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Exploring Macroeconomics 5th Edition Robert L. Sexton - Solutions
9. In A Bend in the River, Nobel Prize winner V. S. Naipaul describes an underdeveloped country in which the government’s constantly changing tax policies and vague laws regarding ownership of property cause entrepreneurs to become demoralized and unresponsive to economic opportunities. Could
8. How would the following events be shown using a production possibilities curve for shelter and food?a. The economy is experiencing double-digit unemployment.b. Economic growth is increasing at more than 5 percent per year.c. Society decides it wants less shelter and more food.d. Society decides
7. During wartime, countries shift production from civilian goods, like automobiles and clothing, to military goods, like tanks and military uniforms. When the United States entered World War I in April 1917, for example, the federal government created the War Industries Board and charged it with
6. Given the following production possibilities curve:a. Does this production possibilities curve show increasing opportunity costs? Explain.b. What is the opportunity cost of moving from point I to point D? Explain.c. What is the opportunity cost of moving from point C to point B?d. Which of
5. Identify whether each of the following transactions takes place in the factor market or the product market.a. Billy buys a sofa from Home Time Furniture for his new home.b. Home Time Furniture pays its manager her weekly salary.c. The manager buys dinner at Billy’s Café.d. After he pays all
4. Identify where the appropriate entries go in the circular flow diagram. Consumption Spending Revenue Capital, Land, Labor, and Entrepreneurship Goods and Services Sold Firms Factor Markets (Households Sell Firms Buy) Wages, Rent, Interest, and Profit
3. As women’s wages and employment opportunities have expanded over the past 50 years, Americans have purchased more and more labor-saving home appliances like automatic washers and dryers, dishwashers, and microwave ovens. Do you think these phenomena are related? Could higher wages and better
2. Recently the American Film Institute selected Citizen Kane as the best movie of all time. Citizen Kane is a fictional psychological biography of one of the most powerful newspaper publishers in history, William Randolph Hearst.Titanic, an epic romance about the sinking of the Titanic, has made
1. What are the three basic economic questions? How are decisions made differently in a market economy than in planned economies?
24. Say that a technological change doubles an economy’s ability to produce good X and triples the economy’s ability to produce good Y. As a result,a. the economy will tend to produce less X and more Y than before.b. the opportunity cost of producing units of Y in terms of X forgone will tend
23. A virulent disease spreads throughout the population of an economy, causing death and disability. This event can be portrayed asa. a movement from a point on the production possibilities curve to a point inside the curve.b. a movement from a point on the production possibilities curve to the
22. Suppose Country A produces few consumption goods and many investment goods while Country B produces few investment goods and many consumption goods. Other things being equal, you would expecta. per capita income to grow more rapidly in Country B.b. population to grow faster in Country B.c. the
21. Inefficiency is best illustrated by which of the following?a. forgoing civilian goods in order to produce more military goodsb. limiting economic growth by reducing capital spendingc. having high levels of unemployment of labor and other resources that could be productively employedd. producing
20. Which of the following is least likely to shift the production possibilities curve outward?a. a change in preferences away from one of the goods and toward the otherb. an invention that reduces the amount of natural resources necessary for producing a goodc. the discovery of new natural
19. Which of the following is most likely to shift the production possibilities curve outward?a. an increase in unemploymentb. a decrease in the stock of physical or human capitalc. a decrease in the labor forced. a technological advance
18. Which of the following is the most accurate statement about a production possibilities curve?a. An economy can produce at any point inside or outside its production possibilities curve.b. An economy can produce only on its production possibilities curve.c. An economy can produce at any point on
17. What determines the position and shape of a society’s production possibilities curve?a. the physical resources of that societyb. the skills of the workforcec. the level of technology of the societyd. the number of factories available to the societye. all of the above
16. Consider a production possibilities curve for an economy producing bicycles and video game players. It is possible to increase the production of bicycles without sacrificing video game players ifa. the production possibilities curve shifts outward due to technological progress.b. the production
15. Which of the following is consistent with the implications of the production possibilities curve?a. If the resources in an economy are being used efficiently, scarcity will not be a problem.b. If the resources in an economy are being used efficiently, more of one good can be produced only if
14. The opportunity cost of one more unit of bread is greater at point _______ than at point ________.a. G; Bb. C; Ac. A; Cd. None of the above. The opportunity cost of a good is constant everywhere along the production possibilities curve. Wine A B G F Bread C E D
13. Along the production possibilities curve, the most efficient point of production depicted isa. point B.b. point C.c. point D.d. point G.e. All points on the production possibilities curve are equally efficient. Wine A B G F Bread C E D
12. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement froma. A to B.b. B to E.c. C to F.d. G to F.e. None of the above are correct. Wine A B G F Bread C E D
11. Currently, it is not possible to produce ata. point A.b. point B.c. point E.d. point G.e. either point E or point G. Wine A B G F Bread C E D
10. A point beyond the boundary of an economy’s production possibilities curve isa. efficient.b. inefficient.c. attainable.d. unattainable.e. both attainable and efficient.
