AP Classroom Econ Units 1-4
A change in which of the following will cause a change in the supply of personal computers (PC's) in the short run? A Technology B Demand for PC's C Price of disks, which are a complement to PC's D Price of PC's E Consumers' incomes
A
After graduating from high school, Maria chose to go to college, while Omar chose to work full- time. Which of the following best describes the opportunity costs for these decisions? A Maria's opportunity cost includes the salary she could have earned if she had gone to work. B Maria's opportunity cost is her living expenses while attending college. C Omar's opportunity cost is the salary he will earn from working. D Omar's opportunity cost is the tuition and expenses he would have paid for college. E Omar's opportunity cost is definitely greater than Maria's.
A
All of the following cause a rightward shift in the demand schedule for a normal good EXCEPT A a decrease in the price of the good B a decrease in the price of a complementary good C an increase in the price of a substitute good D an increase in consumers' income E an increase in consumers' preference for the good
A
Assume that an economy produces televisions and shoes. Which of the following would cause the production possibilities curve for this economy to shift outward? A An increase in the labor force B An increase in the prices of both goods C An increase in the prices of resources used to produce both goods D A decrease in the demand for shoes E A change in consumers' tastes in favor of televisions
A
Assume there are two goods in a market economy. The amount of each good produced is determined by A buyers and sellers' interactions in the market for each good B a central planning agency C the desires of households only D each citizen's minimum needs for survival E popular voting with one vote per citizen
A
Compared to a market economy, in a command economy there is greater A. government involvement in the allocation of resources B. protection of private property rights C. reliance on prices for allocating scarce resources D. reliance on private businesses for the allocation of resources and distribution of goods E. consumption of consumer goods
A
For an inferior good, an increase in consumer income will cause A the demand curve to shift to the left B the demand curve to shift to the right C the short-run supply curve to shift to the right D the long-run supply curve to shift to the right E new firms to enter the market in the long run
A
In the absence of barriers to entry, a typical firm is currently in long-run equilibrium. Assume there is an increase in the market demand for the good that the firm is producing. Which of the following will happen in the long run? A New firms will enter the market. B The market supply will decrease, but the quantity supplied will increase. C The firm will earn positive economic profit. D The firm's price will be greater than its average revenue. E The firm will continue to produce the same quantity of output.
A
Nation Alpha can produce either 3 units of good X or 1 unit of good Y with one hour of labor, whereas nation Beta can produce either 4 units of good X or 2 units of good Y with one hour of labor. Assuming that labor is the only input, which of the following is true? A. Beta has an absolute advantage in the production of good X. B. Alpha has an absolute advantage in the production of good Y. C. Beta has a comparative advantage in the production of good X. D. Alpha has a comparative advantage in the production of good Y. E. Alpha has both an absolute and comparative advantage in the production of good Y.
A
The difference between the price a consumer would be willing to pay for a cone of ice cream and the actual market price that she pays gives a measure of her A consumer surplus B producer surplus C marginal utility D marginal cost E ability to pay
A
The fundamental difference between a market economy and a command economy lies in which of the following? A Property rights and protection of private property B Absolute and comparative advantages C Specialization and trade D Taxes and subsidies E Positive and negative externalities
A
The graph above shows the market for good X. The letters in the graph denote the enclosed areas. If the government imposes an excise tax of t dollars on each unit of good X, which of the following represents the consumer surplus, producer surplus, and deadweight loss after the imposition of the tax? A Consumer Surplus: A Producer Surplus: G Deadweight Loss: D+E B Consumer Surplus: A Producer Surplus: F+E Deadweight Loss: D+E C Consumer Surplus: A+B Producer Surplus: G+F+E Deadweight Loss: C+D D Consumer Surplus: A+B+H Producer Surplus: G+F Deadweight Loss: D+E E Consumer Surplus: A+B+H Producer Surplus: G+F+C Deadweight Loss: E
A
Which of the following are characteristics of a perfectly competitive industry? I. New firms can enter the industry easily. II. There is no product differentiation. III. The industry's demand curve is perfectly elastic. IV. The supply curve of an individual firm in the industry is perfectly elastic. A I and II only B I and III only C II and IV only D I, II, and IV only E I, III, and IV only
A
Which of the following economic systems primarily relies on prices for allocating resources and goods? A. Free-market B. Traditional C. Command D. Mixed E. Socialism
A
Which of the following provides a possible explanation for a simultaneous increase in the equilibrium price and the quantity of blueberries in a market? A An increase in the price of strawberries, a substitute B An increase in the supply of strawberries, a substitute C An increase in the price of farmland used to grow blueberries D A decrease in the price of blueberry harvesting equipment E Imposition of a price floor in the market for blueberries
A
A firm produces 400 books and sells each book for $15. If the explicit cost of producing the books is $4,500 and the implicit cost is $1,000, the firm's economic profit is A $0 B $500 C $1,000 D $1,500 E $5,000
B
A power company decides to use wind turbines to provide electricity instead of coal. Which basic economic question does this decision answer in a free market economy? A. What goods or services will be produced? B. How will goods or services be produced? C. Who will consume the goods or services? D. What economic system should be adopted? E. Who gets to decide?
