Econ Exam 1
A key feature of market economies is that market economies
allocate resources by everyone acting in their own self-interest
Which of the following events must cause the equilibrium quantity to rise in the market for burritos?
the price of pizza increases and the price of tortillas decreases
Normative statements are prescriptive, whereas positive statements are descriptive
true
Refer to the Figure . At which of the following prices would both Germany and Spain gain from trade with each other?
4 units of Good Y for 10 units of Good X
Which of the following combinations of cheese and wine could France not produce in 40 hours?
4 units of cheese and 6 units of wine
In the short run, an increase in the money supply will likely cause
a decrease in the unemployment rate and an increase in inflation.
Thousands of people develop asthma and breathing problems from exposure to air pollution. This is an example a
a market failure caused by an externality
Refer to the Figure. Which of the following would cause the supply curve to shift from Supply C to Supply A in the market for tables?
an increase in the price of wood
The economy cannot currently produce at point C because
it does not have the resources and technology to produce that level of output
To measure a business cycle we look at what is happening
its production of goods and services
n the short run, if the money supply increases, which of the following is NOT likely to happen
lead to a lower rate of inflation.
One of the reasons that people tend to eat more in an "all you can eat" buffet is because the
marginal benefit from an extra plate of food is greater than the marginal cost of the additional food
A group of pizza buyers and pizza sellers forms a(n)
market
Which of the following would likely be studied by a macroeconomist rather than a microeconomist?
the effects of borrowing by the federal government
Both the production of goods and services and the unemployment rate are used to measure the business cycle
true
Economics is the study of the choices people make in attempting to manage their scarce resources
true
Germany's hyperinflation after World War I was primarily due to the rapid increase in the supply of money.
true
Given an objective to minimize time spent shopping, deciding which "check-out" line to get into is an everyday example of marginal thinking
true
Most countries on the planet use a market-based approach to organizing economic activity.
true
Refer to the Figure. At a price of
$6, there is a shortage of 40 units.
A main cause of large or persistent inflation is
excessive growth in the money supply
In the circular-flow diagram, which of the following items does NOT flow from households to firms
goods and services
Refer the figure. In the market for pizza in a college, which of the following movements would illustrate the effect of an increase in wages paid to pizza makers and a return of college students after the summer break?
point B to point D
Positive statements are NOT
prescriptive
Refer to the Table . Mexico should export
tablets and import freezers.
Refer to the Figure. Consider the production possibilities frontier for an economy that produces only sofas and cars. The opportunity cost of each car is the slope of the production possibilities frontier.
true
The government plays an important role in a market economy.
true
The last time the United States experienced high inflation was during the 1970s.
true
Michael is a financial adviser. He bills his clients $100 an hour for his services. He can also mow his lawn in 45 minutes. He can hire someone to mow his lawn who takes 90 minutes. Of the following prices, which is the highest Michael would pay someone to mow his lawn?
$74
The table contains a supply schedule for a good. If the law of supply applies to this good, then Q1 could be:
0
Refer to the figure. Before specialization, Alan and Diana were dividing their time equally between the production of muffins and scones. If both decide to specialize in the good in which they have the comparative advantage, total production will increase by
0 scones and 50 muffins.
If England specializes in cheese and France specializes in wine and the countries trade 10 units of cheese for 8 units of wine, England's gains from trade will be
10 units of cheese and 4 units of wine.
Refer to the Figure . At which of the following prices would both Alan and Diana gain from trade with each other?
12 muffins for 21 scones
Refer to the Figure . Germany would incur an opportunity cost of 6 units of Good X if it increase its production of Good Y by
12 units
refer to the Table. Which of the following combinations of cheese and wine could England not produce in 40 hours?
15 units of cheese and 6 units of wine
Refer to the Figure. If the production possibilities frontier shown is for two months of production, then which of the following combinations of beans and avocados could Mexico produce in two months?
2 avocados, 160 beans
refer to the Figure . Germany's opportunity cost of one unit of Good X is
2 units of Good Y and Spain's opportunity cost of one unit of Good X is 1/2 unit of Good Y
Refer to the Table. Which of the following combinations of cheese and wine could France produce in 40 hours?
2 units of cheese and 12 units of wine
Refer to the Figure. Consider the production possibilities frontier for an economy that produces only sofas and cars. The opportunity cost of each sofa is
2/3 of a car
Refer to the Table . Assume that Brian and Tabitha each has 120 minutes available. If each person spends all his or her time producing the good in which he or she has a comparative advantage, then total production is
20 bushels of apples and 10 pounds of pork.
Refer to the Figure. There is a shortage of
20 units when the price is $8.
Refer to the Figure. If the production possibilities frontier shown is for two months of production, then which of the following combinations of beans and avocados could Mexico not produce in two months?
