Test one Econ Jeff Barr
The price mechanism is:
also known as the invisible hand.
Dorm rooms usually are not allocated by markets. Allocating dorm rooms is:
an economic problem.
The price mechanism that guides people's actions is called the:
invisible hand.
Suppose you paid $300 to take this economics course, which meets 30 times for one hour a class during the course of the semester. Instead of attending class you could have either flipped hamburgers for $8 an hour or waited tables for $5 an hour. Given this information, the opportunity cost of attending each class session is:
$8.
Every four years during presidential campaigns, the issue of whether the United States should replace the electoral college method of determining the winner of the presidency arises. Which of the following statements about this debate is the best example of a statement in positive economics?
A candidate could lose the popular vote and win the electoral vote.
Who would probably argue that you need to study the forest before you can understand the trees?
A macro-economist
Suppose a market has an excess demand and price starts to rise. What will the rise in price cause?
A rise in quantity supplied and a fall in quantity demanded.
Which of the following is not likely to change the supply of personal computers?
An increase in consumers' incomes
Which of the following would best explain a decrease in the supply of squash?
An increase in the price of other vegetables
Which of the following occur in the real world? Government failures but not market failures Both market failures and government failures Market failures but not government failures
Both market failures and government failures
Which of the following is an example of the law of one price?
Because their countries have similar institutions, computer programmers in Germany and the United States either are or will be paid about the same.
Which of the following is an example of the law of one price? Exchange rates tend to have equivalent values. For example, one euro equals one U.S. dollar. Because people have essentially the same basic needs wherever they live, they tend to buy the same bundle of goods. Because wages are so much lower in China, eventually all U.S. jobs will be outsourced to China, leaving the United States to import all goods at one price. Because their countries have similar institutions, computer programmers in Germany and the United States either are or will be paid about the same.
Because their countries have similar institutions, computer programmers in Germany and the United States either are or will be paid about the same.
Suppose that in Colombia one unit of labor can produce 8 tons of papayas or 2 tons of bananas and in Brazil, one unit of labor can produce either 2 tons of papayas or 4 tons of bananas. If each country has two units of labor, which of the following consumption combinations can be attained only with trade?
Colombia consumes 8 tons of papayas and 4 tons of bananas.
In practice, capitalism results in the government owning the means of production T or F
False
Socialism relies on self interested individuals to decide what, how, and for whom to produce. True or False
False
The terms socialism and capitalism do a good job of describing and differentiating most countries. True or False
False
Which of the following is not a characteristic of pure capitalism?
Government ownership of capital
Which statement best summarizes the invisible hand theorem
Government policies direct people's selfish desires (tempered by social and economic forces) to the common good
Which statement best summarizes the invisible hand theorem?
Markets direct people's selfish desires (tempered by political and social forces) to the common good.
Which of the following situations best demonstrates the law of demand?
Movie-goers react to an increase in the price of a theater ticket by seeing fewer movies per year.
England has a relatively cool and cloudy climate that is ill suited for grape growing. It can produce 200 units of wine for every 400 units of cloth. Portugal, in contrast, has a relatively warm and sunny climate that is good for growing grapes. It can produce 200 units of wine for every 100 units of cloth. Which country has the higher opportunity cost of producing cloth?
Portugal: 2 units of wine for every unit of cloth
According to the law of supply, what will motivate firms to increase their quantity supplied of a product? Supply Fixed cost Production cost Price
Price
According to the law of supply, what will motivate firms to increase their quantity supplied of a product? Price Supply Production cost Fixed cost
Price
According to the law of supply, what will motivate firms to increase their quantity supplied of a product? Price Supply Production cost Fixed cost
Price
Enron executives were charged with numerous counts of corporate fraud and corruption. Among the charges was insider trading, which involves the trading of a corporation's stock by insiders who may have access to information that the public does not. Which role is the government playing when it makes insider trading illegal?
Promoting effective and workable competition
Nepalese villagers sell their kidneys as a way to earn much-needed money. Unfortunately, although the demand for such kidneys in developed economies is high and the medical facilities are available to conduct kidney transplants, the selling and buying of organs is illegal. What idea from Chapter 1 of the text does this situation best illustrate?
Social and political forces sometimes rein in market forces.
Prostitution is legal in Churchill County, Nevada, but a referendum threatened to close two brothels (prostitution businesses) in that county. What idea from Chapter 1 of the text does this story best illustrate?
Social and political forces sometimes rein in market forces.
The principle of increasing marginal opportunity cost holds in which of the following cases?
Some inputs are better for producing particular goods.
What relates positive economics to normative economics?