B
Assume that good X is a normal good. If the price of good X increases, what will happen? A The substitution and income effects will both lead to more of good X being purchased. B The substitution and income effects will both lead to less of good X being purchased. C The substitution effect will lead to more of good X being purchased, while the income effect will lead to less of good X being purchased. D The substitution effect will lead to less of good X being purchased, while the income effect will lead to more of good X being purchased. E There will be no income effect because only the price of good X has changed.
B
Both Amy and Brad produce and consume apple pie and ice cream. In one hour, Brad makes five apple pies or ten gallons of ice cream while Amy makes fifteen apple pies or fifteen gallons of ice cream. Based on the above information, one can correctly conclude that A Brad has an absolute advantage in making ice cream and will sell ice cream to Amy B Brad has a comparative advantage in making ice cream and will sell ice cream to Amy C Brad does not have a comparative advantage in making either good and will not trade with Amy D Brad has an absolute advantage in making apple pies but a comparative advantage in making ice cream E Brad's opportunity cost of making ice cream is higher than Amy's
B
Cost-benefit analysis assumes rational agents do which of the following? A. Always make a decision that is best for society B. Compare additional costs and additional benefits when making a decision C. Consider only what they will lose when making a decision D. Consider only what they will gain when making a decision E. Always make the same decision
B
Economic profit can be calculated as accounting profit minus which of the following? A Fixed costs B Implicit costs C Marginal costs D Explicit costs E Total costs
B
Given an increase in the price of material K— which is an input used to produce good X— and an increase in the price of good Y— which is a substitute for good X— which of the following will definitely occur? A The equilibrium price of good X will decrease. B The equilibrium price of good X will increase. C The equilibrium quantity of good X will be unaffected. D The equilibrium quantity of good X will increase. E The equilibrium quantity of good X will decrease.
B
If the price of an apple is $0.50, the marginal utility per dollar spent on the fifth apple is: A. 20 B. 30 C. 40 D. 60 E. 100
D
If an effective rent ceiling is eliminated, which of the following is most likely to occur in the rental housing market? A An increase in the demand for housing, resulting in a decrease in the quantity of housing supplied B An increase in rents, resulting in an increase in the quantity of housing supplied C An increase in the demand for housing, resulting in an increase in the quantity of housing demanded D A decrease in rents, resulting in an increase in the quantity of housing supplied E A decrease in the demand for housing, resulting in an increase in the quantity of housing supplied
B
If nations specialize according to their comparative advantage and engage in international trade with each other, each nation can A produce outside its production possibilities curve B consume outside its production possibilities curve C shift its production possibilities curve to the right D become more self-sufficient E produce more of all goods
B
In a command economy, the quantity of computers produced would be determined by A factory owners B the government C consumers and producers D international trade E the wealthy
B
Jane spends all her weekly allowance to buy only two goods: soda and apples. According to the table above, if her preferences are characterized by the law of diminishing marginal utility, then which of the following statements is correct? A Jane is maximizing her utility. B Jane can buy more apples and less soda to maximize her utility. C Jane can buy more soda and fewer apples to maximize her utility. D Jane can buy more apples and the same amount of soda to maximize her utility. E Jane can buy more soda and the same amount of apples to maximize her utility.
