Econ 101 Exam 1

The above table shows production points on Sweet-Tooth Land's production possibilities frontier. A movement from ________ represents the greatest opportunity cost of increasing cola production.

point B to point A

In the figure above, which movement could be the result of an increase in the wages paid to oil workers?

point a to point d

In the above figure, a change in quantity demanded with unchanged demand is represented by a movement from

point a to point e.

In the above figure, a change in quantity supplied with unchanged supply is represented by a movement from

point b to point a.

The quantity of CDs that firms plan to sell this month depends on all the following EXCEPT the

quantity of CDs that people plan to buy.

In mid-2012 Delta increased the price of a New York to LA ticket by 10 percent. As a result of this price hike, there was a ________ shift in the demand curve for a ticket on Continental because the price of a ________ had risen.

rightward; substitute

Moving along a bowed-out PPF between milk and cotton, as more milk is produced the marginal cost of an additional gallon of milk

rises

You observe that an increase in the price of salsa decreases the demand for tortilla chips and increases the demand for potato chips. You can conclude that

salsa and tortilla chips are complements.

The wage rate paid by Walkman producers falls and at the same time the price of raw materials used in the production of Walkmans rises. You predict that the supply curve of Walkmans will

shift either leftward or rightward.

The quantity of shoes produced is measured along the horizontal axis of a PPF and the quantity of shirts is measured along the vertical axis. As you move down toward the right along the PPF, the marginal cost of

shoes increases

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

shortage of 3 pounds of chocolate chip cookies.

In the above figure, a price of $15 per dozen roses would result in a ________ so that the price of roses will ________.

shortage; rise

People buy more of good 1 when the price of good 2 rises. These goods are

substitutes

In the above figure, if the price is $8 then there is a

surplus of 200.

Microeconomics is the study of

the choices that individuals and businesses make

In 2006, the base price of a Hummer SUV was about $30,000. By 2008 as gasoline prices increased,

the demand curve for Hummers shifted leftward and Hummer prices decreased.

Which of the following is a macroeconomic issue?

the effect of increasing the money supply on inflation

For consumers, goods A and B are complementary goods. The cost of a resource used in the production of A decreases. As a result

the equilibrium price of B will rise and the equilibrium price of A will fall.

In the above figure, if the demand curve is D2, then

the equilibrium price will be P1 and the equilibrium quantity will be Q2.

Using the above figure, suppose that roses are a normal good. If there is an increase in income

the equilibrium price will rise above $25 per dozen roses.

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

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

Each point on the demand curve reflects

the highest price consumers are willing and able to pay for that particular unit of a good.

Jane produces only corn, measured in tons, and cloth, measured in bolts. For her, the opportunity cost of one more ton of corn is

the inverse of the opportunity cost of one more bolt of cloth.

Each point on a supply curve represents

the lowest price for which a supplier can profitably sell another unit.

A supply curve shows the relation between the quantity supplied and

the price of the good. Usually a supply curve has positive slope.

Which of the following is a microeconomic topic?

the reasons why Kathy buys less orange juice

human capital is

the skill and knowledge of workers.

Farmers can use their land to grow soy beans or corn. If the price of corn rises,

the supply of soybeans decreases and the soybean supply curve shifts leftward.

Which of the following is NOT a factor of production?

the wages paid to workers.

In terms of dollars, the marginal benefit of working five days a week instead of four days a week is

the wages received for the fifth day of work.

Suppose the equilibrium price for soft drinks is $1.00. If the current price in the soft drink market is $1.25 each

there will be a surplus of soft drinks.

The production possibilities frontier is the boundary between

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

To obtain the gains available from comparative advantage, individuals or countries must do more than specialize; they must also

trade

All economic questions arise because we

want more than we can get.

If Taco Bell decides to produce more tacos and fewer burritos, Taco Bell is answering the ________ part of one of the two big economic questions.

what

When a firm decides to produce more electric cars and conventional gas powered cars, it is most directly answering the ________ part of one of the two big economic questions.

what

When firms in an economy start producing more computers and fewer televisions, they are answering the ________ part of one of the two big economic questions.

what

If the United States can increase its production of automobiles without decreasing its production of any other good, the United States must have been producing at a point

within its ppf

On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is

working out at the gym

Bill Bonecrusher graduates from college with a choice of playing professional football at $2 million a year or coaching for $50,000 a year. He decides to play football, but eight years later, though he could continue to play football at $2 million a year, he quits football to make movies for $3 million a year. His opportunity cost of playing football at graduation was ________ and eight years later the opportunity cost of making movies was ________.