The art of economics
Which of the following is a normative statement?
The governments should spend more to aid the poor.
Which of the following is not held constant as you move along the demand curve? The price of other goods The preferences of consumers for the good The price of that good The incomes of consumers
The price of that good
Which of the following is not held constant as you move along the demand curve? The price of other goods The incomes of consumers The price of that good The preferences of consumers for the good
The price of that good
Which of the following is not held constant as you move along the demand curve? The price of other goods The preferences of consumers for the good The price of that good The incomes of consumers
The price of that good
A student who has paid nonrefundable tuition of about $45 a lecture estimates the marginal benefit of each lecture to be $60. What additional information would she need to make a rational decision to attend class?
The value of her time that she could spend doing something else
A student who has paid nonrefundable tuition of about $45 a lecture estimates the marginal benefit of each lecture to be $60. What additional information would she need to make a rational decision to attend class? one, since she has enough information already The tuition for other classes The value of her time that she could spend doing something else The value of the professor's time
The value of her time that she could spend doing something else
In a capitalist system, ownership of the means of production reside with a small group of individuals. True or False?
True
The terms market system and capitalist system mean the same thing in everyday language. T or F
True
Which of the following is an example of the law of one price in action?
Wages in India are lower than wages in the United States, and so firms move their call centers to India. This tends to raise wages in India and depress wages in the United States.
Which of the following is not one of the three central coordination problems of the economy given in the book?
Whether
John and Jane Smith are both economists who are deciding how to split household chores of cooking and cleaning. They discover that John has a comparative advantage in cooking. Does this discovery tell them anything about comparative advantage in cleaning?
Yes; Jane must have a comparative advantage in cleaning.
Mary buys cell-phone services from a company that charges $30 per month. For that $30 she is allowed 600 minutes of free calls and then pays 25 cents per minute for any calls above 600 minutes. Mary has used 300 minutes this month so far. What is her marginal cost per minute of making two more calls lasting 10 minutes each?
Zero
The supply of leather jackets would be expected to increase as a result of:
a decrease in the cost of producing leather jackets.
The law of supply states that, other things constant, there is:
a direct relation between price and the quantity supplied.
A natural experiment is
a naturally occurring event that approximates a controlled experiment.
A natural experiment is:
a naturally occurring event that approximates a controlled experiment.
The statement "government should provide affordable health care coverage for every member of society" is:
a normative statement.
Through most of the 20th century in the former USSR:
a type of socialism that departed from theory was implemented.
With a sole proprietorship:
all of one's assets are at risk of loss.
When applied to labor markets, the law of supply suggests that:
an increase in the wages earned by nurses will cause the quantity of nurses supplied to increase.
An economic model:
applies economic theory to understand real-world events.
Economic forces: are not related to scarcity. are a reaction to scarcity. give rise to scarcity. are not related to rationing.
are a reaction to scarcity.
Economics is an art because it:
blends objective and subjective analyses.
If a country takes advantage of the comparative advantage of some resources over others, its production possibility curve is likely to be:
bowed outward.
In the goods market:
businesses produce goods and services and sells them to households and government.
The term efficiency involves achieving a goal as:
cheaply as possible.
According to the law of one price,
competition, combined with transferable goods and resources, drives the prices of similar goods toward equality.
Trade based on comparative advantage benefits: consumers in some countries but hurts consumers in other countries. neither producers nor consumers. producers in all countries but not consumers. consumers in all countries.
consumers in all countries
Trade based on comparative advantage benefits:
consumers in all countries.
The marginal benefit of going to a movie during the week is currently $6 for you. Assume that the $4 price of going to the movies measures its marginal cost. Following the economic decision rule, you will:
continue going to movies until the marginal benefit of doing so falls below $4.
A company such as Microsoft or Pepsi Co. is a legal hassle to organize, difficult to monitor, and possibly could double tax income. It is an example of a: sole proprietorship. corporation. consumer. partnership.
corporation.
Suppose the marginal cost of dating Perry is $30 and the marginal benefit is worth $40 to you. Following economic reasoning, you should:
date Perry.
When a government bans prostitutions, it may do so because it considers prostitution to be a: progressive good. regressive good. public good. demerit good.
demerit good.
Normative economics seeks to:
determine the most appropriate economic goals for a society.
If there is an inverse relationship between two variables, the graph relating the two variables will be: vertical. horizontal. downward-sloping. upward-sloping.
downward-sloping
Because you can get more of one good only by giving up some of another good, the shape of a production possibility curve is: perfectly vertical. perfectly horizontal. upward-sloping. downward-sloping.
downward-sloping.