B
Of the feasible and efficient points on the production possibilities curve (PPC) above, producing at which point will lead to the most economic growth in the future? A Point M B Point N C Point R D Point J E Point S
B
The above data describes a bakery's daily production possibilities curve for doughnuts and sweet rolls. Which of the following is true about the PPC? A. The PPC illustrates decreasing opportunity cost. B. The PPC illustrates increasing opportunity cost. C. The PPC illustrates constant opportunity cost. D. Producing 100 doughnuts and 10 sweet rolls illustrates efficiency in production. E. Producing 0 doughnuts and 40 sweet rolls illustrates inefficiency in production.
B
The table provided shows the total benefits and costs of studying at the library. If the student is rational, the optimal number of hours to spend at the library is A 2 B 3 C 4 D 5 E 6
B
What will happen to the price and quantity of footballs as a result of an increase in the price of leather used to make footballs? A Price will increase, and quantity will increase. B Price will increase, and quantity will decrease. C Price will decrease, and quantity will increase. D Price will decrease, and quantity will decrease. E Price will not change, and quantity will not change.
B
Which of the following MUST be true of the long run? A It is at least one year in duration. B All factors of production are variable. C At least one factor of production is fixed. D Marginal costs are constant. E Average total costs are constant.
B
Which of the following best explains why individuals and societies must make choices when presented with alternatives? A. People possess limited knowledge. B. Resources are scarce. C. People cannot agree on societal goals. D. Resources are not fully employed. E. People are more interested in their own well-being than in society's well-being.
B
Which of the following indicates the presence of economies of scale as the quantity of output increases? A Average variable cost decreases. B Long-run average total cost decreases. C Marginal cost decreases. D Average fixed cost decreases. E Marginal cost exceeds average total cost.
B
Which of the following is most likely to occur when a competitive market adjusts from one equilibrium to another? A A decrease in demand will cause the equilibrium price, equilibrium quantity, and total surplus to increase. B An increase in demand will cause the equilibrium price, equilibrium quantity, and producer surplus to increase. C A decrease in supply will cause the equilibrium price to decrease, the equilibrium quantity to increase, and consumer surplus to decrease. D An increase in supply will cause the equilibrium price to increase, the equilibrium quantity to decrease, and consumer surplus to increase. E A decrease in supply and increase in demand will cause the equilibrium quantity to decrease but the equilibrium price to be indeterminate.
B
Which of the following will cause the demand for a normal good to increase? A A decrease in consumers' income B A decrease in the price of a complementary good C A decrease in the price of a substitute good D A decrease in the price of the good E A decrease in the number of consumers
B
Assume that the government imposes a binding price ceiling on a market for an inferior good. Which of the following is most likely to occur in the market if consumers' incomes increase? A The market demand will shift to the right. B The market supply will shift to the right. C The shortage in the market will decrease. D The surplus in the market will increase. E The market price will increase.
C
A city is considering building playgrounds in city parks located near residential areas. The city planner presented to the township the following cost and benefit estimates to help the city council decide how many playgrounds to build. What is the optimal number of playgrounds to maximize net benefits? A. 6 B. 5 C. 4 D. 3 E. 2
C
A decrease in raw material prices will change the equilibrium price and quantity in a market in which of the following ways? A Price Increase Quantity Increase B Price Increase Quantity Decrease C Price Decrease Quantity Increase D Price Decrease Quantity Decrease E Price No change Quantity Increase
C
A firm is producing 100 units of output at a total cost of $400. The firm's average variable cost is $3 per unit. What is the firm's total fixed cost? A $1 B $50 C $100 D $300 E $400
C
According to the theory of consumer behavior, which of the following decreases first as additional units of a product are consumed? A Total utility B Average utility C Marginal utility D Marginal physical product E Total physical product
C
At her current level of consumption, a consumer is willing to pay up to $1.50 for a bottle of water and up to $1,500 for a diamond ring because the A total utility of diamond rings is greater than the total utility of water B total utility of water is less than the marginal utility of a diamond ring C marginal utility of a bottle of water is less than the marginal utility of a diamond ring D marginal utility of a bottle of water is greater than the marginal utility of a diamond ring E consumer is irrational and does not understand that water is more important than a diamond
C
At the current quantity that a firm is selling, the firm has marginal revenue of $750 and marginal cost of $800. Which of the following is true? A The firm is maximizing profit. B The firm's profits would increase if the firm increased the quantity sold. C The firm's profits would increase if the firm decreased the quantity sold. D The firm earns negative economic profit. E The firm earns zero accounting profit.
