Econ Mid Term Edited

The line on a production possibilities curve showing the relative amounts of two types of goods produced using all resources is called the a. production possibilities frontier. b. opportunity cost line. c. utilization of resources. d. maximum possible production line.

A

Suppose the demand for bicycles increases. What will the new equilibrium point show about the number of bicycles sold and the price? a. more bicycles sold, at a higher price b. fewer bicycles sold, at a higher price c. more bicycles sold, at a lower price d. fewer bicycles sold, at a lower price

A

The law of increasing costs means that when an economy increases the production of one item the a. opportunity cost goes up. b. actual cost of making the item goes down. c. actual cost goes up but the opportunity cost goes down. d. production costs will increase also.

A

Which of the following is an example of changing physical capital? a. hiring more workers to do a job b. building extra space in a factory c. switching to cheaper fuel d. lowering workers' wages

B

Why does the government protect inventors and authors by offering them patents and copyrights? a. to encourage free trade b. to promote innovation c. to regulate the business cycle d. to strengthen American culture

B

monopolistic competition

a market structure in which many companies sell products that are similar but not identical

natural monopoly

a market that runs most efficiently when one large firm supplies all of the output

commodity

a product such as petroleum or milk that is considered the same no matter who produces or sells it

price war

a series of competitive price cuts that lowers the market price below the cost of production

nonprice competition

a way to attract customers through style, service, or location, but not a lower price

merger

when two or more companies join to form a single firm

barrier to entry

any factor that makes it difficult for a new firm to enter a market

A large increase in gas prices creates a demand for cars with good gas mileage. It takes months for car companies to make these cars. How do you describe this market for cars? a. inelastic b. elastic c. static d. inferior

A

A person who believes that wealth should be evenly distributed throughout society is a. a socialist. b. a communist. c. a capitalist. d. an entrepreneur.

A

Farmer Brown has ten dairy cows. Her costs to feed the cows go up, although milk production remains the same. What effect will this rise in costs have on her supply? a. None, although she will raise prices to make up the lost revenue. b. Her supply will go down, because her fixed costs have risen. c. Her supply will go up, because she won't sell as much milk. d. Supply will remain the same, but she will have to sell more.

A

For which of the following goods is supply likely to be inelastic in the short term whether prices rise or fall? a. cargo ships b. haircuts c. newspapers d. staples

A

In order to have demand for a good, consumers must a. desire the good and have the money to buy it. c. know where the stores are and have a credit card. b. be able to create the good and sell it to others. d. understand how it works and be able to get it.

A

What stays the same when you change an individual demand schedule into a market demand schedule for the same product? a. price of the product c. number of consumers b. demand curve d. quantity demanded

A

When is a market at equilibrium? a. when quantity demanded equals quantity supplied c. when prices equal the cost of production b. when unsold goods begin to pile up d. when suppliers begin to reduce prices

A

Which of the following are factors of production? a. capital and land b. scarcity and shortages c. technology and productivity d. economics and business decisions

A

Which of the following is the kind of decision that can be made at the margin? a. whether or not to hire new workers b. whether or not to go on a vacation c. whether or not to build an extra room on a home d. whether to have a dog or a cat as a pet

A

Which of these products or services is likely to have an inelastic supply in the short run? a. cargo ships b. haircuts c. newspapers d. staples

A

Cruz likes to chew one piece of sugarless gum each day. The gum costs only a tiny fraction of his weekly budget. The company that makes his favorite gum doubles its prices. What will Cruz do? a. buy a cheaper brand c. give up chewing gum b. pay the doubled cost d. try many different brands

B

During World War II, the United States used rationing to a. limit production c. give away goods b. meet tremendous shortages d. stop the black market

B

Elena is looking for an apartment. Which of the following is an example of her search costs? a. Elena pays movers $400 to help her move to the new apartment. b. Elena loses two days of pay when she misses work to look for an apartment. c. Elena pays $300 to stay at a hotel for four nights before the apartment is ready. d. Elena must pay an extra month's rent before she can move into a new apartment.

B

How did the ratio between wages and benefits change between 1975 and 2005? a. Wages account for a higher percentage of total earnings. b. Benefits account for a higher percentage of total earnings. c. Benefits account for a lower percentage of total earnings. d. Wages and benefits have maintained the same ratios.

