Sample Test 1
22) When firms in an economy start producing more computers and fewer televisions, they are answering the ________ part of one of the two big economic questions.
A) "what"
32) The equilibrium price in the above figure is
A) $6.
12) Florida State University has just lowered the price of its season football tickets from $350.00 to $300.00. As a result, there was an increase in the number of season tickets purchased from 43,000 to 47,000. The price elasticity of demand for season tickets equals
A) 0.58.
42) A rise in the price of cabbage from $14 to $18 per bushel increases the quantity supplied from 4,000 to 6,000 bushels. The elasticity of supply is
A) 1.6.
30) In the figure above, an economy would grow fastest if it produces at point
A) A.
44) Which of the following is a normative statement?
A) Low rents are good because they make apartments more affordable.
28) In the U.S. economy, which of the following statements is TRUE? (see textbook page 3: "Fig. 1.1: What Three Countries Produce)
A) More services are produced than goods.
44) Supply is elastic if
A) a 1 percent change in price leads to a larger percentage change in quantity supplied.
50) In markets, people's decisions are coordinated by
A) adjustments in prices.
2) In the figure above, moving from production at point d to production at point a requires
A) decreasing the output of consumer goods in order to boost the output of capital goods.
12) Marginal benefit curves slope
A) downward, but not because of increasing opportunity cost.
34) Goods and services that can be produced by using commonly available resources that could be allocated to a wide variety of alternative tasks have a supply that is
A) elastic.
20) In the above figure, if 4000 bicycles are produced per month,
A) fewer bicycles should be produced to reach the allocatively efficient level of output.
26) Last year, Jack's income was $15,000 and he bought 50 bags of potato chips. This year his income is $18,000 and he buys 55 bags of potato chips. Therefore, Jack's
A) income elasticity of demand for potato chips is 0.52.
8) The above figure shows the demand curve for movie rentals from Redbox. If Redbox lowered its price from $4.00 to $3.50, then total revenue would ________ because demand is ________.
A) increase; elastic
18) The principle of decreasing marginal benefit means that as the quantity of a good consumed
A) increases, its marginal benefit decreases.
18) Which of the following best defines capital as a factor of production?
A) instruments, machines, and buildings used in production
10) In broad terms the difference between microeconomics and macroeconomics is that
A) microeconomics studies decisions of individual people and firms and macroeconomics studies the entire national economy.
20) The cross elasticity of demand is calculated as the percentage change in the
A) quantity demanded of one good divided by the percentage change in the price of another good
36) The above table shows the demand schedule and supply schedule for chocolate chip cookies. If the price is $4.00 per pound, there is a
A) shortage of 3 pounds of chocolate chip cookies.
38) If a 1 percent decrease in the price of a pound of oranges results in a smaller percentage decrease in the quantity supplied
A) supply is inelastic.
32) Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she is choosing at the margin when she compares
A) the extra revenue from selling a few additional printers to the extra costs of producing the printers.
28) Each point on a supply curve represents
A) the lowest price for which a supplier can profitably sell another unit.
40) You decide to take a vacation and the trip costs you $2,000. While you are on vacation, you do not go to work where you could have earned $750. In terms of dollars, the opportunity cost of the vacation is
B) $2,750.
20) Which of the following is consistent with the law of demand?
B) An increase in the price of a soda causes a decrease in the quantity of soda demanded.
46) Which of the following is a positive statement?
B) An increase in the price of pizza will lead fewer students to buy pizza.
38) Suppose Joe can prepare 10 sandwiches or 5 pizzas in an hour and Beth can produce 12 sandwiches or 9 pizzas. Which of the following is TRUE?
B) Beth should produce pizza because she has a lower opportunity cost of producing pizza than does Joe.
10) The above table shows production points on Sweet-Tooth Land's production possibilities frontier. Which of the following statements is TRUE?
B) Producing 0 chocolate bars and 100 cans of cola is both attainable and efficient.
26) Suppose a scientific breakthrough made free solar power available in unlimited quantities in the United States. The effect of this invention would be to move the
B) U.S. production possibilities frontier outward.
42) Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. Which of the following statements is TRUE?
B) Washington has an absolute advantage in the production of both pecans and pears.
12) A change in which of the following shifts the demand curve for hamburgers?