9. In the circular flow model,a. firms supply both products and resources.b. firms demand both products and resources.c. firms demand resources and supply products.d. firms supply resources and demand products.
8. Which of the following is true?a. In the product markets, firms are buyers and households are sellers.b. In the factor markets, firms are sellers and households are buyers.c. Firms receive money payments from households for capital, land, labor, and entrepreneurship.d. All of the above are
7. In a circular flow diagram,a. goods and services flow in a clockwise direction.b. goods and services flow in a counterclockwise direction.c. product markets appear at the top of the diagram.d. factor markets appear at the left of the diagram.e. both b and c are true.
6. When a command economy is utilized to resolve economic questions regarding the allocation of resources, thena. everyone will receive an equal share of the output produced.b. the preferences of individuals are of no importance.c. economic efficiency will be assured.d. the role of markets will be
5. The degree of government involvement in the economy is greatest ina. a command economy.b. a mixed economy.c. a market economy.d. a traditional economy.
4. The private ownership of property and the use of the market system to direct and coordinate economic activity are most characteristic ofa. a command economy.b. a mixed economy.c. a market economy.d. a traditional economy.
3. Three economic questions must be determined in all societies. What are they?a. How much will be produced? When will it be produced? How much will it cost?b. What will the price of each good be? Who will produce each good? Who will consume each good?c. What is the opportunity cost of production?
2. Economic disputes over the distribution of income are generally associated with which economic question?a. Who should produce the goods?b. What goods and services will be produced?c. Who will get the goods and services?d. How will the goods and services be produced?
1. Which of the following is not a question that all societies must answer?a. How can scarcity be eliminated?b. What goods and services will be produced?c. Who will get the goods and services?d. How will the goods and services be produced?e. All of the above are questions that all societies must
18. From a point inside the production possibilities curve, in order to get more of one thing, an economy must give up something else. True or False:
17. Economic growth means a movement along an economy’s production possibilities curve in the direction of producing more consumer goods. True or False:
16. An economy can grow despite a lack of qualitative and quantitative improvements in the factors of production. True or False:
15. Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future. True or False:
14. The basic reason for increasing opportunity cost is that some resources and skills cannot be easily adapted from their current uses to alternative uses. True or False:
13. If resources are being used efficiently, at a point along a production possibilities curve, more of one good or service requires the sacrifice of another good or service as a cost. True or False:
12. We all have an interest in the efficient use of all of society’s resources because more of everything we care about can be available for our use as a result. True or False:
11. Underutilized resources or those not being put to their best uses are illustrated by output combinations along the production possibilities curve. True or False:
10. The economy cannot produce beyond the levels indicated by the production possibilities curve during a given time period, but it is possible to operate inside the production possibilities curve. True or False:
9. With a straight-line production possibilities curve, the opportunity cost of producing another unit of a good increases with its output. True or False:
8. The circular flow model illustrates the continuous flow of goods, services, inputs, and payments between firms and households. True or False:
7. The market where households sell the use of their inputs to firms is called the product market. True or False:
6. In a market economy, with private ownership and control of the means of production, the amount of output one is able to obtain depends on the quantity and quality of the scarce resources that the individual controls. True or False:
5. Each nation tends to use the production processes that conserve its relatively scarce (and thus relatively more expensive)resources and use more of its relatively abundant resources. True or False:
4. In any economy, it would always be less efficient to dig ditches by having many workers use their hands than to use workers with shovels or a backhoe. True or False:
3. All economies, regardless of political structure, must decide how, from several possible ways, to produce the goods and services that they want. True or False:
2. Command economies rely on central planning, where decisions about what and how many are largely determined by a government official associated with the central planning organization. True or False:
1. Consumer sovereignty describes how individual consumers in market economies determine what is to be produced. True or False:
22. The production possibilities curve can be used to illustrate the economic concepts of _____________ (resource combinations outside the production possibilities curve are unattainable), _____________ (selecting among the alternative bundles available along the production possibilities curve),
21. Increases in a society’s output do not make _____________ disappear. Even when output has grown more rapidly than population so that people are made better off, they still face _____________.
