Micro Unit 1
CH 1: A rational decision maker takes an action only if the ?
Marginal Benefit is greater than the Marginal cost.
CH 1: Which of the following is the best statement about markets?
Markets are usually a good way to organize economic activity.
CH3:Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that the opportunity cost of 1 chair for
Mike is 1/5 table and 1/3 table for Sandy
CH2:The country of Econoland produces two goods, textbooks and widgets. Last year it produced 200 textbooks and 500 widgets. This year it produced 250 textbooks and 600 widgets. Given no other information, which of the following could NOT explain the change?
None of the above are correct
CH6:Refer to Figure 6-12. The equilibrium price before the tax is
P1
CH4:What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell?
Price will fall and the effect on quantity is ambiguous.
CH3:Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that
Sandy has a comparative advantage in tables
CH 1: Economics deals primarily with the concept of
Scarcity
CH5:Last year, Sheila bought 6 pairs of shoes when her income was $40,000. This year, her income is $50,000 and she purchased 10 pairs of shoes. All else constant, it is obvious that Sheila
considers shoes to be a normal good
CH3:With trade a
country's consumption possibilities frontier can be outside its production possibilities frontier
CH6:Suppose that a tax is placed on books. If the buyer pays the majority of the tax we know that the
demand curve is more inelastic than the supply curve
CH2:When a production possibilities frontier shifts outward, it is demonstrating the concept of
economic growth
CH2:Macroeconomics is the study of
economy-wide phenomena
CH5:When quantity demanded responds substantially to changes in price, demand is said to be
elastic
CH5:Refer to Figure 5-11. When a new, more productive strawberry was developed which caused supply to increase, strawberry farmers' total revenue
fell from $6000 to $5250 since demand is inelastic
CH3:Imports are
goods produced abroad and sold domestically
CH5:Demand is elastic if elasticity is
greater than 1
CH2:Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 50 units of food and 30 machines. This year it experienced a technological advance in its machine-making industry. As a result, this year the society wants to produce 55 units of food and 30 machines. Which of the following statements is true?
he technological advance reduced the amount of resources needed to produce 30 machines. These resources could be used to produce more food.
CH2: In the markets for factors of production,
households provide firms with labor, land, and capital
CH5:Refer to Figure 5-6. The price elasticity of this demand curve between $10 and $15 is
inelastic
CH6:A price ceiling
is a legal maximum on the price at which a good can be sold
CH2:Refer to Figure 2-2. Money spent by households
is earned from the sale of factors of production
CH4:If a seller is supplying a product that is slightly different from that of many close competitors and is able to charge a different price than competitors, then the seller
is participating in a monopolistically competitive market
CH4:Alyssa rents 5 movies per month when the price is $3.00 each and 7 movies per month when the price is $2.50. Alyssa has demonstrated the
law of demand
CH6:The equilibrium wages of teenagers tend to be
low because teenagers are among the least skilled and least experienced workers
CH6:Under rent control, tenants can expect
lower rent and lower quality housing
CH6:Researchers have found that a 10 percent increase in the minimum wage will
lower teen employment by 1 to 3 percent
CH 1: A donut shop sells fresh baked donuts from 5 a.m. until 3 p.m. every day but Sunday. The cost of making and selling a dozen glazed donuts is $1.00. Since this shop does not sell day-old donuts the next day, what should the manager do if he still has 10 dozen left at 2:30 p.m.?
lower the price of the remaining donuts even if the price falls below $1.00
CH6:Refer to Figure 6-11. In which market will the tax be most equally divided between the buyer and the seller?
market (c)
CH4:Which of the following is NOT a characteristic of a perfectly competitive market?
market power
CH5:Assume that a 4 percent increase in income results in a 6 percent decrease in the quantity demanded of a good. The income elasticity of demand for the good is
negative and therefore the good is an inferior good
CH2: Refer to Figure 2-8.. If this economy puts all of its resources into the production of bathtubs it could produce
no barrels and 16 bathtubs
CH2:The point where both x and y are zero is known as the
origin
CH5:Chocolate Chip Cookie Dough ice cream would tend to have very elastic demand because
other flavors of ice cream are almost perfect substitutes
CH6:Refer to Figure 6-1. A binding price ceiling is shown in
panel (b)
CH 1: When the government redistributes income from the rich to the poor?
people work less and produce fewer goods and services
CH5:If the quantity supplied is the same regardless of price, then the supply curve would be
perfectly inelastic
CH5:Which of the following is NOT a determinant of the price elasticity of demand for a product?