$50,000; $2 million

When an economy produces more houses and fewer typewriters, it is answering the ________ part of one of the two big economic questions.

"what"

Suppose you are working four nights per week at your courses and your grade point average is 3.5. You want a higher grade and decide to study an extra night each week. Your GPA now rises to 3.8. What is your marginal benefit from studying for one additional night a week?

0.3

Jerry is studying three nights per week and his grade point average is 3.1. He wants a higher GPA and decides to study an extra night each week. His GPA now rises to 3.5. Had Jerry not decided to study an extra night, he would have spent this night with his friends. Jerry's marginal benefit from studying for one additional night a week is _____________ and his marginal cost of increasing the study time by one night per week is _____________.

0.4; a night spent with his friends that he gives up

During the summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. In terms of dollars, the opportunity cost of attending summer school is

10300

Which of the following is NOT a factor of production?

175 shares of Microsoft stock

In the table above, country B is producing 4 units of X and 6 units of Y. For country B, the opportunity cost of producing an additional unit of Y is

2/3 unit of X per unit of Y.

You decide to take a vacation and the trip costs you $2,000. While you are on vacation, you do not go to work where you could have earned $750. In terms of dollars, the opportunity cost of the vacation is

2750

The most anyone is willing to pay for another purse is $30. Currently the price of a purse is $40, and the cost of producing another purse is $50. The marginal benefit of a purse is

30

In the above figure, what is the minimum supply price for the fourth gallon of ice cream?

5

The equilibrium price in the above figure is

6

The table above represents the marginal cost and marginal benefit associated with pizza (in terms of movies). What quantity of pizza should be produced if resources are to be used efficiently?

7

The Miami Dolphins play football in Joe Robbie Stadium which holds 76,500 seats. In 2009, attendance averaged about 70,000 fans per game. This means that the quantity supplied of seats is

76500

Which of the following is consistent with the law of demand?

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

Which of the following is NOT an example of an opportunity cost?

Because Mary is now being paid a higher wage, she can afford to buy a new car even though she is moving into a bigger apartment.

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?

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

A marginal cost curve

Both answers is upward sloping and shows that as more of a good is produced, opportunity costs of producing another unit increase are correct.

The figure above shows the market for airline tickets. If airline tickets are a normal good, then the recession in 2008 that caused people's incomes to decrease lead to a shift from

D0 to D1.

What will happen to the equilibrium price and equilibrium quantity of ice cream cones when consumers' incomes decrease?

If ice cream cones are a normal good, then the equilibrium price and quantity of ice cream cones will decrease.

In the above figure, which point represents an unattainable production combination of the two goods?

L

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. If these two states were to engage in trade, which of the following is TRUE?

Missouri would specialize in pecan production and trade pecans to Washington for pears.

In the U.S. economy, which of the following statements is TRUE?

More services are produced than goods.

In economics we learn that

None of the above answers is correct.

The above table shows production points on Sweet-Tooth Land's production possibilities frontier. Which of the following statements is TRUE?

Producing 0 chocolate bars and 100 cans of cola is both attainable and efficient.

The figure above shows the market for airline tickets. In early 2008 firms negotiated lower wages with their workers. This change is shown in the figure as a shift from

S0 to S1.

The figure above shows the market for airline tickets. In early 2008 the price of jet fuel rose. This change is shown in the figure as a shift from

S0 to S1.

As we increase the production of computers, we find that we must give up larger and larger amounts of DVD players per computer.

This situation illustrates increasing opportunity cost.

Suppose a scientific breakthrough made free solar power available in unlimited quantities in the United States. The effect of this invention would be to move the

U.S. production possibilities frontier outward.

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. Which of the following statements is TRUE?

Washington has an absolute advantage in the production of both pecans and pears.

In 2014, the price of peanuts was rising, which lead peanut butter sellers and peanut butter buyers to expect the price of peanut butter would rise in the future. Consequently, in the current market for peanut butter there was ________ which resulted in a ________ in the price of peanut butter and ________ in the quantity of peanut butter.

a decrease in supply of peanut butter and an increase in demand for peanut butter; rise; an increase, decrease or possibly no change

A changes in which of the following shifts the demand curve for hamburgers?

