Economics exam

Refer to Figure 4-7. Equilibrium price and quantity are, respectively,

$25 and 400 units.

Which of the following would shift the supply of umbrellas to the left?

The number of firms making umbrellas decreases.

Refer to Table 2-2. Which of the following statements is correct?

The opportunity cost of an additional 100 toys increases as more glasses are produced.

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that

the nation is not using all available resources or is using inferior technology or both

Which of the following events would cause a movement upward and to the left along the demand curve for olives?

decreases the demand for the other good

If the number of buyers in a market decreases, then

demand will decrease

Total output in an economy increases when each person specializes because

each person spends more time producing that product in which he or she has a comparative advantage.

Economists sometimes give conflicting advice because

economists have different values and scientific judgments.

Suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are

substitute goods

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to increase the money supply. This is likely because

the Federal Reserve is worried about unemployment.

Prior to the collapse of communism, communist countries worked on the premise that economic well-being could be best attained by

the actions of government central planners.

A baker recently has come to expect higher prices for bread in the near future. We would expect

the baker to supply more bread now than she was supplying previously.

The production possibilities frontier illustrates

the combinations of output that an economy can produce

When a relevant variable that is not named on either axis changes,

the curve will shift

Alana decides to spend 2 hours working overtime rather than going shopping with her friends. She earns $11 per hour for overtime work. Her opportunity cost of working is

the enjoyment she would have received had she gone shopping.

The slow growth of U.S. incomes during the 1970s and 1980s can best be explained by

a decline in the rate of increase in U.S. productivity.

Refer to Figure 4-3. The shift from Da to Db in the market for pita chips could be caused by

a decrease in income, assuming that pita chips are a normal good

The gains from trade are

a result of more efficient resource allocation than would be observed in the absence of trade

The term market failure refers to

a situation in which the market on its own fails to allocate resources efficiently

Economists at the Department of Justice

help enforce the nation's antitrust laws

A circular-flow diagram is a model that

helps to explain how the economy is organized.

Suppose that you have received $650 as a birthday gift. You can spend it today or you can put the money in a savings account for a year and earn 2 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is

$663.00

Refer to Table 3-11. Cuba's opportunity cost of one cooler is

0.5 radios, and Denmark's opportunity cost of one cooler is 0.125 radios

Refer to Table 3-12. India's opportunity cost of producing bananas is Correct!

0.5 units of rice. This is lower than Indonesia's opportunity cost of producing bananas.

Refer to Table 2-3. Which of the following combinations of corn and rye is not currently attainable but would be attainable if there was an improvement in overall production technology?

1,250 bushels of corn and 1,700 bushels of rye

Refer to Table 4-2. If these are the only four buyers in the market, then the market quantity demanded at a price of $2.00 is

14 units

Refer to Table 4-3. If the law of supply applies to this good, then Q1 could be

170

Refer to Table 2-1. If the production possibilities frontier is bowed outward, then which of the following could be the maximum number of tennis balls produced when 300 tennis rackets are produced?

2,400

Refer to Figure 2-3. The opportunity cost of this economy moving from point D to point C is

20 washers

Which of the following changes would not shift the supply curve for a good or service?

A change in the price of the good or service

Refer to Figure 3-2. If the production possibilities frontier shown is for 32 hours of production, then how long does it take Peru to make one pound of cashews?

3 hour

Refer to Table 3-11. Assume that Cuba and Denmark each has 6 days available for production. Originally, each country divided its time equally between the production of coolers and radios. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of coolers increased by

36

Refer to Table 3-2. Which of the following combinations of bread and lemonade could France produce in 20 hours?

4 units of bread and 10 units of lemonade

Refer to Figure 3-3. Tanek's opportunity cost of one burrito is

4/3 tacos and Barb's opportunity cost of one burrito is 2 taco

Refer to Table 4-1. If the law of demand applies to this good, then Q1 could be

40

Suppose that a worker in Radioland can produce either 5 radios or 1 television per year, and a worker in Teeveeland can produce either 1 radios or 5 televisions per year. Each nation has 100 workers. Also, suppose that each country completely specializes in producing the good in which it has a comparative advantage. If Radioland trades 50 radios to Teeveeland in exchange for 50 televisions each year, then each country's maximum consumption of new radios and televisions per year will be

450 radios, 50 televisions in Radioland and 50 radios, 450 televisions in Teeveeland

Refer to Table 3-10. What is Teresa's opportunity cost of producing one bushel of wheat?

