Econ Test 1

the government decides to address the problem of lumber shortages for the market of newly constructed housing by imposing a price ceiling in the market for lumber. Over the next 2 years the economy will likely experience:

A decrease in the market for homes more lumber than wanted for the increased price of lumber

Which of the following best characterizes the circular flow of income?

Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses

Which arrow represents the flow of land, labor, and capital?

C (bottom inside arrows)

A change in price of a good or service typically causes ___ for that specific good or service

a change along the supply curve

Which of the following best denotes the reason for the existence of substantial black markets?

a command economy

The supply curve of textbooks (which are produced using paper made from trees) will shift to the left in response to:

a damage in the supply of trees

Which of the following would most likely shift the PPF inward? an increase in the number of hours factories are in use a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time an increase in the production of capital goods technological progress

a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time

Which of the following lies primarily within the realm of macroeconomics

a study of how tax cuts stimulate aggregate production

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of:

buyers and sellers

Marginal thinking is best demonstrated by:

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

The circular flow diagram of economic activity is a model of the:

flow of goods, services, and payments between households and firms

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

$44

Referring to Table 2-1: A student has only a few hours to prepare for two different exams this afternoon. The above table shows alternative possible exam scores with three alternative uses of the student's time. The opportunity cost of scoring a 94 on the economics exam rather than a 77 is: Econ and then History: 1 94 76 2 87 84 3 77 91

15 points on the history exam

Refer to Table 2-1. A student has only a few hours to prepare for two different exams tomorrow morning. The above table shows alternative possible exam outcomes with three alternative uses of the student's time. The opportunity cost of scoring an 84 on the history exam rather than 76 is: Econ and then History: 1 94 76 2 87 84 3 77 91

7 points on the Econ exam

Refer to Figure 2-2. At Point A in the production possibilities graph shown above, the economy:

is not using its resources efficiently.

____ are enacted when discontented sellers, felling that prices are too low, appeal to legislators to keep prices from falling.

price floors

Consider the recent shortage of lumber as a result of supply chain interruptions. What effect will this shortage have on the price and quantity traded of newly constructed housing?

prices will rise and less newly constructed houses will be bought

A dead weight loss occurs because

supply and demand are not in equilibrium

As the _____________ complement for high-skill labor becomes cheaper, the demand curve for high-skill labor will shift to the right.

technology

Refer to Figure 2-2. When the economy moves from Point A to Point B in the diagram above:

the economy begins using its resources efficiently to produce both food and clothing. the economy operates at its productive capacity once it reaches Point B. the economy increases the production of both clothing and food. All of the above occurs.

Consider the recent shortage of lumber as a result of supply chain interruptions. How will the market of new housing construction be affected by this shortage?

the high level of demand will enable sellers to charge more for the good -> demand will drop and more people will want to produce more.

The law of ____________________________ explains why people and societies rarely make all-or-nothing choices.

the law of diminished marginal utility

Whenever there is a surplus at a particular price, the quantity sold at that price will equal:

the quantity demanded at that price

When consumers and businesses have greater confidence that they will be able to repay in the future, _______________________.

the quantity demanded of financial capital at any given interest rate will shift to the right.

Consider the recent shortage of lumber as a result of supply chain interruptions. What effect will this shortage have on the rental price of existing apartments?

this will cause the prices of rental homes to increase

Consider the recent shortage of lumber as a result of supply chain interruptions. the government decides to address the problem of lumber shortages for the market of newly constructed housing by imposing a price ceiling in the market for lumber. This will:

this will force the price of lumber to decrease with an already existing shortage (Qd will exceed Qs forcing the price of new homes to raise in value)

Because it is difficult for economists to use experiments to generate data, they generally must

use whatever data the world gives them

Economists often refer to a competitive market as being the most efficient market form. How do economists measure efficiency in markets?

when all resources are at maximum efficiency and resources are efficiently allocated (points on the PPF)

Are markets always in equilibrium?

No, but if there is no outside interference, they tend to move toward equilibrium.

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good.

PPF

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:

The benefit to his grades

the government decides to address the problem of lumber shortages for the market of newly constructed housing by imposing a price ceiling in the market for lumber. Given the significant size of the housing market which of the following effects do you expect?

The dip in the housing market will hurt the economy

Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market." The statement is correct. The statement would be correct if "quantity of wheat demanded" were substituted for "quantity of wheat supplied." The statement is incorrect because it confuses a change in quantity supplied with a change in supply. The statement would be correct if it read that a "decrease in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."

The statement is correct.

Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel?

There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.

How do apple growers react to the news of medical research findings that suggest that eating apples leads to greater health benefits than were previously known?

They increase the quantity of apples supplied.

The term "ceteris paribus" means that:

all else equal

Consider the recent shortage of lumber as a result of supply chain interruptions. the government decides to address the problem of lumber shortages for the market of newly constructed housing by imposing a price floor in the market for lumber. This will:

decrease the amount of newly constructed housing and force the price of lumber to increase (Qs will exceed Qd).

_______ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines.

economies of scale

The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if: the economy moves along the production possibilities in the direction of a greater quantity of defense. the economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve. the production possibilities frontier shifts outward due to an improvement in technology. either b) or c) occurs, but not as a result of a).

either b or c occurs but not a result of a ->