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

Which of the following raises the price of a used car and increases the equilibrium quantity sold?

a new 8 percent federal excise tax placed on all new car purchases

General Electric (GE) produces wind turbines that generate wind power. Over the past 10 years, the advances in technology used to produce wind turbines has resulted in

a rightward shift in the supply curve for wind-generated power.

If the quantity demanded exceeds the quantity supplied, then there is

a shortage and the price is below the equilibrium price.

Ticket scalpers at the NCAA basketball tournament last year charged prices high above the printed ticket price. This observation is evidence of

a shortage at printed ticket prices

In the above figure, a price of $15 per dozen for roses would result in

a shortage.

A market research team has come up with the demand and supply schedules for gasoline in Motorville in the table above. Use these data to analyze the situation in the market for gas in Motorville.Suppose the price is 330 cents per gallon. There is

a surplus and the price will decrease to restore equilibrium.

The marginal benefit is the

additional gain from one more unit of an activity.

Which of the following shifts the supply curve for good X leftward?

an increase in the cost of the machinery used to produce X

In the market for magazines, the "income effect" means that

an increase in the price of magazines will reduce the total purchasing power of magazine readers, making them able to afford fewer magazines.

When the price of an inferior good falls, the substitution effect leads to ________ in the quantity purchased and the income effect leads to ________ in the quantity purchased.

an increase; a decrease

Consider the demand curves for soft drinks shown in the figure above. Initially the economy is at point a. If people come to expect that the price of a soft drink will increase in the future, there will be a movement to a point such as

b

A person has a comparative advantage in producing a particular good if that person

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

An efficient allocation of resources occurs when we

cannot produce more of a good or service without giving up some other good or service that we value more highly.

Which of the following pairs of goods are most likely substitutes?

cola and lemon lime soda

An incentive

could be either a reward or a penalty.

Cupcakes and granola bars are substitutes in consumption. The price of a granola bar increases so the demand for

cupcakes will increase, that is, the demand curve will shift rightward.

The tradeoff between current consumption and the production of capital goods also reflects a tradeoff between

current consumption and future consumption.

Based on the above, which figure shows the impact of a decrease in the population available to work?

d

In the above figure, once on PPF2, a country would grow slowest by producing at point

d

The figure above shows supply curves for soft drinks. Suppose the economy is at point a. An increase in the price of a soft drink is shown as a movement from point a to

d

Ham and eggs are complements. If the price of ham rises, the demand for eggs will

decrease and the demand curve for eggs will shift leftward.

A decrease in the expected future price of cars

decreases the current demand for cars, that is, there is a leftward shift of the demand curve for cars.

In the figure above, moving from production at point d to production at point a requires

decreasing the output of consumer goods in order to boost the output of capital goods.

The above figure shows the market for oil. Because of the development of a new deep sea drilling technology the

demand curve does not shift, and the supply curve shifts from S1 to S2.

The above figure shows the market for bicycles. When there is a physical fitness craze so that everyone wants to exercise the

demand curve for bicycles shifts from D1 to D2.

There are 72,922 seats in Lambeau Field where the Green Bay Packers play football. The Packers have sold out their season tickets since 1960. There were about 70,000 people on the waiting list to buy season tickets in 2010. Packers tickets are a normal good. As a result of the economic recession in 2010 during which people's incomes decreased, the

demand for Packers tickets decreased.

Marginal benefit curves slope

downward, but not because of increasing opportunity cost.

Macroeconomics is concerned with

economy-wide variables.

Human resources that perform the functions of organizing, managing, and assembling the other resources are called

entrepreneurship

Which factor of production earns profit?

entrepreneurship

When there is a shortage in the market, the quantity sold is

equal to the quantity supplied.

If the price of a movie download falls, the rental rate of DVDs ________ and the equilibrium quantity of DVDs rented ________.

falls; decreases

In the above figure, if 4000 bicycles are produced per month,

fewer bicycles should be produced to reach the allocatively efficient level of output.

The above figures show the market for hamburger meat. Which figure(s) shows the effect of a new report by the U.S. Surgeon General that beef consumption is healthier than previously believed?

figure a

The fact that people with higher incomes get to consume more goods and services addresses the ________ part of one of the two big economic questions.

for whom

The figure above shows the demand for fruit snacks. Which movement reflects a decrease in population?

from point a to point c

The figure above shows the demand for fruit snacks. Which movement reflects how consumers would react to an increase in the price of a fruit snack that is expected to occur in the future?

from point a to point d

In one day, Brandon can either plow 10 acres or plant 20 acres. In one day, Christopher can either plow 14 acres or plant 14 acres. Brandon and Christopher can

gain from exchange if Brandon specializes in planting and Christopher specializes in plowing.

