Econ Exam 1

4) At one point along a PPF, 10 pizzas and 7 sandwiches can be produced. At another point along the same PPF, 9 pizzas and 10 sandwiches can be produced. The opportunity cost of a pizza between these points is ________ per pizza. A) 10/7 of a sandwich B) 7/10 of a sandwich C) 1/3 of a sandwich D) 3 sandwiches

3 sandwiches

24) During the summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books andsupplies cost $1,300. In terms of dollars, the opportunity cost of attending summer school is A) $4,300. B) $3,300. C) $10,300. D) $6,000.

10,300

37) Suppose that you are spending two hours a day studying economics, and your grade is 85 percent. You want a higher grade and decide to study for an extra hour a day. As a result, your grade rises to 90 percent. Your marginal benefit is the A) 5 point increase in your grade. B) three hours per day you spend on studying. C) extra hour per day you spend on studying. D) 5 point increase in your grade minus the opportunity cost to you of spending the hour studying.

5 point increase in your grade

43) Which of the following is a positive statement? A) What to do with Social Security is the most important economic issue today. B) The United States should fight inflation even if it raises unemployment. C) A 5 percent increase in income leads to a 3 percent increase in the consumption of orange juice. D) Because they decrease productivity, labor unions should be eliminated.

A 5 percent increase in income leads to a 3 percent increase in consumption of orange juice

2) Which of the following is a macroeconomic issue? A) the effect of increasing the money supply on inflation B) the hiring decisions that a business makes C) the purchasing decisions that an individual consumer makes D) the effect of an increase in the tax on cigarettes on cigarette sales

A) the effect of increasing the money supply on inflation

48) Which of the following is a positive statement? A) An increase in gas prices leads people to car pool more. B) State lotteries are good methods to use for raising revenues. C) Increased prison sentences are the best way to reduce the crime rate. D) Inflation is a more serious problem than is deflation.

An increase in gas prices leads people to car pool more

4) Economists point out that scarcity confronts A) the rich but not the poor. B) both the poor and the rich. C) the poor but not the rich. D) neither the poor nor the rich.

Both the poor and the rich

3) Which of the following questions is NOT a microeconomic question? A) How would a tax on e-commerce affect eBay? B) Can the Federal Reserve keep income growing by cutting interest rates? C) Does the United States have a comparative advantage in information technology services? D) What is Britney's opportunity cost of having another baby?

Can the Federal Reserve keep income growing by cutting interest rates

5) Microeconomics is the study of ________. A) all aspects of scarcity B) the global economy C) thenational economy D) the choices that individuals and businesses make

The choices that individuals and businesses make

In part, microeconomics is concerned with the study of A. unemployment and economic growth B. national output of goods and services C. the Federal Reserve's policies D. the effect government regulation has on the price of a product

D. the effect government regulation has on the price of a product

12) Entrepreneurs directly do all of the following EXCEPT A) face risks that arise from making business decisions. B) create new ideas about what and how to produce. C) make business decisions. D) decide for whom goods and services are produced.

Decide for whom goods and services are produced

11) One economist says that raising taxes on gas would be in the social interest. What does this economist mean? A) Higher taxes on gas would benefit everyone. B) Raising taxes on gas would benefit most of the people. C) Higher taxes on gas would benefit society as a whole. D) Both answers A and C are correct.

Higher taxes on gas would benefit society as a whole

10) Scarcity requires that people must A) make choices. B) compete. C) cooperate. D) trade.

Make choices

25) Which of the following creates an incentive to increase the amount of an activity? A) an increase in the marginal cost of the activity and a decrease in the marginal benefit of the activity B) constant marginal cost and constant marginal benefit of the activity C) a decrease in the marginal cost of the activity and an increase in the marginal benefit of the activity D) None of the above create an incentive to increase the amount of an activity.

a decrease in the marginal cost of the activity and an increase in the marginal benefit of the activity

23) A cost due to an increase in activity is called A) the total cost. B) an incentive loss. C) a negative marginal benefit. D) a marginal cost.

a marginal cost

45) The statement "Unemployment should be below 6 percent" is A) a normative statement. B) a prediction. C) an assumption. D) a positive statement.

a normative statement

14) The Occupy Wall Street movement advocates A) following the teachings of Adam Smith. B) centrally planned socialism. C) a shift away from market capitalism. D) a shift towards more market capitalism.