C
If both supply and demand for wheat increase, the equilibrium price and quantity of wheat will most likely change in which of the following ways? A Price Decrease Quantity Decrease B Price Decrease Quantity Increase C Price Indeterminate Quantity Increase D Price Increase Quantity Decrease E Price Increase Quantity Indeterminate
C
If cotton is used to produce towels, an increase in the price of cotton will result in which of the following changes in the towel market? A A decrease in the demand for towels, which leads to a shortage of towels followed by upward pressure on the price of towels B A decrease in the demand for towels, which leads to a surplus of towels followed by downward pressure on the price of towels C A decrease in the supply of towels, which leads to a shortage of towels followed by upward pressure on the price of towels D An increase in the supply of towels, which leads to a surplus of towels followed by downward pressure on the price of towels E An increase in both the demand and supply of towels, which leads to a surplus of towels followed by upward pressure on the price of towels
C
If the minimum wage for teenagers increased to a rate higher than their market equilibrium wage, what would be the effect on their wage and employment? A Wage Increase Employment No effect B Wage Increase Employment Increase C Wage Increase Employment Decrease D Wage Decrease Employment Increase E Wage Decrease Employment Decrease
C
If the output of a firm doubles when the firm doubles all of its inputs, the firm must be experiencing A economies of scale B increasing returns to scale C constant returns to scale D decreasing returns to scale E diseconomies of scale
C
In a perfectly competitive market, a change in which of the following could cause a shift in the supply curve? A The incomes of consumers B The number of buyers C Technology D The price of the product E Tastes and preferences
C
In the short run, a decrease in production costs of a product will shift A both the demand curve and the supply curve to the right B the demand curve to the left and the supply curve to the right C only the supply curve to the right D only the supply curve to the left E only the demand curve to the left
C
In the short run, which of the following is true of a firm's average total cost of production? A It is equal to marginal cost plus average variable cost. B It is equal to marginal cost plus average fixed cost. C It is equal to average fixed cost plus average variable cost. D It always increases when a firm increases production. E It is zero if the firm shuts down.
C
The opportunity cost of owning a business is equal to which of the following? I. The economic profits earned in the business II. The accounting profits earned in the business III. The profits that could be earned in another business using the same amount of resources A I only B II only C III only D I and III only E I, II, and III
C
Nation Aga can produce either 3 units of good X or 1 unit of good Y with one hour of labor, while nation Kaza can produce either 4 units of good X or 2 units of good Y with one hour of labor. Assuming that labor is the only input, mutually beneficial exchange can take place between Aga and Kaza if A. Aga exchanges 1/2 unit of good X for 1 unit of good Y from Kaza. B. Aga exchanges 1 1/2 units of good X for 1 unit of good Y from Kaza. C. Aga exchanges 2 1/2 units of good X for 1 unit of good Y from Kaza. D. Kaza exchanges 1 unit of good Y for 1 unit of good X from Aga. E. Kaza exchanges 2 units of good Y for 1 unit of good X from Aga.
C
Oren's father tells Oren he can have one dessert after dinner. He can choose from a scoop of ice cream, a slice of apple pie, a cup of chocolate pudding, or a piece of fruit. Oren prefers chocolate pudding to a piece of fruit; he prefers apple pie to chocolate pudding; and he prefers ice cream to apple pie. If Oren chooses a scoop of ice cream, what is his opportunity cost? A. A piece of fruit. B. A cup of chocolate pudding. C. A slice of apple pie. D. A scoop of ice cream. E. A piece of fruit, a cup of pudding and a slice of apple pie.
