chapter1-3

11. In the figure above, which of the curves shows a production possibilities frontier with increasing opportunity cost in the production of VCRs and telephones? A) A B) B C) C D) All of the curves illustrate a production possibilities frontier with increasing opportunity cost

A) A

14. Which of the following is NOT a normative statement? A) People buy more of a good or service when its price falls. B) The distribution of income is fair. C) The government ought to provide health care to everyone. D) Corporations should be more socially responsible.

A) People buy more of a good or service when its price falls.

Which of the following does NOT shift the demand curve for broccoli? A) an increase in the cost of fertilizer used to grow broccoli B) a warning by the U.S. Surgeon General that broccoli causes schizophrenia C) an increase in the price of spinach, a substitute for broccoli, because rodents gobbled up much of this year's spinach crop D) a decrease in the price of spinach, a substitute for broccoli, because of a bumper crop of spinach this year

A) an increase in the cost of fertilizer used to grow broccoli

15.John has two hours of free time this evening. He ranked his alternatives, first go to a concert, second go to a movie, third study for an economics exam, and fourth answer his e-mail. What is the opportunity cost of attending the concert for John? A) attending a movie B) studying for an economics exam C) answering his e-mail D) attending a movie, studying for an economics exam, and answering his e-mail

A) attending a movie

12.Marginal cost is the A) opportunity cost of producing one more unit of a good and increases as production increases. B) opportunity cost of producing one more unit of a good and decreases as production increases. C) benefit from consuming one more unit of a good and increases as consumption increases. D) benefit from consuming one more unit of a good and decreases as consumption increases

A) opportunity cost of producing one more unit of a good and increases as production increases.

Positive and normative statements differ in that A) positive statements can be tested, whereas normative statements cannot. B) normative statements can be tested, whereas positive statements cannot. C) normative statements depict "what is" and positive statements depict "what ought to be." D) normative statements never use the word "should."

A) positive statements can be tested, whereas normative statements cannot.

16. After Hurricane Katrina devastated parts of Mississippi and New Orleans in 2005, we can be sure that the production possibilities frontier for that area temporarily A) shifted inward, toward the origin. B) shifted outward, away from the origin. C) became flatter. D) became steeper.

A) shifted inward, toward the origin.

A substitute is a good A) that can be used in place of another good. B) that is not used in place of another good. C) of lower quality than another good. D) of higher quality than another good

A) that can be used in place of another good.

Which of the following influences people's buying plans and does not shift the demand curve? A) the price of the good B) the prices of related goods C) income D) preferences

A) the price of the good

The above table shows the demand schedule and supply schedule for chocolate chip cookies. An increase in income results in an increase in the demand for chocolate cookies by an amount of 3 pounds at every price. What are the new equilibrium quantity and equilibrium price? A) 5 pounds, $4.00 per pound B) 5 pounds, $6.00 per pound C) 5 pounds, $5.00 per pound D) 4 pounds, $5.00 per pound

B) 5 pounds, $6.00 per pound

Which of the following is consistent with the law of demand? A) An increase in the price of a DVD causes an increase in the quantity of DVDs demanded. B) An increase in the price of a soda causes a decrease in the quantity of soda demanded. C) A decrease in the price of a gallon of milk causes a decrease in the quantity of milk demanded. D) A decrease in the price of juice causes no change in the quantity of juice demanded.

B) An increase in the price of a soda causes a decrease in the quantity of soda demanded.

20. 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? A) Beth should produce pizza because she has a higher opportunity cost of producing pizza than does Joe. B) Beth should produce pizza because she has a lower opportunity cost of producing pizza than does Joe. C) Joe should produce pizza because he has a higher opportunity cost of producing pizza than does Beth. D) Joe should produce pizza because he has a lower opportunity cost of producing pizza than does Beth

B) Beth should produce pizza because she has a lower opportunity cost of producing pizza than does Joe.

10.The principle of increasing opportunity cost leads to A) a production possibilities frontier (PPF) that is bowed inward from the origin. B) a production possibilities frontier (PPF) that is bowed outward from the origin. C) an inward shift of the production possibilities frontier (PPF). D) an outward shift of the production possibilities frontier (PPF).

B) a production possibilities frontier (PPF) that is bowed outward from the origin.