a shift away from market capitalism

42) A positive statement is A) about what is. B) about what ought to be. C) always true. D) one that does not use marginal concepts.

about what is

49) A positive statement is A) about what ought to be. B) about what is. C) valid only in the context of a model with simple assumptions. D) the result of a model's normative assumptions.

about what is

34) The marginal benefit is the A) additional gain from one more unit of an activity minus the additional cost from one more unit of the activity. B) loss of the highest-valued alternative. C) additional gain from one more unit of an activity. D) additional cost from one more unit of an activity.

additional gain from one more unit of an activity

43) Both Mergatroid and the Geebocks produce only gizmos and widgets. It is possible for Mergatroid to have A) a comparative but not an absolute advantage in both products. B) an absolute and a comparative advantage in both products. C) neither a comparative nor an absolute advantage in both products. D) an absolute but not a comparative advantage in both products.

an absolute but not a comparative advantage in both products

21) Joe likes to sleep late in the mornings and play tennis in the afternoons. The opportunity cost of Joe attending his morning class for one hour is A) both the tennis given up and the sleep given up. B) an hour of tennis given up. C) an hour of sleep given up. D) nothing because he is paying for his class.

an hour of sleep given

32) Economic growth is shown on the production possibilities frontier as A) an outward shift in the PPF. B) an inward shift in the PPF. C) a movement from one point on the PPFto another. D) the curvature of the PPF.

an outward shift in the PPF

48) The term "market" refers to A) locations where buyers and sellers physically meet. B) any arrangement that enables buyers and sellers to get information and trade with one another. C) trading arrangements that have been approved by the government. D) physical structures only.

any agreement that enables buyers and sellers to get information and trade with one another

14) A country produces only pencils and erasers. Pencil production is allocatively efficient if the marginal ________ of a pencil equals the marginal ________ of ________. A) benefit; cost; a pencil B) benefit; benefit; an eraser C) cost; benefit; an eraser D) cost; cost; an eraser

benefit, cost, a pencil

15) We measure the marginal ________ of a good by what a ________ for another unit of the good. A) benefit; person is willing to pay B) benefit; person must pay C) cost; person is willing to pay D) cost; person's preferences are

benefit, person is willing to pay

6) Sam's production possibilities frontier has good Aon the horizontal axis and good Bon the vertical axis. If Sam is producing at a point insidehis frontier, then he A) is fully using all his resources. B) values good Amore than good B. C) values good Bmore than good A. D) can increase production of both goods with no increase in resources.

can increase production of both good with no increase in resources

30) Jill, an economics student, has already spent 5 hours cleaning her room. In deciding whether or not to continue cleaning for another hour, she applies the economic principle of A) scarcity. B) ceteris paribus. C) productivity. D) choosing at the margin.

choosing at the margin

7) Which of the following is NOTtrue concerning a society's production possibilities frontier (PPF)? A) It reveals the maximum amount of any two goods that can be produced from a given quantity of resources. B) Production efficiency occurs when production is on the frontier itself. C) Tradeoffs occur when moving along a PPF. D) Consumers will receive equal benefits from the two goods illustrated in the PPF.

consumers will receive equal benefits from the two goods illustrated in the PPF

28) Marginal cost is the A) cost of all forgone alternatives. B) cost of an activity minus the benefits of the activity. C) cost of an increase in an activity. D) total cost of an activity.

cost of an increase in an activity

3) A point inside a production possibilities frontier A) reflects the fact that more technology needs to be developed to fully employ all resources. B) implies that too much labor and not enough capital is being used. C) is more efficient than a point on the production possibilities frontier. D) could indicate that resources are misallocated.

could indicate that resources are misallocated

28) The tradeoff between current consumption and the production of capital goods also reflects a tradeoff between A) economic growth and technological change. B) the future production of capital goods and future consumption of goods. C) satisfying today the needs of the poor and the wants of the wealthy. D) current consumption and future consumption.

current consumption and future consumption

38) Making a choice at the margin means A) waiting until the last minute to make a choice. B) letting someone else choose for you. C) deciding to do a little bit more or a little bit less of an activity. D) making a choice by comparing the total benefit and the total cost.

deciding to do a little bit more or a little bit less than an activity

46) In order forsocieties to reap the gains from trade, it is necessary to A) achieve productive efficiency. B) define and enforce property rights. C) distribute resources equally. D) foster economic growth.

