econ study set and practice tests
An increase in the price of onions _______.
decreases the quantity of onions demanded and results in a movement up along the demand curve for onions
Allocative efficiency occurs when ______.
we are producing at a point on the PPF that we prefer above all other points
William Gregg owned a mill in South Carolina. In December 1862, he placed a notice in the Edgehill Advertiser announcing his willingness to exchange cloth for food and other items. Here is an extract: 1 yard of cloth for 1 pound of bacon 2 yards of cloth for 1 pound of butter 4 yards of cloth for 1 pound of wool 8 yards of cloth for 1 bushel of salt Calculate the relative price of 1 pound of bacon1 pound of bacon in terms of pounds of butterpounds of butter. If the price of butterbutter is $0.300.30 a pound, what do you predict is the money price of a pound of woolpound of wool? >>> Answer to 2 decimal places. If the price of butterbutter is $0.30 a pound, you would predict that the price of a pound of woolpound of wool is $ nothing
.5 .6
Amber, a computer science student, has noticed that for every problem she works, her grade increases by a half a percent. She decides to work 200 problems before her next exam and try for a perfect 100. The marginal benefit to Amber of working a problem is ________.
.5%
In one hour, Sue can produce 60 caps or 18 jackets and Tessa can produce 60 caps or 24 jackets. Sue's opportunity cost of producing a cap is ______ jackets and Tessa's opportunity cost of producing a cap is ______ jackets.
0.3; 0.40
You plan to travel in Europe this summer. If you do, you won't be able to take your usual summer job that pays $9 comma 0009,000 for the summer, and you won't be able to live at home for free. The cost of transportation is $1 comma 0001,000, visas cost $300300, and living expenses are $2 comma 0002,000. What is the opportunity cost of your plan to travel in Europe?
12300 (ALL TOGETHER)
The figure shows the flows of expenditure and income in PacificaPacifica. During 2013, flow A was $13,134 billion, flow B was $9,162 billion, flow D was $3,340 billion, and flow E was negative $−$777 billion. Calculate GDP and government expenditure. >>> Answer to 1 decimal place. During 2013, GDP was $ gov expend was
13134 1409
If the money price of a cup of coffee is $1 and the money price of gum is 50 cents per pack, then the relative price of a cup of coffee in terms of a pack of gum is _____.
2
The money price of a pack of frozen burritos is $0.50 and the money price of a jar of pasta sauce is $1.50. The opportunity cost of a jar of a jar of pasta sauce is _______.
3.00 packs of frozen burritos, which is the relative price of a jar of pasta sauce
Both Mia and Mario produce only the item in which they have a comparative advantage. Then they trade one pasta for one pizza. Before specialization and trade started, Mia and Mario were each producing 6 dishes of pasta and 6 pizzas an hour. The total gains from trade are ______ dishes of pasta and ______ pizzas an hour.
6, 6
Which of the following is an example of absolute advantage?
A. Tom does his math homework in 2 hours while Harry takes only 30 minutes to do the same task.
The PPF shows a tradeoff because when Hillary's Hobby Factory produces more model cars, ______.
A. it decreases the quantity of toy trains that it produces
Production efficiency occurs when we produce goods and services at the lowest possible cost.
Allocative efficiency occurs when goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit.
______ earns ______. Land earns rent. Labor earns wages. Capital earns interest. Entrepreneurship earns profit.
An oil deposit is an example of landland, which earns rentrent.
Aqua Springs makes the following four statements about bottled spring water. Which statement best describes the firm's quantity supplied in the bottled water market?
At a price of $1 bottle, we plan to sell 2,000 bottles per day.
Jeb makes the following four statements about peanuts. Which statement best describes his quantity demanded in the peanut market?
At a price of $1 per pack, I plan to buy 2 packs of peanuts per week.
Big Lobster sells lobster and fish, and so too does H Salt. If Big Lobster's opportunity cost of preparing lobster exceeds H Salt's opportunity cost of preparing lobster, then all the following are true except ______. If H Salt and Big Lobster decide to specialize and trade, then the source of the gains from the trade between H Salt and Big Lobster is _______.
Big Lobster has a comparative advantage in lobster divergent opportunity cost
Which of the following is an example of comparative advantage?
