ECON EXAM !

Exhibit 2-2 16. Refer to Exhibit 2-2. If PPF2 is the relevant production possibilities frontier, then point __________ illustrates productive inefficiency.

A, B, or C

Price ceilings and price floors

. b. interfere with the rationing function of prices.

Refer to Table 2-11. What is the opportunity cost of producing 1 pound of schnitzel in Germany?

1/3 bottle of wine

Table 2-11 shows the combinations of wine and schnitzel that France and Germany can produce in a day.20. Refer to Table 2-11. What is the opportunity cost of producing 1 bottle of wine in France?

2 pounds of schnitzel

Refer to Table 2-11. Suppose that France and Germany trade 3 bottles of wine for 7 ½ (7.5) pounds of schnitzel with each other. How many bottles of wine will Germany consume after trade?

3

. Refer to Exhibit 2-6. Which graph depicts a technological breakthrough in the production of good Y only?

4

Refer to Table 2-11. How many bottles of wine will be produced after specialization?

4

Consider two points on the PPF: point A, at which there are 50 apples and 40 pears, and point B, at which there are 46 apples and 41 pears. If the economy is currently at point A, the opportunity cost of moving to point B

4 apples

Refer to Table 2-11. Suppose that France and Germany trade 3 bottles of wine for 7 ½ (7.5) pounds of schnitzel with each other. How many pounds of schnitzel will Germany consume after trade?

7.5

Which of the following is true?

Buyers prefer lower prices to higher prices, ceteris paribus.

Refer to Table 2-11. Which country has a comparative advantage in the production of Wine

France

Refer to Exhibit 2-2. If PPF2 is the relevant production possibilities frontier, then point __________ is unattainable

J

11. How are changes in opportunity cost predicted to affect behavior?

The higher the opportunity cost of doing X, the less likely X will be done. The lower the opportunity cost of doing X, the more likely X will be done.

One of the effects of a price floor (set above equilibrium price) is

a surplus

Jake is an excellent barber. However, all customers who come to him for a haircut must buy a bottle of shampoo. This type of arrangement is known as

a tie in sale

Both country 1 and country 2 are located on their respective production possibilities frontiers (PPFs) for consumer goods and capital goods, but country 1 produces twice the output of both types of goods compared to country 2. It follows that

a. country 1's PPF lies further to the right than country 2's PPF.

Which of the following would not result from a price ceiling (set below the equilibrium price)

an increase in supply

. Which of the following is a positive macroeconomics statement?

b. The increase in the nation's money supply helped push the nation's unemployment rate down in the short run

A vertical supply curve represents:

b. an independent relationship between price and quantity supplied.

4. Here are three things you could do if you do not attend your economics class: watch television with some friends (you value this at $25), read a good book (you value this at $17), or go to work (you could earn $20 during the economics class). The opportunity cost of going to your economics class is

c. $25, because this is the highest valued alternative forfeited.

9. Which of the following statements is false?

c. Elementary education at public schools is free.

At a price of $15 each, Marta buys 4 books per month. When the price increases to $20, Marta buys 3 books per month. Luz says that Marta's demand for books has decreased. Is Luz correct

c. No, Luz is incorrect. Marta's quantity demanded has decreased, but her demand has stayed the same.

At a price for which quantity demanded exceeds quantity supplied, a __________ is experienced, which pushes the price __________ toward its equilibrium value.

shortage; upward

10. The cost of building a new interstate highway system is reported to be high at $25 billion. Does it necessarily follow that the interstate highway is not worth building?

c. No, because the benefits of building a new interstate highway system may be greater than $25 billion

Which of the following is true about the relationship between price and quantity supplied

c. There is usually a direct relationship between price and quantity supplied.

As the price of good X rises as a result of a decrease in supply, the demand for good Y falls. Therefore, goods X and Y are

c. complements to one another.

7. Decision making "at the margin" means making a choice based on __________ of a decision

comparing total benefits and costs

5. Which of the following is an example of a positive economic statement?

d. If you drop a ball from the top of a building, it will fall to the ground.

14. If increasingly more units of good Y must be given up as each successive unit of good X is produced, then the PPF for these two goods is

d. a downward-sloping curve that is bowed outward.

. Refer to Exhibit 3-2. Which of the following would result in a movement from point A on D1 to point B on D2?

d. an increase in income of the buyers of good X, assuming good X is a normal good

8. Most states have instituted mandatory seatbelt laws to reduce traffic fatalities. An economist may point out that an unintended effect of these laws is

d. an increase in risky driving behavior, increasing fatalities.

2. Many years ago, chemists at 3M Corporation were trying to create a super-strong glue. Somehow they got their molecules twisted and came up with one of the weakest glues ever made. But, rather than pouring it down the drain, they tried coating some paper with it, and the "Post-It Note" was born. In this case, 3M was acting as a(n)

entrepreneur

1. Which of the following is not one of the four broad categories of resources?

government

Oil producers expect that oil prices next year will be higher than oil prices this year. As a result, oil producers are most likely to

hold some oil off the market this year, thus shifting the present supply curve of oil leftward

18. Refer to Exhibit 2-2. The production possibilities frontiers shown in this exhibit depict _______________ opportunity costs.

increasing

One major reason for the law of demand is that

people substitute relatively lower-priced goods for relatively higher-priced goods.

5 28. An increase in the number of buyers in a particular market for a good will result in a ___________________ for that good.

rightward shift in demand curve

If the demand for a good falls by less than the supply of the good rises, then the good's equilibrium price will __________ and its equilibrium quantity will __________.

rise; fall

The opportunity cost of attending college is

the highest valued alternative one forfeits to attend college.

Points that lie outside (or beyond) the PPF are

unattainable