Microeconomics Exam 1

Which statement is positive and which is normative? 1. The federal minimum wage in 2016 was $8 2. The minimum wage should be high enough that families will not live in poverty.

1. is positive 2. is normative

What 5 things shift the supply curve?

1. Input prices 2. Technology 3. Number of producers 4. Future expectations 5. Prices of related goods/services

What is a complimentary good?

Goods like PB and jelly that go together. A decrease in the price of one good will lead to an increase in the demand for the other good.

A resource is anything that: A. Can be used in production B. You pay for C. Is in scarce supply D. Can be consumed

A. Can be used in production

When markets fail: A. Government intervention may help B. The market realizes the maximum amount of possible gains from trade given the available resources C. There may still be an efficient allocation of those resources D. No goods or services are being produced

A. Government intervention may help

People who live in large cities decide to spend less in their day-to-day activities. This will most likely lead to: A. Less income for other people B. More income for other people C. No impact on other people D. Inflation

A. Less income for other people

A simplified representation that is used to study a real situation is called a(n): A. Model B. Production Possibility Frontier C. Assumption D. Trade-off

A. Model

Gains from trade arise because of: A. Specialization in production B. Specialization in consumption C. Marginal analysis D. Individual choice

A. Specialization in production

Marla will make $10 by tutoring for an additional hour, but she will lose an hour of studying for her economics test. Marla decides to study rather than tutor. Marla's choice indicates that she: A. Values an additional hour of studying more than the $10 she would earn tutoring B. Values an hour of studying less than the $10 she would earn tutoring C. Does not understand that there is no value in studying D. Doesn't need the money

A. Values an additional hour of studying more than the $10 she would earn tutoring

Scarcity in economics means that: A. We often do not have sufficient resources to achieve our objectives B. The wants of people are limited C. There must be poor people in rich countries D. Shortages exist in nearly all markets

A. We often do not have sufficient resources to achieve our objectives

What is the law of demand?

As price increases, the quantity demand decreases

Suppose small business owners decide to spend less. How will this affect an economy? A) It will have no impact, since this group makes up a small portion of any economy. B) It will decrease the level of income of other people, since one person's spending becomes someone else's income. C) It will cause prices for many goods to increase. D) It will increase the level of income in the economy, since other groups will spend more.

B) It will decrease the level of income of other people, since one person's spending becomes someone else's income.

A beneficial technological change enhances the production of cranberries. At the same time, scientists discover the health benefits of cranberries. This will result in: A. An increase in equilibrium price and demand B. An increase in equilibrium price and an uncertain effect on the equilibrium demand C. A decrease in both equilibrium price and demand D. A decrease in equilibrium price and an uncertain effect on the equilibrium demand

B. An increase in equilibrium price and an uncertain effect on the equilibrium demand

The country that has the lowest opportunity cost of producing a good is said to have a(n): A. Absolute advantage B. Comparative advantage C. PPF D. Increasing opportunity cost

B. Comparative advantage

If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has a(n): A. Zero slope B. Constant negatie slope C. Increasing negative slope D. Decreasing negative slope

B. Constant negatie slope

The _____ apples will decrease when apple prices rise. A. Demand for B. Quantity demanded of C. Supply of D. Equilibrium of

B. Quantity demanded of

We have to make choices because: A. We have unlimited income B. Resources are scarce C. Resources are infinite D. With good planning trade-offs can be avoided

B. Resources are scarce

You can spend $100 on either a new economics textbook or a new tablet. If you choose to buy the new economics textbook, the opportunity cost is: A. $100 B. Your enjoyment of the tablet C. Both the $100 and the enjoyment of the tablet D. It's impossible to determine

B. Your enjoyment of the tablet

The circular flow diagram illustrates how households ___ goods and services and ____ factors of production.

Buy and sell

A choice made _____ is a choice whether to do a little more or a little less of something. A. At the front end B. At the beginning C. At the margin D. Ceteris Paribus

C. At the margin

You are being paid $7.25 an hour to work at a restaurant. In the circular flow diagram this is an example of: A. Businesses selling goods and services in the production market B. Households buying goods and services in the production market C. Businesses buying a resource in the factor market D. Households buying a resource in the factor market.

