Quiz: Unit 1 Practice Exam Economics

-a downsloping line that is bowed out from the origin.

The typical production possibilities curve is: -a downsloping line that is bowed out from the origin. -a straight upsloping line. -an upsloping line that is bowed out from the origin. -a downsloping line that is bowed in toward the origin.

- do all of these

In a market economy a significant change in consumers' desire for product X will: - Cause some industries to expand and others to contract -cause a reallocation of scarce resources -alter the profits or losses received by suppliers of product X. -do all of these

-price floor

In this market, economists would call a government-set minimum price of $50 a: -price floor -fair price -equilibrium price -price ceiling

-enterprises resisted innovation in fear that their production targets would be raised

Innovation lagged in the centrally planned economies because: -there was too much domestic business competition -enterprises resisted innovation in fear that their production targets would be raised -there was too much competition from foreign firms -exports had to equal imports for the plan to work

-consumer sovereignty

(Consider This) In 2000, McDonald's introduced its McSalad Shaker, which failed to catch on with the public and was subsequently dropped from the menu. This failure illustrates the idea of: -technological change -consumer sovereignty -downsloping demand -specialization

-creates economic gains for both buyers and sellers

(Consider This) Ticket scalping: -imposes losses on sellers but creates gains for buyers -creates economic gains for both buyers and sellers -imposes losses on buyers but creates gains for sellers -imposes economic losses on both buyers and sellers

-price of outboard motors

A decrease in the demand for recreational fishing boats might be caused by an increase in the: -price of sailing boats -price of outboard motors -income of sport fishers -size and number of fish alive

-factors of production

Economic resources are also called: -factors of production -free gifts of nature -units of money capital -consumption goods

-it promotes specialization by overcoming the problems with barter.

The use of money contributes to economic efficiency because: -it promotes specialization by overcoming the problems with barter. -governmental direction of the production and distribution of output can be avoided by using money. -it is necessary for the creation of capital goods. -roundabout production could not occur without the availability of money.

-moral hazard problem

Upon buying a car with airbags, Indy begins to drive recklessly. This is an example of the: -principal-agent problem -free-rider problem -moral hazard problem -adverse selection problem

-if the amount producers want to sell is equal to the amount consumers want to buy.

A market is in equilibrium: -whenever the demand curve is downsloping and the supply curve is upsloping. -at all prices above that shown by the intersection of the supply and demand curves. -provided there is no surplus of the product. -if the amount producers want to sell is equal to the amount consumers want to buy.

-resources are not generally equally efficient in producing every good.

A nation's production possibilities curve is bowed out from the origin because: -the originator of the idea drew it this way and modern economists follow this convention. - resources are scarce -wants are virtually unlimited -resources are not generally equally efficient in producing every good.

-is based on value judgments.

A normative statement is one that: -applies only to microeconomics. -applies only to macroeconomics. -is based on value judgments. -is based on the law of averages

-she has served society's interests by providing a desired good or service.

According to the concept of the "invisible hand," if Susie opens and operates a profitable childcare center, then: -she has served society's interests by providing a desired good or service. -this demonstrates that consumer sovereignty is not present in this market. -government should regulate the business to ensure quality. -the profit Susie earns indicates that she is overcharging for her services.

-result in a product shortage

An effective ceiling price will: -result in a product shortage -result in a product surplus -clear the market -induce new firms to enter the industry

-maximum willingness to pay exceeds minimum acceptable price.

An efficiency loss (or deadweight loss) declines in size when a unit of output is produced for which: -producer surplus exceeds consumer surplus. -consumer surplus exceeds producer surplus. -maximum willingness to pay exceeds minimum acceptable price. -marginal cost exceeds marginal benefit.

-shift the supply curve to the right

An improvement in production technology will: -shift the supply curve to the right -increase the equilibrium price -shift the supply curve to the left -shift the demand curve to the left

-Who owns the factors of production and the methods used to coordinate economic activity.

Economic systems differ according to which two main characteristics? -How goods are produced and who gets them. -The political system in place and the degree of scarcity facing the economy. -The technology used in production and the quantity and quality of natural resources. -Who owns the factors of production and the methods used to coordinate economic activity.

