Exam 1?
6. Which of the following statements explains why markets lead to an efficient outcome for buyers and sellers?
Markets are flexible, so that prices adjust until every unit of a good that sellers wish to sell is purchased by a consumer who wishes to buy it.
_______________________ includes labor markets and environmental policy.
Microeconomics
If a student were not studying economics, he could be doing one of the following: sleeping in (which he values at $5), playing cards with his friends (which he values at $10), or working (he would have earned an extra $8). The opportunity cost of studying economics is therefore
$10
Suppose Keisha decides to go to a concert. It is being held on a day that she would not have worked anyway, but her daily earnings are usually $80. Keisha's friend gave her the concert ticket, which would have cost her $40, and she cannot resell it. She can expect to spend $40 on food and beverages. What is the opportunity cost of going to the concert?
$40
Suppose a friend invites you to attend the Opening Day game for your favorite baseball team. You will have to miss a day of work in order to go. You would have earned $40 that day. Your ticket to the game cost your friend $10, and your friend treats you to another $10 worth of food and beverage. What is your opportunity cost of attending the Opening Day game?
$40
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...
3. What is the difference between a positive question and a normative question?
A positive question concerns what is; a normative question concerns what should be.
_____ advantage exists when one country can produce more of a good than another country.
Absolute
______________ efficiency occurs when individuals who want a product the most obtain that product.
Allocative
Suppose that Costa Rica is able to produce 50,000 pounds of coffee or 10,000 medical devices per day; Vietnam is able to produce 40,000 pounds of coffee or 5,000 medical devices per day. Which statement is TRUE?
Costa Rica has a comparative advantage in the production of medical devices, while Vietnam has a comparative advantage in coffee production
_________________ describes a person's ability to combine land, labor, and capital to produce goods and services.
Entrepreneurial ability
If the price of carrots drops, ceteris paribus, people will buy more carrots. Which statement BEST describes this phenomenon?
If the price of carrots drops and everything else remains the same, the number of carrots people buy will increase.
If Japan can produce 3 rice cakes or 6 seaweed salads in an hour, while Indonesia can produce 2 rice cakes or 5 seaweed salads in an hour, which of the following is true?
Indonesia has a comparative advantage in producing seaweed salads.
_____ is(are) concerned with how trade policy can affect unemployment.
Macroeconomics
When one member of a society owns all of the goods, and redistribution of goods cannot take place without making that member worse off, the society can be said to be:
Pareto efficient.
Which statement is TRUE regarding production efficiency?
Producing at the lowest possible resource cost is equivalent to getting as much output as possible from a given set of resources
If a technology company introduces a new gadget to the market which creates long lines of eager customers at stores and some of them even walk away empty handed, what is true about this market?
Quantity demanded exceeds quantity supplied and a shortage occurs.
Sally has a higher income than Tim, even though they both have the same job. One of the major reasons that this happens is that:
Sally is more productive than Tim.
3. An economy that finds new inputs or improves technology to use existing inputs in a more productive manner is pushing its PPF outward and can experience long-run economic growth.
True
A country is said to have an absolute advantage if it can produce more of a good than another country can.
True
If two variables are correlated with one another, it is possible but not necessary that one variable causes the other.
True
If variable S falls as variable X falls, then S and X have a positive relationship and the slope of the line is positive.
True
Time series graphs allow us to see trends in one variable over a set time frame.
True
When a country dedicates more resources to consumer goods than capital goods, its productive capacity will...
expand less rapidly
Shaniah learned from a Cornell University Web site for beginning farmers that if she wants to start farming, she should consider what is demanded by society. Which of these basic economic questions does this illustrate?
What good or service is to be produced?
What are the three basic economic questions each society must answer?
What to produce? How to produce? For whom to produce?
Assume that the population of Lauronia increased and so did its total production. What would this look like on a graph of the production possibilities frontier?
a new curve that is to the right of the original curve
The increased demand for corn for ethanol production has resulted in record-high corn prices. As a result, more farmers have planted acreage in corn. The effect on the supply of corn would be shown as:
a new curve to the right of the original supply curve.
When can an economy increase the production of one good without reducing the output of another?
a point below the PPF.
How would unemployment be shown on the PPF?
a point inside the PPF
Dan owns a small grocery store. When an item doesn't sell well, he'll typically stop carrying it in favor of something that sells better. What type of efficiency does this help him achieve?
allocative efficiency
A parent offers to pay a child $5 for each A received on a school report card. The money offered for each A is an example of:
an incentive.