C
Raheem is currently working as a financial analyst earning $75,000 a year and is considering quitting his current job to start an art gallery. The estimated annual revenue from the art gallery is $175,000. The annual cost of labor, advertising, and acquiring the art inventory is $125,000. What are Raheem's accounting and economic profits if he opens the art gallery? A Accounting profit is -$25,000, and economic profit is $50,000. B Accounting profit is $100,000, and economic profit is $50,000. C Accounting profit is $50,000, and economic profit is -$25,000. D Accounting profit is $100,000, and economic profit is -$25,000. E Accounting profit is $50,000, and economic profit is $100,000.
C
Suppose a firm's production process exhibits diseconomies of scale. How and why will costs change if the firm reduces its output? A Long-run average total cost will increase because it becomes more difficult for the firm to manage its workforce. B Long-run average fixed costs will increase because the firm produces fewer units of output. C Long-run average total cost will decrease because it becomes easier for the firm to manage its workforce. D Long-run average fixed costs will decrease because the firm produces fewer units of output. E Long-run average total cost will decrease because it becomes more difficult for the firm to manage its workforce.
C
Suppose hot dogs and hamburgers are substitutes in consumption. If the supply of hot dogs decreases, which of the following will happen in the market for hamburgers? A The supply curve for hamburgers will shift to the right. B The supply curve for hamburgers will shift to the left. C The demand curve for hamburgers will shift to the right. D The demand curve for hamburgers will shift to the left. E Both the demand curve and supply curve for hamburgers will shift to the left.
C
The marginal utility per dollar spent on the last orange consumed is 75. If the price of an apple is $0.50, how many apples would Johnny have to consume before he considers purchasing another orange? A. 2 B. 3 C. 4 D. 5 E. 6
C
The table provided shows the number of labor hours required to produce a cell phone or a unit of lumber in Estonia and in Finland. Based on the information in the table, which of the following is true? A Estonia has a comparative advantage in producing lumber. B Finland has a comparative advantage in producing cell phones. C Finland has an absolute advantage in producing lumber. D Estonia has both the absolute and comparative advantages in producing lumber. E Neither country has a comparative advantage in producing cell phones.
C
Which of the following changes will lead to an increase in the supply of good X? A An increase in the price of good X B An increase in the wages of labor used to produce good X C A decrease in the price of energy, a key input to the production of good X D An increase in the demand for good X E A decrease in the number of sellers of good X
C
Which of the following is an example of a nonrival resource? A. National park camping sites that can be reserved by anyone B. Farmland that can be used to grow corn or soybeans C. Solar energy D. Fish in the ocean E. Timber in a forest
C
Which of the following situations best illustrates the law of demand? A As real incomes of United States citizens have decreased over the past year, the demand for housing has also decreased. B Recent decreases in the price of imported wine have led to an increase in the consumption of domestic wine. C In the past several months, as the price of compact disc players has decreased, the quantity of compact disc players sold has increased D The increase in the price of quality health foods has increased the revenues of firms producing these goods. E As the demand for computers has increased, the number of workers in the computer industry has increased.
C
Which of the following statements regarding accounting profits, opportunity costs, and economic profits is true? A With positive opportunity costs, a firm can never earn economic profits. B Accounting profits are equal to economic profits minus opportunity costs. C If accounting profits are less than opportunity costs, there will be economic losses. D Economic profits must always be greater than accounting profits. E When economic profits are positive, accounting profits may be positive or negative.
