Macroeconomics approaches the study of economics from the viewpoint of:

1. A. the entire economy.
2. B. governmental units.
3. C. the operation of specific product and resource markets.
4. D. individual firms.
Which of the following is associated with macroeconomics?
1. A. an examination of the incomes of Harvard Business School graduates
2. B. an empirical investigation of the general price level and unemployment rates since 1990
3. C. a study of the trend of pecan prices since the Second World War
4. D. a case study of pricing and production in the textbook industry
The problems of aggregate inflation and unemployment are:
1. A. major topics of macroeconomics.
2. B. not relevant to the U.S. economy.
3. C. major topics of microeconomics.
4. D. peculiar to command economies.
Which of the following statements pertains to macroeconomics?
1. A. Because the minimum wage was raised, Mrs. Olsen decided to enter the labor force.
2. B. A decline in the price of soybeans caused farmer Wanek to plant more land in wheat.
3. C. National income grew by 2.7 percent last year.
4. D. The Pumpkin Center State Bank increased its interest rate on consumer loans by 1 percentage point.
Macroeconomics can best be described as the:
1. A. analysis of how a consumer tries to spend income.
2. B. study of the large aggregates of the economy or the economy as a whole.
3. C. analysis of how firms attempt to maximize their profits.
4. D. study of how supply and demand determine prices in individual markets.
Microeconomics is concerned with:
1. A. the aggregate or total levels of income, employment, and output.
2. B. a detailed examination of specific economic units that make up the economic system.
3. C. positive economics, but not normative economics.
4. D. the establishing of an overall view of the operation of the economic system.
Microeconomics:
1. A. is the basis for the “after this, therefore because of this” fallacy.
2. B. is not concerned with details, but only with the overall big picture of the economy.
3. C. is concerned with individual economic units and specific markets.
4. D. describes the aggregate flows of output and income.
Which of the following is a microeconomic statement?
1. A. The real domestic output increased by 2.5 percent last year.
2. B. Unemployment was 6.8 percent of the labor force last year.
3. C. The price of personal computers declined last year.
4. D. The general price level increased by 4 percent last year.
Which of the following statements is true?
1. A. Microeconomics focuses on specific decision-making units of the economy; macroeconomics examines the economy as a whole.
2. B. Macroeconomics focuses on specific decision-making units of the economy; microeconomics examines the economy as a whole.
3. C. Every topic in economics is either a microeconomic or a macroeconomic issue; a topic cannot be both.
4. D. Topics in microeconomics have public policy implications; topics in macroeconomics do not.
A normative statement is one that:
1. A. is based on the law of averages.
2. B. applies only to microeconomics.
3. C. applies only to macroeconomics.
4. D. is based on value judgments.
A positive statement is one which is:
1. A. derived by induction.
2. B. derived by deduction.
3. C. subjective and is based on a value judgment.
4. D. objective and is based on facts.
Which of the following is a positive statement?
1. A. The humidity is too high today.
2. B. It is too hot to jog today.
3. C. The temperature is 92 degrees today.
4. D. Summer evenings are nice when it cools off.
Normative statements are concerned primarily with:
1. A. facts and theories.
2. B. what ought to be.
3. C. what is.
4. D. rational choice involving costs and benefits.
A positive statement is concerned primarily with:
1. A. some goal that is desirable to society.
2. B. what should be.
3. C. what is.
4. D. the formulation of economic policy.
“Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.” This statement is:
1. A. positive, but incorrect.
2. B. positive and correct.
3. C. normative, but incorrect.
4. D. normative and correct.
Ben says that “An increase in the tax on beer will raise its price.” Holly argues that “Taxes should be increased on beer because college students drink too much.” We can conclude that:
1. A. Ben’s statement is normative, but Holly’s is positive.
2. B. Holly’s statement is normative, but Ben’s is positive.
3. C. Both statements are normative.
4. D. Both statements are positive.
“Macroeconomics is the part of economics concerned with individual units such as a person, a household, a firm, or an industry.” This statement is:
1. A. positive, but incorrect.
2. B. positive and correct.
3. C. normative, but incorrect.
4. D. normative and correct.
Brinley says that “Gas prices are rising because there aren’t enough oil refineries.” Katie argues that “Gas prices are rising because of the growing demand for gasoline from China and India.” We can conclude that:
1. A. Brinley’s statement is positive; Katie’s statement is normative.
2. B. Brinley’s statement is normative; Katie’s statement is positive.
3. C. Both statements are positive.
4. D. Both statements are normative.
The economizing problem is:
1. A. the need to make choices because economic wants exceed economic means.
2. B. how to distribute resources equally amongst all members of society.
3. C. that people’s means often exceed their wants.
4. D. that people do not know how to rationally allocate resources.
The economizing problem is one of deciding how to make the best use of:
1. A. virtually unlimited resources to satisfy virtually unlimited wants.
2. B. limited resources to satisfy virtually unlimited wants.
3. C. unlimited resources to satisfy limited wants.
4. D. limited resources to satisfy limited wants.
The scarcity problem:
