Economics Unit 1 Test
refer to the above figure. a minimum wage has been set at Wm. The amount of unemployment is
Qs minus Qd
which of the following is a statement with positive economic analysis
a reduction in the size of the budget deficit will reduce interest rates, slower money growth reduces inflation, lower wages increase employment and decrease the unemployment rate, *all of the above*
which of the following statements are correct?
a shortage occurs when the quantity demanded is greater than the quantity supplied at a price below the markets clearing price
If the price of Pepsi increases, then there will be _________ of Pepsi
an increase in the quantity supplied
economic growth is shown by
an outward shift of the production possibilities curve
price floors
create surpluses by setting the price above equilibrium
"Ceteris paribus" assumption means
that nothing else changes except the variables under consideration
which of the following is a macroeconomic concern
the national output of the United States
In the above graphs a direct relationship is shown by
*shown on graph*
a movement along a demand curve is
a change in the quantity demanded and is caused by a change in the price of the good
which of the following is not considered to be an economic resource -the telephone company repair truck -the local gas station -a view of the stars on a clear night -your economics professor
a view of the stars on a clear night
which of the following would likely cause an increase in the supply of espresso coffee makers
a widespread expectation that the price of espresso makers will fall in the future
the combination of psychology and economics to determine individual decision making is known as
behavioral economics
the terms of exchange are determined
by supply and demand
which of the following factors will lead to a shift in the demand curve
changes in consumers tastes and preferences
which of the following sets of terms describes the problem of scarcity in economics? -goods, land, and needs -choices, opportunity costs, and trade-offs -production, consumption, and wants -labor, needs, and opportunity costs
choices, opportunity costs, and trade-offs
in economics, international trade is based on the existence of
comparative advantage between countries
there is an increase in demand for cream when the price of coffee falls. Other things constant, we can conclude coffee and cream are
complementary goods
Which of the following is a microeconomic concern?
consumer behavior
the principle of comparative advantage implies that
everyone can benefit from international trade
the division of labor refers to
the assignment of different workers to different tasks
we know products g and h are relative goods because when the price of g increases,
the demand curve for h will shift to the left because g and h are complementary goods
the reason the production possibilities curve is bowed outward (concave) is
the law of increasing additional cost
the production possibilities curve represents
the maximum combination of goods and services that can be produced with fixed resources and technology, given efficient use of the resources
the price of a first class stamp in 1957 was 3 cents, and was 41 cents in 2007. From this we know that
the money price of first class stamps increased from 1957 to 2007, but we can't tell if the relative price of the first class stamps increased or decreased without more information
which of the following is a true statement? -the x-axis is the vertical line and the y-axis is the horizontal -the origin is (0,0) -it is impossible to graph negative values -graphs show the relationship between two dependent variables
the origin is (0,0)
Prices ration goods to
the people willing and able to pay the highest price
refer to the above figure. a surplus will exist when (equilibrium price is $6)
the price equals $10
if there is a surplus,
the price will decline to the equilibrium level
There has recently been an increase in the price of dairy products used in the production of ice cream. High temperatures have also induced people to consume more ice cream. In the market for ice cream, the effects these changes will have on equilibrium price and quantity are:
the price will increase, and the effect on quantity is indeterminate
refer to the above figure, if a price floor of $5 was set (above equilibrium)
the quantity sold would be 60 units
if the government imposes a per unit tax on sales of an industry's products, then we would expect
the supply curve in that industry would shift to the left
the rationing function of prices refers to
the synchronization of decisions by buyers and sellers that leads to equilibrium
Scarcity exists because
there are not enough resources available to produce all the goods that people want
the existence of scarcity means that
there are not enough resources to satisfy unlimited human wants
Consider the case of a teacher who tells students that those who miss more than three classes for any reason will automatically receive a lower grade.
