Econ Exam #1 Practice Questions
Image #14 Using the information in the Table above, Scott's optimal seat type is ______ (hint: use marginal analysis to decide which type of seat Scott should get) Diamond Seat Club Home Club Seating Scout Box
club seating
the effect of an increase in the supply of lumber on the homebuilding industry
micro
the price of concert tickets in the United States
micro
the rising cost of health care for employees
micro
a change in our tax laws is the best way to increase the incomes of the poor
positive
a higher price of corn will decrease the amount of corn purchased. However, it will increase the amount of wheat purchased
positive
an increase in tax rates will reduce unemployment
positive
Refer to the Table (image #4 on phone): If the economy is producing at alternative X, the opportunity cost of producing at Y instead of X is ________ units of consumer goods per period. 14 0 6 8
6
If an economy has to sacrifice increasing amounts of good X for each unit of good Y produced, then its production possibility frontier is: A. bowed in toward the origin B. a vertical line C. a straight line D. bowed out from the origin
D
lawmakers worry about the possibility of a US recession
Macro
Image #7 (Refer to the Table: The Demand for Chocolate-Covered Peanuts) If Barbara is only able to purchase 20 bags of chocolate-covered peanuts, the maximum price she is willing and able to pay for the 20th bag is ________. $0.90 $0.80 $0.60 $0.70
$0.70
Image #11 (Refer to the Table: The Market for Chocolate-Covered Peanuts): A surplus of 210 bags of chocolate-covered peanuts exists if the price is ________ per bag. $0.60 $0.80 $0.90 $0.40
$0.90
If you can buy 9 DVDs for $126 or you could buy 10 DVDs for $130, then the marginal cost of the tenth DVD is: $4 $13 $14 $130
$4
Suppose that demand and supply functions in the market for laundry detergent are given by the following equations: Qd = 40 - 2.5P (Qd is quantity demanded in millions of ounces; P is the price in dollars) Qs = 2.5P (Qs is quantity supplied in millions of ounces; P is the price in dollars) The market equilibrium price is ________ and equilibrium quantity is _______. $4; 30 ounces $6; 20 ounces $10; 25 ounces $8; 20 ounces
$8; 20 ounces
Image #17 Suppose that Canada and the United States both produce maple syrup and honey that are sold at the same price in both countries. The following table shows some of the combinations of the two goods that each country can produce in one day using the same amount of labor and capital. The opportunity cost of producing an additional ton of maple syrup in the United States is _______ ton(s) of honey. (Note: The answer has to be a numerical value)
0.25
Image #17 Suppose that Canada and the United States both produce maple syrup and honey that are sold at the same price in both countries. The following table shows some of the combinations of the two goods that each country can produce in one day using the same amount of labor and capital. The opportunity cost of producing an additional ton of honey in the Canada is _______ ton(s) of maple syrup. (Note: The answer has to be a numerical value).
0.5
Image #16 This question is about using the production possibilities curve to analyze trade-offs. Tesla assembles sedans and SUVs and has an 8-hour day. The following table shows the trade-offs Tesla faces in allocating the time. If Tesla is producing at choice C, the opportunity cost of increasing the production of SUVs by 10 is _______ Sedans.
15
Image #16 This question is about using the production possibilities curve to analyze trade-offs. Tesla assembles sedans and SUVs and has an 8-hour day. The following table shows the trade-offs Tesla faces in allocating the time. If Tesla is producing at choice F, the opportunity cost of increasing the production of SUVs by 10 is _______ Sedans.
15
Image #17 Suppose that Canada and the United States both produce maple syrup and honey that are sold at the same price in both countries. The following table shows some of the combinations of the two goods that each country can produce in one day using the same amount of labor and capital. The opportunity cost of producing an additional ton of maple syrup in Canada is _______ ton(s) of honey. (Note: The answer has to be a numerical value)
2
The company you manage has invested $5 million in developing a new product but the development is not quite finished. At a recent meeting, your salespeople report that the introduction of competing products has reduced the expected sales of your new product to $2 million. The most amount of money that you should pay to complete the development of your new product is $_____________ million.
2
Image #13 (Refer to the Table). What is the market quantity demanded of DVDs at a price of $12? 12 24 9 6
24
Image #17 Suppose that Canada and the United States both produce maple syrup and honey that are sold at the same price in both countries. The following table shows some of the combinations of the two goods that each country can produce in one day using the same amount of labor and capital. The opportunity cost of producing an additional ton of honey in the United States is _______ ton(s) of maple syrup. (Note: The answer has to be a numerical value).