define and enforce property rights

49) In goods markets ________ and in factor markets ________. A) firms sell to households; firms sell to households B) households sell to firms; firms sell to households C) households sell to firms; households sell to firms D) firms sellto households; households sell to firms

firms sel to household, households sell to firms

16) Marginal benefit is the benefit ________ one more unit of the good and ________ of the good increases. A) of producing; decreases as production B) of producing; increases as production C) from consuming; increases as consumption D) from consuming; decreases as consumption

from consuming, decreases consumption

39) From 8 to 11 p.m., Sam can either attend a basketball game, a hockey match or the symphony. Suppose that Sam decides to attend the hockey match and thinks to herself that if she did not go to the match she would go to the symphony. Then the opportunity cost of attending the hockey match is A) going to the basketball game. B) three hours of time. C) going to the symphony and the basketball game. D) going to the symphony.

going to the symphony

19) According to Adam Smith(see "The Protest Against Market Capitalism"on page 8 in the Parkin textbook) A) in a market transaction buyers can either get what they want for less than they would be willing to pay or sellers can earn a profit, but both buyers and sellers can't gain simultaneously. B) politicians are well-equipped to regulate corporations and intervene in markets to improve market outcomes. C) government intervention in markets is not desirable because an invisible hand leads decisions made in pursuit of self-interest to unintentionally promote the social interest. D) when big corporations pursue their self-interest of maximum profit, they will inevitably conflict with social interest.

government intervention

47) In a world lacking property rights, it would be ________ to realize the gains from trade and there would be ________ specialization. A) harder; more B) harder; less C) easier; more D) easier; less

harder, less

13) An art museum decides to offer tours by having visitors listen to cassette tapes rather than have tour guides. The museum is answering the ________ part of one of the two big economic questions. A) "why" B) "scarcity" C) "how" D) "what"

how

15) Joy is training to become a chef. The skills she is obtaining from her training and education will increase Joy's ________. A) human capital B) entrepreneurship C) physical capital D) None of the above answers are correct.

human capital

20) If the marginal benefit of consuming another unit of a good is positive, then to reach the allocatively efficient level of output more of the good should be produced and consumed A) no matter what. B) if the marginal benefit of the good is greater than its marginal cost. C) if the total benefit of the good is greater than its total cost. D) as long as the consumer can afford to pay for it.

if the marginal benefit of the good is greater than its marginal cost

19) The principle of decreasing marginal benefit means that as the quantity of a good consumed A) decreases, its marginal benefit decreases. B) increases, its total benefit decreases. C) increases, its marginal benefit decreases. D) None of the above answers is correct.

increases, its marginal benefit decreases

47) Which of the following is an example of a positive statement? A) Increasing the minimum wage results in more unemployment. B) The Federal Reserve ought to cut the interest rate. C) We should cut back on our use of carbon-based fuels such as coal and oil. D) Every American should have equal access to health care.

increasing the minimum wages results in more unemployment

18) Samantha goes to college to become an engineer. This is an example of an A) increase in entrepreneurship. B) investment in physical capital. C) increase in labor. D) investment in human capital.

investment in human capital

17) Factors of production include A) the economic system. B) labor and capital (not land, which is fixed). C) land, labor, capital and entrepreneurship. D) only capital, land, and labor.

land, labor, capital, and entrepreneurship

36) Today, Julie attended her 12:30 Economics class. If she hadn't gone to class, Julie would have gone out to lunch with friends. She had other options; she could have worked or slept in. Julie's opportunity cost of going to class is the A) lunch she gave up. B) income from working, lunch, and sleep she gave up. C) sleep she gave up. D) income from working she gave up.

lunch she gave up

7) The branch of economics that deals with the analysis of the whole economy is called A) marginal analysis. B) metroanalysis. C) microeconomics. D) macroeconomics.

macroeconomics

22) In the above figure, if 2 million computers are produced per year then the ________ should be produced to achieve the allocatively efficient use of resources. A) marginal cost of a computer exceeds the marginal benefit of a computer, so fewer computers B) marginal cost of a computer exceeds the marginal benefit of a computer, so more computers C) marginal benefit of a computer exceeds the marginal cost of a computer, so more computers D) marginal benefit of a computer exceeds the marginal cost of a computer, so fewer computers

marginal benefit of a computer exceeds the marginal cost of a computer, so more computers

