Econ 1

If the equation C = 1 + 0.50H is graphed with C on the vertical axis and H on the horizontal axis, then the vertical intercept will be:

1

Barb takes one hour to update 3 Web pages and one hour to repair 3 bicycles. What is Barb's opportunity cost of repairing 1 bicycle?

1 web page update

Buzz takes 10 minutes to make a pot of coffee and 40 minutes to make a loaf of banana bread. What is Buzz's opportunity cost of making a loaf of banana bread?

4 pots of coffee

The smallest amount you would have to pay Bronx Pizza to get them sell an additional cheese pizza is $8.84. Thus, $8.84 is

Bronx Pizza's reservation price.

Belle and Linda work in a beauty salon, either coloring or cutting people's hair. If Belle colors someone's hair, she gives up 4 haircuts. If Linda colors someone's hair, she gives up 3 haircuts. Thus, Blank______ has a comparative advantage in coloring hair.

Linda

Suppose that Mies and Frank are both architects. Mies has a comparative advantage over Frank in designing skyscrapers. Select all of the reasons why this might arise.

Mies has more innate ability than Frank. correct Mies had more training than Frank. correct Mies had more experience than Frank. correct

Suppose you're trying to decide what to cook for dinner. Both the chicken and the salmon you have in your fridge are about to go bad, and whichever one you don't eat tonight, you'll have to throw away. In deciding which one to cook, should it matter to you that the salmon was slightly more expensive than the chicken?

No (the amount you spent on the food is a sunk cost and shouldn't factor into your decision. You should just cook whichever one sounds better to you)

A(n)________ cost is a cost that is beyond recovery at the moment a decision is made

Sunk or sunken

If bagels and cereal are substitutes, then a decrease in the price of bagels will lead to Blank______ in the demand for cereal.

a decrease

economists believe that scarcity is

a fundamental fact of life for everyone

A supply curve is ______.

a schedule or graph showing the quantity of a good that sellers wish to sell at each price

increasing opportunity cost explains why production possibilities curves have _____.

a slope that becomes steeper as production of the good on the x-axis increases

Denise can knit 2 scarves per day and Jacob can knit 3 scarves per day. So, we know that Jacob has a(n) _______ advantage in knitting scarves.

absolute

If it takes a person less time to perform a task than anyone else, then that person has a(n) _____ advantage in performing that task.

absolute

Joe and Rachel are roommates. Rachel takes 10 minutes to do the dishes, and Joe takes 15 minutes to do the dishes. So, we know that Rachel has a(n) ______ advantage in washing dishes.

absolute

always true, sometimes true or never true a market equilibrium leaves no unexploited opportunities for individuals

always true

A medical breakthrough that decreases the cost of treating cancer should lead to Blank______ in the supply of cancer treatments. Multiple choice question.

an increase

If a government announcement leads home buyers to believe that house prices will go up in the future, then this should lead to Blank______ in the current demand for houses.

an increase

Prozac and Wellbutrin are both prescription medications to treat depression. If the price of Prozac increases, then this should lead to:

an increase in the number of people who use Wellbutrin. an increase in the price of Wellbutrin.

Given that hops are an important input to the production of beer, a sharp increase in the price of hops should lead to:

an increase in the price of beer. a decrease in the amount of beer bought and sold in the market.

two goods are substitutes if

an increase in the price of one good, leads to an increase (rightward shift) in the demand for the other.

the shift from the "old" to the "new" line in the accompanying graph represents _______.

an increase in the vertical intercept (an increase in the vertical intercept of a line is represented by an upward parallel shift)

Suppose your roommate recently lost his part-time job, and you notice that afterward his consumption of Ramen Noodles increases. This suggests that for your roommate Ramen Noodles are

an inferior good

Economic growth is represented by Blank______ shift in a country's production possibilities curve.

an outward

A production possibilities curve that becomes steeper as production of the good on the x-axis increases reflects that principle that Blank______.

as we produce more of something, the opportunity cost of producing that good increases.

