Topic 1 - Overview of Macroeconomics

Which of the following involve a tradeoff?

• e. All of the above involve tradeoff

• d. Walking the dog
• c. Reading a book
• b. Eating a sandwich
• a. Buying a new boat

Tradeoffs are required because wants are unlimited and resources are

• c. scarce
• a. efficient
• b. economical
• d. unlimited
• e. marginal.

Economics is the study of

• d. how to avoid having to make tradeoff

• c. how to reduce our wants until we are satisfied.

• b. how society manages its scarce resources.

• a. how to fully satisfy unlimited wants.

• e. how society manages its unlimited resources.

A rational person does not act unless

• a. the action makes money for the person.

• b. the action is ethical.

• c. the action produces marginal costs that exceed marginal benefits.

• d. the action produces marginal benefits that exceed marginal costs.

• e. none of the above.

Suppose you find $20. If you choose to use the $20 to go to the football game, your opportunity cost of going to the game is

• a. nothing, because you found the money.

• b. $20 (because you could have used the $20 to buy other things).

• c. $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game.

• d. $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game, plus the cost of the dinner you purchase at the game.

• e. none of the above.

Since people respond to incentives, we would expect that, if the average salary of accountants increases by 50% while the average salary of teachers increases by 20%,

• c. more students will attend college.
• a. students will shift majors from education to accounting.
• d. all of the above.
• b. students will shift majors from accounting to education.

Workers in the United States enjoy a high standard of living because

• b. they have protected their industry from foreign competition.

• c. the United States has a high minimum wage.

• a. unions in the United States keep the wage high.

• e. none of the above.

• d. workers in the United States are highly productive.

The Phillips curve suggests that a. an increase in inflation temporarily increases unemployment. b. a decrease in inflation temporarily increases unemployment. c. inflation and unemployment are unrelated in the short run. d. none of the above.

• d. none of the above.

• c. inflation and unemployment are unrelated in the short run.

• a. an increase in inflation temporarily increases unemployment.

• b. a decrease in inflation temporarily increases unemployment.

An increase in the price of beef provides information which

• b. tells consumers to buy less pork.

• c. tells producers to produce more beef.

• d. provides no information because prices in a market system are managed by planning boards.

• a. tells consumers to buy more beef.

You have spent $1000 building a hot dog stand based on estimates of sales of $2000. The hot dog stand is nearly completed but now you estimate total sales to be only $800. You can complete the hot dog stand for another $300. Should you complete the hot dog stand?a. Yes. b. No. c. There is not enough information to answer this question.

• No.

• Yes.

• There is not enough information to answer this question.