3 avocados, 140 beans
Refer to the Table. If the market consists of John and Albert only and the price decreases by $2, the quantity demanded in the market increases by
3 units
Refer to the Table . What is Tabitha's opportunity cost of producing one bushel of apples?
3/5 of pork
Refer to the Table . What is Tabitha's opportunity cost of producing one bushel of apples?
3/5 pound of pork
Suppose that a worker in Shipville can produce either 5 units of oats or 20 pounds of tuna per year, and a worker in Grainland can produce either 20 units of oats or 5 pounds of tuna per year. There are 20 workers in each country. No trade occurs between the two countries. Shipville produces and consumes 50 units of oats and 200 pounds of tuna per year while Grainland produces and consumes 200 units of oats and 50 pound of tuna per year. If trade were to occur, Shipville would trade 60 pounds of tuna for 60 units of oats. If Shipville now completely specializes in tuna production, how many pounds of tuna could it now consume along with the 60 units of imported oats?
340 pounds
Refer to the Figure. If Luigi and Maria each divides his/her time equally between the production of meatballs and pizzas, then total production is
350 meatballs, 300 pizzas
Refer to the Figure. If the production possibilities frontier shown is for 24 hours of production, then how long does it take Mexico to produce one avocado?
4 hours
Refer to the Table. Which of the following combinations of cheese and wine could France not produce in 40 hours?
4 units of cheese and 6 units of wine
Refer to the Figure . Alan's opportunity cost of one muffin is ______ and Diana's opportunity cost of one muffin is __
4/3 scones; 2 scones
Refer to the table. Assume that England and France each has 40 labor hours available. Both countries decide they could be better off if they specialized in the production of one good and traded with each other. If England specializes in cheese and France specializes in wine, then the total production is
40 units of cheese and 20 units of wine.
Refer to the figure. Adam and Deirdre decide they could both be better off if they specialized in the production of one good and traded with each other. If Adam specializes in burritos and Deirdre specializes in tacos, then the total production is
400 tacos and 400 burritos.
Refer to the Figure. If Adam and Deirdre each divides his/her time equally between the production of tacos and burritos, then total production is
400 tacos, 250 burritos
Refer to the Table. Which of the following combinations of cheese and wine could England produce in 40 hours?
5 units of cheese and 7 units of wine
What is the opportunity cost of increasing the production of corn from 800 bushels to 1200 bushels?
500 bushels of wheat
Refer to the Figure. If the production possibilities frontiers shown are each for one day of production, then which of the following combinations of meatballs and pizzas could Luigi and Maria together produce in a given day?
500 meatballs 200 pizzas
Refer to the Figure. If the production possibilities frontiers shown are each for one day of production, then which of the following combinations of meatballs and pizzas could Luigi and Maria together not produce in a given day?
550 meatballs, 250 pizzas
Refer to the Table . At which of the following prices would both Brian and Tabitha gain from trade with each other?
6 bushels of apples for 4 pounds of pork
Refer to the figure. Before specialization, Germany and Spain were dividing their time equally between the production of Good X and Good Y. If both countries decide to specialize in the good in which they have the comparative advantage, total production will increase by
6 units of Good X and 3 units of Good Y.
Refer to the Figure . At which of the following prices would both Germany and Spain gain from trade with each other?
6 units of Good Y for 4 units of Good X
Refer to the Table . What is Brian's opportunity cost of producing one pound of pork?
6/5 bushels of apples
Refer to the Table . What is Brian's opportunity cost of producing one pound of pork?
6/5 of applesRefer to the Table .
Refer to the table. Assume that England and France each has 40 labor hours available. Before specialization and trade each country divides its time equally between the production of cheese and wine. Then, both countries decide they could be better off if they specialized in the production of one good and traded with each other. If England specializes in cheese and France specializes in wine and the countries trade 10 units of cheese for 8 units of wine, France's gains from trade will be
7.5 units of cheese and 2 units of wine.
Refer to the Figure. If Consumer A and Consumer B are the only consumers in the market, then the market quantity demanded when the price is $8 is
8 units
Which of the following statements about comparative advantage is not true?
A country cannot have a comparative advantage in producing a good unless it has an absolute advantage in producing that good.
Refer to the Figure . Which of the following is not correct?
Alan and Diana could each consume 150 muffins and 150 scones with trade
Refer to the Figure. If point A represents Anne's current production and point B represents Brianna's current production, under what circumstances can both Anne and Brianna benefit from specialization and trade
Anne produces more lemonade and Brianna produces more pizzas
When a new study reveals that eating pretzels can increase the likelihood of developing lung cancer, which of the following outcomes is expected?
Both the price and quantity of pretzels will fall.
