EC 113

The average tax on a professor's income of $100,000 is 18%, and the marginal tax rate above $100,000 is 45%. If the professor teaches during the summer and earns an additional $10,000 (bringing her total earnings for the year to $110,000), how much of the summer income does she keep after paying taxes? A) $4,500 B) $1,800 C) $6,300 D) $5,500

$5,500

Air travel from New York to Los Angeles costs $800 and takes four hours. A bus ticket between the cities costs $100 and takes 104 hours. Other things constant, the minimum value of one's time that would induce a rational individual to fly rather than drive would be: A) $1 per hour. B) $7 per hour. C) $12 per hour. D) $120 per hour.

$7

The opportunity cost of winning a free ticket to the Super Bowl worth $950 and attending the game is: A) zero, since the ticket was free. B) priceless, if the person really loves football. C) $950, representing the lost market value of selling the ticket to somebody else. D) zero, if the person would rather go to the game than do anything else.

$950

Susan quits her administrative job, which pays $40,000 a year, to finish her four-year college degree. Her annual college expenses are $8,000 for tuition, $700 for books, and $500 for food. The opportunity cost of attending college for the year is: A) $9,200. B) $8,700. C) $48,700. D) $49,200

48,700

A decrease in income causes the demand to ________ for a normal good, and an increase in income causes the demand to ________ for an inferior good. A) decrease; decrease B) increase; increase C) decrease; increase D) increase; decrease

decrease; decrease

(Figure: Demand Shift) In the figure above, the demand curve shifted from D0 to D1. To describe this movement, we would say that the: A) demand increased, which caused an increase in supply. B) quantity demanded increased, which caused an increase in supply. C) demand increased, which caused an increase in quantity supplied. D) quantity demanded increased, which caused an increase in quantity supplied.

demand increased, which caused an increase in quantity supplied.

Computers and printers are complements in consumption. If the price of computers ___________, then the demand for printers will ________________. A) increases; increase B) decreases; decrease C) decreases; not change D) increases; decrease

increases; decrease

In Zimbabwe, the government is ______ the ______ money, which is causing the country's severe inflation. A) decreasing; demand for B) decreasing; supply of C) increasing; supply of D) increasing; demand for

increasing; supply of

Gross Domestic Product uses __________ to account for differences in ________ of final goods and services. A) market prices; value B) market prices; demand C) quality measures; value D) quality measures; demand

market prices; value

In the oil market, an increase in the wage of oil workers will: A) shift the supply curve of oil to the right. B) shift the supply curve of oil to the left. C) shift the demand curve for oil to the left. D) shift the demand curve for oil to the right.

shift the supply curve of oil to the left.

You must decide whether to attend class tomorrow morning or take your friend to the airport. Your decision highlights the following "big idea" in economics. A) Institutions matter. B) Central banking is a hard job. C) Economics is fun. D) Trade-offs are everywhere.

Trade-offs are everywhere

Which of the following services does not count towards GDP? A) A doctor treats a patient in a hospital. B) An economics professor educates her students in a classroom. C) You paint your garage. D) Your real estate agent sells your house for you.

You paint your garage.

A producer has a comparative advantage over other producers if his production of the good involves: A) more inputs. B) fewer inputs. C) a higher opportunity cost. D) a lower opportunity cost.

a lower opportunity cost.

Which one of the following answer choices would cause the demand curve for an inferior good to shift to the left? A) a fall in incomes B) a fall in the price of the inferior good C) a rise in incomes D) a rise in the price of the inferior good

a rise in incomes

Which of the following answer choices contains only factors that cause the supply curve to shift to the right? A) a fall in production costs, a rise in technology, an increase in taxes on output B) a fall in tastes and preferences for the product, economic growth, and a rise in technology C) a decrease in taxes on production, a fall in subsidies on production, a rise in costs of production D) a rise in technology, a fall in the costs of production, a fall in taxes on output

a rise in technology, a fall in the costs of production, a fall in taxes on output

The ability of one producer to produce one good or service using fewer inputs than another producer is: A) comparative advantage. B) absolute advantage. C) opportunity cost. D) competition

absolute advantage.

When you move along a demand curve: A) only price is held constant. B) income and the price of the good are held constant. C) all non-price determinants of demand are held constant. D) all determinants of quantity demanded are held constant

all non-price determinants of demand are held constant.

