Econ 202 1-7

Which of the following statements best captures the relationship between microeconomics and macroeconomics? a. Microeconomics and macroeconomics are distinct from one another, yet they are closely related. b. For the most part, microeconomists are unconcerned with macroeconomics, and macroeconomists are unconcerned with microeconomics. c. Microeconomists study markets for small products, whereas macroeconomists study markets for large products. d. Microeconomics is oriented toward policy studies, whereas macroeconomics is oriented toward theoretical studies.

a. Microeconomics and macroeconomics are distinct from one another, yet they are closely related.

Abraham drinks Mountain Dew. He can buy as many cans of Mountain Dew as he wishes at a price of $0.55 per can. On a particular day, he is willing to pay $0.95 for the first can, $0.80 for the second can, $0.60 for the third can, and $0.40 for the fourth can. Assume Abraham is rational in deciding how many cans to buy. His consumer surplus is a. $0.70. b. $0.50. c. $0.60. d. $1.00.

a. $0.70

Donald produces nails at a cost of $350 per ton. If he sells the nails for $500 per ton, his producer surplus is a. $150. b. $850. c. $500. d. $350.

a. $150.

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that the opportunity cost of 1 table is a. 6 chairs for Ken and 3 chairs for Traci. b. 1/6 chair for Ken and 3 chairs for Traci. c. 6 chairs for Ken and 1/3 chair for Traci. d. 1/6 chair for Ken and 1/3 chair for Traci.

a. 6 chairs for Ken and 3 chairs for Traci.

Market power refers to the a. ability of market participants to influence price. b. forces of supply and demand in determining equilibrium price. c. side effects that may occur in a market. d. government regulations imposed on the sellers in a market.

a. ability of market participants to influence price.

A price ceiling is binding when it is set a. below the equilibrium price, causing a shortage. b. below the equilibrium price, causing a surplus. c. above the equilibrium price, causing a shortage. d. above the equilibrium price, causing a surplus.

a. below the equilibrium price, causing a shortage

A decrease in the price of a good will a. decrease quantity supplied. b. decrease supply. c. increase supply. d. increase quantity supplied.

a. decrease quantity supplied.

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is a. inelastic. b. highly responsive to changes in income. c. unit elastic. d. elastic

a. inelastic.

Assume a market is perfectly competitive. When a new producer enters the market, the a. price in the market does not change. b. market is no longer a competitive market. c. price in the market decreases. d. price in the market increases.

a. price in the market does not change

Almost all economists agree that tariffs and import quotas a. reduces general economic welfare. b. increases general economic welfare. c. stimulate a less than fully employed economy. d. have no effect on general economic welfare.

a. reduces general economic welfare.

The overriding reason why households and societies face many decisions is that a. resources are scarce. b. people, by nature, tend to disagree. c. incomes fluctuate with business cycles. d. goods and services are not scarce.

a. resources are scarce.

A production possibilities frontier is a straight line when a. the rate of tradeoff between the two goods being produced is constant. b. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced. c. the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. d. an economy is interdependent and engaged in trade instead of self-sufficient.

a. the rate of tradeoff between the two goods being produced is constant.

Economics is the study of how society manages its a. unlimited wants and limited resources. b. limited wants and limited resources. c. unlimited wants and unlimited resources. d. limited wants and unlimited resources.

a. unlimited wants and limited resources.

When a society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing a. surpluses. b. scarcity. c. inefficiencies. d. inequalities.

b. scarcity.

Suppose there is an early freeze in California that reduces the size of the lemon crop. What happens to consumer surplus in the market for lemons? a. We would have to know whether the demand for lemons is elastic or inelastic to make this determination. b. Consumer surplus decreases. c. Consumer surplus is not affected by this change in market forces. d. Consumer surplus increases

b. Consumer surplus decreases.

Analysis of data on workers and those looking for work is conducted by economists at the a. Office of Management and Budget. b. Department of Labor. c. Congressional Budget Office. d. Department of the Treasury.

b. Department of Labor.

Almost all economists agree that rent control a. has no effect on the rental income of landlords. b. adversely affects the availability and quality of housing. c. allows the market for housing to work more efficiently. d. is a very inexpensive way to help the most needy members of society.

b. adversely affects the availability and quality of housing.