B

How is the total cost of a factory or other production site determined? a. marginal cost plus fixed costs b. fixed costs plus variable costs c. marginal cost plus variable costs d. marginal cost plus output cost

B

If prices rise and income stays the same, what is the effect on demand? a. More is bought of some goods and less of others. c. More goods are bought. b. Fewer goods are bought. d. Demand stays the same.

B

Scarcity requires that people make trade-offs because a. people have more wants than needs. b. there is a limited supply of resources. c. services are more available than goods. d. producers rarely make enough of a good.

B

franchise

a contract that gives a single firm the right to sell its goods within an exclusive market

Students are publishing a magazine at their school. How many copies should they print? What price should they charge for each copy? a. 300 copies at $3 each b. 200 copies at $4 each c. 250 copies at $5 each d. 100 copies at $6 each

B

Suppose a supplier has no control over the market price of a game. The marginal revenue of the game is $10. What does this mean? a. The supplier makes a $10 profit on each game sold. b. People pay a market price of $10 to buy the game. c. It costs the supplier $10 to make each game. d. The supplier earns $10 more revenue for each worker hired.

B

What does elasticity of demand measure? a. an increase in the quantity available c. a decrease in the quantity demanded b. how buyers will cut back or increase their demand when price rises or falls d. the amount of time consumers need to change their demand for a good

B

What must a nation's economy do in order to improve the standard of living? a. remain stable b. grow c. reach economic equity d. allow central planning

B

What was the purpose of rationing in the United States during World War II? a. to limit production c. to give away goods b. to deal with shortages d. to stop the black market

B

When government intervention causes the supply of a good to rise, what happens to the supply curve? a. It shifts to the left. b. It shifts to the right. c. It reverses direction. d. The supply curve is not affected.

B

Which group lists the key principles of the free enterprise system? a. profit motive, legal equality, consumer protection, public interest b. profit motive, legal equality, private property, voluntary exchange c. private property, taxation, public interest, patriotism d. profit motive, private property, eminent domain, voluntary exchange

B

Which is a government subsidy? a. a minimum wage for farm workers b. a minimum price for soybeans c. an excise tax on soybeans d. a law on which crops can be grown

B

You have been asked to write a newspaper story for the financial section about how the restaurants in your city are doing. Based on the graph, which of the following headlines will you use? a. Wholesale Prices Stay Steady b. Restaurants Hit by Rising Costs c. High-End Restaurants Suffer d. Government Lifts Meal Tax

B

An efficient economy is one that a. creates new resources through ongoing research and development. b. conserves its resources through underutilization. c. uses its resources to make the most goods and services. d. does not face the problem of scarcity.

C

cartel

a formal organization of producers that agree to coordinate prices and production

Why do people need to buy and sell goods or services? a. People need to make a profit. b. Poeple need a competitive society. c. No one is completely independent. d. People need to provide the market with goods.

C

A country is changing from a centrally planned economy to a free market economy. What will be one difficulty for citizens in this country? a. Farmers will have to grow the crops that government instructs them to. b. Only poor quality goods will become available to consumers. c. Workers will lose job security and guaranteed incomes. d. Entrepreneurs will have fewer opportunities to start new businesses.

C

A factory makes pencils. New machines in the factory make it faster and cheaper to make pencils. What will happen next? a. Costs will drop, but supply will remain the same. b. Supply and costs will both decrease. c. Costs will go down and supply will go up. d. At first, supply will rise, but then it will decrease.

C

A nation's automakers install new robotic machinery to build cars. As a result, cars take only a day to make, and the factories can produce many more cars than before. This is an example of growth caused by a. natural resources. b. labor. c. technology. d. production possibility curves.

C

A new runway has opened up at the airport, and citizens complain to local officials that the noise of the airplanes is disturbing their neighborhood. The noise is an example of a a. positive externality. b. free-rider problem. c. negative externality. d. market failure.

C

Advances in technology have reduced the cost of manufacturing MP3 players. If demand does not change, a. more MP3 players will be sold at a higher price. b. fewer MP3 players will be sold at a higher price. c. more MP3 players will be sold at a lower price. d. fewer MP3 players will be sold at a lower price.

C

patent

a license that gives the inventor of a new product the exclusive right to sell it for a specific period of time

In 1971 the American economy was suffering from a rapid increase in the cost of living. To combat this trend, the government temporarily froze all wages and prices. This action by the government is an example of a. rationing. c. a price ceiling. b. disequilibrium. d. a price floor.

