Please see attachment. Please answer all of the following question. If you have any question please contact me,Principles of Macroeconomics
Dr. Shishu Zhang
Fall, 2020
Name: __________________________ Date: _____________
Part I: Multiple Choices Questions & True or False Questions (2points each):
1. Which of the following is the best example of making a choice at the margin?
A)
buying new clothes
B)
quitting your job
C)
drinking another cup of coffee
D)
attending college
2. Margo spends $10,000 on one year’s college tuition. The opportunity cost of spending
one year in college for Margo is:
A)
$10,000.
B)
whatever she would have purchased with the $10,000 instead.
C)
whatever she would have earned had she not been in college.
D)
whatever she would have purchased with the $10,000 and whatever she would have
earned had she not been in college.
Figure: Consumer and Capital Goods
A)
B)
C)
D)
3. (Figure: Consumer and Capital Goods) The shift from Curve 1 to Curve 2 indicates:
economic recession.
change from unemployment to full employment.
a decrease in the level of technology.
instability.
4.
A)
B)
C)
D)
When markets fail, which of the following is false?
government intervention may help.
The market doesn’t need any intervention from the government.
It may be caused by the monopoly.
It may caused by individual side effects
Figure: Guns and Butter
5. (Figure: Guns and Butter) If the economy were operating at point B, producing 16 units
of guns and 12 units of butter per period, a decision to move to point E and produce 18
units of butter:
A)
indicates you can have more butter and guns simultaneously.
B)
makes it clear that this economy experiences decreasing opportunity costs.
C)
involves a loss of 8 units of guns per period.
D)
involves a loss of 4 units of guns per period.
6. (Figure: Guns and Butter) The combination of guns and butter at point H:
A)
can be attained, but would cost too much.
B)
cannot be attained, given the level of technology and the factors of production
available.
C)
can be attained, but is inefficient.
D)
is attainable but would increase unemployment.
7. (Figure: Guns and Butter) If the economy were producing 8 units of guns and 12 units
of butter per period:
A)
this is a possible choice, but would involve unemployment and/or inefficiency.
B)
the notion of increasing opportunity cost is invalidated.
C)
the economy is efficient.
D)
This is an impossible choice.
8. If the opportunity cost of manufacturing automobiles is lower in the United States than
in Britain and the opportunity cost of manufacturing airplanes is higher in the United
States than in Britain, then the United States will:
A)
export both airplanes and automobiles to Britain.
B)
import both airplanes and automobiles from Britain.
C)
export airplanes to Britain and import automobiles from Britain.
D)
import airplanes from Britain and export automobiles to Britain.
A)
B)
C)
D)
9. Which of the following is false about the circular-flow diagram?
Households are the primary demanders of goods and services.
Firms are the primary suppliers of goods and services.
Money flows from households to firms as households offer labor to the company.
Money flows in the opposite direction as goods and services and factors of production.
10.
A)
B)
C)
D)
An example of a positive statement is:
the rate of unemployment is 4%.
a high rate of economic growth is good for the country.
everyone in the country needs to be covered by national health insurance.
baseball players should not be paid higher salaries than the president of the United
States.
11. In a single day, George can bake 10 cakes while Greta can bake 5 cakes. We then know
that:
A)
George has a comparative advantage in baking cakes.
B)
George has an absolute advantage in baking cakes.
C)
Greta has a comparative advantage in baking cakes.
D)
Greta has an absolute advantage in baking cakes.
12.
A)
B)
C)
D)
Which of the following is an example of a normative statement?
The rate of unemployment is 4%.
A high rate of economic growth creates more jobs for the country.
The federal government spends half of its budget on national defense.
Everyone in America deserves to be covered by national health insurance.
13.
A)
B)
C)
D)
Too little spending in an economy often leads to:
a recession.
an inflation.
equilibrium.
efficiency.
14. Handicapped-designated parking spaces are an example of horizontal equity.
A)
True
B)
False
15.
A)
B)
C)
D)
Khalil is offered a free ticket to the opera. His opportunity cost of going to the opera is:
zero—the tickets were free.
the price listed on the ticket.
whatever Khalil would have done had he not gone to the opera.
the price listed on the ticket and whatever Khalil would have done had he not gone to
the opera.
16. On any given production possibility frontier, we see the minimum quantity of one good
that can be produced for any given production of the other.
A)
True
B)
False
17. A typical, bowed-out production possibility frontier between two goods—guns and
butter—shows that the opportunity cost of butter in terms of guns increases as more
butter is produced. This implies that the opportunity cost of guns in terms of butter
decreases as more guns are produced.
A)
True
B)
False
18. If the United States is more productive than Mexico in all lines of production, then the
United States cannot benefit from trade with Mexico.
A)
True
B)
False
19. Market failure could happen when the pursuit of self-interest leads to bad results.
A)
True
B)
False
20. Trade allows people to get more of what they can produce by themselves at a lower
cost.
A)
True
B)
False
Part II: Short Answer Questions (5points each):
1. You are reading an editorial in your local newspaper. The editorial says: “The U.S. had
a trade deficit of $18.4 billion in February 2008. This is a clear indication to our
leaders that we must renegotiate our trade agreements with other countries to make
them fairer for the American worker.” What parts of this editorial are positive and what
parts are normative economics?
2. A college student waits in line for hours to purchase a ticket to the Rose Bowl, but an
attorney does not. Rather than spend hours in line, he purchases a much more
expensive ticket through a ticket broker. Explain why this happens using the concept of
opportunity cost.
3. The demand and supply model is described by the following two equations:
Q=2+P
Q=4-P
Answer the following Questions:
a. Draw the demand curve according to the demand function (using scales).
b. Draw the supply curve according to the supply function (using scales).
c. Find the range for equilibrium price and equilibrium quantity according to the above two
drawings.
d. Solve the above two equations for equilibrium and compare the answer with what you
obtained in part c.
4. Eastland and Westland produce only two goods, peaches and oranges, and this figure shows
each nation’s production possibility frontier for the two goods.
Answer the following Questions (1 point for each question):
a. What is the opportunity cost of producing 1 unit of oranges for Eastland?
b. What is the opportunity cost of producing 1 unit of oranges for Westland?
c. Which country has comparative advantage in producing orange?
d. Which country has absolute advantage in producing orange?
e. What is the price range of trading oranges?
5. Draw the Circular Flow Model and mark clearly how the factors/money flows.
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