Suppose the administration at a local university decides to double the school's enrollment over the next five years in attempts to increase tuition revenue. Which of the following would most likely occur in the market for rental housing in the surrounding community? A) a decrease in the price of rental housing B) an increase in the demand for rental housing C) a decrease in the supply of rental housing D) no change in the demand for rental housing, as a change in the population leads to a change in quantity demanded, not demand

an increase in the demand for rental housing

Mario buys eight units of good X when his income is $2,000 a month. When his income increases to $2,700 per month, he buys only six units of good X. What kind of a good is good X? A) a normal good B) an expensive good C) an inferior good D) a useless good

an inferior good

(Figure: Oil Market) Which of the following events could have caused the change in the above figure? A) the expectation of an outbreak of war in the world's best oil producing regions B) the expectation of a reduction in the future supply of oil C) the expectation that next week's oil prices will be substantially higher D) All of the answers are correct.

All of the answers are correct.

Joe runs a landscape business. He knows that providing landscaping services costs him $100 per hour on average, while the cost of providing such services is $150 per hour after 5 PM (due to overtime pay, reduced productivity, and the added wear and tear on his equipment). A potential client offers Joe $130 per hour to provide services but needs him to provide the services after 5 PM due to circumstances at the property. A) Joe should take the job, since $130 exceeds his average cost of production. B) Joe should take the job, since he is making a $30 profit per hour. C) Joe should decline the job, since he would lose $150 per hour worked on the job. D) Joe should decline the job, since he would lose $20 per hour worked.

D) Joe should decline the job, since he would lose $20 per hour worked.

Suppose France can produce 4 phones or 3 computers with 1 unit of labor, and Sweden can produce 1 phone or 2 computers with 1 unit of labor. If France can trade only with Sweden, then the theory of comparative advantage suggests that: A) France should specialize in producing phones and import computers from Sweden. B) France should specialize in producing computers and import phones from Sweden. C) France should produce both phones and computers, and import nothing from Sweden. D) France should import both phones and computers from Sweden.

France should specialize in producing phones and import computers from Sweden.

Which of the definitions below best defines Gross Domestic Product? A) Gross Domestic Product is the market value of all final goods and services sold within a country in a year. B) Gross Domestic Product is the market value of all final goods and services produced within a country in a year. C) Gross Domestic Product is the market value of all goods and services produced within a country in a year. D) Gross Domestic Product is the market value of all final goods and services produced by a country's permanent residents, wherever located, in a year.

Gross Domestic Product is the market value of all final goods and services produced within a country in a year.

(Figure: Demand Curve) Which of the following statements is true regarding the above figure? I. At a price of $6 per unit, consumers are willing and able to buy 10 units. II. The maximum price demanders are willing to pay for 15 units is $3.75 per unit. III. The higher the price, the greater the quantity demanded. IV. At a price of $3.75 per unit, consumers are indifferent between buying 10 and 15 units. A) I only B) I and II C) I, II, and III D) I, II, and IV *****

I and II

(Figure: Demand Shift) Which of the following factors could have caused the change in the above figure? I. an increase in the price of a complement good II. an increase in production costs III. an increase in the price of a substitute good IV. an increase in income for an inferior good A) I and III B) II and IV C) III only D) I, II, and III

III only

Which of the following statements shows how absolute advantage can be distinguished from comparative advantage? I. Asolute advantage refers to the ability to produce a good using fewer inputs, while comparative advantage is based on the monthly amount. II. Absolute advantage is based on the yearly production amount that a country can produce, while comparative advantage is based on the monthly production amount. III. Absolute advantage refers to the ability to produce a larger amount of goods with the same number of inputs, whereas comparative advantage refers to the ability to have the lowest opportunity cost of production. A) I and III only B) II and III only C) I, II, and III D) III only

III only

Joe runs a landscape company and uses one of his home's bedrooms as a home office. This office could be used to earn rental income from college students. If average rental income in Joe's neighborhood were to rise: A) Joe's opportunity cost of using a bedroom as a home office would decrease. B) Joe's landscape company would experience a decrease in demand for services at all prices. C) Joe should expand his office space in his home. D) Joe's opportunity cost of using a bedroom as a home office would increase.

Joe's opportunity cost of using a bedroom as a home office would increase.

Which of the following best explains the term "specialization" with respect to international trade? A) Specialization occurs when a country concentrates its productive resources on the goods and services it can produce most efficiently. B) Specialization occurs when a larger country can produce more of a particular good than a smaller country. C) Specialization refers to the absolute advantage that a country enjoys in the production of goods and services. D) Specialization refers to the ability of a country to produce more of a good than its trading partners.

Specialization occurs when a country concentrates its productive resources on the goods and services it can produce most efficiently.

Which of the scenarios below best displays how international trade allows for specialization? A) You are better at mowing lawns than your neighbor who is better at gardening. B) Truck drivers stay awake on long routes by drinking Colombian coffee. C) The United States and Canada can both produce lumber, but the U.S. buys lumber from Canada because it has a greater yield per acre. D) Cuba does not have a comparative advantage in producing antibiotics, but due to economic sanctions, relies on its own supply of medicines.