- Cuba and North Korea

Examples of command economies are: -Sweden and Norway -Mexico and Braizl -the United States and Japan -Cuba and North Korea

Q2

Refer to the diagram for athletic shoes. The optimal output of shoes is: -Q3 -greater than Q3 -Q1 -Q2

-benefit of abatement equals its marginal cost of abatement.

The socially optimal amount of pollution abatement occurs where society's marginal: -benefit of abatement is zero. -cost of abatement is at its maximum. -benefit of abatement equals its marginal cost of abatement. -benefit of abatement exceeds its marginal cost of abatement by the greatest amount.

-a consumer surplus of $10 and Tony experiences a producer surplus of $190.

Amanda buys a ruby for $330 for which she was willing to pay $340. The minimum acceptable price to the seller, Tony, was $140. Amanda experiences: -a consumer surplus of $670 and Tony experiences a producer surplus of $200. -a producer surplus of $10 and Tony experiences a consumer surplus of $190. -a producer surplus of $200 and Tony experiences a consumer surplus of $10. -a consumer surplus of $10 and Tony experiences a producer surplus of $190.

-result in a surplus of wheat.

An effective price floor on wheat will: -result in a shortage of wheat. -result in a surplus of wheat. -force otherwise profitable farmers out of business. -clear the market for wheat.

-the horizontal sum of individual demand curves.

Graphically, the market demand curve is: -the vertical sum of individual demand curves -the horizontal sum of individual demand curves. -steeper than any individual demand curve that is part of it. -greater than the sum of the individual demand curves.

-the production possibilities curves of such nations have shifted inward.

Some agricultural sub-Saharan nations of Africa have overfarmed and overgrazed their land to the extent that significant portions of it have turned into desert. This suggests that: -the production possibilities curves of such nations have shifted outward -the production possibilities curves of such nations have shifted inward. -these nations are operating at some point outside of their production possibilities curves. -the production possibilities curves of such nations are more bowed out from the origin.

-results in greater total output

Specialization in production is important primarily because it: -allows society to have fewer capital goods -allows society to trade by barter -allows society to avoid the coincidence-of-wants problem. -results in greater total output

-the demand and supply curves don't reflect the full cost of producing a good or service

Supply-side market failures occur when: -government regulates production of a good or service -the demand and supply curves don't reflect the full cost of producing a good or service. -a good or service is not supplied because no one wants it -the demand and supply curve don't reflect consumers' full willingness to pay for a good or service

-suggest that the demand for Mustangs increased between 2007 and 2008.

Suppose that in 2007, Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. These statements: -constitute an exception to the law of demand in that they suggest an upsloping demand curve. -suggest that the demand for Mustangs decreased between 2007 and 2008. -suggest that the supply of Mustangs must have increased between 2007 and 2008. -suggest that the demand for Mustangs increased between 2007 and 2008.

-those willing and able to pay for them

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially: - those willing and able to pay for them - those who physically produced them -those who most need them -those who get utility from them

- minimize the cost per unit of output

The most efficient combination of resources in producing a given output is the combination that: -comes closest to using the same quantities of land, labor, capital, and entrepreneurial ability. -minimize the cost per unit of output -uses the smallest total quantity of all resources -conserves most on the use of labor

-each good is produced at a level where marginal benefits equal marginal costs.

The optimal point on a production possibilities curve is achieved where: -large amounts of capital goods are produced relative to consumer goods. -large amounts of consumer goods are produced relative to capital goods. -the smallest physical amounts of inputs are used to produce each good. -each good is produced at a level where marginal benefits equal marginal costs.

-A computer programmer

Which of the following is a labor resource? -A computer -A computer programmer -Silicon (sand) used to make computer chips -A piece of software used by a firm

- Government ownership of most property resources

Which of the following is not a typical characteristic of a market system? - Private property -Freedom of enterprise -Competition in product and resource markets - Government ownership of most property resources

-competition

Which of the following is not a typical characteristic of a market system? -specialization -competition -private property -self-interest

-Principle

Which of the following terms implies the greatest degree of confidence in an economic generalization? - Comparison -Principle -Hypothesis -Anomaly

-A technological advance that allows farmers to produce more output from given inputs.