3. A point outside a production possibilities frontier indicates A) that resources are not being used efficiently. B) an output combination that society cannot attain given its current level of resources and technology. C) that resources are being used very efficiently. D) that both goods are characterized by increasing costs.

B) an output combination that society cannot attain given its current level of resources and technology.

6.The figure above shows Roger's production possibilities frontier. Point a is an ________ point and production is ________. A) attainable; efficient B) attainable; inefficient C) unattainable; inefficient D) unattainable; efficient

B) attainable; inefficient

20 In economics, the term "capital" refers to A) the money in one's pocket. B) buildings and equipment. C) mineral resources. D) consumer goods.

B) buildings and equipment.

19.A person has a comparative advantage in producing a particular good if that person A) has higher productivity in producing it than anyone else has. B) can produce it at lower opportunity cost than anyone else can. C) has less desire to consume that good than anyone else has. D) has more human capital related to that good than anyone else has.

B) can produce it at lower opportunity cost than anyone else can.

Which of the following pairs of goods are most likely substitutes? A) DVDs and DVD players B) cola and lemon lime soda C) lettuce and salad dressing D) peanut butter and gasoline

B) cola and lemon lime soda

A severe drought has damaged this year's lettuce crop. The initial effect on the lettuce market is a A) decrease in the demand for lettuce. B) decrease in the supply of lettuce. C) decrease in both the demand and supply of lettuce. D) rightward movement along the demand curve for lettuce.

B) decrease in the supply of lettuce.

When there is a surplus in the market, the quantity sold is A) equal to the quantity supplied. B) equal to the quantity demanded. C) less than the quantity demanded. D) greater than the quantity bought.

B) ewual to the quantity demanded.

7. A person goes to college to become an engineer. This is an example of an A) investment in physical capital. B) investment in human capital. C) increase in entrepreneurship. D) increase in labor.

B) investment in human capital.

6.What are the four categories into which factors of production are grouped? A) profit, wages, rent, and interest B) land, labor, capital, and entrepreneurship C) capital, human capital, land, and labor D) entrepreneurship, profit, labor, and wages

B) land, labor, capital, and entrepreneurship

13.The marginal benefit from a good is the maximum amount a person is willing to pay for A) all of the good the person consumes. B) one more unit of the good. C) all of the units of the good the person consumes divided by the number of units he or she purchases. D) one more unit of the good divided by the number of units purchased

B) one more unit of the good.

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 2 pounds of chocolate chip cookies. B) shortage of 3 pounds of chocolate chip cookies. C) shortage of 5 pounds of chocolate chip cookies. D) surplus of 3 pounds of chocolate chip cookies

B) shortage of 3 pounds of chocolate chip cookies.

18.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 total revenue from sales of printers to the total cost of producing all the printers. B) the extra revenue from selling a few additional printers to the extra costs of producing the printers. C) the extra revenue from selling a few additional printers to the average cost of producing the additional printers. D) HP's printers to printers from competing companies, such as Lexmark.

B) the extra revenue from selling a few additional printers to the extra costs of producing the printers.

When the price of a pizza decreases from $14 to $12, A) the income effect means people buy less pizza. B) the income effect points out that the total purchasing power of people who buy pizza increases. C) the quantity demanded of pizza will not change. D) None of the above answers is correct.

B) the income effect points out that the total purchasing power of people who buy pizza increases.

When a market is in equilibrium A) everyone has all they want of the commodity in question. B) there is no shortage and no surplus at the equilibrium price. C) the number of buyers is exactly equal to the number of sellers. D) the supply curve has the same slope as the demand curve

B) there is no shortage and no surplus at the equilibrium price.

A complement is a good A) of lower quality than another good. B) used in conjunction with another good. C) used instead of another good. D) of higher quality than another good.

B) used in conjunction with another good.

The price of a film camera is $50 and the price of a similar digital camera is $150. What is the relative price of the digital camera? A) 1/2 of a film camera B) $150 C) 3 film cameras D) $150 more expensive than the film camera

C) 3 film cameras

The table above represents the marginal cost and marginal benefit associated with pizza (in terms of movies). What amount of pizza should be produced if resources are to be used efficiently? A) 5 pizzas B) 6 pizzas C) 7 pizzas D) 8 pizzas

C) 7 pizzas

13.Which of the following is a positive statement? A) The United States should fight inflation even if it raises unemployment. B) What to do with Social Security is the most important economic issue today. C) A 5 percent increase in income leads to a 3 percent increase in the consumption of orange juice. D) Because they decrease productivity, labor unions should be eliminated.