If there is an inverse relationship between two variables, the graph relating the two variables will be:
downward-sloping.
If there is an inverse relationship between two variables, the graph relating the two variables will be: upward-sloping. horizontal. vertical. downward-sloping.
downward-sloping.
A business is most likely to be characterized as a corporation if:
each owner is liable only to the extent of his or her own investment.
A business is most likely to be characterized as a corporation if: each owner is liable only to the extent of his or her own investment. it has only one owner. it is legally treated as a person and owned by stockholders who are liable for the actions of the corporate "person" regardless of their investment it has two or more owners, with each owner liable for every other owner's actions.
each owner is liable only to the extent of his or her own investment.
The marginal benefit from consuming another unit of a good:
equals the increase in total benefits from consuming the unit.
A market economy:
expects people to be self-interested.
In a capitalist system, society collectively decides what, how, and for whom to produce True or false?
false
In a socialist economic system:
government planning boards decide what to produce and then give individuals directives how to achieve those goals.
In socialism:
government planning, rather than the market, is relied upon to coordinate economic activity.
One advantage of a corporation over a sole proprietorship is:
greater ability to obtain funds.
One advantage of a partnership over a corporation is:
greater accountability.
The slope of a line is zero when it is
horizontal.
In the factor market:
households supply factors of production to business and are paid by business for doing so.
People can reasonably expect that an economic system will decide all of the following except:
how to assign initial property rights
The effect of higher gasoline prices is most likely to:
increase the demand for hybrid cars and decrease the demand for the gas guzzler Hummer.
If you move from a point inside the production possibility curve to a point on the production possibility curve, it follows that efficiency is:
increased because the economy is now on the production possibility curve.
The Industrial Revolution was important to the history of economic systems because it:
increased the power of capitalists and eventually led to a revolution instituting capitalism as the dominant economic system.
The Apple iPod has been a trendy product. It was designed by Apple in the United States, manufactured in factories in Asia, and sold throughout the world. Many other firms, both American and foreign, began to try to develop alternatives to the iPod. The iPod is an example of American comparative advantage in:
innovation.
Governments can make trading easier and more beneficial by: limiting private restrictions on trade. providing merit goods. setting quotas. establishing externalities.
limiting private restrictions on trade.
The principle of increasing marginal opportunity costs states that the initial opportunity costs are:
low but increase the more you concentrate on the activity.
To engage in economic reasoning, one must compare
marginal cost and marginal benefit.
To engage in economic reasoning, one must compare:
marginal cost and marginal benefit.
The fact that the price of a gallon of milk is likely to be more expensive at a convenience store than at a supermarket is an example of:
market forces.
Business decisions about what and how much to produce are based on what: maximizes profits. the government wants. maximizes market share. consumers want.
maximizes profits.
The invisible hand theorem comes from:
microeconomics.
Relative to corporations, sole proprietorships are:
more numerous and smaller in size.
Market economies are present in:
most economies.
A defining difference in what makes a firm a sole proprietorship, partnerships, or a corporation is the: profitability of each type of business. nature of ownership and accountability for each type of business. size of each type of business. number of each type of business.
nature of ownership and accountability for each type of business.
New developments in computer monitors have made flat panel LCD's cheaper and better than the older CRT models. Given that monitors can contain as much as 8 pounds of lead, disposing of the old monitors creates a: negative externality. limited liability. neutral externality. positive externality.
negative externality.
Positive economics seeks to:
objectively explain how the economy functions.
Even though 60,000 individuals in the United States wait for kidney transplants and, for a price, there are many individuals who would be willing to supply a kidney (a healthy person can donate one kidney without any problems), it remains illegal to buy and sell organs in the United States. A market for kidneys does not exist because of:
political forces
Antitrust laws are an example of
political forces.
Maintaining objectivity is easiest in:
positive economics.
Market economies are based upon:
private property and individual planning
The law of demand states that consumers buy more of a good when its price declines: even if other demand determinants change at the same time. because their income increases at the same time. provided all else remains constant. only if their income increases at the same time.
provided all else remains constant.
If the price of steel rises, the law of supply predicts that, other things constant, the:
quantity supplied of steel will increase.
Demand for healthy kidneys is high in both India in Nepal. But it is also illegal to buy or sell organs. Despite the legal and social disapproval, there is an illegal market for organs. Assuming the legal and social disapproval does not influence buyers but discourages sellers from offering organs, the disapproval will: raise price but lower quantity. lower price but raise quantity. raise price and raise quantity. lower price and lower quantity.
raise price but lower quantity.