Refer to the Figure. Max works as a CPA for a corporation and is paid a salary in exchange for the accounting services he performs. Jim owns land and rents his land to companies in exchange for rent payments. If Max's income is represented by a flow of dollars from Box D to Box B of this circular-flow diagram, then Jim's income is represented by a flow of dollars from
Box D to box B
Which arrow represents the flow of factors of production?
C
Luke and Carol are two toymakers who both produce trains and cars. In one month, Luke can produce 5 trains or 20 cars, whereas Carol can produce 8 trains or 24 cars. Given this, we know that
Carol has an absolute advantage in cars.
Tom Cruise should pay someone else to mow his lawn instead of mowing it himself, unless
Cruise has a comparative advantage over everyone else in mowing his lawn.
Both Denis and Carol produce cupcakes and cookies. If Denis's opportunity cost of 1 cupcake is 3 cookies and Carol's opportunity cost of 1 cupcake is 4 cookies, then
Denis has a comparative advantage in the production of cupcakes.
Which of the following statements about economic models is NOT correct?
Economic models are not useful because they oversimplify the real world.
Which of the following is true?
Efficiency refers to the size of the economic pie; equality refers to how the pie is divided.
survey of professional economists revealed that more than three-fourths of them agreed with a number of statements. Which of the following statement is NOT one of those propositions?
Flexible and floating exchange rates are not an effective international monetary arrangement.
Refer to the Figure . Germany has a comparative advantage in the production of
Good Y and Spain has a comparative advantage in the production of Good X
Refer to the Figure . Germany has an absolute advantage in the production of
Good Y and Spain has an absolute advantage in the production of Good X.
Which of the following is an example of a positive, as opposed to normative, statement?
Inflation occurs when the government prints too much money.
Which of the following statements about trade is the most accurate
International trade has the potential to make all countries better off.
Which of the following statements about the Council of Economic Advisers is NOT true
It implements the president's tax policies.
Which of the following statements about the circular-flow diagram is NOT correct?
It incorporates all aspects of the real economy.
Suppose Jake and Tim can both produce two goods: football helmets and baseball bats. Which of the following is not possible?
Jake has a comparative advantage in the production of football helmets and in the production of baseball hats.
Suppose that Jarrod receives a pay increase. We would expect
Jarrod's demand for pizza, a normal good, to shift to the right.
If Jeff can produce more cookies in one day than Josie can produce in one day, then
Jeff has an absolute advantage in the production of cookies
Refer to the Figure. Efficient production is represented by which point(s)?
L and M
Which of the following is true about market economies?
Market economies are more efficient than centrally-planned economies.
Which of the following statements about economic models is correct?
Models assume away irrelevant details, allowing us to see what is truly important.
Suppose that a worker in Wheatville can grow either 50 bushels of wheat or 10 bushels of oats per year, and a worker in Oatland can grow either 25 bushels of wheat or 5 bushels of oats per year. There are 15 workers in Wheatville and 15 workers in Oatland. Which of the following statements is true?
Neither country could gain from trade with each other because neither one has a comparative advantage
Suppose Maria and Nikki can produce ballet shoes. If Maria's opportunity cost of producing ballet shoes is higher than Nikki's opportunity cost of producing ballet shoes, then
Nikki has a comparative advantage in the production of ballet shoes.
Sometimes economists disagree because their values differ. Which of the following instances best reflects this source of disagreement?
One economist advises against a consumption tax because she thinks it's unfair for low-income people; another economist argues that what's fair isn't relevant.
Suppose Jessica can wash six windows per hour or she can iron twelve shirts per hour. Peter can wash four windows per hour or he can iron ten shirts per hour. Which of the following is not true?
Peter has an absolute advantage over Jessica in ironing shirts
What will happen to the equilibrium price and quantity of iPhones if the price of other smart phones falls, Apple develops new technology to produce iPhones, wireless phone contracts become more expensive, and Apple expects the price of iPhones to decrease in the near future?
Price will fall, and the effect on quantity is ambiguous
In the circular-flow diagram, which of the following do firms NOT do?
Produce factors of production
Cookies are normal goods. What will happen to the equilibrium price and quantity of cookies if the price of sugar falls, the price of milk falls, more firms start producing cookies, and cookie lovers experience an increase in income
Quantity will rise, and the effect on price is ambiguous.
Which of the following is not an example of a competitive market?
Residents of Middleton have one cable television provider
Refer to the Figure. Consider the market for jeans. An increase in the number of sellers of jeans could be shown by a
S2 to S1
Which of the following best summarizes a basic difference between market economies and centrally- planned economies?
Self-interest and prices serve to allocate resources in a market economy while a central planner typically attempts to allocate resources in a centrally-planned economy.
Assume that Sweden has a comparative advantage in chocolate and Italy has a comparative advantage in wine. Also assume that Sweden has an absolute advantage in both chocolate and wine. If these two countries specialize and trade so as to maximize the benefits of specialization and trade, then
Sweden will produce more chocolate than it would produce in the absence of trade.