price
CH4:Buyers and sellers who have no influence on market price are referred to as
price takers
CH4:Suppose that the American Medical Association announces that men who shave their heads are less likely to die of heart failure. We could expect the current demand for
razors to increase
CH6:The tax incidence is equivalent
regardless of whether the tax is levied on buyers or sellers
CH2:In the early 19th century, the Russian government sent doctors to southern Russian villages to provide assistance during a cholera epidemic. The villagers noticed that wherever doctors appeared, people died. Therefore, many doctors were chased away from villages, and some were even killed. This reaction to the correlation between doctors and deaths is most likely a problem of
reverse causality
CH5:Refer to Figure 5-12. Which supply curve is perfectly inelastic?
s1
CH2:The y-coordinate is the
second number of an ordered pair and represents the point's vertical location
CH5:If sellers respond substantially to changes in price, then
sellers are considered to be relatively price sensitive
CH5:Suppose that you are in charge of pricing at a local sandwich shop. The business needs to increase revenue and your job is on the line. If the demand for sandwiches is elastic you
should decrease the price of sandwiches
CH6:When a tax is placed on the sellers of a product the
size of the market is reduced
CH 1: In a market economy decisions are guided by individual self-interest. Hence, there is?
still the ability to achieve desirable economic well-being for society as a whole
CH4:In a free market, who determines how much of a good will be sold and the price at which it is sold?
suppliers and demanders together
CH5:If sellers do not respond at all to a change in price
supply must be perfectly inelastic
CH5:Given the market for illegal drugs, if the government attempts to reduce the flow of drugs into the United States,
supply would fall and prices would rise
CH4:Refer to Figure 4-8. If price in this market is currently $14, there would be a
surplus of 40 units and price would tend to fall
CH4:Suppose roses are currently selling for $40.00 per dozen. The equilibrium price of roses is $30.00 per dozen. We would expect a
surplus to exist and the market price of roses to decrease
CH4:When it comes to people's tastes, economists generally believe that
tastes are based on historical and psychological forces
CH3:Tariffs are
taxes placed on imported products
CH2:Which of the following would be considered a topic of study in macroeconomics?
the effect of an increase in the price of imported oil on the U.S. inflation rate
CH2:In the simple circular-flow diagram, markets consist of
the market for goods and services and the market for factors of production
CH6:Water shortages can be most efficiently eliminated even in times of drought if
the market is allowed to adjust freely
CH3:A production possibilities frontier will be linear and not bowed out if
the tradeoff between the two goods is always at a constant rate
CH 1: The opportunity cost of going to college is ?
the value of the best opportunity a student gives up to attend college
CH4:If there is a shortage of farm laborers, we would expect
the wages of farm laborers to increase
CH 1: Taxes adversely affect the allocation of resources in society because ?
they distort prices and thus the decisions of households and firms
CH5:When quantity moves proportionally the same amount as price, demand is
unit elastic and the price elasticity of demand is 1
CH5:Refer to Figure 5-1. The point on the demand curve labeled B represents the
unit elastic section of the demand curve
CH6:If a tax is levied on the seller of a product the demand curve
will not change
CH4:You love peanut butter. You hear on the news that 50 % of the peanut crop in the South has been wiped out, which will cause the price to double by the end of the year. As a result,
your demand for peanut butter increases today
CH 1: In the United States, higher income tax rates on rich people could be justified on the basis of ?
Equity for society
CH5:An inelastic demand means that
consumers hardly respond to a change in price
CH6:Binding price ceilings in a market cause quantity demanded to be
greater than quantity supplied
CH5:If the cross-price elasticity of demand is 1.25, then the two goods would be
substitutes
CH4:A monopoly is a market _
with one seller
CH3:Refer to Table 3-3. The opportunity cost of 1 birdhouse for Montana is
1/3 basket
CH3:Refer to Table 3-4. The opportunity cost of 1 car for the United States is
1/4 airplane
CH6:Refer to Figure 6-9. The amount of the tax imposed in this market is
10
CH2:Refer to Table 2-1. What is the opportunity cost to Toyland of increasing the production of dolls from 200 to 300?
150 fire trucks
CH6:Refer to Figure 6-13. The equilibrium price before the tax is
16
CH6:Refer to Figure 6-13. The per unit burden of the tax on the sellers is
16
CH6:Refer to Figure 6-9. The price buyers will pay after the tax is imposed is
18
CH6:Refer to Figure 6-8. The amount of the tax that buyers would pay would be
2
CH3:Refer to Figure 3-4. The opportunity cost of 1 loaf of bread for Barney is
2 pies
CH5:Refer to Figure 5-2. The elasticity of demand from point A to point B, using the midpoint method would be
2.5
CH3:Refer to Table 3-3. The opportunity cost of 1 basket for Missouri is
3/4 birdhouse
CH4:Refer to Figure 4-8. If price in this market is currently $8, quantity supplied would be
40 and quantity demanded would be 60
CH4:Refer to Figure 4-9. If price is $15, quantity supplied would be
400
CH6:Refer to Figure 6-10. The equilibrium price in the market before the tax is imposed
5
CH6:Refer to Figure 6-8. The price buyers will pay after the tax is imposed is
8
CH4:Refer to Figure 4-10. Which of the four graphs represents the market for pizza delivery in a college town in September?