C
Which of the following would shift the short-run supply curve for strawberries? A A decrease in the consumption of strawberries B An increase in the price of strawberries C A strike by all farmworkers D An increase in household incomes E An announcement of a study that shows the health benefits of eating strawberries
C
A decrease in the supply of oranges raised the price of oranges in the market. The substitution effect of the price increase will motivate consumers to A raise their real income to offset the price effect B decrease their demand for oranges C demand that the government set a price ceiling for oranges D increase the quantity of other fruits demanded and decrease the quantity of oranges demanded E decrease the quantity of other fruits demanded and increase the quantity of oranges demanded
D
A profit-maximizing, perfectly competitive firm is currently in long-run equilibrium. It is earning $15,000 of total revenue from a sale of 1,000 units. Its total fixed cost of production is $2,500. Which of the following can correctly be inferred from the information provided? A Its marginal cost is $12.50, and its average total cost is $12.50. B Its marginal cost is $12.50, and its average variable cost is $12.50. C Its marginal cost is $15.00, and its average total cost is $12.50. D Its marginal cost is $15.00, and its average variable cost is $12.50. E Its marginal cost is $15.00, and its average fixed cost is $12.50.
D
All of the following are included in computing the opportunity cost of attending college EXCEPT A interest paid on student loans B wages the student gave up to attend college C money spent on college tuition D money spent on clothing expenses E money spent on books and supplies
D
Assume that labor is the only variable input. If a firm's short-run marginal cost is increasing as output rises, which of the following must be true? A Average product of labor is constant. B Average product of labor is increasing. C Marginal product of labor is greater than average product of labor. D Marginal product of labor is decreasing. E Total product of labor is decreasing.
D
Assume that people like onions on their hamburgers. If the supply of hamburgers decreases, the demand for onions will most likely A remain unchanged because hamburgers and onions are different goods B increase because hamburgers and onions are substitutes C increase because hamburgers and onions are complements D decrease because hamburgers and onions are complements E decrease because hamburgers and onions are substitutes
D
Assume that popcorn and movie attendance are complements and that Salty Concession grows corn suitable for popping. Mr Concession will most likely sell a greater quantity of popping corn at a higher price if which of the following occurs? A The wages of farm workers and movie theater employees increase. B A technological improvement results in less expensive and more efficient harvesting of corn. C The introduction of new fat-free potato chips provides new competition in the snack-food market. D The release of three summer movies sets records for movie attendance E New government regulations force movie theaters to hire more security guards at each theater.
D
Assume that the government increases the unit excise tax on gasoline suppliers and also that people commute longer distances to work as more houses are built in city suburbs. As a result, the equilibrium price and quantity of gasoline will most likely change in which of the following ways? A Price Decrease Quantity Decrease B Price Increase Quantity Decrease C Price Increase Quantity Increase D Price Increase Quantity Indeterminate E Price Indeterminate Quantity Increase
D
Assume that the original supply and demand curves of a commodity are S and D, respectively. Also assume that the government imposes an excise tax (per unit tax) of t dollars on the commodity, which shifts the supply curve to S1. The deadweight loss created by the tax is equal to A P1GHP0 B P1GKP0 C GHK D GKI E zero
D
At its current level of output, a firm's total revenue is greater than its total variable cost but less than its total cost. If the firm is producing at the point where marginal revenue is equal to marginal cost, what should the firm do to maximize profit in the short run? A Increase price to increase revenue. B Decrease price to increase quantity. C Exit the market to minimize losses. D Continue to produce at its current level of output to minimize losses. E Shut down.
D
Based on the graph above, the consumer surplus at the market equilibrium price and quantity is shown by which area? A GMK B GMN C GZN D ZMN E MNK
D
Because of conflict and political instability in Country Y, millions of its citizens emigrate to Country X. Which of the following best explains what will happen to Country X? A. Country X's PPC will not change, but its consumption of goods will decrease. B. Country X's production will move to a point inside its PPC, indicating slower growth. C. Country X's production will move to a point on its PPC at which it produces only consumer goods. D. Country X's PPC will shift outward over time. E. Country X's PPC will shift inward over time.
D
If Nation X produces coffee at a higher opportunity cost than Nation Y, which of the following is true? A. Nation X must have an absolute advantage in producing coffee. B. Nation X must have a comparative advantage in producing coffee. C. Nation Y must have an absolute advantage in producing coffee. D. Nation Y must have a comparative advantage in producing coffee. E. There is insufficient information to determine both absolute and comparative advantage.
D
If bologna is an inferior good, which of the following must be true? A The demand curve for bologna is vertical. B The demand curve for bologna is horizontal. C An increase in the price of bologna will decrease the supply of bologna. D An increase in consumer income will decrease the demand of bologna. E A decrease in consumer income will decrease the supply of bologna.
