Micro exam 1 review

2) The fact that wants cannot be fully satisfied with available resources reflects the definition of A) scarcity. B) the big tradeoff. C) the what tradeoff. D) for whom to produce.

A

21) If a decrease in the price of gasoline increases the demand for large cars, then A) gasoline and large cars are complements in consumption. B) large cars are an inferior good. C) gasoline is an inferior good. D) gasoline and large cars are substitutes in consumption.

A

22) The price of an apple increases and people buy more pears. You infer that apples and pears are ________. A) substitutes B) inferior goods C) normal goods D) complements

A

27) Which of the following shifts the supply curve rightward? A) a decrease in the price of a factor of production used to produce the good B) an increase in the population C) a decrease in the price of the good D) a positive change in preferences for the good

A

29) Which of the following is the best way to describe equilibrium in a market? At equilibrium, the A) quantity supplied equals the quantity demanded. B) supply and demand curves can never shift again. C) price is the lowest possible. D) price is usually affordable to most people.

A

3) In every economic system, choices must be made because resources are ________ and our wants are ________. A) limited; unlimited B) unlimited; unlimited C) unlimited; limited D) limited; limited

A

40) A local pizzeria raised its price from $9 to $11 for each pizza and the sales of its pizza decreased from 150 to 100 per day. What is the price elasticity of demand in this case? A) 2 B) -2 C) -1/2 D) 1/2

A

43) Because Product X has a large positive income elasticity, it is likely that the product A) is a luxury. B) is a necessity. C) has few good complements. D) has many good substitutes.

A

10) Which of the following is NOT illustrated by a production possibilities frontier? A) scarcity B) who gets the goods C) opportunity cost D) necessity for choice

B

19) The law of demand implies that demand curves A) shift rightward whenever the price rises. B) slope down. C) shift leftward whenever the price rises. D) slope up.

B

23) When people's incomes increase, the demand for a good increases. The good is called A) a complement. B) a normal good. C) an inferior good. D) a substitute.

B

24) Gruel is an inferior good. Hence, an increase in people's incomes A) shifts the supply curve of gruel leftward. B) shifts the demand curve for gruel leftward. C) shifts the demand curve for gruel rightward. D) decreases the quantity of gruel supplied.

B

28) Which of the following leads to a movement along the supply curve for shredded wheat but does not shift the supply curve for shredded wheat? A) an increase in the cost of machinery used to shred wheat B) a fall in the price of shredded wheat C) perfect weather conditions that resulted in a large wheat crop D) a decrease in the number of shredded wheat producers

B

36) If the demand curve for bikes shifts leftward and the supply curve for bikes shifts rightward, the equilibrium A) price of bikes definitely increases. B) price of bikes definitely decreases. C) quantity of bikes definitely decreases. D) quantity of bikes definitely increases.

B

38) The price elasticity of demand is calculated as the absolute value of the A) change in price divided by the change in quantity demanded. B) percentage change in quantity demanded divided by the percentage change in price. C) change in quantity demanded divided by the change in price. D) percentage change in price divided by the percentage change in quantity demanded.

B

44) The elasticity of supply measures the sensitivity of A) supply to changes in costs. B) quantity supplied to a change in price. C) quantity supplied to quantity demanded. D) price to changes in supply.

B

6) Positive economic statements A) prescribe what should be. B) can be tested against the facts. C) are related only to microeconomics. D) cannot be tested against the facts.

B

9) Markets are best defined as A) hypothetical constructs used to analyze how people form their tastes and preferences. B) arrangements where buyers and sellers get together to buy and sell. C) places where people can inspect goods and services carefully. D) specific geographic locations where people get together to buy and sell.

B

1) The analysis of the behavior of individual decision-making units is the definition of A) normative economics. B) positive economics. C) microeconomics. D) macroeconomics.

C

16) Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. If Tom and Jerry trade A) Jerry will benefit and Tom will not. B) Tom will benefit and Jerry will not. C) both will benefit. D) none of them will benefit.

C

20) The "law of demand" is illustrated by a A) rightward shift of the demand curve. B) leftward shift of the demand curve. C) movement along the demand curve. D) Both answers A and B are correct.

C

4) Opportunity cost means the A) accounting cost minus the marginal benefit. B) monetary costs of an activity. C) highest-valued alternative forgone. D) accounting cost minus the marginal cost.

C

8) The statement that "peach ice cream is better than chocolate ice cream" A) is a positive statement. B) provides a basis for predicting which type of ice cream will exhibit the most sales. C) is a normative statement. D) can be tested using the scientific approach.

C

14) Suppose that in an hour Joe can prepare 10 sandwiches or 5 pizzas. The opportunity cost of Joe producing one sandwich is A) 5 pizzas. B) 2 pizzas. C) 1 pizza. D) 1/2 pizza.

D

15) By specialization and trade, two individuals can A) shift their individual production possibilities frontiers outward. B) increase their absolute advantage. C) increase their comparative advantage. D) consume at a point beyond their individual production possibilities frontiers.

D

18) Each point on the demand curve reflects A) the highest price sellers will accept for all units they are producing. B) the lowest-cost technology available to produce a good. C) all the wants of a given household. D) the highest price consumers are willing and able to pay for that particular unit of a good.

D

25) Which of the following explains why supply curves slope upward? A) prices and income B) substitutes in production and complements in production C) resources and technology D) increasing marginal cost

D

30) The demand and supply curves for OU tents in Norman, Oklahoma , are given by the following equations: Q = 600- P Q = 200 + P Where P is measured in dollars and Q is the number of shirts sold per year. The equilibrium quantity is _________and the equilibrium price is___________. A) 200,400 B) 0,0 C) 40, 20 D) 400,200

D

37) If the demand for bathing suits and supply of bathing suits both decrease, then definitely the equilibrium A) price will increase. B) price will decrease. C) quantity will increase. D) quantity will decrease.

D

39) The price elasticity of demand for purses is measured in what units? A) dollars per purse B) purses C) dollars D) The price elasticity of demand is a unitless measure.

D

5) Ted can study for his economics exam or go to a concert. He decides to study for his economics exam instead of going to the concert. The concert he will miss is Ted's ________ of studying for the exam. A) discretionary cost B) explicit cost C) implicit cost D) opportunity cost

D

7) A normative statement concerns A) what is correct. B) what is incorrect. C) what is provable. D) a value judgment.

D