A
CH2:Which of the following statements is true? Different economic models employ different sets of assumptions. Good economic models should attempt to mimic reality as closely as possible. All economic models are created using the same set of basic assumptions. Economic models, to be accepted, must be tested by conducting experiments.
A:Different economic models employ different sets of assumptions.
CH5:Alice says that she would buy one banana split a day regardless of the price. If she is telling the truth,
Alice's demand for banana splits is perfectly inelastic
CH2:Figure 2.1 Which arrow shows the flow of the factors of production?
C
CH4:Beef is a normal good. You observe that both the equilibrium price and quantity of beef has fallen over time. Which of the following would be most consistent with this observation?
Consumer tastes have changed so as to prefer beef less than before.
CH2:The nation's antitrust laws are enforced by the
Department of Justice and the Federal Trade Commission
CH3:Which of the following would NOT occur if each person specializes in the good for which they have a comparative advantage?
Each person's production possibilities frontier will shift outward.
CH 1: An example of a monopoly would be?
Electric company in Nowhere, Arkansas.
CH4:Suppose that demand increases AND supply decreases. What would happen in the market for the good?
Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
CH 1: The invisible hand's ability to coordinate the decisions of the firms and households in the economy can be hindered by ?
Government actions that distort price
CH3:Assume that Greece has a comparative advantage in fish and Germany has a comparative advantage in cars. If these two countries specialize and trade according to their comparative advantage, which of the following would NOT be true?
Greece will benefit from trade more than Germany.
CH4:Which of the following would be most likely to increase the price of a new house?
Higher wages for carpenters, higher wood prices, increases in consumer incomes, higher apartment rents, increases in population and expectations of higher house prices in the future.
CH3:Refer to Table 3-4. The opportunity cost of 1 airplane for the United States is
4 cars
CH6:Refer to Figure 6-8. The price sellers receive after the tax is imposed is
5
CH2:Refer to Figure 2-6. The movement from point C to point D was most likely caused by
an increase in unemployment
CH4:If the demand for a product increases, we would expect equilibrium price
and equilibrium quantity to both increase
CH2:The foundation stones from which economic models are built are
assumptions
CH3:Refer to Table 3-3. If Montana and Missouri trade based on the principle of comparative advantage, Montana will export
birdhouses and Missouri will export baskets.
CH3:Refer to Table 3-2. Helen has an absolute advantage in
both goods and Carolyn has an absolute advantage in neither good
CH5:The price elasticity of demand measures how responsive
buyers are to a change in price
CH3:Refer to Table 3-4. The United States and Japan could benefit by the United States specializing in
cars and Japan specializing in airplanes
CH6:A newly imposed minimum wage set above the equilibrium wage in a labor market will
cause some workers to get a raise and some workers to lose their job
CH3:Refer to Table 3-5. If England and Spain trade based on the principle of comparative advantage, Spain will export which product to England?
cheese
CH5:The cross-price elasticity of demand can tell us whether goods are
complements or substitutes
CH 1: Which of the following is most likely to generate an externality?
Taxes that are collected to pay for public schools. (GOV ONLY)
CH5:Suppose that when the price of corn is $2 per bushel, farmers can sell 10 million bushels. When the price of corn is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true?
The demand for corn is price inelastic, and so an increase in the price of corn will increase the income of corn farmers.
CH4:Suppose that the incomes of buyers in a particular market for a normal good decline and there is also a reduction in input prices. What would we expect to occur in this market?
The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.
CH 1: After much consideration, you have chosen Cancun over Ft. Lauderdale for your Spring Break trip this year. For this decision to change, which of the following must occur?
The marginal benefit of Ft. Lauderdale must increase. (Marg. Benefit always must be greater that Marg. Cost to change answer.)
CH 1: Which is the most accurate statement about trade?
Trade can make every nation better off.
CH 1: In a market economy, prices reflect the?
Value of a good to society and cost to society of making the good
CH6:Rent control is
a common example of a price ceiling
CH6:A binding price ceiling in the computer market will cause
a shortage of computers
CH2: A model is
a simplification of real life
CH6:Refer to Figure 6-3. In panel (b), at the actual price there will be
a surplus of wheat
CH4:If a surplus exists in a market we know that the actual price is
above equilibrium price and quantity supplied is greater than quantity demanded
CH3:Refer to Table 3-4. If the United States and Japan trade based on the principle of comparative advantage, Japan will export what product to the United States?
airplanes
CH3:Trade
allows a person to consume at a point outside his production possibilities frontier
CH5:When demand is elastic in the current price range, _
an increase in price would decrease total revenue because the decrease in quantity demanded is greater than the increase in price