16) The 2010 Patient Protection and Affordable Care Act (Obamacare) contains a provision that may require individuals to either purchase private health insurance or pay a tax(see "The Protest Against Market Capitalism"on page 8 in the Parkin textbook). This is an example of A) a mixed economy. B) centrally planned socialism. C) the invisible hand. D) market capitalism.

mixed economy

29) In economics we learn that A) opportunity costs are all of the possible alternatives given up when we make a choice. B) tradeoffs allow us to avoid the problem of opportunity cost. C) tradeoffs allow us to have more of everything we value. D) None of the above answers is correct.

none of the above answers is correct

12) Allocative efficiency occurs when it is A) not possible to produce more of one good without giving up the production of some other good that is valued more highly. B) possible to produce more of all goods. C) not possible to produce more of one good without giving up the production of some other good that is valued less highly. D) possible to produce more of one good without giving up the production of some other good.

not possible to produce more of one good without giving up the production of some other good that is value more highly.

26) The loss of the highest-valued alternative defines the concept of A) marginal benefit. B) entrepreneurship. C) scarcity. D) opportunity cost.

opportunity cost

33) When the government hires people to serve in the army, these people are no longer available to do other work. This choiceillustrates the concept of A) an incentive. B) marginal benefit. C) a social interest/private interest conflict. D) opportunity cost.

opportunity cost

5) When the production possibilities frontier bows outward from the origin A) opportunity costs are decreasing. B) opportunity costs are constant. C) opportunity costs are increasing. D) some of society's resources are unemployed.

opportunity costs are increasing

8) Fundamental economic problems basically arise from A) turmoil in the stock market. B) our wants exceeding our scarce resources. C) the fact that society has more than it needs. D) the unequal distribution of income.

our wants exceeding our scarce resources

44) Which of the following is a positive statement? A) Corporations should be more socially responsible. B) People buy more of a good or service when its price falls. C) The distribution of income is fair. D) The government ought to provide health care to everyone.

people buy more of a good or service when it falls

50) Which of the following is NOTa normative statement? A) The distribution of income is fair. B) Corporations should be more socially responsible. C) The government ought to provide health care to everyone. D) People buy more of a good or service when its price falls.

people buy more of a good or service when its price falls

9) Scarcity is a situation in which A) some people can get all they want and some cannot. B) people can satisfy all their wants. C) most people can get only bare necessities. D) people cannot satisfy all their wants.

people cannot satisfy all their wants

1) In the above figure, which point represents an attainable but inefficient production point? A) point L B) point C C) point D D) point N

point N

30) When economic growth occurs, the A) economy moves along its production possibilities frontier. B) production possibilities frontier becomes steeper. C) production possibilities frontier shifts outward. D) production possibilities frontier shifts outward but no longer limits the amount that can be produced.

production possibilities frontier shifts outward

25) One of the opportunity costs of economic growth is A) technological change. B) capital accumulation. C) the gain in future consumption. D) reduced current consumption.

reduced current consumption

24) Technological progress makes the production possibilities frontier A) become more linear and less bowed. B) become less linear and more bowed. C) shift inward toward the origin. D) shift outward from the origin.

shift outward from the origin

26) Suppose the United States discovers a way to produce clean nuclear fuel. The effect of this discovery would be to A) shift the U.S. PPF outward. B) shift the U.S. PPF inward. C) force the United States to produce at a point inside its PPF. D) lead the United States to produce less nuclear fuel.

shift the US PPF outward

27) After Hurricane Katrina devastated parts of Mississippi andNew Orleans in 2005, we can be sure that the production possibilities frontier for that area temporarily A) shifted outward, away from the origin. B) became steeper. C) shifted inward, toward the origin. D) became flatter.

shifter inward, toward the origin

2) The bowed outward shape of the production possibilities frontier in the above figure indicates that A) some resources are better suited for producing computers. B) computer technology is subject to the principle of decreasing costs. C) the opportunity cost of producing more computers decreases as more computers are produced. D) All of the above answers are correct.

some resources are better suited for producing computers

41) Whichof the following is a normative statement? A) An increase in tax rates means people work fewer hours. B) Studying more hours leads to an increase in your GPA. C) Taking extra vitamin C prevents catching a cold. D) States should require all motorcycle riders to wear helmets to reduce the number of riders killed.

state should require all motorcycle riders want to wear helmets to reduce the number of riders killed

32) Marginal cost is the cost A) that arises from an increase in an activity. B) that arises from the secondary effects of an activity. C) that your activity imposes on someone else. D) of an activity that exceeds its benefit.