A leftward shift of a supply curve would be the result of:
an increase in the price of an alternative product that could be produced with the same resources.
Willingness-to-pay is:
an individual's valuation of a good or service.
Points on the PPF are....
attainable and efficient.
Points to the left of the PPF are...
attainable but not efficient
A surplus is represented by the distance:
between the demand curve and the supply curve at a price above the equilibrium point.
A shortage is represented by the distance:
between the demand curve and the supply curve at a price below the equilibrium point.
A straight-line PPF has
constant opportunity costs, whereas a bowed PPF has increasing opportunity costs.
Macroeconomics focuses on
decisions affecting the entire economy
In the equation S = 130 - 2T, where S is hot chocolate sales and T is temperature, sales _____ if temperature increases by 10 degrees.
decrease by 20
Consider the equation Y = e + fX. Which letter represents the intercept?
e
Which effect does NOT deal with macroeconomics?
effect of Walmart's pricing policies on consumers
A PPF that is bowed out exhibits higher opportunity costs for producing greater quantities of either good. So a point in the middle of the curve would exhibit....
equal opportunity costs
Sixteen slices of pizza are distributed in a society of four people so that one person receives eight slices, the second person receives six slices, the third receives two, and the last receives no pizza. If no person wants to give up the pizza he or she has but they all agree that the fair outcome would be the one where each person gets four slices, then _____ could be improved at the expense of _____.
equity; Pareto efficiency
1. Evaluate the statement. "Economics is everything to do with money."
false. Economics is the study of decision-making given scarcity.
The process of adding the number of units of the product purchased or supplied at each price to determine market demand or supply is:
horizontal summation.
2. The production possibilities frontier (PPF) shows:
how much an economy can produce when using all of its inputs efficiently.
In which of the three basic questions facing any society does technology play the greatest role?
how to produce question.
A country operating outside of the production possibilities frontier is operating
impossibly because a country cannot operate outside the production possibilities frontier
An economy exhibits production efficiency if
it produces goods at the lowest possible cost.
Resources are
limited, but wants are unlimited
Sam lives in a state that changes to Daylight Savings Time. Every time Sam has to change the clocks in his house, he realizes how many things have clocks built into them. Which of the following key ideas of economics can explain why clocks are so prevalent?
marginal analysis
A theory composed of a number of assumptions and facts boiled down to their basic relevant elements is called a:
model
A change in price that increases the quantity demanded of a good will cause a:
movement downward along the demand curve.
When you get a pay raise, you are likely to buy more clothes. To you, clothes are an example of a(n):
normal good.
A question whose answer is based on what should or should not take place is a _____ question.
normative
A change in supply occurs when:
one or more of the determinants of supply change.
Ceteris paribus means
other things being equal.
During World War II, the production of synthetic rubber increased dramatically in response to high natural rubber prices and the unstable supply of natural rubber. The new substitute allowed industries that used rubber, such as the tire industry, to achieve what type of efficiency?
production efficiency
When goods are produced at the lowest possible cost, an economy is said to have achieved:
production efficiency.
The market equilibrium price exists when:
quantity supplied and quantity demanded are equal.
Economics is BEST defined as the study of how:
resources are apportioned to satisfy human wants.
If a graph between hot chocolate sales and temperature is downward sloping, then sales of hot chocolate
rise as temperature falls.
An increase in technology
shifts the production possibilities frontier curve outward
If a decrease in the price of one good causes a decrease in the demand for another, the two goods are called _____ goods.
substitute
If a public offering of new stock is initially priced too high relative to market demand, the result would be a:
surplus of shares, causing prices to fall.
Economists use graphs because
they represent relationships between variables.
Alex goes to the store to buy snacks. While he's there, he remembers he also has run out of deodorant. When Alex gets to the cashier, he finds that he's forgotten his wallet and has only $5 in cash to spend. Alex has to choose which items to buy. Which of the following key ideas of economics does this illustrate?
tradeoffs
Bolivia has about 50% of the world's reserves of lithium. It is also a major producer of zinc. Suppose that Bolivia produced only those two goods and that its linear production possibilities frontier had the following end points: 20,000 tons of lithium and zero zinc or 10,000 tons of zinc and no lithium. A combination of 12,000 tons of lithium and 5,000 tons of zinc would be:
unattainable.
Because of scarcity:
we face tradeoffs in nearly every choice we make.
Which is the best definition of efficiency?
when nobody can be made better off without making someone worse off
Which of these is an example of a microeconomic topic?
why a movie theater charges different prices to different groups of people