C. Businesses buying a resource in the factor market

Which decision is the BEST example of making a choice at the margin? A. Buying a new car B. Quitting your job C. Drinking one more cup of coffee D. Attending college

C. Drinking one more cup of coffee

Resources are being used efficiently when: A. Scarcity is no longer an issue B. They are also used equitably C. Every opportunity to make people better off without making others worse off has been seized. D. Gains from trade are still available

C. Every opportunity to make people better off without making others worse off has been seized.

A high school grad who gets a college degree is adding to the economy's stock of: A. Labor B. Capital C. Human Capital D. Financial Capital

C. Human Capital

A central and fundamental theme in economics is: A. Wants are limited B. The US is rich and we are simply unaware of that C. People have unlimited wants, but limited means to satisfy them D. Resources are unlimited

C. People have unlimited wants, but limited means to satisfy them

If a market is in disequilibrium: A. It will continue unless there is government intervention B. No individual will be better off doing something different C. There are opportunities for some people to make themselves better off

C. There are opportunities for some people to make themselves better off

If country A gives up 3 cars for each ton of coffee while country B gives up 7 cars for each ton of coffee, country A has the comparative advantage in ___ and should produce ___

Coffee and coffee

The basis of the circular flow diagram is that: A. The best models avoid making assumptions B. Goods and services flow in a circle in the factor market C. Resources are sold along with goods and services in the resource market D. The flow of money into each market or sector is equal to the flow of money coming out of that market or sector.

D. The flow of money into each market or sector is equal to the flow of money coming out of that market or sector.

The demand curve for monthly subscriptions to HBO has shifted to the right, what could have caused this? A. A fall in the price of HBO subscriptions B. An increase in the price of HBO subscriptions C. An increase in the supply of HBO subscriptions D. An increase in the incomes of buyers

D. An increase in the incomes of buyers

The market for tacos, a normal good, you observe the equilibrium price and quantity have increased. This can only be caused by: A. An increase in the price of beef B. An increase in taco shop workers wages C. Fewer taco shops D. An increase in the incomes of people who eat tacos

D. An increase in the incomes of people who eat tacos

In the circular flow diagram, the factor market is where: A. Households buy factors of production B. Households buy goods and services C. Businesses buy goods and services D. Businesses buy factors of production

D. Businesses buy factors of production

Economists believe that a country should specialize in the production of a good if the: A. PPF is further from the origin than that of any other country B. PPF is closer to the origin than that of any other country C. Country can produce the product using more resources than another country D. Country can produce the product while forgoing fewer alternative products than any other country

D. Country can produce the product while forgoing fewer alternative products than any other country

A dozen friends get together to celebrate a birthday and eat a cake that is cut into 12 pieces, each person gets one piece. This allocation of cake is: A. Efficient but not equitable B. Equitable but not efficient C. Efficient and Equitable D. Equitable

D. Equitable

In the circular flow diagram, an organization that produces goods and services for sale is a: A. Market B. Household C. Factor D. Firm

D. Firm

You are planning to study 8 hours this week for your econ final and are considering studying a 9th hour, you should: A. Compare the benefits of studying one more hour with the cost of one less hour of sleep B. Compare the benefits of studying one more hour with the cost of one less hour of studying for your calc test C. Compare the benefits of studying one more hour with the cost of one less hour of work at your job D. Make your decision based on the cost of the next best alternative use of your time compared to the benefit of one more hour to study

D. Make your decision based on the cost of the next best alternative use of your time compared to the benefit of one more hour to study

Which factor is NOT an example of a resource? A. Land B. Labor C. Capital D. Production

D. Production

The opportunity cost of something is: A. Larger during periods of rising prices B. Equal to the monetary cost C. Smaller during periods of falling prices D. What you give up to acquire it

D. What you give up to acquire it

Free trade between countries: A. Should always be based on absolute advantage B. Always involves wealthy countries exploiting poor countries C. Will shift the domestic production possibilities frontier to the right D. Will allow for greater levels of consumption than without trade

D. Will allow for greater levels of consumption than without trade

After graduating from college, you have increased your income and decided to eat less ramen and enjoy more steaks. For you ramen is a _____ good.

Inferior good

What is a substitute good?

Interchangeable goods, if there is a decrease in the price for good A, it will lead to a decrease in demand for good B

The market for corn in Kansas is considered to be competitive. This means there are _____ buyers and _____ sellers of corn in Kansas.

Many buyers and many sellers

If person A and B spend all night making computers, person A can make 5 and person B can make 10. If they spend all night making bracelets person A can make 4 and person B can make 6. Person _____ has the absolute advantage in making _______.

Person B has the absolute advantage for both making computers and bracelets

What is a shortage?

When quantity demanded is greater than quantity supplied

What is a surplus?

When quantity supplied is greater than quantity demanded