4
A primary difference between a change in demand and a change in the quantity demanded is: A. a change in quantity demanded causes a movement along the demand curve and a change in demand causes a shift in the demand curve. B. a change in demand causes a movement along the demand curve and a change in quantity demanded causes a shift in the demand curve. C. both a change in quantity demanded and a change in demand cause movements along the demand curve, only in different directions. D. both a change in quantity demanded and a change in demand cause shifts in the demand curve, only in different directions.
A
Economic analysis is a tool that A. aids all decision making. B. helps us understand why people make mistakes. C. complicates decision making. D. helps us forgive selfish people
A
Image #17 Suppose that Canada and the United States both produce maple syrup and honey that are sold at the same price in both countries. The following table shows some of the combinations of the two goods that each country can produce in one day using the same amount of labor and capital. Which country has an absolute advantage in producing maple syrup? A. United States B. Canada C. Neither country has an absolute advantage D. Both countries have an absolute advantage
A
In much of the country, homeowners choose to heat their houses with either natural gas or home heating oil. Which of the following could cause the demand for natural gas to change? A. a change in the price of home heating oil B. a change in the price of natural gas C. new discoveries of natural gas deposits D. a change in technology used in the production of natural gas
A
In the above production possibilities Table (image #2 on phone), as the production of bananas increases, the cost of producing an additional ton of bananas _______. A. increases B. cannot be determined C. Decreases D. remains constant
A
One major assumption of economics is that people A. act as if they systematically pursue self-interest. B. behave randomly without any predictable pattern. C. always pursue the interests of others. D. are sometimes rational and sometimes irrational.
A
Refer to the Table (image #4 on phone): The production of 14 units of consumer goods and 1 unit of capital goods per period would: A. result in some unused or inefficiently used resources B. increase economic growth C. result in full employment D. shift the economy's PPC inward
A
Which of the following is an example of a positive economic statement? A. If payroll taxes are raised, then the Social Security crisis will be resolved. B. In order to reduce the budget deficit, tax rates should be increased. C. In order to increase employment, the minimum wage should be decreased. D. If gas prices fall, consumers should purchase more gas
A
Image #6 (Refer to the Figure: Demand for Coconuts) If fish is a substitute good for coconuts and the price of fish increases, then the movement that would take place in the model could be: B to E. C to A. B to A. A to C.
A to C
Image #9 (Refer to the Figure: Supply of Coconuts) If there is an improvement in the technology used to harvest coconuts (e.g., a faster, less expensive coconut picker), then the movement in the model could be: B to A. A to C. B to E. C to A
A to C
Refer to the PPC (image #3 on phone). Points ______, _______, _______, and _______, represent full and efficient use of resources and technology. A, B, C, and D A, B, D, and E A, B, D, and F E, F, C, and D
A,B,D,E
Image #10 (Refer to the Figure: Demand and Supply of Gasoline) A factor that may have changed supply from S1 to S2 is: A. increased prices of substitutes for gasoline. B. better technology in the production of gasoline. C. lower labor productivity D. increased demand for gasoline
B
Image #12 (Refer to the Figure: The Supply of DVD rentals): A decrease in the price of DVDs sold by movie producers to rental stores would result in a change illustrated by: A. the move from s to t in panel C. B. the move from n to o in panel A. C. the move from p to q in panel B. D. the move from u to v in panel D.
B
Image #5 (Table: Comparative Advantage I) Finland has an absolute advantage in producing: A. cell phones only. B. neither cell phones nor herring. C. herring only. D. both cell phones and herring.
B
Image #8 (Refer to the Figure: Demand for DVDs): A decrease in the price of DVD players (a complement) would result in a change illustrated by: A. the move from j to k in panel C. B. the move from h to i in panel B. C. the move from l to m in panel D D. the move from f to g in panel A.
B
Macroeconomics deals with ________ while microeconomics deals with ________. A. choices of rich people; choices of poor people B. economywide choices; choices of individuals C. choices that involve money; choices that does not involve money D. choices important to people; choices not important to people
B
Refer to the graph #1 on phone. Rodney has taken 2 trips to New York City at an average cost of $800 per trip. Which of the following is true? [Note: The height of each bar represents the marginal benefit obtained from each of the trips 1 through 4] A. Based on marginal analysis, Rodney took the right number of trips B. Based on marginal analysis, Rodney took too many trips C. We cannot determine whether Rodney took too few or too many trips given the available information. D. Based on marginal analysis, Rodney took too few trips
B
Suppose that demand and supply functions in the market for laundry detergent are given by the following equations: Qd = 40 - 2.5P (Qd is quantity demanded in millions of ounces; P is the price in dollars) Qs = 2.5P (Qs is quantity supplied millions of ounces; P is the price in dollars) At a price of $4 per million ounces of laundry detergent, ______ A. there is a surplus of 10 million ounces B. there is a shortage of 20 million ounces C. the market is in equilibrium D. there is a shortage of 30 million ounces
B
The branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units is A. positive economics B. microeconomics. C. normative economics. D. institutional economics.
