ECO-251 exam study guide
Which of the following is an example of a durable good?
Binoculars
The figure given below shows the production possibilities frontier for mufflers and socks. The opportunity cost of moving from point b to d is:
100 socks
In what ways is consumer demand different from consumer wants?
Demand takes into account the ability to pay
Which of the following is a defining characteristic of a public good?
It is freely available to everyone once it is produced
Jennifer expects the price of chewing gum to go up by 10 percent next week. Which of the following is the most likely result of such an expectation?
Jennifer's demand for chewing gum will increase during this week
Refer to Exhibit 4.4, which shows the supply curve of a good. Which outcome will result when price increases from P to P'?
Quantity supplied will increase
A cottage industry is one that:
carries out production in workers' homes
Externalities are defined as:
costs or benefits that fall on third parties
If the price of potato chips increases, other things constant, the demand for potato chip dips will _____
decrease, because the goods are complements
An increase in the price of a good normally increase the
demand for its substitutes
The law of demand is illustrated by a demand curve that is
downward sloping
The figure below shows the production possibilities frontier for Good A and Good B. In the figure below, given the quantity of resources and level of technology, which of the following points is unattainable?
e
The figure below shows the production possibilities frontier for Good A and Good B. In the figure below, if all the economy's resources are used efficiently to produce only good B, then the economy will be at point:
g
The figure below shows the production possibilities frontier for Good A and Good B. In the figure below, if resources are used fully and efficiently, then the economy can produce at point(s):
g,h, or i
If people believe that prices are going to be higher in the future than they are today, they will
increase their demand now
If Good A and Good B are complements, then a decrease in the price of Good B _____
increases the demand for Good A.
Adam Smith's term "the invisible hand" refers to:
market forces
The law of demand states that _____
other things constant, quantity demanded varies inversely with price.
Households:
own and sell resources
A good economic theory:
predicts well
The labor market is an example of:
resource market
Households act as suppliers when they provide:
resources to firms and governments
The term "utility" refers to:
satisfaction
The table given below shows the quantity supplied and the quantity demanded of a good at different prices. If the price of the good is $1.40, there is a _____.
shortage of 30 units
The table given above shows the quantity supplied and the quantity demanded of a good at different prices. If the price of the good described in the table given below is $1.60, then there is a _____
surplus of 30 units
Which of the following best defines supply?
the amount of a good that producers are willing and able to sell at each possible price, other things constant
Which of the following is an example of a positive economic statement?
An increase in the price of gasoline will cause a reduction in the amount of gasoline purchased.
Which of the following is an example of a normative economic statement?
Women should earn the same income as men
A production possibilities frontier can shift outward for all of the following reasons except:
a decrease in the size of the labor force
A country has an absolute advantage in the production of a good if that country:
can produce the good using fewer resources than another country would require
The law of comparative advantage says that a person should produce a good if he or she:
has the lowest opportunity cost of producing that good
A resource is something that:
is used to produce goods and services
The figure given below shows the production possibilities frontier for mufflers and socks. If society moves from point c to point d, then society:
loses 30 mufflers
Scarcity:
occurs when a resource is not freely available
An outward shift of the production possibilities frontier:
reflects economic growth
Adam Smith believed that people's pursuit of their own self-interests:
tended to promote general welfare
Macroeconomics is the study of:
the behavior of the economy as a whole
Microeconomics is the study of:
the economic behavior of individual decision makers
The law of comparative advantage says that:
the individual with the lowest opportunity cost of producing a particular good should produce it.
Goods and services are scarce because:
they are produced using scarce resources
To say that people make decisions at the margin means that:
they weigh the additional costs and the additional benefits of various activities before they make a decision.
Which of the following is not a reason why some production continues in households?
Some household production requires many specialized resources.
Which of the following is true of import tariffs and quotas?
They benefit domestic producers.
A PPF will not shift because of an increase in
Unemployment
Refer to Exhibit 4.3, which shows the supply curves of baby formula. The development of a more efficient production technology for producing baby formula is likely to cause _____
a rightward shift of the supply curve from S1 to S2
A tariff is:
a tax on imports
The difference between normal and inferior goods is that
an increase in income will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward
Gross domestic product is the market value of:
all final goods produced during the course of a year
A movement along the demand curve for a good can be attributed to a change in _____
the quantity demanded of the good
An improvement in technology would shift
the supply curve rightward
Which of the following is the fundamental resource that is the basis of labor?
time