Dave makes 4 pizzas giving up 6 jars of milk shakes while Rob makes 2 pizzas giving up 4 jars of milk shakes.
choose the correct statement
Entrepreneurship is the human resource that organizes labor, land, and capital.
Which of the following statements describes a change in the quantity supplied and which describes a change in supply? I Farms are selling less chicken because the price of turkey has increased. II Farms are selling less chicken because the price of chicken has fallen. III Farms are selling more chicken because the price of chicken has risen. IV Farms are selling more chicken because the cost of chicken feed has fallen.
I and IV are changes in supply and II and III are changes in the quantity supplied.
Which of the following statements about the market for chicken describes a change in the quantity demanded and which describes a change in demand? I People are buying less chicken because the price of beef has fallen. II People are buying less chicken because the price of chicken has increased. III People are buying more chicken because the price of chicken has fallen. IV The cost of chicken feed has increased.
I is a change in demand and II and III are changes in the quantity demanded.
Which of the following statements is about a normal good, which is about an inferior good, which is about both, and which is about neither? I With incomes falling in the recession, people are buying more chicken. II People are buying more beef now that incomes have increased. III People are buying more chicken because the price of chicken has fallen. IV With higher incomes people are switching from chicken to beef.
I is inferior, II is normal, III is neither, and IV is both
Which of the following statements by Aqua Springs demonstrates that the firm's selling plans obey the law of supply?
If the price of bottled water falls and all the other influences on our selling plans remain the same, we will cut back on production and lay off some workers
Read the news clip, then answer the following questions. The components of the 787 Dreamliner that Boeing produces in Japan are part of ______ GDP. The aircraft that are assembled in the United States and sold to All Nippon Airways are part of ______ GDP. The purchase of the 787 Dreamliner by ANA is recorded as an ______ in Japan's GDP and as an ______ in U.S. GDP.
Japans;US import;export
Which of the following is an example of money price?
Joe paid $15 to buy a pizza box from McDonald's.
Leisure Island has 50 hours of labor a day that it can use to produce entertainment and good food. The table shows the maximum quantity of each good that Leisure Island can produce with different quantities of labor. 1. Can Leisure Island produce 4 shows and 14 meals a week?
No
2. If Leisure Island produces 4 shows and 9 meals a week, is production efficient? 3. If Leisure Island produces 8 shows and 5 meals a week, do the people of Leisure Island face a tradeoff? 4. Suppose that Leisure Island produces 4 shows and 12 meals a week. Calculate the opportunity cost of producing 2 additional shows a week? The opportunity cost of producing 2 additional shows per week is
No Yes 3 meals per week
Which of the following illustrates an efficient outcome?
Ted cuts the price of his sausages and his profit increases.
Choose the correct statements. a. There is no relationship between the opportunity cost of producing an additional good measured on the x dash axis andThere is no relationship between the opportunity cost of producing an additional good measured on the x-axis and the opportunity cost of producing an additional good measured on the y dash axis.the opportunity cost of producing an additional good measured on the y-axis. nothing b. Opportunity cost of a good cannot be accurately measured along a PPF because the PPF shows only two goods.Opportunity cost of a good cannot be accurately measured along a PPF because the PPF shows only two goods. nothing nothing c. The opportunity cost of producing more x comma illustrated as a movement between two points on the PPF is equal toThe opportunity cost of producing more x, illustrated as a movement between two points on the PPF is equal to the inverse of the opportunity cost of producing more y comma illustrated as a movement between the same two points in thethe inverse of the opportunity cost of producing more y, illustrated as a movement between the same two points in the nbsp opposite direction. opposite direction. d. Opportunity cost of a good is the decrease in the quantity produced of one good divided by the increase in the quantityOpportunity cost of a good is the decrease in the quantity produced of one good divided by the increase in the quantity produced of another good as we move along the PPF .produced of another good as we move along the PPF. nothing
Statements c and d are correct.
The table gives the demand and supply schedules for hamburgershamburgers. What is the equilibrium price of a hamburgerhamburger and the equilibrium quantity of hamburgershamburgers per day?
The equilibrium quantity of hamburgers is 30 a day. The equilibrium price is $5 a hamburger.