5/3 pounds of beef

Refer to Table 3-5. Which of the following combinations of cheese and bread could England produce in 24 hours?

6 units of cheese and 8 units of bread

Refer to Figure 3-3. If Tanek must work 0.2 hour to produce each taco, then his production possibilities frontier is based on how many hours of work?

80 hours

Which of the following changes would not shift the demand curve for a good or service?

A change in the price of the good or service

Which of the following events would cause both the equilibrium price and equilibrium quantity of number two grade potatoes to increase if number two grade potatoes are an inferior good?

A decrease in consumer income

Which of the following statements about models is correct?

A model can be accurately described as a simplification of reality.

The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book?

Adam Smith

Refer to Figure 3-4. If point A represents Alvina's current production and point B represents Jane's current production, under what circumstances can both Alvina and Jane benefit from specialization and trade?

Alvina produces more lemonade and Jane produces more pizzas

Which of the following would shift the demand curve for gasoline to the right?

An increase in consumer income, assuming gasoline is a normal good

Which of the following statements best represents the principle represented by the adage, "There ain't no such thing as a free lunch"?

Benjamin must decide between going to Florida or Brazil for summer vacation.

If China is capable of producing either shoes or toy trains or some combination of the two, then

China's opportunity cost of shoes is the inverse of its opportunity cost of toy trains.

Analysis of data on workers and those looking for work is conducted by economists at the

Department of Labor.

The president of the United States receives tax policy advice from economists in the

Department of the Treasury.

Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good?

Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

In the circular-flow diagram, which of the following items flows from firms to households through the markets for goods and services?

Goods and service

Savion is restoring a car and has already spent $4,000 on the restoration. He expects to be able to sell the car for $5800. Savion discovers that he needs to do an additional $2,400 of work to make the car worth $5,800 to potential buyers. He could also sell the car now, without completing the additional work, for $3,800. What should he do?

He should sell the car now for $3,800.

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

Which of the following claims is consistent with the views of mainstream economists?

If we increase the rate of inflation from 4 percent to 6 percent, then the rate of unemployment will temporarily fall.

In the circular-flow diagram, which of the following is not a factor of production?

Output

If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then

Iowa has a comparative advantage in the production of corn.

A donut shop sells fresh-baked donuts from 6 a.m. until 5 p.m. every day. The shop does not sell day-old donuts, so all unsold donuts are thrown away at 5 p.m. each day. The cost of making and selling a dozen donuts is $1; there are no costs associated with throwing donuts away. If the manager has seven dozen donuts left at 4 p.m. on a particular day, which of the following alternatives is most attractive?

Lower the price of the remaining donuts, even if the price falls below $1 per dozen.

Refer to Figure 2-9. Which of the following conclusions should not be drawn from observing this graph?

No other factors besides the frequency of service affect the number of passengers.

Which of the following is an example of a positive, as opposed to normative, statement?

Prices rise when the government prints too much money.

Economists who are primarily responsible for advising Congress on economic matters work in which agency?

The Congressional Budget Office

You go to the movieplex where movies ordinarily cost $8.00. You are intending to see a movie for which you have a $2.50-off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost? Correct Answer

The amount you value the first movie + $2.50

Which of the following statements exemplifies a principle of individual decision making?

The cost of something is what you give up to get it.

What would happen to the equilibrium price and quantity of lattés if the cost of producing steamed milk, which is used to make lattés, rises?

The equilibrium price would increase, and the equilibrium quantity would decrease.

Which of the following events would cause a movement downward and to the left along the supply curve for kiwis?

The price of kiwis falls

Which of the following would not increase in response to a decrease in the price of ironing boards?

