ECO2013 Exam 1 Pearson Questions

Which of the following best describes scarcity? A. unlimited wants exceed the limited resources available B. markets cannot properly allocate resources C. wants cannot be fulfilled and thus all goods must be rationed D. prices of goods are very high

A. unlimited wants exceed the limited resources available

What is the basis for trade? A. Economic growth B. Available resources C. Efficiency D. Comparative advantage E. Absolute advantage

D. Comparative advantage

Scarcity is central to the study of economics because it implies that A. economic agents are rational B. wants are unlimited C. society must make decisions at the margin D. every choice involves an opportunity cost

D. every choice involves an opportunity cost

Peanut butter and jelly are complements for many consumers. Consider the market for peanut butter. If there is an increase in the price of jelly, A. the price of peanut butter rises B. the demand curve for peanut butter does not shift; instead there is a movement along it C. there is a shift in the supply curve for jelly D. the quantity of peanut butter increases E. there is a movement along the supply curve of peanut butter

E. there is a movement along the supply curve of peanut butter

"I was going to drop my psych course so I could concentrate on my other courses, but I had already put so much time into the course I decided not to drop it" Is your friend's reasoning correct? Correct/incorrect

Incorrect

A large corporation that runs nursing homes estimates that changes to Medicare will result in lower payments by Medicare to nursing homes for short-term stays by patients that require therapy or care upon leaving hospitals. Assume the corporation is considering expanding the number of "beds" it offers at its nursing homes. Given the changes to Medicare, if the marginal benefit of offering an additional bed is $3000 and the marginal cost is $5000 per bed, then the corporation _____ offer additional beds. Should/Should not

Should not

Suppose Applie is currently selling 3,000,000 iPods per year. However, managers at Apple are considering whether to increase the production by 300,000 iPods. One manager explains that after increasing production by this amount, total profit would be $100 million. Given this info, should Apple increase production by 300,000 iPods? A. Info about the additional revenue earned and the additional cost incurred from producing 300,000 additional iPods is required to answer this question B. No, because increasing production by 300,000 iPods would decrease the price of iPods C. Info about the total revenue earned and the total cost incurred from producing 3,300,000 iPods is required to answer this question D. Yes, because Apple would earn a profit E. Info about the additional cost incurred from producing 300,000 additional iPods is required to answer this question

A. Info about the additional revenue earned and the additional cost incurred from producing 300,000 additional iPods is required to answer this question

Prof Knight's office hours are held in ____ on ____ A. MAT 340; MW at 1:30-3:00pm B. STZ 102; MWF at 1:30-3:00pm C. MAT 340; TR at 1:30-3:00pm D. STZ 102; TR at 1:30-3:00pm

A. MAT 340; MW at 1:30-3:00pm

The price of Burger King's Whopper hamburger increases. This will cause A. demand for McDonald's Big Mac hamburgers to increase B. demand for McDonald's Big Mac hamburgers to decrease C. a movement along the demand curve for McDonald's Big Mac Hamburgers

A. demand for McDonald's Big Mac hamburgers to increase

Consider the market for camera film. If more people start using digital cameras, which do not require film, A. the demand curve for film shifts left B. neither the demand curve nor the supply curve for film shifts; instead there is a movement along both C. there is a movement up along the demand curve for film D. there is a movement down along the demand curve for film E. the supply curve of film shifts rightward

A. the demand curve for film shifts left

A minimum wage set above the equilibrium wage will ____ the quantity of labor demanded and ____ the quantity of labor supplied A. decrease, decrease B. decrease, increase C. not change, not change D. increase, decrease E. increase, increase

B. decrease, increase

McDonald's eliminates $1.00 off coupons. This will cause A. demand for McDonald's Big Mac hamburgers to shift right B. demand for McDonald's Big Mac hamburgers to shift left C. a movement along the demand curve for McDonald's Big Mac Hamburgers

B. demand for McDonald's Big Mac hamburgers to shift left

The US economy enters a period of decline in incomes. This will cause A. demand for McDonald's Big Mac hamburgers to shift left if they are inferior goods B. demand for McDonald's Big Mac hamburgers to shift right if they are inferior goods C. a movement along the demand curve for McDonald's Big Mac hamburgers if they are normal goods

B. demand for McDonald's Big Mac hamburgers to shift right if they are inferior goods

The price of fries decreases due to a potato surplus. This will A. decrease the demand for McDonald's Big Mac hamburgers B. increase the demand for McDonald's Big Mac hamburgers C. a movement along the demand curve for McDonald's Big Mac Hamburgers

