Chapter #1, 2, 3, 4, 6 Practice Test

Consider Paul's decision to go to college. If he goes to college, he will spend $90,000 on tuition, $15,000 on room and board, and $7,000 on books. If he does not go to college, he will earn $22,000 working at a construction job and he will spend $11,000 on room and board. Paul's cost of going to college is

$123,000

Refer to Table 3-25. The opportunity cost of 1 mixer for Maya is

1.6 toaster

Refer to Figure 3-20. Canada would incur an opportunity cost of 6 units of Good X if it increased its production of Good Y by

12 units.

The U.S. Congress first instituted a minimum wage in

1938

Refer to Table 3-7. Which of the following combinations of meat and potatoes could the farmer produce in 24 hours?

2 pounds of meat and 2 pounds of potatoes

Refer to Figure 3-20. Saved mank07t.18.196.1 Canada's opportunity cost of one unit of Good X is

2 units of Good Y and Mexico's opportunity cost of one unit of Good X is 1/2 unit of Good Y.

Hotdogs Burgers 1800 0 1350 450 900 750 450 975 0 1125 Refer to Table 2-4. What is the opportunity cost to Picnicland of increasing the production of hotdogs from 450 to 900?

225 burgers

Refer to Figure 2-9, Panel (a). Saved as mank07t.08.215.1 The opportunity cost of one cup of coffee is highest when the economy produces

6 cups

The mayor of Workerville proposes a local payroll tax to fund a new water park for the city. The mayor proposes to collect half the tax from workers and half the tax from firms. Workers will bear

All of the above -a smaller share of the tax in comparison to firms. -a greater share of the tax in comparison to firms. -an equal share of the tax in comparison to firms.

One difference between a hypothetical benevolent king implementing the best policy and the president implementing the best policy in the real world is the president has to be concerned about

All of the above -any misunderstandings in communicating the policy to the public. -what amendments will be suggested by members of Congress. -whether the policy will affect his standing among different groups in the electorate.

Which of the following is a subject that economists study?

All of the above -the rate at which prices are rising -the growth in average income -the fraction of the population that cannot find work

Both Dave and Caroline produce sweaters and socks. If Dave's opportunity cost of 1 sweater is 3 socks and Caroline's opportunity cost of 1 sweater is 5 socks, then

Dave has a comparative advantage in the production of sweaters.

Refer to Figure 4-20. At a price of $20, which of the following statements is not correct?

Equilibrium price is equal to equilibrium quantity.

A production possibilities frontier has a bowed shape if the opportunity cost is constant at all levels of output.

False

Suppose that in one hour Dewey can produce either 10 bushels of corn or 20 yards of cloth. Dewey's opportunity cost of producing one bushel of corn is 1/2 yard of cloth.

False

In the early 1920s,

Germany experienced a very high rate of inflation

If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then

Iowa has a comparative advantage in the production of corn.

Which of the following is a principle concerning how people interact?

Markets are usually a good way to organize economic activity.

Which of the following statements about models is correct?

Models assume away irrelevant details.

Refer to Figure 6-23. Which of the following is correct?

One-third of the burden of the tax falls on buyers, and two-thirds of the burden of the tax falls on sellers.

Which of these activities will most likely result in an external benefit?

Ted purchases a dilapidated house and cleans up the yard and exterior of the house.

A yard sale is an example of a market.

True

Advocates of the minimum wage admit that it has some adverse effects, but they believe that these effects are small and that a higher minimum wage makes the poor better off.

True

Positive statements can be evaluated using data alone, but normative statements cannot.

True

Which of the following statements about trade is false?

With trade, one country wins and one country loses.

A price ceiling is

a legal maximum on the price at which a good can be sold.

Refer to Figure 6-8. If the government imposes a price ceiling of $2 on this market, then there will be

a shortage of 30 units of the good

If both members and non-members are allowed to purchase tickets to this year's celebrity golf tournament and the country club sets the ticket price at $20, then there will be

a shortage of 300 tickets.

When we move along a given supply curve,

all nonprice determinants of supply are held constant.

When a tax is placed on the sellers of cell phones, the size of the cell phone market

and the effective price received by sellers both decrease.

Refer to Figure 6-15. Suppose a price ceiling of $2 is imposed on this market. As a result,

buyers' total expenditure on the good falls by $15

Once the demand curve for a product or service is drawn, it

can shift either rightward or leftward.

in conducting their research, economists face an obstacle that not all scientists face; specifically, in economics, it is often impractical to

conduct laboratory experiments.

Refer to Figure 3-18. Bintu has a comparative advantage in the production of

cups and Juba has a comparative advantage in the production of bowls.

Refer to Figure 4-1. It is apparent from the figure that the

demand for the good conforms to the law of demand.

For international trade to benefit a country, it must benefit all citizens of that country.

false

Goods produced abroad and sold domestically are called exports and goods produced domestically and sold abroad are called imports.

false

People are likely to respond to a policy change

if the policy changes either the costs or benefits of their behavior.

In the circular-flow diagram,

income payments flow from firms to households, and sales revenue flows from households to firms.

Two goods are complements when a decrease in the price of one good

increases the demand for the other good.

In the circular-flow diagram, which of the following items represents a payment for a factor of production?

interest

It costs a company $35,000 to produce 500 graphing calculators. The company's cost will be $35,080 if it produces an additional graphing calculator. If the company produces 501 graphing calculators then

its average cost is less than its marginal cost.

Refer to Figure 6-16. In this market, a minimum wage of $2.75 creates a labor

neither a labor shortage nor surplus.

The long-run effects of rent controls are a good illustration of the principle that

people respond to incentives

Refer to Table 3-23. The rancher has an absolute advantage in the production of

pork

Refer to Figure 2-9, Panel (a). Saved as mank07t.08.210.1 Production is

possible at points J, K, L, and M, but efficient only at points J, L, and M

Buyers and sellers who have no influence on market price are referred to as

price takers.

What is the most important factor that explains differences in living standards among countries

productivity

The y-coordinate is the

second number of an ordered pair and represents the point's vertical location.

Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the following: • x = 2. • The current price of a sandwich is $3.00. • The market quantity supplied of sandwiches is 5. • The slope of the supply curve is 1. Then there is currently a

shortage of 5 sandwiches, and the equilibrium price of a sandwich is between $3.00 and $5.00.

In any economic system, scarce resources have to be allocated among competing uses. Market economies harness the forces of

supply and demand to allocate scarce resources.

Ashley bakes bread that she sells at the local farmer's market. If she purchases a new convection oven that reduces the costs of baking bread, the

supply curve for Ashley's bread will increase.

You go to the movieplex where movies ordinarily cost $9. You are intending to see a movie for which you have a $3 off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost?

the amount you value the first movie + $3

The primary determinant of a country's standard of living is

the country's ability to produce goods and services.

The opportunity cost of going to college is

the value of the best opportunity a student gives up to attend college.

Suppose there are only two people in the world. Each person's production possibilities frontier also represents his or her consumption possibilities when

they choose not to trade with one another.

In economics, graphs serve two purposes: they offer a way to visually express ideas, and they provide a way of finding and interpreting patterns when analyzing economic data.

true

Regardless of whether a tax is levied on sellers or buyers, taxes discourage market activity.

true

The law of demand states that, other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises.

true

When a tax is imposed on the sellers of a good, the supply curve shifts

upward by the amount of the tax