C) A 5 percent increase in income leads to a 3 percent increase in the consumption of orange juice.

Consider the market for broccoli. If the price of a pound of broccoli increases, what happens to the supply of broccoli? A) The supply of broccoli decreases. B) The supply of broccoli increases. C) There will be no change in the supply of broccoli, but instead is an increase in the quantity supplied of broccoli. D) There will be no change in the supply of broccoli, but instead is a decrease in the quantity supplied of broccoli.

C) There will be no change in the supply of broccoli, but instead is a increase in the quantity supplied of broccoli.

12. If the marginal cost of an activity exceeds the marginal benefit, then A) the activity will occur because of the high marginal cost. B) the forgone alternatives' costs must be increased. C) an alternative action will be selected. D)the person must concentrate on the activity's total benefits

C) an alternative action will be selected.

If consumers' incomes increase and the demand for bus rides decreases A) bus rides are a normal good. B) consumers are behaving irrationally. C) bus rides are an inferior good. D) none of the above

C) bus rides are an inferior good.

2. An incentive A) could be a reward but could not be a penalty. B) could be a penalty but could not be a reward. C) could be either a reward or a penalty. D) is the opposite of a tradeoff.

C) could be either a reward or a penalty.

A surplus occurs when the price is A) less than the equilibrium price. B) equal to the equilibrium price. C) greater than the equilibrium price. D) None of the above because the existence of a surplus is independent of the price of the good

C) greater than the equilibrium price.

1. All economic questions are about A) how to make money. B) what to produce. C) how to cope with scarcity. D) how to satisfy all our wants.

C) how to cope with scarcity.

Normal goods are those for which demand decreases as A) the price of a complement falls. B) the price of a substitute falls. C) income decreases. D) the good's own price rises.

C) income decreases.

The "law of supply" states that, other things remaining the same, firms produce A) more of a good the less it costs to produce it. B) less of a good the more it costs to produce it. C) more of a good the higher its price. D) less of a good as the required resources become scarcer.

C) more of a good the higher its price.

17.Economic growth is the result of all of the following EXCEPT A) technological change. B) capital accumulation. C) opportunity cost. D) investment in human capital.

C) opportunity cost.

Wages for workers producing iPods and similar products will rise next year. Walkman Watch asks you to predict the effect of this change in next year's market for iPods. You predict that the major effect will be that the A) demand curve for an iPod will shift rightward. B) demand curve for an iPod will shift leftward. C) supply curve for an iPod will shift leftward. D) supply curve for an iPod will shift rightward.

C) supply curve for an iPod will shift leftward.

9. Opportunity cost is defined as A) all the possible alternatives given up. B) the amount of money spent to take part in the activity chosen. C) the highest-valued alternative given up. D) the top two alternatives given up.

C) the highest-valued alternative given up.

7. Opportunity cost is best defined as A) the amount of money that an individual is willing to pay to purchase a good that means a great deal to that person. B) the amount of money lost by one individual in an exchange process so that another individual might gain. C) the highest-valued alternative that is forgone when choosing among various alternatives. D) a situation in which one individual cannot have an absolute advantage over another individual in the production of all goods.

C) the highest-valued alternative that is forgone when choosing among various alternatives.

The "law of demand" states that changes in A) demand are related directly to changes in supply. B) the quantity demanded of a good are not related to changes in the quantity supplied. C) the quantity demanded of a good are inversely related to changes in its price. D) demand are inversely related to changes in supply.

C) the quantity demanded of a good are inversely related to changes in its price.

A relative price is A) a price expressed in terms of money. B) what you get paid for babysitting your cousin. C) the ratio of one money price to another. D) equal to a money price.

C) the ratio of one money price to another.

1. The production possibilities frontier is the boundary between A) those combinations of goods and services that can be produced and those that can be consumed. B) those resources that are limited and those that are unlimited. C) those combinations of goods and services that can be produced and those that cannot. D) those wants that are limited and those that are unlimited.

C) those combinations of goods and services that can be produced and those that cannot.