D
If the supply of fish increases, there will be A an increase in the demand for chicken, a substitute good B an increase in the demand for fish C an increase in the price of fish tacos D a decrease in the price of fish E a decrease in the supply of potatoes, a complementary good
D
In the diagram above, if there is a price ceiling set at P1, consumer surplus will be represented by the area A ABC B P2BP0 C P3BP2 D P3ACP1 E P3BCP1
D
In the short run, which of the following must be true for a perfectly competitive firm that is maximizing profits? A The firm will shut down if it has any economic losses. B The firm will produce at the minimum of average total cost. C The firm will produce where MR = MC, but price from the demand curve is greater than MC. D The firm will produce where MR = MC as long as P is greater than average variable cost. E The firm will produce the quantity that exhibits allocative and productive efficiency.
D
Suppose that Habib has a weekly fixed budget and spends it all on music downloads and snacks. At his current combination of consumption, the marginal utility of the last dollar spent on music downloads is greater than the marginal utility of the last dollar spent on snacks. Has Habib maximized his utility? A. Yes, because he has purchased the maximum possible with his limited budget. B. Yes, because he has purchased the two goods in proportion so that he can get the maximum utility from each. C. Yes, because changing his current consumption combination will reduce his total utility. D. No, because he can increase his total utility by purchasing more music downloads and fewer snacks. E. No, because he can increase his total utility by purchasing fewer music downloads and more snacks.
D
The demand curve for a normal good slopes down for which of the following reasons? I. An increase in the price of the good induces consumers to purchase substitute products. II. An increase in the price of the goods reduces consumers' purchasing power. III. An increase in the price of the good increases consumers' utility from consuming that good. A I only B II only C III only D I and II only E I and III only
D
The following questions refer to the diagram below. The letters on the graph represent enclosed areas. If a price ceiling is set at P1, which of the following areas represent the resulting consumer surplus, producer surplus, and deadweight loss? A Consumer Surplus f Producer Surplus k Deadweight Loss l + m B Consumer Surplus f + g + h Producer Surplus k + l Deadweight Loss h + j C Consumer Surplus f + g + h Producer Surplus i + j + k Deadweight Loss l + m D Consumer Surplus f + g + i Producer Surplus k Deadweight Loss h + j E Consumer Surplus f + g + i Producer Surplus h + j Deadweight Loss l + m
D
The following questions refer to the graph below showing cost curves for a perfectly competitive firm. If the market price is $10, how many widgets should this profit-maximizing firm produce? A 3,000 B 6,000 C 12,000 D 16,000 E 21,000
D
The table above shows the amount of labor required to produce a unit of corn and a unit of shoes in Brazil and Spain. If both countries have equal numbers of workers, what pattern of international trade between Brazil and Spain is most likely to emerge? A Brazil will export both corn and shoes. B Spain will export both corn and shoes. C No mutually beneficial trade can occur. D Brazil will export corn and import shoes. E Brazil will import corn and export shoes.
D
The table provided shows the market demand and supply schedules for wheat. Which of the following is true? A At a price of $1, there is excess supply of wheat and the price will decrease. B At a price of $2, there is excess demand for wheat and the price will decrease. C At a price of $3, there is excess demand for wheat and the price will increase. D At a price of $4, there is excess supply of wheat and the price will decrease. E At a price of $5, there is excess demand for wheat and the price will increase.
D
Which of the following best describes the law of demand? A When income increases, the demand for goods increases. B When the price of a good decreases, the demand for the good increases. C When the price of a good decreases, the quantity demanded of the good decreases. D When the price of a good increases, the quantity demanded of the good decreases. E When the demand for a good increases, consumers' willingness and ability to buy the good increases.
D
Which of the following is always true of the relationship between average and marginal costs? A Average total costs are increasing when marginal costs are increasing. B Marginal costs are increasing when average variable costs are higher than marginal costs. C Average variable costs are increasing when marginal costs are increasing. D Average variable costs are increasing when marginal costs are higher than average variable costs. E Average total costs are constant when marginal costs are constant.