Every week, SallySally plays the pianoplays the piano for threethree hourshours, and herher grade on each FrenchFrench test is 8585 percent. Last week, after playing pianoplaying piano for threethree hourshours, SallySally considered playingplaying for another hour. SheShe decided to playplay for another hour and cut herher study time by one hour. But last week, herher FrenchFrench grade fell to 8080 percent. Given that SallySally spent a fourthfourth hour playing pianoplaying piano, what can you conclude about the marginal benefit and marginal cost of the thirdthird hour of playing pianoplaying piano?
The marginal benefit of the first hour of playing guitar exceeded its marginal cost.
Which of the following statements by Tom demonstrates that his buying plans obey the law of demand?
The only thing that's changed is the price of textbooks: they've become more expensive and now I'm not buying as many.
Pam, Pru, and Pat are deciding how they will celebrate the New Year. Pam prefers to go on a cruise, is happy to go to Hawaii, but does not want to go skiing. Pru prefers to go skiing, is happy to go to Hawaii, but does not want to go on a cruise. Pat prefers to go to Hawaii or to take a cruise, but does not want to go skiing. Their decision is to go to Hawaii. What is the opportunity cost of the trip to Hawaii for each of them?
The opportunity cost for Pam and Pat is a cruise and for Pru it is skiing.
Dairies make low-fat milk from full-cream milk. In the process of making low-fat milk, the dairies produce cream, which is made into ice cream. In the market for low-fat milk, which of the following events illustrates the law of supply?
The price of low-fat milk rises.
Mitsubishi Heavy Industries makes the wings of the new Boeing 787 Dreamliner in Japan. Toyota assembles cars for the U.S. market in Kentucky. Choose the statement that is incorrect.
The wings appear as imports in U.S. GDP. If any parts for the cars come from Japan, they are recorded as a positive entry in calculating U.S. GDP
All of the following will change the demand for the onions except _______.
a change in the price of onions
Classify each of the following items as a final good or service or an intermediate good or service and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services: Item 1. The purchase of new computers for the office of Secretary of StateThe purchase of new computers for the office of Secretary of State Item 2. New kitchen equipment bought by Burger KingNew kitchen equipment bought by Burger King Item 3. Banking services bought by a studentBanking services bought by a student Item 4. Jet engines bought by Boeing item 1 is and item 2 is item 3 is and item 4 is
a final good which is gov expenditure; a final good that is investment a final good that is consumption expenditure and an intermediate good
The table shows the demand schedule and supply schedule in the market for ricerice. If the price of rice is $1.40 a pound, there is ______ and the price of rice will ______.
a shortage of rice;rise
The graph shows Brazil's PPF for ethanol and food crops. Brazil faces ______ opportunity cost of a barrel of ethanol, which is shown by the _____________ of the PPF.
an increasing; bowed-out shape
Social institutions such as firms, markets, property rights, and money _______.
are required for society to enjoy the benefits of specialization/trade
Gross domestic product and gross investment are measured ______. Net domestic product and net investment are measured ______. Domestic product is _______. National product is _______.
before the depreciation of capital; after the depreciation of capital production within a country; the value of goods and services produced anywhere in the world by the residents of a nation
The marginal benefit of a good or service is the _____.
benefit received from consuming one more unit of it.
A country produces only pencils and erasers. Pencil production is efficient if the marginal _______ a pencil equals the marginal _______.
benefit from; cost of a pencil
Rational choice is a choice that uses the available resources to _____ of the person making the choice.
best achieve the objective
The price of food increased during the past year. The law of demand applies to food because when the price of food rises, there is ______. The substitution effect influences food purchases because when the price of a certain food rises, other things remaining the same, ______. Consumers ______.
both a substitution effect and an income effect its relative price rises; purchase more of a different food that is less expensive
A market is an arrangement that brings _____ together and enables them to get information and do business with each other.
buyers and sellers
The production possibilities frontier is the boundary between the combinations of goods and services that _____, given the available factors of production and the state of technology.
can be produced and the combinations that cannot be produced
The graph shows Brazil's PPF. Brazil's PPF illustrates scarcity because Brazil ______. If Brazil produces 40 barrels of ethanol a day, it must produce _____ tons of food a day to achieve production efficiency.
cannot attain the points outside the PPF; 3
Economic growth comes from _______.
capital accumulation and technological advance
Which of the following news headlines does not illustrate the potential for conflict between self-interest and the social interest?