A bow-shaped production possibility curve that becomes steeper as production of the good on the x-axis increases reflects the fact that _____

as you produce more of the good on the x- axis, the opportunity cost of producing that good increases

A bow-shaped production possibility curve that becomes steeper as production of the good on the x-axis increases reflects the fact that

as you produce more of the good on the x-axis, the opportunity cost of producing that good increases

An activity's ______ benefit is the total benefit of carrying out n units of an activity divided by n

average

If the price of a good or service in a closed economy is less than the world price, and that economy opens itself to trade, the economy will tend to

become a net exporter of that good or service

Suppose the price of grapefruit falls drastically. What will happen to the equilibrium price and quantity of oranges?

both equilibrium price and equilibrium quantity will decrease

What will happen to the equilibrium price and quantity of beef if consumer income increases? (Assume that beef is a normal good.)

both will increase

The largest dollar amount that a buyer is willing to pay for a good is the

buyer's reservation price.

a person has an absolute advantage in a given task if they ________.

can complete that task in less time than the other person

A(n) ______ economy is an economy that does not trade with the rest of the

closed

If Tom's opportunity cost of performing a task is lower than Jerry's, then Tom has a(n) ______ advantage over Jerry in performing that task. (Enter one word in the blank.)

comparative

one person has a ______ advantage over another if their opportunity cost of performing a task is lower than the other person's opportunity cost

comparative

Everyone can be made better off if each person specializes in performing the task in which they have a(n)

comparative advantage

If an increase in the price of one good, causes a decrease (leftward shift) in the demand for another good, then the two goods are

complements

State whether the following pairs of goods are complements or substitutes. coffee and cream

complements

State whether the following pairs of goods are complements or substitutes. squash racquets and squash balls

complements

If the price of butter increases, the quantity of butter demanded will

decrease

A(n) Blank______ variable is a variable in an equation whose value is determined by the value taken by another variable in the equation.

dependent

the value of a(n) ______ variable is determined but the value taken by another variable in the equation.

dependent

In the graph of a straight line, the vertical intercept is the value taken by the:

dependent variable when the independent variable is equal to zero

When two parties produce the good or service for which they wield a comparative advantage, there are gains from specialization and exchange. In general, this means:

each can consume a combination of goods that would have been unattainable otherwise

a mathematical expression that describes the relationship between two or more variables is an_____

equation

suppose the wage paid to orange pickers rises what will happen to the equilibrium price and quantity of oranges

equilibrium price will increase and equilibrium quantity will decrease

The domestic producers of Blank______ goods benefit from free trade.

exported

A person's comparative advantage can never change.

false

a production possibilities curve is a ______

graph the describes the maximum amount of one good that can be produced for every possible level of production of the other good.

When the price of a good or service in a closed economy is Blank______ the world price, that economy will tend to become a net importer of that good or service when it opens itself to trade.

greater than

The fact that the production possibility curve is downward sloping illustrates the idea that

having more of one thing generally means having less of something else.

Hazel and Rusty are farmers. Each year, Hazel can either grow 100 bushels of tomatoes or 50 bushels of green beans, and Rusty can either grow 60 bushels of tomatoes or 20 bushels of green beans. Who has an absolute advantage in growing green beans?

hazel

the domestic consumers of ______ goods benefit from free trade

imported

Suppose that as the price of coffee increases, consumers purchase less coffee in part because they can no longer afford to buy as much coffee as they used to. This reduction in the quantity of coffee demanded is known as the Blank______ of a price change.

income effect

The change in the quantity demanded of a good that results because a change in the price of a good changes the buyer's purchasing power is known as the Blank______ of a price change.

income effect

the marginal cost of carrying out an activity is the

increase in total costs that results from carrying out one additional unit of the activity

Given that paper is made from wood, a decrease in the price of wood should:

increase the quantity of paper bought and sold in the market, decrease the price of paper.

a production possibilities curve that becomes steeper as production of the good on the x-axis increases reflects the principle that

increasing opportunity cost

microeconomics is the study of:

individual choice under scarcity and its implications for the behavior of prices and quantities in individual markets

A buyer's reservation price is the

largest dollar amount the buyer would be willing to pay for a good

the increase in total cost that results from carrying out one additional unit of an activity is its ______ cost

marginal

the increase in total benefit that results from carrying out one additional unit of the activity is called______.

marginal benefit

indicate which of the following will lead to an outward shift in the production possibilities curve

measurable increase in the population new factories and equipment

the study of individual choice under scarcity and its implications for the behavior of prices and quantities in individual markets is known as

microeconomics

economists believe that people

never have enough time, money, or energy to do everything or have everything they want

Suppose you pay $35 to reserve a camp site at a local state park. The rules specify that you can only receive a refund if you cancel your reservation 2 weeks before your trip. Several days before your trip, you learn that it's supposed to rain the whole time you had planned to camp, and you are having second thoughts about going. Should the $35 you paid for the camp site factor into your decision about whether to go camping?

no (several days before your trip, the 35 dollars you paid for the camp site is a sunk cost. so the 35 dollars you paid for the camp site should not factor into your decision about whether to go camping.)