When a buyer's willingness to pay for a good is equal to the price of the good, the a. buyer will buy as much of the good as the buyer's budget allows. b. buyer is indifferent between buying the good and not buying it. c. buyer's consumer surplus for that good is maximized. d. price of the good exceeds the value that the buyer places on the good.

b. buyer is indifferent between buying the good and not buying it.

A tax on buyers will shift the a. supply curve downward by the amount of the tax. b. demand curve upward by the amount of the tax. c. demand curve downward by the amount of the tax. d. supply curve upward by the amount of the tax.

b. demand curve upward by the amount of the tax.

For which of the following goods is the income elasticity of demand likely lowest? a. subscriptions to premium movie channels through the local cable television provider b. housing c. hi-definition DVD players d. champagne

b. housing

An increase in price causes an increase in total revenue when demand is a. elastic. b. inelastic. c. unit elastic. d. All of the above are possible.

b. inelastic.

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts, the price elasticity of supply approaches a. zero, and the supply curve is horizontal. b. infinity, and the supply curve is horizontal. c. infinity, and the supply curve is vertical. d. zero, and the supply curve is vertical.

b. infinity, and the supply curve is horizontal.

A decrease in supply is represented by a a. movement downward and to the left along a supply curve. b. leftward shift of a supply curve. c. rightward shift of a supply curve. d. movement upward and to the right along a supply curve.

b. leftward shift of a supply curve.

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will a. raise both price and total revenues. b. lower both price and total revenues. c. raise price and lower total revenues. d. lower price and raise total revenues.

b. lower both price and total revenues.

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it a. minimizes the expenditure of buyers. b. maximizes the combined welfare of buyers and sellers. c. maximizes tax revenue for the government. d. maximizes costs of the seller.

b. maximizes the combined welfare of buyers and sellers.

Comparative advantage is related most closely to which of the following? a. bargaining strength in international trade b. opportunity cost c. output per hour d. efficiency

b. opportunity cost

A demand schedule is a table that shows the relationship between a. quantity demanded and quantity supplied. b. price and quantity demanded. c. price and income. d. income and quantity demanded.

b. price and quantity demanded.

Resources are a. scarce for households but plentiful for economies. b. scarce for households and scarce for economies. c. plentiful for households but scarce for economies. d. plentiful for households and plentiful for economies.

b. scarce for households and scarce for economies.

A tax on sellers will shift the a. demand curve upward by the amount of the tax. b. supply curve upward by the amount of the tax. c. supply curve downward by the amount of the tax. d. demand curve downward by the amount of the tax.

b. supply curve upward by the amount of the tax.

Buyers are able to buy all they want to buy and sellers are able to sell all they want to sell at a. prices at and below the equilibrium price. b. the equilibrium price but not above or below the equilibrium price. c. prices above and below the equilibrium price, but not at the equilibrium price. d. prices at and above the equilibrium price.

b. the equilibrium price but not above or below the equilibrium price.

If the current allocation of resources in the market for wallpaper is efficient, then it must be the case that a. producer surplus equals consumer surplus in the market for wallpaper. b. the market for wallpaper is in equilibrium. c. on the last unit of wallpaper that was produced and sold, the value to buyers exceeded the cost to sellers. d. All of the above are correct.

b. the market for wallpaper is in equilibrium.

A decrease in the number of sellers in the market causes a. the supply curve to shift to the right. b. the supply curve to shift to the left. c. a movement downward and to the left along a stationary supply curve. d. a movement up and to the right along a stationary supply curve.

b. the supply curve to shift to the left.

Which of the following is not an example of scarcity? a. Only some people can afford to buy a BMW automobile. b. Miranda has an unlimited supply of oranges in her orchard. c. Every individual in society cannot attain the highest standard of living to which he or she might aspire. d. Each member of a household cannot get everything he or she wants.

b. Miranda has an unlimited supply of oranges in her orchard.

A leftward shift of a demand curve is called a(n) a. increase in quantity demanded. b. decrease in quantity demanded. c. decrease in demand. d. increase in demand.

c. decrease in demand.

