price,

The current price is less than the equilibrium price

The current price is greater than the equilibrium price.

The equilibrium price does not exist.

All of the above are possible.

If the current price is below the equilibrium price, quantity demanded will exceed quantity supplied and a market shortage will exist.

18 / 25

The demand for a good is determined by all but which of the following?

The technology used to produce the good.

The tastes and preferences of potential buyers of the good.

The incomes of potential buyers of the good.

Buyer expectations about the price of the good in the near future.

Demand for a good is determined by the number of potential buyers, their respective tastes, their incomes, the prices of other goods, and their expectations about the future.

19 / 25

For a price ceiling to have an effect on a market, it must be

Below the equilibrium price, and it will create a market shortage.

Below the equilibrium price, and it will create a market surplus.

Above the equilibrium price, and it will create a market shortage.

Above the equilibrium price, and it will create a market surplus.

If a price ceiling is set above the equilibrium price of a market, that market will simply move its equilibrium price and quantity. But, when the ceiling is set below the equilibrium price, Quantity demanded will exceed quantity supplied.

20 / 25

The problem with negative externalities is that their external cost isn’t fully reflected in the price of the good that produces them and, therefore,

The government has failed to establish rules for contracts.

Firms can expect their profits to fall.

Firms tend to produce more of that good than is socially optimal.

The government is concerned about broad economic welfare.

21 / 25

If the price of a good changes

Its supply curve will shift.

Its quantity supplied will change.

The slope of it supply curve will change.

The technology used to produce the good will change.

As with demand, a change in price results in a movement along the curve and, therefore, a change in the quantity supplied of the good.

22 / 25

The factors of production are

Scarce in all societies.

More scarce in advanced countries than in poor countries.

More scarce in poor countries than in rich countries

Available without limit.

23 / 25

Which of the following events would shift a country’s production possibilities curve outward?

Many of the country’s middle-aged workers decide to retire from the workforce.

A decline in the high school and college graduation rates.

An increase in technological discoveries.

All of the above.

24 / 25

Consumers purchase ________ in product markets and supply ________ in the factor market.

Capital goods; final goods

Factors of production; final goods and services

Capital goods; final goods and services

Final goods and services; factors of production

25 / 25

Which of the following sectors has seen its share of real GDP grow significantly in recent decades?

Manufacturing.

Services.

Agriculture.

None of the above.

Your score is

The average score is 64%

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113

Created on September 17, 2020 By

Dennis Burns

1st. Macroeconomics Exam (DIFFICULT)

This is the third--and most demanding--version of the First Macroeconomics Exam. If you do well on this one, you should be ready for the real thing. Good luck!

1 / 25

Assume a series of technical difficulties has reduced the supply of tennis balls. Assume also that tennis balls and tennis rackets are complements. If the price of tennis balls increases, we can expect the

Demand for tennis rackets to decrease.

Supply of tennis rackets to decrease.

Demand for tennis rackets to increase.

Supply of tennis rackets to increase.

With complements, when the price of one good rises, we expect the demand for the other good to decline.

2 / 25

If the economy expands, the Production Possibilities Curve will:

Shift outward.

Shift inward.

Become less bowed out.

Shift in the direction of the good whose technology had improved.

The Production Possibilities Curve is the maximum an economy can produce with current technology. If the economy acquires new productive capacity, we illustrate this with an outward shift of the Production Possibilities Curve.

3 / 25

A technological improvement is shown by

An outward shift of the production possibilities curve.

An inward shift of the production possibilities curve.

The production of a combination of goods at a point outside the production possibilities curve.

The production of a combination of goods at a point inside the production possibilities curve.

4 / 25

Which of the following would lead to an increase in the demand curve for new cars?

A decrease in the price of new cars.

An increase in the incomes of consumers between the ages of 25 and 45.

A widespread increase in the acceptance of mass transit.

Consumer expectations that car prices will fall dramatically in the near future..

A decrease in the price of new cars would lead to a movement along the demand curve. Changes in beliefs about commuting and lower future car prices would reduce current demand for cars.

5 / 25

The problem with negative externalities is that their external cost isn’t fully reflected in the price of the good that produces them and, therefore,

The government has failed to establish rules for contracts.

Firms can expect their profits to fall.

Firms tend to produce more of that good than is socially optimal.

The government is concerned about broad economic welfare.

6 / 25

Of the following, which goods or services may be purchased in a product market?

A share of Intel stock.

A factory.

An iPad.

The services of a sales manager.

Finished goods and services are bought and sold in product markets.

7 / 25

The Antitrust Division of the US Justice Department seeks to

Encourage competitive behavior among firms.

Discourage competitive behavior among firms.