college coaches are cashing in
In January 2010, the price of gasoline was $2.70 a gallon. By spring 2010, the price had increased to $3.00 a gallon. Assume that there were no changes in average income, population, or any other influence on buying plans. Given the law of demand, you would expect the rise in the price of gasoline to ______ the quantity of gasoline demanded and ______ the demand for gasoline.
decrease;not change
The following events occur one at a time: (i) The price of crude oil rises. (ii) The price of a car rises. (iii) All speed limits on highways are abolished. (iv) Robots cut car production costs. The supply of gasoline _______. The quantity of gasoline demanded _______. The quantity of gasoline supplied _______.
decreases when the price of a car rises decreases when the price of crude oil rises decreases when the price of crude oil rises increases when the speed limits are abolished
A rise in the wage rate of dairy workers ______ the supply of low-fat milk. A rise in the price of cream ______ the supply of low-fat milk.
decreases; increases
The price of a PC comma a substitute for an MP 3 player comma fallsa PC, a substitute for an MP3 player, falls. As a result, you predict that the equilibrium quantity of MP3 players _______ and the equilibrium price _______.
decreases;falls
Economic growth ______ overcome scarcity because ______.
does not; we can produce more goods and services but it is still impossible to satisfy all our wants
The main functions of markets include _______.
enabling buyers and sellers to get info about eachother
Gross domestic product can be measured in two ways: By the total ______ or the total ______.
expenditure on goods and services; income earned producing goods and services
Property rights are legally established titles to the ownership, use and disposal of _____ and goods and services that are enforceable in the courts.
facotrs of prod
As fewerfewer people buy bicycles, the demand for bicycle helmets will decrease and the price of a helmet will increase. The rise in the price of a bicycle helmet will increase the supply of bicycle helmets." This statement is ______ because _____
false; a decreasea decrease in demand for bicycle helmetsbicycle helmets does not increaseincrease the price of a bicycle helmeta bicycle helmet and an increasean increase in the price of a bicycle helmeta bicycle helmet does not increaseincrease the supply of bicycle helmets
For each news item below, indicate whether it involves a what, how, or for whom question. "Oscar stars' swag dash bags may be taxableOscar stars' swag-bags may be taxable" involves a ______ question. "Cancer scientists hail breakthrough treatmentCancer scientists hail breakthrough treatment" involves a ______ question.
for whom;what
a tradeoff is
giving up one thing to get something else.
As the average income in China continues to increase, we would expect the demand for beef to _______ and the demand for rice to _______.
increase if beef is a normal good; decrease if rice is an inferior good
Ann currently produces at point A in the figure. If Ann moves from point A to point C, her opportunity cost of a brownie _______.
increases
Why does the PPF bow outward and what does that imply about the relationship between opportunity cost and the quantity produced? The PPF bows outward because as we move from point A to point B to point C, the opportunity cost of producing a blanket ______.
increases. Resources are not equally productive in all activities
During wedding season, the demand for gold ________ and the supply of gold _______. Expectations of a rising gold price during wedding season in India ______ the supply of gold and ______ the demand for gold prior to wedding season. When the wedding season begins, the price rises by less than it would have done if the wedding season was a surprise.
increases; does not change decrease; increase true
A supply curve _______.
is a minimum-supply-price-curve
A demand curve _______.
is a willingness-and-ability-to-pay curve
A demand curve that illustrates the law of demand ______.
is downward sloping
The opportunity cost of economic growth _______.
is fewer consumption goods today
The firm that printed your textbook bought the paper from XYZ Paper Mills. This purchase of paper ______ part of GDP because the paper is ______ good. The value of the paper is counted in GDP as ______.
is not; an intermediate part of the value of the textbook
Brazil faces a tradeoff on its PPF because if it increases the quantity of food produced _______.
it decreases the quantity of ethanol that it produces
A dog trainer is an example of the factor of production _______.
labor
Factors of production are grouped into four categories, which are _______.
land, labor, capital, and entrepreneurship
The marginal benefit curve is a curve that shows the relationship between the _____.
marginal benefit from a good and the quantity consumed of that good
The quantity demanded of a good or service is ______.
measured as an amount per unit of time
An increase in the demand for tank tops together with an increase in the supply of tank tops ______ create a surplus or a shortage of tank tops at the original price. The price of tank tops ______.