B) a fall in the price of french fries, a complement for hamburgers
10) Joe pays $8,000.00 in tuition. The 8000-dollar tuition Joe pays is an example of what economists call
B) a money price.
4) If the money price of hats rises and no other prices change, the I. relative price of a hat rises. II. opportunity cost of a hat rises.
B) both I and II
24) The tradeoff between current consumption and the production of capital goods also reflects a tradeoff between
B) current consumption and future consumption.
26) The above figure shows the market for oil. Because of the development of a new deep sea drilling technology the
B) demand curve does not shift, and the supply curve shifts from S1 to S2.
12) Macroeconomics is concerned with
B) economy-wide variables.
16) Human resources that perform the functions of organizing, managing, and assembling the other resources are called
B) entrepreneurship.
36) Country A can produce 1 cello by giving up the production of 5 guitars. Country B can produce 1 guitar by giving up the production of 4 cellos. In which good does country A have a comparative advantage?
B) guitars
4) A president of the United States promises to produce more defense goods without any decreases in the production of other goods. This promise can be valid
B) if the United States is producing at a point inside its production possibilities frontier.
48) An increase in the demand for computers and a decrease in the number of sellers of computers will definitely ________.
B) increase the price of a computer
18) Suppose Target decided to lower the price on all shirts as part of its Back to School promotion. The cross elasticity of demand between pants and shirts is negative. Lowering the price on shirts will ________ the demand for pants because shirts and pants are ________.
B) increase; complements
4) If the price elasticity is between 0 and 1, demand is
B) inelastic.
6) If University of Nebraska increased its season football ticket sales from 43,000 to 47,000 when it lowered price from $350.00 to $300.00, then its demand for season tickets must be ________ because total revenue ________ when the price was lowered.
B) inelastic; decreased
6) In every economic system, choices must be made because resources are ________ and our wants are ________.
B) limited; unlimited
2) People must make choices because
B) of scarcity.
8) The above table shows production points on Sweet-Tooth Land's production possibilities frontier. A movement from ________ represents the greatest opportunity cost of increasing cola production.
B) point B to point A
44) In the above figure, a change in quantity supplied with unchanged supply is represented by a movement from
B) point b to point a.
46) For consumers, goods A and B are complementary goods. The cost of a resource used in the production of A decreases. As a result
B) the equilibrium price of B will rise and the equilibrium price of A will fall.
34) In terms of dollars, the marginal benefit of working five days a week instead of four days a week is
B) the wages received for the fifth day of work.
16) If Pepsi decided to raise its price, you would expect the price of Coca Cola
B) to raise.
30) The increase in the demand for widgets, shown in the figure above, is the result of an increase in the price of McBoover devices. Therefore
B) widgets and McBoover devices are substitutes.
38) During the summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. In terms of dollars, the opportunity cost of attending summer school is
C) $10,300.
22) The income elasticity of demand for vacations is 5. If incomes increase by 3 percent next year, the quantity of vacations demanded at today's price will increase by ________ percent.
C) 15
40) In the table above, country B is producing 4 units of X and 6 units of Y. For country B, the opportunity cost of producing an additional unit of Y is
C) 2/3 unit of X per unit of Y.
14) The table above represents the marginal cost and marginal benefit associated with pizza (in terms of movies). What quantity of pizza should be produced if resources are to be used efficiently?
C) 6 pizzas
42) Which of the following is NOT an example of an opportunity cost?
C) Because Mary is now being paid a higher wage, she can afford to buy a new car even though she is moving into a bigger apartment.
50) In 2014, the price of peanuts was rising, which lead peanut butter sellers and peanut butter buyers to expect the price of peanut butter would rise in the future. Consequently, in the current market for peanut butter there was ________ which resulted in a ________ in the price of peanut butter and ________ in the quantity of peanut butter.
C) a decrease in supply of peanut butter and an increase in demand for peanut butter; rise; an increase, decrease or possibly no change
24) Which of the following shifts the supply curve for good X leftward?
C) an increase in the cost of the machinery used to produce X
8) The relative price of a good is
C) an opportunity cost.
50) Positive economic statements
C) can be tested against the facts.
22) An efficient allocation of resources occurs when we
C) cannot produce more of a good or service without giving up some other good or service that we value more highly.