Encourage competitive behavior among firms that sell to other countries.

Encourage business mergers and acquisitions between US firms.

8 / 25

A basic formula to calculate productivity is

(Units of output)/(units of input).

(Dollar value of output)/(dollar value of inputs).

(Units of output)/(dollar value of inputs).

(Dollar value of output)/(units of outputs).

9 / 25

Of the following events, which would cause a rightward shift in the supply curve for tennis rackets?

An improvement in the technology used to produce tennis rackets.

An increase in the demand for tennis rackets.

An increase in the sales tax on tennis rackets.

An increase in the incomes of consumers.

Improvements in technology that reduce the cost of production will improve profit margins at every price level and will increase supply.

10 / 25

Of the following, which would not cause the market supply of cell phones to change?

The government deregulates the provision of cell phones and cell phone services and new companies enter the market for both.

A technological advance reduces the prices of computer chips used in cell phones.

A drop in the demand for cell phones causes their price to fall.

Government increases the subsidies given to cell phone producers.

11 / 25

When economists speak of factor mobility they are referring to

The extent of capital investment in the economy.

The level of investment in transportation in the economy.

The ease with which laborers move into the ranks of management.

The ease with which resources can be moved to industries that show promise of growth and/or profits.

12 / 25

When government regulates food additives, it is attempting to

Restrain the monopolistic position of food companies.

Ensure the monopolistic position of food companies.

Assess the safety of using those additives.

Avoid market failure.

13 / 25

When government intervenes in a market economy

Society always benefits.

Society may benefit.

Society never benefits.

Society is always harmed.

14 / 25

If an economy’s annual output increases by 3% while its inputs increased by 2%, we can say that

Its productivity has improved.

Its productivity has fallen.

Its productivity has remained constant.

We can’t determine this with the data provided.

15 / 25

A technological advance means that

The economy can produce more output using the same (current) resources.

The economy can produce more output using less resources.

The economy can produce more output using more resources.

The economy no longer needs resources.

16 / 25

A country can raise the level of human capital its economy by

Enacting tax cuts for investment.

Providing for more and better education in its population.

Building more roads, schools, and bridges.

All of the above.

Education, training, and skills gained through work experience are generally used as measures of human capital.

17 / 25

Of the following events, which would cause a rightward shift in the supply curve for tennis rackets?

An improvement in the technology used to produce tennis rackets.

An increase in the demand for tennis rackets.

An increase in the sales tax on tennis rackets.

An increase in the incomes of consumers.

Improvements in technology that reduce the cost of production will improve profit margins at every price level and will increase supply.

18 / 25

Relative to the average household in most low-income countries, poor people in the United States, on average, receive

As much as rich people in the US receive.

Fewer goods and more services.

More goods and fewer services.

Far more of both goods and services.

19 / 25

If peanut butter and jelly are complements. Ceteris paribus, an increase in the price of peanut butter will cause the demand for jelly to

Shift to the left.

Shift to the right.

Remain stable; but, the supply of jelly will shift left.

Remain stable; but, the supply of jelly will shift right.

With complements, an increase in the price of one good will lead to decrease in the demand for the other.

20 / 25

With regard to income inequality, which of the following statements is true?

Rich countries always have higher degrees of income inequality.

Income inequality is an issue that is easy to resolve.

Socialism is the best solution to income inequality.

Because they require individual initiative prompted by incentives, free markets generally produce unequal distribution of income.

21 / 25

What would happen in the market for life-saving drugs if the US government placed a price ceiling on their sales?

More of those drugs would be produced.

Fewer of those drugs will be produced

The number of those drugs will not change.

None of the above.

The price ceiling would reduce the incentive to invent and fewer drugs would be invented.

22 / 25

When a third party pays for or receives benefits from an economic transaction that s/he was not involved, we say that a(n) ________ has occurred.

Exchange.

Partial transaction.

Externality.

Bull market.

23 / 25

Which of the following is true when an economy is producing efficiently?

The economy is producing a combination of goods on the production possibilities curve.

The economy is producing a combination of goods within the production possibilities curve.

The economy is producing the most goods and services possible without growth.

The economy is producing everything that everyone wants.

24 / 25

If a farmer is capable of producing either corn or wheat, the supply of corn will change, ceteris paribus, when

The price of wheat increases.

The price of corn increases.

The demand for corn increases.

Buyer incomes increase.

If the price of wheat changes, this will make corn production relatively more or less profitable and, therefore, the supply of corn will change.

25 / 25

_______ countries tend to experience the greatest levels of income inequality.

Poor.

Middle-income.

Rich.

None of the above.

Your score is

The average score is 71%

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