Economists who are primarily responsible for advising Congress on economic matters work in which agency
The Congressional Budget Office
Economists who are primarily responsible for advising Congress on economic matters work in which agency?
The Congressional Budget Office
A survey of professional economists revealed that more than three-fourths of them agreed with a number of statements. Which of the following statement is NOT one of those propositions?
The United States should restrict employers from outsourcing work to foreign countries.
Which of the following scenarios would cause a shortage in a market?
The actual price is $10, the equilibrium price is $12, the quantity demanded is 1,250 and the quantity supplied is 800.
What would happen to the equilibrium price and quantity of sunscreen if a new formula is developed that makes production cheaper, and scientists discovered that sunscreen causes more cancer than sun damage?
The equilibrium price would decrease, and the effect on equilibrium quantity would be ambiguous.
If a drought affects the harvest of coffee beans and coffee and tea are considered to be substitutes, what changes occur in the markets for coffee and tea?
The price of coffee rises and the quantity of coffee falls; both the price and quantity of tea rise.
Which of the following changes would not shift the demand curve for gas?
The price of gas decreases due to increased production.
Washing machines and dryers are complementary goods. When the technology used to produce washing machines improves, what changes occur in the markets for washing machines and dryers?
The price of washing machines falls and the quantity of washing machines rises; both the price and quantity of dryers rise.
Suppose an economy produces two goods, food and clothing. This economy always operates on its production possibilities frontier. Last year, it produced 2000 units of food and 500 articles of clothing. This year it experienced a technological advance in its clothing-making industry. As a result, this year the society wants to produce 2200 units of food and 500 articles of clothing. Which of the following statements is correct
The technological advance reduced the amount of resources needed to produce 500 articles of clothing, so these resources could be used to produce more food.
Suppose an economist advises a state's governor to raise the tax on cigarettes. The governor does not implement the policy because it would not be popular with voters. Which of the following statements best describes the scenario?
This is a common occurrence. The policymaker knows the best policy but chooses not to institute it for other reasons
It once took 90 percent of our population to grow our food but now it takes around 3 percent of the population. Which of the following statements is true?
This is good for our economy because those who would have been farmers years ago can now invent new things and produce other goods.
Suppose an economy only produces two goods, pizza and tables. Last month, the economy produced 100 pizzas and 10 tables. This month, the same economy produced 125 pizzas and 15 tables. Which of the following statements could NOT explain this change?
This month, the economy experienced a change in the opportunity cost of producing pizza
Suppose an economy only produces two goods, pizza and tables. Last month, the economy produced 100 pizzas and 10 tables. This month, the same economy produced 125 pizzas and 15 tables. Which of the following statements could NOT explain this change?
This month, the economy experienced a change in the opportunity cost of producing pizza.
Which of the following statements is not correct?
Trade does not allow for specialization
Trevor can shovel a driveway in two hours or he can plow a parking lot in 30 minutes. Paul can shovel a driveway in one hour or he can plow a parking lot in one hour. Given this we know that
Trevor has an absolute advantage in plowing a parking lot.
Which of the following demonstrates the law of supply?
When camera prices rose, camera sellers increased their quantity supplied of cameras.
Refer to the Figure. Which of the following would cause the demand curve to shift from Demand C to Demand A in the market for pickup trucks?
a change in consumer tastes toward public transit and environmentally conscious travel modes
If generic medicine is an inferior good, then an increase in
a consumer's income will cause the demand curve for generic medicine to shift to the left.
Refer to the Figure. Which of the following would cause the demand curve to shift from Demand B to Demand C in the market for pickup trucks in the United States?
a decrease in the price of gas
The supply curve for yoga mats shifts when
a determinant of the supply of yoga mats other than the price of yoga mats changes.
A marginal change is best described as:
a small, incremental change from the present situation.
Which of the following events would cause a production possibilities frontier to shift outward?
a tech improvement
Imports are goods produced _____ and sold ________
abroad; domestically
The idea that trade can make everyone better off applies to which of the following
all of the answers
A reason for government involvement in a market economy is
all of these
Reasons why we need government, even in a market economy, include
all of these
Which of the following is something an economist might study?
all of these
US citizens have better nutrition, better healthcare, and a longer life expectancy than citizens of Nigeria. Which of the following conclusions can be drawn from this statement?
all of these answers
Refer to the Figure. Which of the following would cause the demand curve to shift from Demand A to Demand B in the market for sweatshirts, a normal good?
an expectation by buyers that their incomes will increase in the very near future
Refer to the Figure. Which of the following would cause the supply curve to shift from Supply B to Supply A in the market for replacement windows?
an expectation by firms that the price of replacement windows will increase in the very near future
Refer to the Figure. In the market for beer, a movement from point A to point B could be caused by
an increase in the price of beer.