2) A shift of the supply curve of oil raises the price from $60 a barrel to $75 a barrel and reduces the quantity demanded from 40 million to 20 million barrels a day. You can conclude that the
C) demand for oil is elastic.
42) If the price of a movie download falls, the rental rate of DVDs ________ and the equilibrium quantity of DVDs rented ________.
C) falls; decreases
44) George and Michael can gain from exchange
C) if each specializes in the production of the good for which he has the lower opportunity cost.
24) The "gifts of nature" are included as part of which factor of production?
C) land
14) When the price of a good falls, the income effect for a normal good implies that people buy
C) more of that good because they can afford to buy more of all the things they previously bought.
34) In the above figure, a price of $15 per dozen roses would result in a ________ so that the price of roses will ________.
C) shortage; rise
10) At a local ice cream parlor, when the price of half-gallons of chocolate ice cream was lowered by fifty cents per half-gallon, total revenue from the sale of chocolate ice cream decreased. This result indicates that
C) the demand for chocolate ice cream is inelastic.
4) Which of the following is a microeconomic topic?
C) the reasons why Kathy buys less orange juice
32) Last year in the United States, the price of snowboards rose by 5 percent and the price rise resulted in a 15 percent increase in the quantity supplied. This outcome is an indication that
C) the supply of snowboards is price elastic.
22) In the above figure, what is the minimum supply price for the fourth gallon of ice cream?
D) $5.00
48) If property rights are not clearly defined and enforced, then
D) All of the above answers are correct.
16) A marginal cost curve
D) Both answers A and B are correct.
28) In the above figure, once on PPF2, a country would grow slowest by producing at point
D) D.
32) Based on the above, which figure shows the impact of a decrease in the population available to work?
D) Figure D
34) Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. If these two states were to engage in trade, which of the following is TRUE? A) Half of both Washington's and Missouri's resources would be devoted to pears and the other half to pecans because that is the comparative advantage.
D) Missouri would specialize in pecan production and trade pecans to Washington for pears.
36) The elasticity of the momentary supply curve for any good always equals
D) None of the above answers is correct.
28) For Product X, the income elasticity of demand is 1.16. Which of the following is therefore definitely TRUE?
D) Product X is income elastic.
14) The price elasticity of demand for purses is measured in what units?
D) The price elasticity of demand is a unitless measure.
2) Twenty years ago a stove cost $300 and a refrigerator cost $1,500. Today a stove costs $600, while a refrigerator costs $1,800. Which of the following statements is TRUE?
D) The relative price of a stove has increased.
40) In the above figure, a price of $15 per dozen for roses would result in
D) a shortage.
16) Ham and eggs are complements. If the price of ham rises, the demand for eggs will
D) decrease and the demand curve for eggs will shift leftward.
18) A decrease in the expected future price of cars
D) decreases the current demand for cars, that is, there is a leftward shift of the demand curve for cars.
48) Normative economic statements
D) describe what ought to be.
20) Which factor of production earns profit?
D) entrepreneurship
40) The price elasticity of supply of laptop computers equals 1.5 if
D) for every 1 percent that laptop prices increase, computer makers produce another 1.5 percent laptops.
6) As a country that has a bowed-out production possibilities frontier produces more of one good, the opportunity cost of a unit of that good ________.
D) increases
30) The loss of the highest-valued alternative defines the concept of
D) opportunity cost.
36) When the government hires people to serve in the army, these people are no longer available to do other work. This choice illustrates the concept of
D) opportunity cost.
14) Fundamental economic problems basically arise from
D) our wants exceeding our scarce resources.
46) The social arrangement that gives John Grisham, the writer of best-selling novels, the ownership of his novels is
D) property rights.
6) The opportunity cost of good A in terms of good B is equal to the
D) ratio of the money price of good A to the money price of good B.
24) If goods A and B are complements, then
D) the cross elasticity of demand between A and B is negative.
38) In the above figure, if the demand curve is D2, then
D) the equilibrium price will be P1 and the equilibrium quantity will be Q2.
30) A supply curve shows the relation between the quantity of a good supplied and
D) the price of the good. Usually a supply curve has positive slope.
26) Human capital is
D) the skill and knowledge of workers.
8) All economic questions arise because we
D) want more than we can get