The quantity of irons supplied at each possible price of iro

Refer to Table 3-1. Assume that Celia and John each work 24 hours. What happens to total production if instead of each person spending 12 hours producing each good, Celia spends 18 hours producing wine and 6 hours producing bread and John spends 6 hours producing wine and 18 hours producing bread?

The total production of bread and wine each rise

Suppose the cost of flying a 350-seat plane for an airline is $350,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is

This cannot be determined from the information given.

Refer to Figure 2-4, Graph (a) and Graph (b). A shift of the economy's production possibilities frontier from Graph (a) to Graph (b) could be caused by

an improvement in tractor production technology.

If a seller in a competitive market chooses to charge more than the going price, then

buyers will make purchases from other sellers.

You are considering staying in college another semester so that you can complete a major in finance. In deciding whether or not to stay you should

compare the cost of staying one more semester to the benefits of staying one more semester.

Your professor loves her work, teaching math. She has been offered other positions in the corporate world that would increase her income by 15 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal Correct!

cost of teaching increased

Refer to Table 3-4. Which of the following represents Zimbabwe's and Portugal's production possibilities frontiers when each country has 60 minutes of machine time available?

d

The art in scientific thinking—whether in physics, economics, or engineering—is

deciding which assumptions to make

Large or persistent inflation is almost always caused by

excessive growth in the quantity of money.

Refer to Figure 2-2. If households are buyers in the markets represented by Box C of this circular-flow diagram, then

firms are sellers in the markets represented by Box C

Soup is an inferior good if the demand

for soup falls when income rises.

Refer to Figure 2-2. Ethan works as an attorney for a corporation and is paid a salary in exchange for the legal services he performs. If Ethan's income is represented by a flow of dollars from Box D to Box B of this circular-flow diagram, then the revenue earned by a firm selling its product is represented by a flow of dollars

from Box C to Box A

The "invisible hands" ability to coordinate the decisions of the firms and households in the economy can be hindered by

government actions that distort prices

The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good,

has an absolute advantage in the production of that good

A popular celebrity that is paid highly for her time should probably not mow her own lawn because

her opportunity cost of mowing her lawn is higher than the cost of paying someone to mow it for her.

In the simple circular-flow diagram, the participants in the economy are

households and firms

The "invisible hand" refers to

how the decisions of households and firms lead to desirable market outcomes

Trade between countries tends to

increase both competition and specialization.

Absolute advantage is found by comparing different producers'

input requirements per unit of output

The business cycle is the

irregular fluctuations in economic activity

For a self-sufficient producer, the production possibilities frontier Correct!

is the same as the consumption possibilities frontier

Refer to Figure 2-3. This economy cannot currently produce 70 washers and 80 dryers because

it does not have the resources and technology to produce that level of output.

A competitive market is a market in which

no individual buyer or seller has any significant impact on the market price.

The adage, "There ain't no such thing as a free lunch," means

people face tradeoffs

A demand schedule is a table that shows the relationship between

price and quantity demanded

A professor spends 8 hours per day giving lectures and writing papers. For the professor, a graph that shows his various possible mixes of output (lectures given per day and papers written per day) is called his

production possibilities frontier.

The law of supply states that, other things equal, when the price of a good

rises, the quantity supplied of the good rises

Resources are

scarce for households and scarce for economies

The quantity supplied of a good is the amount that

sellers are willing and able to sell

As a student, Jordyn spends 40 hours per week writing term papers and completing homework assignments. On one axis of her production possibilities frontier is measured the number of term papers written per week. On the other axis is measured the number of homework assignments completed per week. Jordyn's production possibilities frontier is a straight line if

she can switch between writing term papers and completing homework assignments at a constant rate.

Refer to Figure 2-6. Consider the production possibilities frontier for an economy that produces only televisions and computers. When society moves from point A to point B,

the opportunity cost is the same as when society moves from point B to point C.

When computing the opportunity cost of attending a professional football game as a spectator, you should include

the price you pay for the ticket and the value of your time.

In the ordered pair (1, 16), 16 is the

the y-coordinate and the vertical location of the point.

The opportunity cost of an item is

what you give up to get that item