that arises from an increase in an activity

31) Marginal benefit is the benefit A) that arises from the secondary effects of an activity. B) that arises from an increase in an activity. C) of an activity that exceeds its cost. D) that your activity provides to someone else.

that arises from an increase is an activity

21) Marginal benefit is the benefit A) of producing a good or service when the total benefit from the good or service exceeds its total cost. B) that is received from consuming one more unit of a good or service. C) of consuming another good or service divided by the total number of goods or services produced. D) that your activity provides tosomeone else.

that is received from consuming one more unit of a good or service

40) Comparative advantage is A) the ability to perform an activity at a zero opportunity cost. B) the ability to perform an activity at a higher opportunity cost than anyone else. C) another name for absolute advantage. D) the ability to perform an activity at a lower opportunity cost than anyone else.

the ability to perform an activity at a lower opportunity cost than anyone else

23) An opportunity cost of economic growth is A) so high that places such as Hong Kong have had to do without it. B) the decrease in production of consumption goods in the present time period. C) essentially zero because economic growth leads to such large gains in the long run. D) decreased by the creation of capital goods rather than consumption goods.

the decrease in production of consumption goods in the present time period

22) Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she is choosing at the margin when she compares A) the total revenue from sales of printers to the total cost of producing all the printers. B) the extra revenue from selling a few additional printers to the extra costs of producing the printers. C) HP's printers to printers from competing companies, such as Lexmark. D) the extra revenue from selling a few additional printers to the average cost of producing the additional printers.

the extra revenue from selling a few additional printers to the extra costs of producing all the printers

27) The opportunity cost of attending college includes the cost of A) tuition, books, and the lost wages for the hours spent studying. B) the tuition but not the job at which you would otherwise have worked. C) the highest valued alternative to attending college plus the cost of tuition. D) the highest valued alternative to attending college.

the highest valid alternative to attending college plus the cost of tuition

6) An example of a question that might be explored in microeconomics is to determine A) why the U.S. economy has grown more rapidly than the Japanese economy. B) the number of workers employed by Intel. C) the total employment within the U.S. economy. D) savings by the household sector.

the number of workers employed by intel

46) The statement that ________ is a positive statement. A) the price of sugar in the United States is higher than the price in Australia B) more students should study economics C) too many people in the United States have no health care insurance D) the price of gasoline is too high

the price of sugar in the United States is higher than the price in Australia

45) Which of the following does NOT help organize trade?A) markets B) property rights C) the production possibilities frontier D) None of the above because all these answers given help organize trade.

the production possibilities frontier

11) On the vertical axis, the production possibilities frontier shows ________; on the horizontal axis, the production possibilities frontier shows ________. A) the quantity of a good; a weighted average of resources used to produce the good B) the quantity of a good; the number of workers employed to produce the good C) the quantity of one good; the quantity of another good D) the quantity of a good; the price of the good

the quantity of one good; the quantity of another good

35) You have the choice of going to Hawaii for a week, staying at work for the week, or spending the week skiing. If you decide to go to Hawaii, the opportunity cost is A) working, because you would be giving up a week's pay. B) the value of working or skiing, depending on which you would have done rather than go to Hawaii. C) the value of working and skiing. D) none of the above if you enjoy the time spent in Hawaii.

the value of working or skiing, depending on which you would have done rather than go to Hawaii

29) Consider a production possibilities frontier with corn on the vertical axis and cars on the horizontal. Unusually good weather for growing corn shifts A) the horizontal intercept rightward but does not shift the vertical intercept. B) the vertical intercept upward but does not shift the horizontal intercept. C) neither the horizontal intercept nor the vertical intercept. D) the horizontal intercept rightward and the vertical intercept upward.

the vertical intercept upward does not shift the horizontal intercept

20) When an economy produces more houses and fewer typewriters, it is answering the ________ part of one of the two big economic questions. A) "how" B) "for whom" C) "where" D) "what"

what

18) Resource use is allocatively efficient A) whenever marginal cost exceeds marginal benefit. B) when the maximum possible quantity is being produced. C) when marginal benefit equals marginal cost. D) whenever marginal benefit exceeds marginal cost.

when the marginal benefit equals the marginal cost

40) On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym,have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is A) not clear because not enough information is given. B) zero because you do not have to pay money to use the library. C) working out at the gym, having breakfast with friends, and sleeping late. D) working out at the gym.

working out at the gym