20. Advancements in _____________, improvements in _____________, or new _____________ could all lead to outward shifts of the production possibilities curve.
19. To generate economic growth, a society must produce _____________ consumer goods and _____________ capital goods in the present.
18. Resources tend to be specialized, so we lose some of their productivity when we transfer those resources from producing what they are relatively _____________ at to producing something they are relatively _____________ at.
17. On a bowed production possibilities curve (concave to the origin), the opportunity costs of producing additional units of a good rises as society produces more of that good. This relationship is called the law of _____________.
16. If the production possibilities curve is concave from below (that is, bowed outward from the origin), it reflects _____________ opportunity costs of producing additional amounts of a good.
15. _____________ requires society to use its resources to the fullest extent—getting the _____________ we can out of our scarce resources.
14. By putting _____________ resources to work or by putting already employed resources to _____________ uses, we could expand output.
13. If an economy is operating _____________ its production possibilities curve, it is not at full capacity and is operating _____________. Such an economy’s actual output is less than _____________ output.
12. On a straight-line production possibilities curve, the _____________ are constant.
11. On a production possibilities curve, we assume that the economy has a given quantity and quality of _____________ and _____________ available to use for production.
10. A(n) _____________ curve represents the potential total output combinations of any two goods for an economy.
9. The simple _____________ model shows the continuous flow of goods, services, inputs, and payments through the _____________ and _____________ markets among households and _____________.
8. The markets where households sell the use of their _____________ (capital, land, labor, and entrepreneurship)to _____________ are called _____________ or _____________ markets.
7. The markets where households are buyers and firms are sellers of goods and services are called _____________ markets.
6. In a market economy, the amount of goods and services one is able to obtain depends on one’s _____________, which depends on the quality and quantity of the scarce _____________ he or she controls.
5. Methods of production used where capital is relatively scarce will be _____________, and methods of production used where labor is relatively scarce will be _____________.
4. The _____________-cost method is the most appropriate method for producing a given product.
3. Most countries, including the United States, have _____________ economies, in which the government and private sector determine the allocation of resources.
2. Market economies largely rely on a(n) _____________ decision-making process, where literally millions of individual producers and consumers of goods and services determine what will be produced.
1. Because of scarcity, certain economic questions must be answered regardless of the level of affluence of the society or its political structure. Three fundamental questions that inevitably must be faced in a world of scarcity are (1) _____________ will be produced?(2) _____________ the goods and
9. If a 68-year-old worker in the United States chooses not to work at all, does that mean that the United States is functioning inside its production possibilities curve? Why or why not?
8. Will a country that makes being unemployed illegal be more productive than one that does not? Why or why not?
7. How are efficiency and inefficiency illustrated by a production possibilities curve?
6. What do we mean by efficiency, and how is it related to underemployment of resources?
5. Why are we concerned with widespread amounts of unemployed or underemployed resources in a society?
4. How does the production possibilities curve illustrate increasing opportunity costs?
3. Why do the opportunity costs of added production increase with output?
2. How are opportunity costs shown by the production possibilities curve?
1. What does a production possibilities curve illustrate?
6. If people reduced their saving (thus reducing the funds available for investment), what would that change do to society’s production possibilities curve over time?
5. What would happen to the production possibilities curve in an economy where a new innovation greatly increased its ability to produce shelter but did not change its ability to produce food?
4. Why doesn’t economic growth eliminate scarcity?
3. How is economic growth shown in terms of production possibilities curves?
2. What is the connection between sacrifices and economic growth?
1. What is the essential question behind issues of economic growth?
3. What is bought and sold in product markets?
2. What is bought and sold in factor markets?
1. Why does the circular flow of money move in the opposite direction from the flow of goods and services?
10. What are the most important functions of the market system?
9. In what way does scarcity determine income?
8. If a tourist from the United States on an overseas trip notices that other countries don’t produce crops “like they do back home,” would he be right to conclude that farmers in the other countries produce crops less efficiently than U.S. farmers?
7. Why might production be labor intensive in one economy but be capital intensive in another?
6. Why must we choose among multiple ways of producing the goods and services we want?
5. Why do consumers have to “vote” for a product with their dollars for it to be a success?
4. Do you think that what and how much an economy produces depends on who will get the goods and services produced in that economy? Why or why not?
3. How does consumer sovereignty determine production decisions in a market economy?
2. How is a command economy different from a market economy?
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