1. A. persists only because countries have failed to achieve continuous full employment.
2. B. persists because economic wants exceed available productive resources.
3. C. has been solved in all industrialized nations.
4. D. has been eliminated in affluent societies such as the United States and Canada.
The alternative combinations of two goods which a consumer can purchase with a given money income is shown by:
1. A. a production possibilities curve.
2. B. a demand curve.
3. C. consumer expenditure line.
4. D. a budget line.
The budget line shows:
1. A. the amount of product A that a consumer is willing to give up to obtain one more unit of product B.
2. B. all possible combinations of two goods that can be purchased, given money income and the prices of the goods.
3. C. the minimum amount of two goods that a consumer can purchase with a given money income.
4. D. all possible combinations of two goods that yield the same level of utility to the consumer.
Refer to the budget line shown in the diagram above. If the consumer’s money income is $20, the:
1. A. prices of C and D cannot be determined.
2. B. price of C is $2 and the price of D is $4.
3. C. consumer can obtain a combination of 5 units of both C and D.
4. D. price of C is $4 and the price of D is $2.
Refer to the budget line shown in the diagram above. If the consumer’s money income is $20, which of the following combinations of goods is unattainable?
1. A. 4 units of C, and 6 units of D.
2. B. 5 units of C, and no units of D.
3. C. 1 unit of C, and 8 units of D.
4. D. 2 units of C, and 6 units of D.
Refer to the budget line shown in the diagram above. The absolute value of the slope of the budget line is:
1. A. MUC/MUD.
2. B. one-half.
3. C. PD/PC.
4. D. PC/PD.
In moving along a given budget line:
1. A. the prices of both products and money income are assumed to be constant.
2. B. each point on the line will be equally satisfactory to consumers.
3. C. money income varies, but the prices of the two goods are constant.
4. D. the prices of both products are assumed to vary, but money income is constant.
An increase in money income:
1. A. shifts the consumer’s budget line to the right.
2. B. shifts the consumer’s budget line to the left.
3. C. increases the slope of the budget line.
4. D. has no effect on the budget line.
The shift of the budget line from cd to ab in the above figure is consistent with:
1. A. decreases in the prices of both M and N.
2. B. an increase in the price of M and a decrease in the price of N.
3. C. a decrease in money income.
4. D. an increase in money income.
Any combination of goods lying outside of the budget line:
1. A. implies that the consumer is not spending all his income.
2. B. yields less utility than any point on the budget line.
3. C. yields less utility than any point inside the budget line.
4. D. is unattainable, given the consumer’s income.
Suppose you have a money income of $10, all of which you spend on Coke and popcorn. In the above diagram, the prices of Coke and popcorn respectively are:
1. A. $.50 and $1.00.
2. B. $1.00 and $.50.
3. C. $1.00 and $2.00.
4. D. $.40 and $.50.
Other things equal, an increase in a consumer’s money income:
1. A. increases the amount of utility a consumer receives from a given quantity of a good.
2. B. shifts her budget line rightward because she can now purchase more of both products.
3. C. eliminates the individual’s economizing problem.
4. D. causes the consumer to choose a different combination of goods along a given budget line.
The slope of a budget line reflects the:
1. A. desirability of the two products.
2. B. price ratio of the two products.
3. C. amount of the consumer’s income.
4. D. utility ratio of the two products.
Suppose Elroy’s budget line is as shown on the above diagram. If his tastes change in favor of Coke and against popcorn, the budget line will:
1. A. become steeper.
2. B. become flatter.
3. C. shift rightward.
4. D. be unaffected.
Assume the price of product Y (the quantity of which is on the vertical axis) is $15 and the price of product X (the quantity of which is on the horizontal axis) is $3.Also assume that money income is $60.The absolute value of the slope of the resulting budget line:
1. A. is 5.
2. B. is 1/5.
3. C. is 4.
4. D. is 20.
Refer to the above graphs. Assume that pizza is measured in slices and beer in pints. In which of the graphs is the opportunity cost of a pint of beer equal to one slice of pizza?
1. A. graph A
2. B. graph B
3. C. graph C
4. D. graph D
Refer to the above graphs. Assume that pizza is measured in slices and beer in pints. In which of the graphs is the opportunity cost of a pint of beer the lowest?
1. A. graph A
2. B. graph B
3. C. graph C
4. D. graph D
Suppose that Julia receives a $20 gift card for the local coffee shop, where she only buys lattes and muffins. If the price of a latte is $4 and the price of a muffin is $2, then we can conclude that Julia:
1. A. should only buy muffins.
2. B. should only buy lattes.
3. C. can buy 5 lattes or 10 muffins if she chooses to buy only one of the two goods.
4. D. can buy 5 lattes and 10 muffins with her $20 gift card.
Camille is at the candy store with her grandmother, who offers to buy her $6 worth of candy. If lollipops are $1 each, and candy bars are $2 each, what combination of candy can Camille’s grandmother buy for her?
1. A. Six lollipops and three candy bars
2. B. Two lollipops and two candy bars
3. C. Three lollipops and two candy bars
4. D. One lollipop and three candy bars
Which of the following is a labor resource?
1. A. a computer programmer
2. B. a computer
3. C. silicon (sand) used to make computer chips
4. D. a piece of software used by a firm