In competitive markets,
both buyers and sellers are price takers.
Fluctuations in economic activity are known as
business cycle
In the market for haircuts, demand is determined by:
buyers of haircuts
In the markets for goods and services in the circular-flow diagram, households are _________ and firms are __________.
buyers, sellers
Any point outside a country's production possibilities frontier represents a combination of two goods that an economy
cannot currently produce.
The economy of the North Korea is best described as a
centrally planned economy
Refer to the Table. France should export
cheese and import wine.
China has a comparative advantage in the production of silk, but Japan has an absolute advantage in the production of silk. If these two countries decide to trade
china should export silk
Refer to the Figure. Argentina should specialize in the production of
coffee and import soybeans
The market for haircuts is a
competitive market
If the Federal Reserve announces it will be decreasing the money supply through its monetary policy tools, it tells us the Federal Reserve is
concerned about inflation
When the government intervenes in the economy to promote equality, it means that the government is trying to
create a more fair distribution of income.
Which of the following steps does an economist not take when studying the economy?
create data in a lab
Refer to the Figure. The movement from point C to point D on the graph is called a(n)
decrease in the quantity supplied.
An increase in the price of a good would
decrease the quantity demanded of the good.
A(n) ___________ in the price of a good will ____________.
decrease; decrease quantity supplied
Refer to the Table. If these are the only four sellers in the market, when the price decreases by $4, the market quantity supplied
decreased by 14 units
Refer to the Figure. A decrease in demand is represented by a
demand c to a
Economists from which administrative department help enforce the nation's antitrust laws?
department of justice
Economists from which administrative department help design tax policy
dept. of treasury
What are the two basic reasons why economists often appear to give conflicting advice to policymakers?
differences in scientific judgment and values
When the price of lumber changes, the demand curve for lumber
does not shift because the quantity demanded of lumber does not change at every possible price.
Exports are goods produced _____ and sold ________.
domestically; abroad
Suppose Canada and China can both produce cars and airplanes, and Canada has the comparative advantage in the production of airplanes while China has the comparative advantage in the production of cars. Also, suppose China has an absolute advantage in the production of both cars and airplanes. China should
export cars to Canada and import airplanes from Canada.
According to the circular-flow diagram, if Molly is an employee who delivers packages for Deliver Dynomite, she participates in the markets for
factors of production exchanging labor for income
China is an example of a centrally-planned economy.
false
Economists use the term absolute advantage when describing the opportunity cost of two producers.
false
Efficiency means our economic pie is divided into equal slices
false
In order to understand how the real world works, economists try to capture every aspect of the real world in their models that they construct
false
Policies such as rent control and trade barriers persist because almost all economists agree that those policies are desirable.
false
President Barack Obama should probably not mow his own lawn because he has a comparative advantage in mowing his lawn relative to a landscaping service
false
The advice of economists is the only thing a policymaker has to consider when implementing a proposed policy.
false
The scientific method is only applicable to studying the natural sciences.
false
When economists are trying to explain the world, they are policy advisers, but when economists are trying to help improve the world they are scientists.
false
efer to the Figure. Point A represents Anne's current production and point B represents Bridget's current production. True or False: In order to benefit from specialization and trade, Anne should produce more pizza and Bridget should produce more lemonade
false
Economists make assumptions to
focus their thinkning
Furniture is a normal good if the demand
for furniture increases when income increases.
Refer to the Table . Korea should export
freezers and import tablets.
Which of the following is an important cause of inflation?
growth in the quantity of money
Almost all economists agree that a large federal budget deficit
has an adverse effect on the economy
If the Federal Reserve announces that it will be increasing the money supply through its monetary policy tools, it tells us the Federal Reserve is
hoping to stimulate demand for goods and services
If the Federal Reserve announces that it will be increasing the money supply through its monetary policy tools, it tells us the Federal Reserve is
hoping to stimulate demand for goods and services.
Suppose a study from a major university reports that consuming chocolate reduces the likelihood of dying from cancer. We could expect the current demand for
hot cocoa to increase
In the simple circular-flow diagrams, the participants in the economy are
households and firms
Adam Smith's 'invisible hand' refers to:
how households and firms, acting in their own self-interest, manage to make everyone better off.
Refer to the figure. Before specialization and trade, Adam and Deirdre each divide his and her time equally between the production of tacos and burritos. Then, both decide they could be better off if they specialized in the production of one good and traded with each other. If Adam specializes in burritos and Deirdre specializes in tacos and they trade 200 tacos for 125 burritos, Adam and Deirdre's gains from trade will be
identical with both gaining 0 tacos and 75 burritos.
A record company went out of business because too many of its customers downloaded its music illegally from the internet rather than purchasing the digital copy from the record company. This instance serves as an example of:
inadequate enforcement of property rights.