Demand for healthy kidneys is high in both India in Nepal. But it is also illegal to buy or sell organs. Despite the legal and social disapproval, there is an illegal market for organs. Assuming the legal and social disapproval does not influence buyers but discourages sellers from offering organs, the disapproval will: raise price but lower quantity. lower price but raise quantity. raise price and raise quantity. lower price and lower quantity.
raise price but lower quantity.
The text argues that the United States has had a comparative advantage in goods and services that:
require creativity and innovation.
When a government intervenes in an economy in a way that influences the relationship between households and businesses, it is: serving the public good. serving as an economic actor. reducing social welfare by interfering with the invisible hand. serving as an economic referee.
serving as an economic referee.
Certificates of ownership of a company are called:
stocks.
Suppose OPEC announces that it will increase production. Using supply and demand analysis to predict the effect of increased production on equilibrium price and quantity, the first step is to show the: supply curve shifting to the right. demand curve shifting to the right. supply curve shifting to the left. demand curve shifting to the left.
supply curve shifting to the right.
If Argentina imposes a 20 percent tax on natural gas exports to be paid by suppliers. Other things equal, this causes the:
supply of natural gas exports to shift to the left.
If the price in a market is above its equilibrium level, there will be a: surplus and downward pressure on price shortage and downward pressure on price. shortage and upward pressure on price. surplus and upward pressure on price.
surplus and downward pressure on price
If the price in a market is above its equilibrium level, there will be a:
surplus and downward pressure on price.
If the price in a market is above its equilibrium level, there will be a: surplus and downward pressure on price. shortage and downward pressure on price. shortage and upward pressure on price. surplus and upward pressure on price.
surplus and downward pressure on price.
The art of economics is:
the application of the knowledge gained by positive economics to the goals set in normative economics.
The text attributes the growth of economies over the last 200 years largely to:
the development of markets.
The price of a ticket to the Maroon 5 concert is set at $35. All the tickets for the concert sell out one hour after they go on sale and there are still 1,000 fans who want to buy tickets. It follows that:
the equilibrium price of tickets to the concert is more than $35.
Countries gain from trade by producing: the goods they produce at the highest opportunity cost. where the production possibility curve has a slope of -1. all goods in equal amounts. the goods they can produce at the lowest opportunity cost
the goods they can produce at the lowest opportunity cost
Countries gain from trade by producing:
the goods they can produce at the lowest opportunity cost.
Businesses fail because:
the invisible hand determines that they are not producing something that is socially valuable.
For a given benefit, a rational person chooses the option that has:
the lowest opportunity cost.
Markets coordinate economic activity through:
the price mechanism.
Macroeconomics is:
the study of aggregate economic relationships.
When the number of Alaskan fishermen increased, salmon prices fell to record lows. This could be shown graphically by a shift in: the supply curve left. the demand curve right. the supply curve right. the demand curve left.
the supply curve right.
According to Adam Smith, individuals are directed to do those things for which they have a comparative advantage by:
their self interest
According to Adam Smith, individuals are directed to do those things for which they have a comparative advantage by:
their self interest.
In feudalism, serfdom was maintained primarily through:
tradition.
Socialism, in principle, is an economic system based on individuals' goodwill towards others. True or false?
true
The law of demand states that the quantity demanded of a good is inversely related to the price of that good. Therefore, as the price of a good goes:
up, the quantity demanded goes down.
If there is a direct relationship between two variables, the graph relating those two variables will be:
upward-sloping.
The opportunity cost of attending college for one year is best measured by the
value of the next-best activity forgone by attending college.
The opportunity cost of attending college for one year is best measured by the:
value of the next-best activity forgone by attending college.
The largest source of household income in the United States is:
wages and salaries.
The use of the phrase "other things constant" in supply and demand analysis indicates that: an equilibrium price has been reached. we are considering all the changes which might take place in actual markets. we are considering changes in just one factor. an equilibrium quantity has been reached.
we are considering changes in just one factor.
The use of the phrase "other things constant" in supply and demand analysis indicates that: an equilibrium price has been reached. we are considering all the changes which might take place in actual markets. we are considering changes in just one factor. an equilibrium quantity has been reached.
we are considering changes in just one factor.
what are the three central coordination problems of the economy given in the book?
what ,for whom, how
Profit is: the same as cost. what is left over from total cost after all of the appropriate revenues have been subtracted. what is left over from total revenue after all of the appropriate costs have been subtracted. the same as revenue.
what is left over from total revenue after all of the appropriate costs have been subtracted
A partnership is a business:
with two or more owners, with each owner liable for every other owner's actions.