The United States and Canada can both produce lumber, but the U.S. buys lumber from Canada because it has a greater yield per acre.

What is a plausible economic explanation as to why Braille "dots" are commonly found on drive-up automatic teller machines? A) Blind people must be able use such machines, due to government regulations requiring such dots on the keys under the Americans with Disabilities Act. B) The cost of making two different types of keypads, at the margin, is substantial, and the benefit of providing keypads without the Braille dots is a mere inconvenience to ATM users. C) The opportunity cost of making the keys with the Braille dots is less than making the keys without the Braille dots. D) There is no economic concept that explains why the keypads have Braille dots.

The cost of making two different types of keypads, at the margin, is substantial, and the benefit of providing keypads without the Braille dots is a mere inconvenience to ATM users.

The September 11 terrorist attacks changed many people's tastes away from flying. The demand and supply model would predict which of the following events in the airline travel market? A) The supply of airline travel would decrease, resulting in a higher equilibrium price and lower equilibrium quantity. B) The supply of airline travel would increase, resulting in a lower equilibrium price and higher equilibrium quantity. C) The demand for airline travel would decrease, resulting in a lower equilibrium price and lower equilibrium quantity. D) The supply and demand for airline travel would decrease, resulting in a higher equilibrium price and higher equilibrium quantity.

The demand for airline travel would decrease, resulting in a lower equilibrium price and lower equilibrium quantity.

Suppose it is widely believed that the price of flat screen high definition televisions will be lower next year. What will happen as a result of such beliefs? A) The demand for flat screen TVs will increase now. B) The demand for flat screen TVs will increase next year when the prices fall. C) The demand for flat screen TVs will decrease now. D) The demand for flat screen TVs will not change.

The demand for flat screen TVs will decrease now.

An increase in supply and a decrease in demand occur in a market. What happens to the equilibrium price and quantity? A) The equilibrium price decreases; the change in the equilibrium quantity is ambiguous. B) The equilibrium price decreases; the equilibrium quantity increases. C) The equilibrium price increases; the change in the equilibrium quantity is ambiguous. D) The equilibrium price increases; the equilibrium quantity decreases.

The equilibrium price decreases; the change in the equilibrium quantity is ambiguous.

Lead, an input in the production of ammunition, has increased in price from $0.60/lb in 2006 to over $1.50/lb in 2007. What happened to the equilibrium price and quantity of ammunition over this period? A) The equilibrium price increased and the equilibrium quantity decreased. B) The equilibrium price increased and the equilibrium quantity increased. C) The equilibrium price decreased and the equilibrium quantity decreased. D) The equilibrium price decreased and the equilibrium quantity increased.

The equilibrium price increased and the equilibrium quantity decreased.

Suppose a famous baseball player, Alex Rodriguez, hires a high school student to paint his house. Which of the following is most likely TRUE? A) The opportunity cost of painting a house is higher for Alex Rodriguez than for the high school student. B) The opportunity cost of painting a house is lower for Alex Rodriguez than for the high school student. C) The opportunity cost of painting a house is the same for Alex Rodriguez as for the high school student. D) The opportunity cost of painting a house is zero for Alex Rodriguez and is negative for the high school student

The opportunity cost of painting a house is higher for Alex Rodriguez than for the high school student.

A firm produces volleyballs and soccer balls. What happens to the supply of soccer balls if the market price of volleyballs increases? A) The opportunity cost of producing soccer balls rises, so the supply curve of soccer balls increases. B) The opportunity cost of producing soccer balls falls, so the supply curve of soccer balls decreases. C) The opportunity cost of producing soccer balls rises, so the supply curve of soccer balls decreases. D) The opportunity cost of producing soccer balls falls, so the supply curve of soccer balls increases.

The opportunity cost of producing soccer balls rises, so the supply curve of soccer balls decreases.

Because of new production technology, the manufacturers of plasma television screens have reduced the number of defective screens that are scrapped in production. What effect will this have in the market for plasma televisions? A) The demand curve will increase. B) The supply curve will increase. C) The demand and supply curve both increase. D) The demand curve will decrease.

The supply curve will increase.

Economic growth in China is leading to more Chinese people owning cars. What effect does this have on oil markets? A) This leads to an increased demand for oil, which causes oil prices to rise. B) This leads to a decreased demand for oil, which causes oil prices to rise. C) This leads to an increased demand for oil but a decreased supply, which causes oil prices to increase rapidly. D) This leads to an increased demand and supply of oil, which causes oil prices to increase rapidly

This leads to an increased demand for oil, which causes oil prices to rise.