C

Private company Big Road Inc. is put in charge of building and running a state's entire road system. The company charges high fees to use its roads and only maintains them in heavily populated areas. Big Road is an example of a a. positive externality. b. public good. c. market failure. d. negative externality.

C

What is one way government could limit negative externalities of a new highway? a. limit the number of vehicles b. charge higher tolls c. build noise barriers nearby d. increase the speed limit

C

What state does a free market move toward naturally? a. disequilibrium c. equilibrium b. shortage d. surplus

C

Which of the following is most likely to lead directly to a black market? a. a supply shock c. rationing b. a price floor d. equilibrium

C

Which of the following is part of communism but not socialism? a. central planning b. government controlled services c. authoritarian government d. government controlled resources

C

Why are there relatively few markets in which there is perfect competition? a. Lack of demand keeps buyers away. b. High prices keep companies in the market too long. c. Barriers keep companies from entering. d. Buyers will not pay more for perfect competition.

C

oligopoly

a market structure in which a few large firms dominate a market

Why does an economist create a market demand schedule? a. to learn what demands the market will make under unusual conditions c. to predict how people will change their buying habits when prices change b. to have an idea of how a market would change if conditions in an area changed d. to show how various conditions can change the demand for a good

C

A company that makes baseball caps is underutilizing its resources. What should it do? a. lay off workers b. pay its workers less money c. make T-shirts instead of caps d. use resources better to make more caps

D

A town wants to repair a school in one of its poorest neighborhoods. To pay for it, citizens vote to raise taxes on households and businesses. What social goal best explains this economic decision? a. freedom b. security c. growth d. equity

D

How did the market react to an increased supply of digital cameras? a. Suppliers struggled to keep up with consumer demand for cameras. b. Manufacturers produced fewer cameras. c. Suppliers increased prices on the cameras. d. A surplus of cameras forced suppliers to reduce prices.

D

How is the U.S. government involved in the factor market? a. It buys paper from firms. b. It purchases telephones and computers. c. It tells businesses and firms what to purchase. d. It pays wages to government employees.

D

Roosevelt said that the government cannot insure all citizens against all hazards. How does the government encourage private efforts to provide social services? a. Medicaid and Medicare b. cash transfers c. in-kind benefits d. federal grants

D

What "invisible hand" regulates the free market economy? a. incentive and efficiency b. specialization c. competition between firms d. competition and self-interest

D

What does the demand curve tell you about how consumer behavior changes if Beth's Bagels raises the price from $.25 to $1.50? a. Demand shifts to the right. c. Quantity demanded increases. b. Demand shifts to the left. d. Quantity demanded decreases.

D

What happens after the demand for a very popular product drops? a. The supply goes down, and the price goes up. b. The supply and the price both go up. c. Shortage makes the product hard to get. d. Excess supply makes the product easy to get.

D

What kinds of goods can be compared on a production possibilities curve? a. farm goods and factory goods b. two types of farm goods c. two types of factory goods d. any two categories of goods

D

Which of the following is a characteristic of a traditional economy? a. It encourages innovation and change. b. It is usually based on light industrial production. c. It has a high standard of living. d. It revolves around the family unit

D

Which of the following lists of factors of production would an economist categorize as land? a. factories, office buildings, assembly lines, workers b. farm fields, tractors, pesticides, fertilizers c. dams, bridges, rock quarries, oil wells d. iron ore, natural gas, fertile soil, water

D

Which of the following people is an entrepreneur? a. a highly-paid singer b. a person who teaches courses at a college c. a highly-paid computer programmer d. a person who starts a cleaning supplies business

D

Which traffic signal best shows what an SUV manufacturer should do when SUV prices go down? a. green light: produce more SUVs c. red light: fire all workers b. green light: hire more workers d. red light: produce fewer SUVs

D

collusion

an illegal agreement among firms to divide the market, set prices, or limit production

economies of scale

factors that cause a producer's average cost per unit to fall as output rises

antitrust laws

laws that encourage competition in the marketplace

predatory pricing

selling a product below cost for a short period of time to drive competitors out of the market

price discrimination

the division of consumers into groups based on how much they will pay for a good

start-up costs

the expenses a new business must pay before it can begin to produce and sell goods

deregulation

the removal of government controls over a market