Changes in which of the following shift the demand curve for hamburgers? A) an increase in the price of the meat used to produce hamburgers B) an improvement in the productivity of hamburger-making machines C) a fall in the price of french fries, a complement for hamburgers D) an increase in the number of hamburger restaurants

C)a fall in the price of french fries,a complement for hamburgers.

11.Your employer has asked you to start working overtime and has offered to pay $18 per hour for every hour you work beyond forty hours a week. The wage rate for each of the first forty hours will continue to be the usual $15 per hour. In terms of dollars, what is the marginal benefit of working each hour of overtime? A) zero B) $3.00 C) $15.00 D) $18.00

D) $18.00

The above table shows the demand schedule and supply schedule for chocolate chip cookies. What is the equilibrium quantity and equilibrium price for chocolate chip cookies? A) 7 pounds, $3.00 per pound B) 2 pounds, $3.00 per pound C) 2 pounds, $6.00 per pound D) 4 pounds, $5.00 per pound

D) 4 pounds, $5.00 per pound

19.The concept of tradeoffs concerns all of the following questions EXCEPT: A) What goods and services should be produced? B) How should goods and services be produced? C) For whom should goods and services be produced? D) Why should goods and services be produced?

D) Why should goods and services be produced?

2.Which of the following is NOT true concerning a society's production possibilities frontier (PPF)? A) It reveals the maximum amount of any two goods that can be produced from a given quantity of resources. B) Tradeoffs occur when moving along a PPF. C) Production efficiency occurs when production is on the frontier itself. D) Consumers will receive equal benefits from the two goods illustrated in the PPF.

D) Consumers will receive equal benefits from the two goods illustrated in the PPF.

Oatmeal is an inferior good and cold cereal is a substitute for oatmeal. Raisins are a complement for oatmeal. Which of the following increases the demand for oatmeal? A) an increase in the price of raisins B) an increase in income C) a decrease in population size D) an increase in the price of cold cereal

D) an increase in the price of cold cereal

Because of increasing marginal cost, most supply curves A) are horizontal. B) are vertical. C) have a negative slope. D) have a positive slope

D) have a positive slope.

5.Some time ago the government of China required many highly skilled technicians and scientists to engage in unskilled agricultural labor in order to develop "proper social attitudes." This policy probably caused China to produce A) at an inappropriate point along its production possibilities frontier. B) outside its production possibilities frontier with respect to food, but inside with respect to high-technology goods. C) inside its production possibilities frontier with respect to food, but outside with respect to high-technology goods. D) inside its production possibilities frontier.

D) inside its production possibilities frontier.

18. The opportunity cost of economic growth is A) future consumption that a nation gets if it gives up some present consumption. B) future consumption that a nation gives up to consume more today C) present consumption that a nation gives up to accumulate capital D) investment that a nation gives up to increase its economic growth.

D) investment that a nation gives up to increase its economic growth.

8.The loss of the highest-valued alternative defines the concept of A) marginal benefit. B) scarcity. C) entrepreneurship. D) opportunity cost.

D) opportunity cost.

10.Marginal benefit is the benefit A) that your activity provides to someone else. B) of an activity that exceeds its cost. C) that arises from the secondary effects of an activity. D) that arises from an increase in an activity.

D) that arises from an increase in an activity.

9. Joe's hot dog stand can produce hot dogs and hamburgers. The table above gives Joe's production possibilities. The opportunity cost of ________. A) the 20th hot dog is 0 hamburgers B) the 40th hamburger is 20 hot dog C) 1 hamburger is 10 hot dogs D) the first 20 hot dogs is 20 hamburgers

D) the first 20 hot dogs is 20 hamburgers

8. On a diagram of a production possibilities frontier, opportunity cost is represented by A) a point on the horizontal axis. B) a point on the vertical axis. C) a ray through the origin. D) the slope of the production possibilities frontier, which indicates that to get more of one good requires less of another.

D) the slope of the production possibilities frontier, which indicates that to get more of one good requires less of another.

14. Resource use is allocatively efficient when A) we produce the goods with the highest opportunity cost. B) we produce the goods with the lowest opportunity cost. C) we cannot produce more goods and services. D) we produce the amount of the different goods we value most highly

D) we produce the amount of the different goods we value most highly

4.Which of the following is NOT illustrated by a production possibilities frontier? A) scarcity B) opportunity cost C) necessity for choice D) who gets the goods

D) who gets the goods