this is an example of negative incentive for students to attend class
The idea of bounded rationality is used to address all of the following except
unbounded knowledge
the price system features
voluntary exchange that makes both the consumer and producer better off
when are black markets likely to arise
when the government enforces a price ceiling
the difference between quantity restrictions and price ceilings as to their effect on the market is that
while some consumers gain from price ceilings, no consumers gain from quantity resitrictions
If Irene can make either four chairs or one table in an hour and Greg can make either three chairs or two tables in an hour then
irene has the absolute advantage in the production of chairs
refer to the above figures, which panel demonstrates the law of demand
its an inverse relationship
which factor of production includes water
land
the long run effect of rent control on an area includes
less investment into the real estate market in the area
what is the type of mechanism that answers the basic economic questions through a decentralized decision making process
market system
the saying that "you cannot have your cake and eat it too" illustrates the economic concept of
opportunity cost
when two variables have a direct relationship, the slope is
positive
refer to the above figure. which panel demonstrates the law of supply
positive slope
refer to the above figure. a price control has been set which has led to a shortage this means that a (p1 is above equilibrium and p2 is below)
price ceiling has been set at p2
efficiency can correctly be defined as
producing the maximum output with given technology and resources
according to the above figure, a shortage will occur at a price at which
quantity demanded exceeds the quantity supplied
which of the following is one of the functions of a rental price
ration the use of existing housing for current consumers
in economics, the concept that individuals are motivated by self-interest and respond to opportunities for gain is know as
rational self-interest
in order to increase the supply of a good, producers must
reduce their per-unit costs of producing the good
the "real" price of a good is known as
relative price of a good
Agriculture price supports that establish a price floor at which agricultural products may be purchased that exceeds the market clearing price
result in the quantity of these products supplied exceeding the quantity demanded at the floor price
economics assumes that people are motivated by
self interest
suppose there is an improvement in technology in the market for Ipods. Which of the following is true
supply will increase and the market clearing price will fall
refer to the above table. suppose buyer 2 leaves the market, what is the new market quantity of DVDs demanded at a price of $10?
25
In the above figure, the opportunity cost of moving from producing 75 guitars and 25 ukuleles to producing 50 guitars and ukuleles is In the above figure, as more ukuleles are produced, the opportunity cost in terms of guitars is
25 guitars constant
Since the minimum wage rate began it has typically stayed at about what percentage of the average manufacturing wage?
40%-50%
One major assumption of economics is that people
act as if they systematically pursue self-interest
A limit on the amount of strawberries that can be imported into the United States is an example of
an import quota
A fundamental aspect of economics is to
analyze how choices are made
economic models
are simplified representations of the real world
If the production of capital goods is shown along the horizontal axis of a production possibilities curve, and the production of consumer goods is shown along the vertical axis of a production possibilities curve, and the economy desires to have a rapid rate of economic growth, then the economy should produce at a point A) near the middle of the curve dividing resources equally between the production of consumer and capital goods. B) at a point near the vertical axis concentrating on the production of consumer goods. C) at a point near the horizontal axis concentrating on the production of capital goods. D) at a point inside the curve allowing the economy to adjust rapidly to changes in economic activity.
at a point near the horizontal axis concentrating on the production of capital goods
if price increases and the quantity purchased increases, we know that
demand increased
which of the following would cause and increase in demand for digital cameras
digital cameras become easier to use
economic goods are
goods that are scarce, for which the quantity demanded exceeds the quantity supplied at zero price
economics is the study of
how people allocate their limited resources to satisfy their unlimited wants
which of the following is not one of the basic questions that an economic system attempts to answer -what to produce -how to eliminate choices -from whom goods and services will be produced -how much goods and services will be produced
how to eliminate choices
Which of the following statements is false?
if the price of a good rises, quantity demanded of the good decreases, and the demand curve shifts toward the origin as long as supply is static
how does an economy represented by a straight-line production possibilities curve differ from on represented by a traditional production possibilities curve with a bowed shape
in the economy represented by a straight-line production possibilities curve, the law of increasing relative cost does not apply
A subsidy to carrot farmers will
increase the supply of carrots.