might; might fall, rise, or not change
Monday Island produces only potatoes and bananas. The marginal cost of a potato is the number of bananas that ______ to get one more ______.
must be forgone; potato
A bakery uses flour to produce bread. When calculating GDP, we include ______, because when we add the value of the flour to the value of the loaf of bread to calculate GDP, the result is ______.
only the value of the bread sold in a store; double counting
The marginal cost of a good or service is the _____.
opportunity cost of producing one more unit of it
The equilibrium price is the best deal available for both buyers and sellers because buyers ______ and sellers ______.
pay the highest price they are willing to pay; receive the lowest price at which they are willing to sell
Indicate whether each of the following news items is a positive or a normative statement. 1. Nuclear energy is cleaner than coal and oilNuclear energy is cleaner than coal and oil based energybased energy. 2. More police on inner dash city streets willMore police on inner-city streets will lower the crime ratelower the crime rate. 3. Flat screen is better than traditionalFlat screen is better than traditional televisiontelevision. 4. The PlayStation has a larger range of gamesThe PlayStation has a larger range of games than the XBoxthan the XBox. Statement 1 is a ______ statement, and statement 2 is a ______ statement. Statement 3 is a ______ statement, and statement 4 is a ______ statement.
positive;positive normative;positive
Read the news clip, then answer the following question. A shortage in the market for oil implies that ______.
price adjustments are being prevented from playing their role as the regulator of buying and selling plans
A demand curve shows the relation between the _____ and _____ when all other influences on buying plans remain the same.
quantity demanded of a good; its price
For 50 years, Cuba has had a centrally planned economy in which government makes the big decisions on how resources will be allocated. We would expect Cuba's production possibilities (per person) to be smaller than those of the United States because Cuba _______. _______ is the social institution that helps the U.S. economy achieve allocative efficiency that Cuba might lack.
produces a greater proportion of consumption goods than capital goods, so its PPF does not shift outward as quickly as the PPF in the United States Property rights
All points on the PPF are points of ______ efficiency. When we produce at the point on the PPF that we prefer above all other points we achieve ______ efficiency.
production; allocative
A supply curve shows the relationship between the ______ and _____ when all other influences on selling plans remain the same.
quantity supplied of a good; its price
Which of the following is an example of consumption expenditure?
rachel buying a tv
In 1998, the price of a barrel of oil was $20. In 2012, the price of a barrel of oil was $106. In 1998, the price of a loaf of bread was $0.86. In 2012, the price of a loaf of bread was $2.32. Between 1998 and 2012, the relative price of a barrel of oil with respect to a loaf of bread _______ and the relative price of a loaf of bread with respect to a barrel of oil _______.
rose;fell
The table sets out the demand and supply schedules for roses on a normal weekend. 1. If the price of a rose is $6, describe the situation in the rose market. Explain how the price adjusts. If the price of a rose is $6, there is a _____ of roses and the price of a rose_____.
shortage; rises
A supply curve that illustrates the law of supply _______.
shows that the quantity supplied decreses as the price falls
If the price of a rose is $9, describe the situation in the rose market. Explain how the price adjusts. If the price of a rose is $9, there is a _____ of roses and the price of a rose _____. What is the market equilibrium? At the market equilibrium, the price of a rose is ______ and _____ roses per week are bought and sold.
surplus; falls 7;100
The quantity supplied of a good or service is ______.
the amt producers plan to sell during a given time period
Aggregate income earned is equal to the total amount paid for ______ to produce final goods and services. Aggregate expenditure is equal to ______.
the factors of production used; C + I + G + (Xminus−M)
You can spend the evening studying or you can go to see a movie You have an incentive to spend the evening studying if ______.
the marginal benefit of spending the evening studying is greater than the marginal cost of spending the evening studying
Gross domestic product is ______.
the market value of all the final goods and services produced within a country in a given time period
The relative price of a gallon of gasoline in terms of a pound of bananas is ______.
the money price of a gallon of gasoline divided by the money price of a pound of bananas
The table shows some of Brazil's production possibilities for ethanol and food crops. Marginal cost of a good is _______.
the opportunity cost of producing one more unit of it
Firms are institutions that organise _____ of goods and services.