Refer to the Figure. The movement from S1 to S2 could be caused by
increase in input prices
A movement upward and to the right along the supply curve for mobile phones is caused by a(n)
increase in the price of mobile phones
Refer to the Figure. The movement from Point B to Point A represents a(n)
increase in the quantity supplied.
If gum and breath mints are substitutes, a higher price for gum would
increase the demand for breath mints.
When the government intervenes in the economy to promote efficiency, it means that the government is trying to
increase the size of the economic pie.
When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good _________ as more of the good is produced.
increases
Almost all economists agree that a minimum wage
increases unemployment among young and unskilled workers.
If Betty experiences an increase in her income, then we would expect Betty's demand for
inferior goods to decrease
An increase in quantity demanded is different from shifting the demand curve to the right because an increase in quantity demanded
is caused by a price decrease while a shift to the right is caused by a change in a nonprice determinant of demand.
A decrease in quantity demanded is different from shifting the demand curve to the left because a decrease in quantity demanded
is caused by a price increase while a shift to the left is caused by a change in a nonprice determinant of demand.
An increase in quantity supplied is different from shifting the supply curve to the right because an increase in quantity supplied
is caused by a price increase while a shift to the right is caused by a change in a nonprice determinant of supply.
Refer to the Figure. If this society moves from point R to point U
it gives up 80 sweaters to get 60 bushels of apples.
When a government program is justified based only on the number of jobs it will create,
it is known as the "broken window fallacy.
In the circular-flow diagram, which of the following items does NOT flow from firms to households?
labor
If the price of umbrellas rose to $15 per umbrella, consumers would purchase fewer umbrellas than if the price were $10 per umbrella. If the price of rain boots fell to $20 per pair, consumers would purchase more rain boots than if the price were $25 per pair. These relationships illustrate the
law of demand
Suppose there are five barbers in the town of Crossroads. If we add the respective quantities of haircuts that each firm would be willing to sell when the price of a haircut is $12 per haircut, $15 per haircut, and $18 per haircut, and so forth, we have found the
market supply curve.
Which of the following is not required for a market to exist?
meeting location and time
The millennials are the largest generation in US history and, according to a recent study, 80% of them use mobile phone as their primary form of communication. As a result of millennials entering the market for mobile phones, the market demand for
mobile phones shift right
Refer to the Figure . Alan should specialize in the production of
muffins and Diana should specialize in the production of scones
Economists from which administrative department help the president formulate spending plans and regulatory policies?
office of management and budget
Every time we choose to do one thing, we give up doing something else. This best describes the economic principle of:
opportunity cost
If a tax on unhealthy food items like soda and candy bars causes people to purchase less of these items and eat more healthful alternatives. Which principle of economics does this illustrate?
people respond to incentives
Suppose the state of Ohio increases the tax on a pack of cigarettes and, in response to the policy change, Ohio smokers decide to buy cigarettes in neighboring states. Which principle of economics does this illustrate?
people respond to incentives
The highest form of competition is called
perfect competition
Refer to the Figure. Which of the following movements would illustrate the effect in the market for cars of a decrease in the price of gas?
point a to d
Refer to the Figure. Which of the following movements would illustrate the effect in the market for paper of an increase in the price of pulp, used in the production of paper?
point c to point d
Refer the figure. Which of the following movements would illustrate the effect in the market for restaurant meals of a decrease in consumer incomes if restaurant meals are a normal good?
point d to a
Refer to the Table . Brian should specialize in the production of
pork and Tabitha should specialize in the production of apples.
"Total revenue rises when the quantity sold increases and prices remain constant" is an example of a
positive economic statment
Which of the following events would cause a movement upward and to the left along the demand curve for flannel sheets?
price of flannel sheets increases
In the circular-flow diagram, which of the following do firms NOT do?
produce factors of production
In the circular-flow diagram, which of the following do households NOT do?
produce goods and services
Which of the following is a way in which the government helps enforce property rights?
providing the court system.
Consider the market for jelly beans. If the price of jelly beans decreases, the
quantity demanded of jelly beans increases.
When the price of pizza increases, the
quantity supplied of pizza increases.
Almost all economists agree that government subsidies on ethanol in the United States should be
reduced
The term "productivity"
refers to the quantity of goods and services each unit of labor can produce.
The main reason households and societies must make many decisions is because
resources are scarce
In the circular-flow diagram, which of the following is NOT a factor of production?
revenue
Consider the market for coffee makers. If coffee becomes cheaper, consumption of coffee is found to reduce heart disease, the wages of workers in manufacturing plants increases, and the price of plastic increases, the equilibrium price will
rise.
In the market for bread, supply is determined by
sellers of bread
In the markets for factors of production in the circular-flow diagram, households are _________ and firms are __________
sellers, buyers
In the markets for factors of production in the circular-flow diagram, households are _________ and firms are __________.
sellers, buyers
Refer to the Figure. Consider the market for winter sweaters. A decrease in the price of wool could be shown in the market for winter sweaters by a
shift from S2 to S1.