Which of the following will shift the production possibilities curve to the right? -Which of the following will shift the production possibilities curve to the right? -An increase in the unemployment rate from 6 to 8 percent. -A technological advance that allows farmers to produce more output from given inputs. -A decline in the efficiency with which the present labor force is allocated.

increase equilibrium price and decrease equilibrium quantity.

With a downsloping demand curve and an upsloping supply curve for a product, placing an excise tax on this product will: -increase equilibrium price and decrease equilibrium quantity. -increase equilibrium price and quantity. -decrease equilibrium price and quantity. -decrease equilibrium price and increase equilibrium quantity.

-the total cost of producing a good exceeds the costs borne by the producer.

A negative externality or spillover cost occurs when: -the price of the good exceeds the marginal cost of producing it. -firms fail to achieve allocative efficiency. -the total cost of producing a good exceeds the costs borne by the producer. -firms fail to achieve productive efficiency.

-consumer preferences have changed in favor of A so that they now want to buy more at each possible price.

A shift to the right in the demand curve for product A can be most reasonably explained by saying that: -the price of A has declined and, as a result, consumers want to purchase more of it. -consumer incomes have declined, and consumers now want to buy less of A at each possible price. -consumer preferences have changed in favor of A so that they now want to buy more at each possible price. -the price of A has increased and, as a result, consumers want to purchase less of it.

-is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.

Consumer surplus: -the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price. -the difference between the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept. -is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price. -rises as equilibrium price rises.

-the decision to engage in one activity means forgoing some other activity

Opportunity cost exists because: -Most decisions do not involve sacrifices or trade-offs -the decision to engage in one activity means forgoing some other activity -households and businesses make rational decisions -wants are scarce relative to resources

-true

Professor Gullible agreed to cancel the final examination if students promised to study for it anyway. The concept of moral hazard would predict that it is unlikely that students will study for the exam. -true -false

-are nonrivalry and nonexcludability.

Public goods are those for which there: -are nonrivalry and nonexcludability. -are no externalities -is no free-rider problem -are rivalry and excludability

-individuals may make different choices because of different desired outcomes.

Purposeful behavior suggests that: -individuals may make different choices because of different desired outcomes. -everyone will make identical choices. -resource availability exceeds economic wants -an individula's economic goals cannot involve trade-offs.

-be adopted because it would lower production costs and increase economic profit.

Refer to the data. If a new production technique is developed that enables a firm to produce 20 units of output with 3 units of land, 3 of labor, 1 of capital, and 2 of entrepreneurial ability, this technique would: -not be adopted because, although it reduces production costs, it does not increase profit. -not be adopted because it entails higher production costs than other available techniques. -be adopted because it would lower production costs and increase economic profit. -be adopted, even though economic profits would be reduced slightly.

-quantity of wheat supplied to decline as a result of the subsequent price change.

Refer to the data. If price was initially $4 and free to fluctuate, we would expect the: -price of wheat to rise. -quantity supplied to continue to exceed the quantity demanded. -quantity of wheat demanded to fall as a result of the subsequent price change. -quantity of wheat supplied to decline as a result of the subsequent price change.

-4 units

Refer to the data. If this good were a private good instead of a public one, the total quantity demanded at a $3 market price would be: -2 units -6 units -4 units -3 units

-0F and 0C, respectively

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. If the initial demand and supply curves are D0 and S0, equilibrium price and quantity will be: -0E and 0B, respectively -0G and 0B, respectively -0F and 0A, respectively -0F and 0C, respectively

- price C

Refer to the diagram. A government-set price floor is best illustrated by: -quantity E -price B -price C -price A

-1/8 of a unit of capital goods.

Refer to the tables. If North Cantina is producing at production alternative B, the opportunity cost of the eleventh unit of consumer goods will be: -1/4 of a unit of capital goods. -10 units of capital goods. -1/8 of a unit of capital goods. -8 units of capital goods