B
The production possibility frontier will shift outward for which of the following reasons? A. a decrease in the unemployment rate B. better technology that improves worker productivity C. a better use of the available capital D. a decrease in the labor force
B
Image #6 (Refer to the Figure: Demand for Coconuts) If a coconut is a normal good and the price of coconuts increases, then the movement that would take place in the model could be C to A. A to B. E to B. B to A.
B to A
An economy in which a central authority draws up a plan that establishes what will be produced and when, sets production goals, and makes rules for distribution is a A. public goods economy. B. price-driven economy C. command economy. D. free market economy
C
If goods A and Z are complements, an increase in the price of good Z will: A. decrease the demand for good Z. B. decrease the demand for both goods. C. decrease the demand for good A. D. increase the demand for good A.
C
If your tuition is $25,000 this semester, your books cost $1,500, you can only work 20 rather than 40 hours per week during the 15 weeks you are taking classes and you make $15 per hour, and your room and board is $7,500 this semester (same as if not attending college), then your opportunity cost of attending college this semester is equal to the value of _______. A. $26,500. B. $26,800 C. $31,000. D. $38,500
C
Image #16 This question is about using the production possibilities curve to analyze trade-offs. Tesla assembles sedans and SUVs and has an 8-hour day. The following table shows the trade-offs Tesla faces in allocating the time. As the number of SUVs produced increases, the opportunity cost of producing an additional SUV _______ A. increases B. decreases C. remains constant D. it first decreases, then to increases
C
Image #5 (Table: Comparative Advantage I) Sweden has an absolute advantage in producing: A. cellphones only B. nether cellphones nor herring C. herring only D. both cellphones and herring
C
Image #5 (Table: Comparative Advantage I): Based on comparative advantage, __________ should specialize in the production of cell phones. A. Sweden B. Neither Sweden nor Finland C. Finland D. Both Sweden and Finland
C
Image #8 (Refer to the Figure: Demand for DVDs) A decrease in the price of movie tickets (a substitute) would result in a change illustrated by: A. the move from l to m in panel D. B. the move from h to i in panel B. C. the move from f to g in panel A. D. the move from j to k in panel C.
C
In a market system, the what, how and for whom questions in economics are determined by A. no one. B. the central authority. C. buyers and sellers together. D. individuals who own the resources.
C
Microeconomics is the study of how rising prices affect the level of A. employment in the economy. B. the effect that money has in the economic system. C. how individuals and firms make decisions D. the behavior of the economy as a whole.
C
Normative economic statements A. are easily testable. B. are always factual statements C. contain value judgments. D. are usually irrational
C
Refer to the above PPC (image #3 on phone). Which of the following statements is false? A. An increase in the resources available to produce motorcycles and hybrid cars would shift the PPC outward B. Both points A and E represent efficient production C. Point E represents inefficient production because no hybrid cars are produced E. The slope of the PPC at any point is equal to the opportunity cost of producing a motorcycle
C
Refer to the above Production Possibilities Curve (PPC) (image #3 on phone). An economy experiencing a high rate of unemployment will likely produce at a point such as ________. A C F E
C
The typical supply curve illustrates that: A. price and quantity supplied are unrelated. B. other things equal, the quantity supplied is inversely related to the price of a good. C. other things equal, the quantity supplied is positively related to the price of a good. D. other things equal, the supply of the good creates its own demand for the good.
C
Using the production Possibilities Table (image #2 on phone), the average opportunity cost of producing one ton of bananas as we go from producing 20 tons of bananas to 21 tons of bananas is ________ A. 1/5 tons of bananas B. 5 tons of bananas C. 5 tons of apples D. 1/5 tons of apples
C
Image #6 (Refer to the Figure: Demand for Coconuts) If coconuts are considered a normal good and the overall income level of consumers is falling, then the movement that would take place in the model could be: E to B. B to A. C to A. A to C.
C to A
Image #9 (Refer to the Figure: Supply of Coconuts): If the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport coconuts are increasing, then the movement in the model could be: E to B C to A B to A A to B
C to A
Economics deals with A. how to profit from the stock market. B. how to satisfy limited human wants. C. how society allocates unlimited resources. D. how individuals and societies allocate scarce resources to satisfy unlimited human wants.