D
Which of the following is necessary in a well-functioning capitalist economy but not in a command economy? A Centralized decision making B Scarcity of resources C Monopolies D Protection of property rights E Positive externalities
D
Which of the following is the best example of a scarce factor of production? A. Money B. Food C. Air D. Airplanes E. Established knowledge
D
Which of the following is true if consuming one unit of a good yields 100 utils and consuming the second unit of the good increases satisfaction by 20 utils? A The marginal utility of the first unit is 20. B The marginal utility of the second unit is 80. C The marginal utility of the second unit is 120. D The total utility of consuming two units is 120. E The total utility of consuming one unit is greater than the total utility of consuming two units.
D
Which of the following statements relating to supply is true? A An increase in an input price will lead to an increase in supply. B An increase in the price of a good will lead to an increase in the supply of the good. C A decrease in consumers' income will lead to a decrease in the supply of the good. D A decrease in the price of a good will lead to a decrease in the quantity supplied of the good. E A decrease in the price of a substitute good in production will lead to a decrease in the supply of another substitute good.
D
Which of the following will enable an economy to reach point F on the diagram above? A. Reallocating currently available resources from apple production to production of oranges B. Reallocating currently available resources from orange production to production of apples C. Fully allocating currently available and unemployed resources efficiently D. Creating or discovering new resources E. Becoming a mixed economy
D
A production possibilities curve can shift inward if there is A an increase in productivity B an increase in unemployment C an increase in the price of raw materials D a misallocation of resources E a natural disaster
E
As a factor of production, capital refers to the A money available to start a business B stocks and bonds issued by businesses to raise funds C financial investment of businesses D currency in circulation and deposits in financial institutions E tools and machinery used to produce goods and services
E
At a firm's current rate of output, the marginal cost is $65, the average variable cost is $35, the average fixed cost is $30, and the product price is $65. Which of the following statements is true for the firm? A Economic profits are zero because marginal revenue equals marginal cost. B Economic profits are negative because total revenue is less than total cost. C Economic profits are positive because total revenue is greater than total cost. D Economic profits are negative because price is greater than average variable cost. E Economic profits are zero because price equals average total cost.
E
If a government eliminated an effective price floor in a market, all of the following would occur EXCEPT: A The surplus would be eliminated. B The price would decrease. C The quantity supplied would decrease. D The quantity demanded would increase. E The supply of the good would increase.
E
Suppose the government sets a price floor at $9 in the market. The resulting consumer surplus, producer surplus, and deadweight loss will be which of the following? A Consumer Surplus B + E Producer Surplus C + F Deadweight Loss A + B B Consumer Surplus A + B Producer Surplus C + D Deadweight Loss E + F C Consumer Surplus A Producer Surplus C + D + F Deadweight Loss E D Consumer Surplus A + B + E Producer Surplus C + D + F Deadweight Loss 0 E Consumer Surplus A Producer Surplus B + C + D Deadweight Loss E + F
E
The diagram above shows the production possibilities curves for two countries, Country X and Country Y. Assume that both countries use equal amounts of resources in production. If the two countries engage in trade, both would be better off under which of the following conditions? A Country X produced both cars and planes, because it has an absolute advantage in the production of both goods. B Country Y produced both cars and planes, because it has a comparative advantage in the production of both goods. C Country X specialized in the production of cars, because it has an absolute advantage in the production of cars. D Country X specialized in the production of cars, because it has a comparative advantage in the production of cars. E Country Y specialized in the production of cars, because it has a comparative advantage in the production of cars.
E
Which of the following is associated with a command economy? A Competitive product markets B Use of resources for private gain C Use of available resources to meet all the needs and wants of its citizens D Entry of firms into industries with economic profit E Public ownership of the means of production
E
Which of the following occurs if the price of oranges is below the equilibrium price? A There is a surplus of oranges. B The quantity supplied of oranges is greater than the quantity demanded. C The quantity supplied of oranges is greater than the quantity sold. D The quantity purchased of oranges is greater than the quantity sold. E The quantity demanded of oranges is greater than the quantity supplied.
E