Equilibrium price must decrease when demand a. decreases and supply does not change, when demand does not change and supply increases, and when demand increases and supply decreases simultaneously. b. increases and supply does not change, when demand does not change and supply decreases, and when demand decreases and supply increases simultaneously. c. decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously. d. increases and supply does not change, when demand does not change and supply decreases, and when demand increases and supply decreases simultaneously.

c. decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously.

Economists at the Department of Justice a. prepare the federal budget. b. advise Congress on economic matters. c. help enforce the nation's antitrust laws. d. track the behavior of the nation's money supply.

c. help enforce the nation's antitrust laws.

A country that currently does not trade with other countries could benefit by a. restricting both imports and exports. b. promoting imports and restricting exports. c. restricting imports and promoting exports. d. not restricting trade.

d. not restricting trade

Cross-price elasticity of demand measures how a. the quantity demanded of one good changes in response to a change in the quantity demanded of another good. b. the price of one good changes in response to a change in the price of another good. c. the quantity demanded of one good changes in response to a change in the price of another good. d. strongly normal or inferior a good is.

c. the quantity demanded of one good changes in response to a change in the price of another good

A production possibilities frontier is bowed outward when a. the rate of tradeoff between the two goods being produced is constant. b. the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. c. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced. d. an economy is self-sufficient instead of interdependent and engaged in trade

c. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

A price floor will be binding only if it is set a. below the equilibrium price. b. either above or below the equilibrium price. c. above the equilibrium price. d. equal to the equilibrium price.

c. above the equilibrium price.

A price ceiling will be binding only if it is set a. above the equilibrium price. b. either above or below the equilibrium price. c. below the equilibrium price. d. equal to the equilibrium price.

c. below the equilibrium price.

A good will have a more inelastic demand, the a. longer the period of time. b. more it is regarded as a luxury. c. broader the definition of the market. d. greater the availability of close substitutes.

c. broader the definition of the market.

Economics is the study of a. the interaction of business and government. b. production methods. c. how society manages its scarce resources. d. how households decide who performs which tasks.

c. how society manages its scarce resources.

Absolute advantage is found by comparing different producers' a. payments to land, labor, and capital. b. locational and logistical circumstances. c. input requirements per unit of output. d. opportunity costs.

c. input requirements per unit of output.

A tax imposed on the buyers of a good will raise the a. effective price received by sellers and lower the equilibrium quantity. b. price paid by buyers and raise the equilibrium quantity. c. price paid by buyers and lower the equilibrium quantity. d. effective price received by sellers and raise the equilibrium quantity.

c. price paid by buyers and lower the equilibrium quantity

If soybean farmers know that the demand for soybeans is inelastic, in order to increase their total revenues they should a. use more fertilizers and weed killers to increase their yields. b. plant additional acres to increase their output. c. reduce the number of acres they plant to decrease their output. d. Both a and b are correct.

c. reduce the number of acres they plant to decrease their output.

A improvement in production technology will shift the a. demand curve to the left. b. supply curve to the left. c. supply curve to the right. d. demand curve to the right.

c. supply curve to the right.

For a good that is a necessity, demand a. has unit elasticity. b. tends to be elastic. c. tends to be inelastic. d. cannot be represented by a demand curve in the usual way.

c. tends to be inelastic.

The production possibilities frontier illustrates a. the combinations of output that an economy should produce. b. the combinations of output that an economy should consume. c. the combinations of output that an economy can produce. d. All of the above are correct.

c. the combinations of output that an economy can produce.

The study of how the allocation of resources affects economic well-being is called a. macroeconomics. b. consumer economics. c. welfare economics. d. willingness-to-pay economics.

c. welfare economics.

A positive economic statement such as "Pollution taxes decrease the quantity of pollution generated by firms" a. would require values and data to be evaluated. b. would likely be made by an economist acting as a policy advisor. c. would require data but not values to be evaluated. d. could not be evaluated by economists acting as scientists.

c. would require data but not values to be evaluated.

If the United States changed its laws to allow for the legal sale of a kidney, which of the following is likely to occur? a. The price of kidneys would rise to balance supply and demand. b. The gains from trade would make both buyers and sellers better off. c. Thousands of lives would be saved. d. All of the above are correct.

d. All of the above are correct.