D
Image #17 If the two countries choose to trade, which country should specialize in producing honey? Canada both countries United States neither country
Canada
Image #17 Suppose that Canada and the United States both produce maple syrup and honey that are sold at the same price in both countries. The following table shows some of the combinations of the two goods that each country can produce in one day using the same amount of labor and capital. Which country has a comparative advantage in the production of honey? United States Canada neither country both countries
Canada
Image #17 Suppose that Canada and the United States both produce maple syrup and honey that are sold at the same price in both countries. The following table shows some of the combinations of the two goods that each country can produce in one day using the same amount of labor and capital. Which country has an absolute advantage in producing honey? A. United States B. Canada C. Both countries D. neither country
Canada
Image #11 (Refer to the Table: The Market for Chocolate-Covered Peanuts): If the price of chocolate-covered peanuts is $0.80, there is: A. a surplus of 245 bags per month. B. a shortage of 105 bags per month. C. a shortage of 140 bags per month. D. a surplus of 140 bags per month.
D
Image #5 (Table: Comparative Advantage I) The opportunity cost of producing 1 unit of cellphones for Sweden is: A. 5 units of herring. B. 1/10 unit of herring. C. 1/5 unit of herring. D. 10 units of herring.
D
Opportunity cost is A. a cost that cannot be avoided, regardless of what is done in the future. B. the additional cost of producing an additional unit of output. C. the additional cost of buying an additional unit of a product. D. the value of that which we forgo, or give up, when we make a choice or a decision.
D
Over the past several years, consumer tastes for tattoos have increased. This means that the ________ for tattoos has ________. A. quantity demanded; decreased B. supply; increased C. demand; decreased D. demand; increased
D
Using the production Possibilities Table (image #2 on phone), the average opportunity cost of producing one ton of bananas as we go from producing zero bananas to 6 tons of bananas is ________ A. 6/5 tons of bananas B. 6/5 tons of apples C. 5/6 tons of bananas D. 5/6 tons of apples
D
Which of the following is NOT a resource as the term is used by economists? A. labor B. land C. machines D. money
D
Which of the following is NOT one of the basic questions that an economic system attempts to answer? A. How much goods and services will be produced? B. For whom will goods and services be produced? C. How to eliminate choices? D. What to produce?
D
Economists usually make the assumption that production is subject to increasing opportunity costs because: A. if production is efficient, it is not possible to increase the production of all goods simultaneously. B. individuals desire constantly increasing opportunities to make themselves better off. C. higher production usually results in more inflation. D. all resources are not equally suited to producing every good.
D.
Image #15 Scott loves to go to baseball games, especially home games of the Cincinnati Reds. All else equal, he likes to sit close to the field. He also like to get to the stadium early to watch batting practice. The close to the stadium he parks, the more batting practice he's able to watch (the garages all open simultaneously). Using the information in the Table above, Scott's optimal parking garage is ______ (hint: use marginal analysis to determine where Scott should park). A. Westin Parking garage B. Fountain Square South Garage C. West River Parking D. East River Parking E. Under Stadium Parking
D.
Refer to the PPF (image #3 on phone). Point ______ represents a desirable but unattainable output of motorcycles and hybrid cars. D A F E
F
explain how playing games in late afternoon or evening rather than in the morning affects the opportunity cost of a student attending a game.
Most students may not have classes in late afternoon or evenings. So, the opportunity cost of attending a game should be lower.
The company you manage has invested $5 million in developing a new product but the development is not quite finished. At a recent meeting, your salespeople reported that the introduction of competing products has reduced the expected sales of your new product to $2 million. If it would cost $1.5 million (in addition to the $5 million already invested) to finish the development and make the product, should you do ahead and complete the development of the product? Briefly (not exceeding 50 words) explain your answer.
The answer is YES. Explanation: The marginal benefit of finishing the development ($2 million) exceeds the marginal cost ($1.5 million).
Image #17 If the two countries choose to trade, which country should specialize in producing maple syrup? both countries Canada Neither country United States
United States
Image #17 Suppose that Canada and the United States both produce maple syrup and honey that are sold at the same price in both countries. The following table shows some of the combinations of the two goods that each country can produce in one day using the same amount of labor and capital. Which country has a comparative advantage in the production of maple syrup? United States Canada both countries neither country
United States
changes in national unemployment rate
macro
companies that are protected from competition by government-granted monopolies should pay higher corporate taxes
normative
teenage unemployment should be reduced
normative