B. increase the demand for McDonald's Big Mac hamburgers

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when A. marginal benefit is maximized B. marginal benefit equals marginal cost C. marginal cost is zero D. marginal benefit is greater than marginal cost

B. marginal benefit equals marginal cost

What is comparative advantage? A. the gain from consuming a product whose benefit is greater than its cost B. the ability to produce a good or service at a lower opportunity cost than other producers C. the ability to produce more of a good or service than competitors using the same amount of resources D. the gain from selling a product for more than it costs to product that product E. the ability to use all available resources to produce output

B. the ability to produce a good or service at a lower opportunity cost than other producers

Consider the market for leather shoes. If producers believe the price of leather shoes will increase next month, today A. the equilibrium price of leather shoes falls B. the supply curve for leather shoes shifts leftward C. the supply curve for leather shoes shifts rightward D. there is a movement along the supply curve for leather shoes E. the equilibrium quantity of leather shoes increases

B. the supply curve for leather shoes shifts leftward

If a firm produces five chairs with marginal costs of $25, $30, $40, $55, and $75 respectively, and sells them for $80 each, what is the firm's total producer surplus? A. $400 B. $225 C. $175 D. $150 E. $80

C. $175

Graphically, producer surplus is the area under the A. price and above the demand curve, up the relevant quantity B. price and above the quantity axis, up the relevant quantity C. price and above the supply curve, up the relevant quantity D. demand curve and above the price, up to the relevant quantity E. demand curve and above the supply curve, up to the relevant quantity

C. price and above the supply curve, up the relevant quantity

What is an absolute advantage? A. the ability to produce a good or service at a lower opportunity cost than other producers B. the gain from consuming a product whose benefit is greater than its cost C. the ability to produce more of a good or service than competitors using the same amount of resources D. the ability to use all available resources to produce output E. the gain from selling a product for more than its costs to produce that product

C. the ability to produce more of a good or service than competitors using the same amount of resources

In the 1950s, the economist Bela Balassa compared 28 manufacturing industries in the US and Britain. In every one of the 28 industries, Balassa found that the US had an absolute advantage. In these circumstances, would there have been any gain to the US from importing any of these products from Britain. Explain. A. even with an absolute advantage, the US would have benefitted from importing those products for which Britain had the same opportunity cost B. since the US had an absolute advantage in all 28 industries, it had more bargaining power and would have gaines from importing all of these products from Britain C. since the US had an absolute advantage in all 28 industries, it also had a comparative advantage in each industry and would not have gained anything from importing any of these products from Britain D. even with an absolute advantage, the US would have benefited from importing those products for which Britain had a comparative advantage E. even with an absolute advantage, the US would have benefitted from importing those products that Britain could have produced at a lower total cost

D. even with an absolute advantage, the US would have benefited from importing those products for which Britain had a comparative advantage

Is it possible for a country to have a comparative advantage in producing a good without also having an absolute advantage? A country without an absolute advantage in producing a good A. will not have a comparative advantage because it has fewer resources B. will have a comparative advantage if it devotes more resources toward that good's production C. will have a comparative advantage if it is able to produce that good at a low total cost D. will have a comparative advantage if it has a lower opportunity cost of producing that good E. will have a comparative advantage if it produces more efficiently

D. will have a comparative advantage if it has a lower opportunity cost of producing that good

How can a country gain from specialization and trade? A. A country can specialize in producing that for which it has an absolute advantage and then trade for other needed goods and services B. A country can specialize by using all available resources to produce goods and services to avoid trading with other countries C. A country can specialize in producing that which is most scarce and then trade for other needed goods and services D. A country can specialize by using all available resources to invest in capital goods to promote economic growth E. A country can specialize in producing that for which it has a comparative advantage and then trade for other goods and services

E. A country can specialize in producing that for which it has a comparative advantage and then trade for other goods and services

The minimum wage is above the equilibrium wage rate, then an increase in the minimum wage _____ employment and _____ unemployment A. increases; increases B. increases; decreases C. does not change; increases D. decreases; decreases E. decreases; increases

E. decreases; increases

Suppose the equilibrium price and the equilibrium quantity of gold both increases. Which of the following would produce such a change? A. the market supply curve for gold could have increased or the market demand curve for gold could have decreased B. the market supply curve for gold could have increased C. the market supply curve for gold could have increased or the market demand curve for gold could have increased D. the market demand curve for gold could have decreased E. the market demand curve for gold could have increased

E. the market demand curve for gold could have increased