In considering how to allocate its scarce resources among its various members, a household considers a. each member's abilities. b. each member's efforts. c. each member's desires. d. All of the above are correct.

d. All of the above are correct.

Which of the following is a decision that economists study? a. how much people work b. what people buy c. how much money people save d. All of the above are correct.

d. All of the above are correct.

What term refers to the property that society has limited resources and therefore cannot produce all the goods and services people wish to have? a. inefficiency b. inequality c. market failure d. scarcity

d. scarcity

Which of the following is a subject that economists study? a. the growth in average income b. the fraction of the population that cannot find work c. the rate at which prices are rising d. All of the above are correct.

d. All of the above are correct.

John Maynard Keynes referred to economics as an easy subject, a. which deals primarily with common sense. b. which very few can enjoy. c. but not as easy as philosophy or the pure sciences. d. at which very few excel.

d. at which very few excel.

A demand curve shows the relationship a. between price and income. b. between income and quantity demanded. c. among income, price, and quantity demanded. d. between price and quantity demanded.

d. between price and quantity demanded.

A surplus results when a a. nonbinding price floor is imposed on a market. b. nonbinding price floor is removed from a market. c. binding price floor is removed from a market. d. binding price floor is imposed on a market.

d. binding price floor is imposed on a market.

The most obvious benefit of specialization and trade is that they allow us to a. work more hours per week than we otherwise would be able to work. b. spend more money on goods that are beneficial to society, and less money on goods that are harmful to society. c. consume more goods by forcing people in other countries to consume fewer goods. d. consume more goods than we otherwise would be able to consume.

d. consume more goods than we otherwise would be able to consume.

When two variables move in opposite directions, the curve relating them is a. downward sloping, and we say the variables are positively related. b. upward sloping, and we say the variables are positively related. c. upward sloping, and we say the variables are negatively related. d. downward sloping, and we say the variables are negatively related.

d. downward sloping, and we say the variables are negatively related.

By definition, imports are a. goods in which a country has an absolute advantage. b. people who work in foreign countries. c. limits placed on the quantity of goods leaving a country. d. goods produced abroad and sold domestically.

d. goods produced abroad and sold domestically.

A tax burden falls more heavily on the side of the market that a. is closer to unit elastic. b. is less inelastic. c. has a fewer number of participants. d. is more inelastic.

d. is more inelastic

A person can benefit from specialization and trade by obtaining a good at a price that is a. higher than his or her opportunity cost of that good. b. the same as his or her opportunity cost of that good. c. different than his or her opportunity cost of that good. d. lower than his or her opportunity cost of that good.

d. lower than his or her opportunity cost of that good.

Inefficiency exists in an economy when a good is a. being produced with less than all available resources. b. being consumed by buyers who value it most highly. c. not distributed fairly among buyers. d. not being produced by the lowest-cost producers.

d. not being produced by the lowest-cost producers.

A likely example of substitute goods for most people would be a. peanut butter and jelly. b. televisions and subscriptions to cable television services. c. tennis balls and tennis rackets. d. pencils and pens.

d. pencils and pens.

A tax imposed on the sellers of a good will raise the a. price paid by buyers and raise the equilibrium quantity. b. effective price received by sellers and raise the equilibrium quantity. c. effective price received by sellers and lower the equilibrium quantity. d. price paid by buyers and lower the equilibrium quantity.

d. price paid by buyers and lower the equilibrium quantity.

A minimum wage that is set above a market's equilibrium wage will result in an excess a. demand for labor, that is, unemployment. b. supply of labor, that is, a shortage of workers. c. demand for labor, that is, a shortage of workers. d. supply of labor, that is, unemployment.

d. supply of labor, that is, unemployment.

Economists use some familiar terms in specialized ways a. because every respectable field of study has its own language. b. to make the subject sound more complex than it is. c. because it was too difficult to come up with new terms. d. to provide a new and useful way of thinking about the world.

d. to provide a new and useful way of thinking about the world.

If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is a. infinity, and the supply curve is vertical. b. infinity, and the supply curve is horizontal. c. zero, and the supply curve is horizontal. d. zero, and the supply curve is vertical.

d. zero, and the supply curve is vertical.