If Alice expects to earn a higher income next month, she may choose to
shift her demand for clothes to the right
If Alice expects to earn a higher income next month, she may choose to
shift her demand for clothes to the right.
The US government announces that next month it will offer tax rebates on new energy efficient windows. As a result of this information, today's demand curve for energy efficient windows
shifts to the left
Refer to the Table. If the price were $60, a
shortage of 35 units would exist, and price would tend to rise.
Suppose milk is currently selling for $2.50 per gallon, but the equilibrium price of milk is $3.00 per gallon. We would expect a
shortage to exist and the market price of milk to increase.
Refer to the Figure. Brazil should specialize in the production of
soybeans and import coffee
ABC Photography Co. purchases new computer software that reduces the costs of editing and distributing photos. As a result, the
supply curve for ABC's photos will increase.
If wireless phone manufacturers begin using new technology to produce phones, we would expect the
supply curve for wireless phones to shift to the right.
Workers in a union at an automobile assembly plant negotiate a higher wage. It is likely that
supply of autos will shift to the left.
If sellers expect lower prices in the near future, the current
supply will increase.
Refer to the Table. If the price were $80, a(n)
surplus of 35 units would exist, and price would tend to fall.
Suppose tickets to a baseball game are currently selling for $60 each, but the equilibrium price of tickets is $50 each. We would expect a
surplus to exist and the market price of tickets to decrease.
Cotton is an important input in the production of t-shirts. If the price of cotton increases, then we would expect the supply of
t-shirts to decrease.
In response to the Great Recession of 2007-2009, the US Congress and the Federal Reserve attempted to stimulate the economy by
the Congress and the Federal Reserve used all of these methods in an attempt to stimulate the economy.
Absolute advantage is
the ability to produce a good using fewer inputs than another producer.
A very snowy winter in Boston will cause
the demand curve for snow blowers to shift to the right
A very snowy winter in Boston will cause
the demand curve for snow blowers to shift to the right.
If consumers want to buy more apples at every possible price,
the demand curve is shifted to the right.
Which of the following would likely be studied by a microeconomist rather than a macroeconomist?
the effect of gas prices on the profitability of snowplow companies in New England
Today's supply curve for corn could shift in response to a change in
the expected future price of corn.
Suppose there are five suppliers of ice cream in the town of Summerville. When the price of ice cream is $2 per scoop, Firm A is willing to sell 20 scoops, Firm B is willing to sell 50 scoops, Firm C is willing to sell 35 scoops, Firm D is willing to sell 100 scoops, and Firm E is willing to sell 40 scoops. From this information we can conclude that
the market quantity supplied is less than 250 scoops when the price is $2 per scoop.
An increase in the number of orange growers causes
the market supply curve for oranges to shift to the right.
China and Japan both produce clothing and computers. China is said to have the comparative advantage in producing clothing if
the opportunity cost of producing clothing is lower for China than it is for Japan
Assume the market for wheat is perfectly competitive. When one wheat buyer exits the market,
the price of wheat does not change; when one wheat seller exits the market, the price of wheat does not change.
Refer to the Table. We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for France. If we were to do this, measuring cheese along the horizontal axis, then
the slope of England's production possibilities frontier would be -0.2 and the slope of France's production possibilities frontier would be -4.
Refer to the Table. We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for France. If we were to do this, measuring wine along the horizontal axis, then
the slope of England's production possibilities frontier would be -5 and the slope of France's production possibilities frontier would be -0.25.
Which of the following events must cause equilibrium price to fall in the market for gas-powered snow blowers?
the weather forecasters predict a drier than normal winter and producers of gas-powered snow blowers find a faster method of production
If buyers and sellers in a certain market are price takers, then individually
they must accept the price the market determines
According to the concept of the 'broken window fallacy' protests and riots that result in the destruction of property are good for the economy.
true
For two individuals who engage in the same two productive activities, it is impossible for one of the two individuals to have a comparative advantage in both activities.
true
When the economy is self-sufficient, an economy's production possibilities frontier is also its consumption possibilities frontier
true
Differences in scientific judgment between economists are similar to all of the following except
two biologists arguing about the fairness of health insurance premiums
Marginal thinking involves:
weighing the small incremental benefits against the small incremental cost of a decision.
Which of the following is the most likely to be a perfectly competitive market?
wheat
Refer to the Table. Italy should export
wine and import cheese.
Refer to the Table. The equilibrium price and quantity, respectively, are
$70 and 40 units.