A principle that predicts how people will behave is called a(n):

positive economic principle

A positive economic principle _____.

predicts how people will behave

A graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good is a

production possibilities curve

with the invisible hand, the entrepreneur is motivated by _____.

self interest

costs that are beyond recovery at the moment a decision is made ____.

should not factor into the cost- benefit calculation

Along a straight line, the _____ is the ratio of the vertical distance the straight line travels between an two points to the corresponding horizontal distance

slope

always true, sometimes true or never true A market equilibrium maximizes total economic surplus

sometimes true

always true, sometimes true or never true a market equilibrium exploits all gains achievable through collective action

sometimes true

If an increase in the price of one good, causes a increase (rightward shift) in the demand for another good, then the two goods are

substitutes

State whether the following pairs of goods are complements or substitutes. cloth diapers and disposable diapers

substitutes

State whether the following pairs of goods are complements or substitutes. handball courts and squash courts

substitutes

Suppose that as the price of pencils increases, people buy fewer pencils and instead use pens. The resulting reduction in the quantity of pencils demanded is known as the Blank______ of a price change.

substitution effect

The change in the quantity demanded of a good that results because buyers switch to or from substitutes when the price of the good changes is known as the Blank______ of a price change.

substitution effect

which of the following costs should be ignored when weighing the costs and benefits of an action? A. sunk costs, B. marginal costs, C. opportunity, D. variable costs.

sunk costs

Zach and Alex both build furniture. If Zach has a comparative advantage in the production of tables, and Alex has a comparative advantage in the production of chairs, then both Zach and Alex can be made better off if Zach specializes in the production of Blank______ and if Alex specializes in the production of Blank______.

tables; chairs

Suppose the price of butter, a complement to bread, increases. At the same time, suppose the price of flour, a key ingredient to the production of bread, falls. How will both of these factors (the increase in the price of butter and the decrease in the price of flour) affect the equilibrium price and quantity of bread? the equilibrium price of bread (), and the equilibrium quantity of bread ()

the equilibrium price of bread (will decrease), and the equilibrium quantity of bread (could either increase or decrease)

Suppose that when milk sells for $4.50 per gallon, the quantity of milk demanded is 3,250 gallons per day and the quantity of milk supplied is 3,860 gallons per day. Will the equilibrium price of milk be greater than, less than, or equal to $4.50 per gallon?

the equilibrium price of milk will be less than 4.50

An increase in the price of cotton is likely to shift the supply curve for clothing (that uses cotton as an input) to

the left

the world price is

the price at which a good or service is traded on the world market

the invisible hand refers to _______.

the price mechanism that guides economic actions

The idea that because resources are limited, having more of one thing generally means having less of another is captured by the fact that

the production possibilities curve is downward slopping

The opportunity cost of the good on the vertical axis is determined by:

the reciprocal of the absolute value of the slope of the production possibilities curve: 1/[slop PCC]

the average cost of carrying out an activity is

the total cost of undertaking n units of an activity divided by n

A quantity that is free to take on different values is a(n) _____

variable

A quantity that is free to take on different values is a(n):

variable

in the graph of a straight line, the value taken by the dependent variable when the independent variable is equal to zero is known as the:

vertical intercept

If Zach's reservation price for a gallon of milk is $5.53, and the market price for milk is $4.90, then Zach

will buy a gallon of milk

If Jason's reservation price for a pound of apples is $1.40, and the market price for a pound of apples is $1.52, then Jason

will not buy a pound of apples

a rational person is someone _____

with well defined goals who tries to fulfill those goals as best he or she can

The price at which a good or service is traded on international markets is known as the

world price