Adam Smith's metaphor of the "invisible hand" refers to the notion that: A) greed is always good. B) behavior based on self-interest can lead to an overall benefit to society. C) market incentive can lead to negative side effects. D) markets always align self-interest with social interest

behavior based on self-interest can lead to an overall benefit to society.

If labor in China is less productive than labor in the United States in all areas of production, then: A) both the United States and China can benefit from trade. B) neither nation can benefit from trade. C) China can benefit from trade but not the United States. D) the United States can benefit from trade but not China

both the United States and China can benefit from trade.

Economics have discovered that economic booms and busts: A) are needless and can be eliminated. B) help to make people better off, so these should be encouraged. C) can be moderated but not eliminated. D) cause people to specialize so they become more productive.

can be moderated but not eliminated.

Which of the following does not shift the demand curve? A) changes in the price of the product itself B) changes in income C) changes in population D) changes in tastes and preferences

changes in the price of the product itself

Suppose the U.S. government wants to encourage individuals to save more of their income. The easiest way for the government to realize this goal is to: A) pass a law requiring people to save a larger percentage of their income. B) decrease government spending in order to set an example for individuals. C) increase the tax rate on savings in order to encourage more savings. D) develop incentives such as tax breaks on savings in order to encourage more savings.

develop incentives such as tax breaks on savings in order to encourage more savings.

Immediately after a hurricane, it is likely that the quantity demanded for tree cutting/removal services will ________ the quantity supplied, causing the price of tree cutting/removal services to ______. A) equal; remain unchanged B) be less than; rise C) exceed; rise D) decrease; fall

exceed; rise

Booms and busts refer to the: A) fluctuations in economic activity over time. B) theory of the second best. C) fact that a nation's output grows at a constant pace. D) monetary inflation and subsequent deflation caused by the central bank.

fluctuations in economic activity over time.

Suppose your teacher finishes class 30 minutes early on the day before an exam. She indicates that you may leave, or stay on for an optional study period which will last for the remaining 30 minutes of the scheduled class time. You should: A) always choose to stay for the study period, since you have already paid for the class time. B) only choose to stay if you like the instructor, since the value obtained is higher than if you disliked the instructor. C) only choose to stay if the additional benefits gained from the extra study session are greater than the additional cost of 30 minutes more in class. D) only choose to stay for the study session if you do not plan to study on your own for the exam.

only choose to stay if the additional benefits gained from the extra study session are greater than the additional cost of 30 minutes more in class.

Which of the following are factors that shift the demand curve? A) costs of production, price of the product, and subsidies B) income, population, tastes, and input prices C) expectations, opportunity costs, price of the product D) price of substitutes, tastes, price of complements

price of substitutes, tastes, price of complements

Technological advances have increased the supply of digital cameras. As a result the: A) demand for digital cameras will increase, putting downward pressure on the price of digital cameras. B) quantity demanded for digital cameras will increase. C) quantity supplied of digitals cameras will increase, putting downward pressure on the price of digital cameras. D) demand and supply of digital cameras will both increase.

quantity demanded for digital cameras will increase.

Quantity demanded is: A) the amount of a good or service that a buyer is able and willing to purchase at a given price. B) the amount of a good or service that a buyer is able and willing to sell at a given price. C) the amount of a good or service that a seller is able and willing to sell at a given price. D) always equal to the equilibrium quantity in a market.

the amount of a good or service that a buyer is able and willing to purchase at a given price.

Inflation is primarily caused by: A) businesses raising their prices in response to increasing energy prices. B) the government printing too much money. C) misguided fiscal policy. D) economic downturns in GDP.

the government printing too much money.

When it comes to the safety of pharmaceutical drugs: A) the government should spare no expense in determining whether drugs are safe. B) the government's lengthy testing of new drugs to ensure that they are safe may cost people their lives. C) economics informs us that more safety is always better. D) profit-driven pharmaceutical companies have no incentive to produce safe drugs.

the government's lengthy testing of new drugs to ensure that they are safe may cost people their lives.

In an effort to clean the air, many communities impose restrictions on the burning of garbage. This policy causes more garbage to be buried underground, potentially increasing groundwater contamination. What concept does this example represent? A) trade-offs B) marginal pollution C) sunk costs D) public provision

trade-offs

You observe that the price of coffee has increased, yet evidence suggests demand for coffee has been stable; you surmise a possible explanation is that: A) there has been no change in the supply of coffee. B) there has been increased use of subsidies in coffee production. C) wages of workers in coffee production might have decreased. D) wages of workers in coffee production might have increased

wages of workers in coffee production might have increased

Which of the following choices shows a good or service (produced in the current period) that is not counted in GDP for this year? A) a personal computer B) wood that is used for making furniture C) an oven that will be installed in a bakery D) flour sold in a grocery store

wood that is used for making furniture