Refer to the table. Assume that England and France each has 40 labor hours available. Before specialization and trade each country divides its time equally between the production of cheese and wine. Then, both countries decide they could be better off if they specialized in the production of one good and traded with each other. If England specializes in cheese and France specializes in wine and the countries trade 10 units of cheese for 8 units of wine, England's gains from trade will be
10 units of cheese and 4 units of wine.
Suppose that a worker in Tabletland can produce either 4 tablets or 1 television per year, and a worker in Ledville can produce either 2 tablets or 4 televisions per year. Each nation has 50 workers. Also suppose that each country completely specializes in producing the good in which it has a comparative advantage. If Tabletland trades 50 radios to Ledville in exchange for 50 televisions each year, then each country's maximum consumption of new tablets and televisions per year will be
150 tablets, 50 televisions in Tabletland and 50 tablets, 150 televisions in Ledville.
The last time the United States experienced prolonged high inflation was during
1970s
Refer to the Table. Assume that England and France each has 40 labor hours available. If each country divides its time equally between the production of cheese and wine, then total production is
22.5 units of cheese and 14 units of wine
In the United States, real incomes have increased about 2 percent per year. At this growth rate, average income doubles every
35 years
Refer to the Figure. If the production possibilities frontiers shown are each for one day of production, then which of the following combinations of tacos and burritos could Adam and Deirdre together produce in a given day?
500 tacos, 300 burritos
Refer to the Figure. If the production possibilities frontiers shown are each for one day of production, then which of the following combinations of tacos and burritos could Adam and Deirdre together not produce in a given day?
700 tacos, 150 burritos
Refer to the Figure. Jeff receives his first paycheck for working as a waiter. To which of the arrows does this transaction directly contribute?
C and D only
Which of the following will happen in the short run if the money supply decreases?
Decreasing the money supply will lead to a lower rate of inflation
Which of the following is an example of a normative, as opposed to positive, statement?
Gasoline prices ought to be lower than they are now.
Some economists disagree because their scientific judgment differs. Which of the following instances best reflects this source of disagreement
One economist believes that the level of household saving would not be affected by a change in the tax laws; another economist believes that taxing a household's consumption would change a household's saving behavior.
Refer to the Figure. Which of the following movements would illustrate the effect in the market for paper of an increase in the price of pulp, used in the production of paper?
Point C to Point D
What will happen to the equilibrium price and quantity of iPhones if the price of other smart phones falls, Apple develops new technology to produce iPhones, wireless phone contracts become more expensive, and Apple expects the price of iPhones to decrease in the near future?
Price will fall, and the effect on quantity is ambiguous.
The principle of comparative advantage does not provide answers to certain questions. One of those questions is
What determines the price at which trade takes place?
What would happen to the equilibrium price and quantity of sunscreen if a new formula is developed that makes production cheaper, and scientists discovered that sunscreen causes more cancer than sun damages
The equilibrium price would decrease, and the effect on equilibrium quantity would be ambiguous.
In the 1990s, inflation in the United States was
about 3% per year
Public policy such as changes in the amount of taxes and subsidies can alter people's behavior by:
all of these answers are correct
In the United States, inflation was much higher during the 1990s than it was during the 1970s.
false
Incentives are not important in economics.
false
Normal cost of living expenses, such as room and board, are included in the opportunity cost of attending college.
false
The Council of Economic Advisers was created in 1946 and consists of two members and a staff of several dozen economists.
false
The production possibilities frontier illustrates the combinations of output that an economy should produce.
false
The production possibilities frontier is a graph that shows the various combinations of output that an economy should produce
false
There is no relationship between a country's productivity and its standard of living
false
There is only one explanation for why economists give conflicting advice on policy issues, and it is that they have different scientific judgments about the validity of alternative theories.
false
Some, but not all, government economists are employed within the administrative branch of government. Which of the following government agencies employs economists outside of the administrative branch?
the federal reserve
Suppose a publishing company is deciding whether or not to print 50,000 additional copies of an economic textbook. The company should print the textbooks if:
the marginal benefit (additional revenue) from selling the extra books is greater than the marginal cost of printing the books.
Suppose there are five suppliers of ice cream in the town of Summerville. If the price of ice cream is $2.50 per scoop, Firm A is not willing to sell any scoops, Firm B is willing to sell 25 scoops, Firm C is willing to sell 5 scoops, Firm D is willing to sell 10 scoops, and Firm E is not willing to sell any scoops. When the price of ice cream is $3 per scoop, Firm A is willing to sell 20 scoops, Firm B is willing to sell 50 scoops, Firm C is willing to sell 35 scoops, Firm D is willing to sell 100 scoops, and Firm E is willing to sell 40 scoops. From this information we can conclude that
the market supply curve between the prices of $2.50 and $3.00 is upward sloping.
An increase in the number of orange growers causes
the market supply curve for oranges to shift to the right
Almost all economists agree that a legitimate role for the government is
the redistribution of income.