The figure above illustrates Mary's production possibilities frontier. If Mary wants to move from point b to point c, she must

give up some of good Y in order to obtain more of good X.

From 8 to 11 p.m., Sam can either attend a basketball game, a hockey match or the symphony. Suppose that Sam decides to attend the hockey match and thinks to herself that if she did not go to the match she would go to the symphony. Then the opportunity cost of attending the hockey match is

going to the symphony.

Country A can produce 1 cello by giving up the production of 5 guitars. Country B can produce 1 guitar by giving up the production of 4 cellos. In which good does country A have a comparative advantage?

guitars

An art museum decides to offer tours by having visitors listen to cassette tapes rather than have tour guides. The museum is answering the ________ part of one of the two big economic questions.

how

All economic questions are about

how to cope with scarcity.

Joy is training to become a chef. The skills she is obtaining from her training and education will increase Joy's ________.

human capital

Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour. There can be gains from exchange

if Agnes specializes in the production of X and Brenda specializes in the production of Y.

George and Michael can gain from exchange

if each specializes in the production of the good for which he has the lower opportunity cost.

A president of the United States promises to produce more defense goods without any decreases in the production of other goods. This promise can be valid

if the United States is producing at a point inside its production possibilities frontier.

When an economist talks of scarcity, the economist is referring to the

inability of society to satisfy all human wants because of limited resources.

An increase in the demand for computers and a decrease in the number of sellers of computers will definitely ________.

increase the price of a computer

As a country that has a bowed-out production possibilities frontier produces more of one good, the opportunity cost of a unit of that good ________.

increases

The principle of decreasing marginal benefit means that as the quantity of a good consumed

increases, its marginal benefit decreases.

Which of the following best defines capital as a factor of production?

instruments, machines, and buildings used in production

When the government chooses to spend the tax dollars that it collects on homeland security, its choice

involves a tradeoff of other goods and services such as education for more homeland security.

Suppose Company A's profits increase by $10 million and nobody is made worse off. The CEO of Company A keeps all $10 million for herself. This situation

is definitely efficient.

A student athlete is deciding whether to work out for an extra hour. Her marginal benefit from another hour of exercise

is the benefit she receives from exercising the additional hour.

The "gifts of nature" are included as part of which factor of production?

land

Factors of production include

land, labor, capital and entrepreneurship.

If the price of aluminum used to make bicycles increases, the price of a bicycle rises because of a

leftward shift of the supply curve of bicycles.

In every economic system, choices must be made because resources are ________ and our wants are ________.

limited; unlimited

Scarcity requires that people must

make choices

Economics is best defined as the study of how people, businesses, governments, and societies

make choices to cope with scarcity

In the figure above, if 4 million computers are produced per year then the ________ should be produced to achieve the allocatively efficient use of resources.

marginal cost of a computer exceeds the marginal benefit of a computer, so fewer computers

In the above figure, the curve labeled a is the ________ curve and the curve labeled b is the ________ curve.

marginal cost; marginal benefit

Studying the determination of prices in individual markets is primarily a concern of

microeconomics

Studying the effects choices have on the individual markets within the economy is part of

microeconomics

In broad terms the difference between microeconomics and macroeconomics is that

microeconomics studies decisions of individual people and firms and macroeconomics studies the entire national economy.

When the price of a good falls, the income effect for a normal good implies that people buy

more of that good because they can afford to buy more of all the things they previously bought.

People must make choices because

of scarcity

The loss of the highest-valued alternative defines the concept of

opportunity cost

When the government hires people to serve in the army, these people are no longer available to do other work. This choice illustrates the concept of

opportunity cost

Marginal cost is the ________ one more unit of a good and ________ of the good increases.

opportunity cost of producing; increases as production

When the production possibilities frontier bows outward from the origin

opportunity costs are increasing.

Scarcity exists because

our wants exceed the resources available to satisfy them.

Fundamental economic problems basically arise from

our wants exceeding our scarce resources

In 2012 Nike reduced the price of its running shoes by 20 percent. As a result, the substitution effect caused

people to switch from Adidas shoes and buy more Nikes.