the production
The equilibrium price is the price at which _____ and the equilibrium quantity is the _____.
the quantity demanded equals the quantity supplied; the quantity bought and sold at the equilibrium price
The quantity of DVD players that firms plan to sell this month depends on all of the following except _______ because ______.
the quantity of DVD players that consumers plan to buy this month; a change in the quantity of DVD players that consumers plan to buy this month changes the quantity supplied
The flows in the market economy that go from firms to households are _______. The flows in the market economy that go from households to firms are _______.
the real flows of goods and services and the income flows of wages, rent, interest, and profit; the real flows of labor, land, capital, and entrepreneurship and the flow of expenditure on goods and services
Demand is _____, when all other influences on buying plans remain the same.
the relationship between the quantity demanded of a good and the price of the good
Supply is _____, when all other influences on buying plans remain the same.
the relationship between the quantity supplied of a good and the price of the good
The relative price of a jar of pasta sauce is an opportunity cost because ______.
the relative price tells us how many packs of frozen burritos we must give up to get a jar of pasta sauce
People specialize and trade for all of the following reasons except _______.
they can obtain an absolute advantage
Allocative efficiency is a situation in which the quantities of goods and services produced are those that people _____ - it is not possible to produce more of a good or service _____ some of another good that people _____.
value most highly; without giving up; value more highly
The graph shows a production possibilities frontier. Production efficiency is achieved at points A, B, and C because to increase the production of x as we move from A to B to C, _______ .
we are giving up the minimum amount of y possible to increase the production of x
1.1 The what, how, and for whom questions in economics are questions about ______.
what goods and services do we produce, how do we use the factors of production to produce these goods, and who consumes the goods and services that are produced
______ has a comparative advantage in producing caps. If Sue and Tessa each specialize in producing the good in which they have a comparative advantage and trade 1 jacket for 33 caps, ______.
;sue both Sue and Tessa gain
A choice on the margin is a choice that is made by comparing all the relevant _____ systematically and _____. Marginal cost is the _____ that arises from one unit _____ in an activity. Marginal benefit is the _____ that arises from one unit _____ in an activity.
alternatives; incrementally; opportunity cost; increase; benefit; increase
Production efficiency is a situation in which the economy is getting all that it can from its resources and _____ produce more of one good or service without producing _____ of something else.
cannot; less
The table shows the demand and supply schedules for boxes of chocolates. The price of chocolates is $17.00 a box. To reach equilibrium, the quantity supplied ______, the quantity demanded ______. The price ______ until the ______ is eliminated.
decreases; increases falls; surplus
Net exports of goods and services is the value of _____ of goods and services _____ the value of _____ of goods and services.
exports; minus; imports
The night before an economicsan economics test, you decide to watch televisionwatch television instead of working your MyEconLab study planworking your MyEconLab study plan. You get 8585 percent on your test compared with the 9090 percent that you normally score. You ______ a tradeoff ______, and the opportunity cost of your evening watching televisionwatching television was ______.
faced; between a higher test score and an evening watching televisionwatching television; the 55 percent fall in your grade
Gross domestic product (GDP) is the market value of all the _____ goods and services produced _____ a country in a given time period.
final; within
The opportunity cost of catching a pound of tunatuna is ______ for JimJim than for DavidDavid, and the opportunity cost of picking a pound of orangesoranges is ______ for JimJim than for DavidDavid. So ______ has a comparative advantage in producing ______.
lower; higher Jim; tuna
If the price of a rose is $6, describe the situation in the rose market. Explain how the price adjusts. If the price of a rose is $6, there is a _____ of roses and the price of a rose_____. If the price of a rose is $9, describe the situation in the rose market. Explain how the price adjusts. If the price of a rose is $9, there is a _____ of roses and the price of a rose _____. What is the market equilibrium? At the market equilibrium, the price of a rose is ______ and _____ roses per week are bought and sold.
shortage; rises surplus; falls 7;100 $8 $9
In 2013, the price of corn fell and in 2014 some corn farmers will switch from growing corn to growing soybeans. This statement illustrates the law of _________because the fall in the price of corn results in _________. A corn farmer would grow soybean because _______.
supply; a decrease in the quantity of corn supplied soybean is a substitute in production for corn, and when the relative price of corn falls, farmers plant more soybeans
