Econ 2301 Test1

Two major virtues of the market system are that it:

allocates resources efficiently and allows economic freedom.

The data indicate that:

consumers spend 90 percent of their after-tax incomes.

The production possibilities curve illustrates the basic principle that:

if all resources of an economy are in use, more of one good can be produced only if less of another good is produced.

Refer to the given information. An increase in the price of a product that is a close substitute for X will:

increase D, increase P, and increase Q

The four factors of production are:

land, labor,capital, and entrepreneurial ability.

Money is not an economic resource because:

money, as such, does not produce anything.

The coordination problem in the centrally planned economies refers to the idea that:

planners had to direct required inputs to each enterprise

If the supply of a product decreases and the demand for that product simultaneously increases the equilibrium:

price must rise, but equilibrium quantity may rise, fall, or remain unchanged

The division of labor means that:

workers specialize in various production tasks.

Refer to the table. A total output of 3 units of capital goods and 4 units of consumer goods:

would involve an inefficient use of the economy's scarce resources.

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. If the initial demand and supply curves are D0 and S0, equilibrium price and quantity will be:

0F and 0C, respectively.

Refer to the table. If the economy is producing at production alternative C, the opportunity cost of the tenth unit of consumer goods will be:

1/3 of a unit of capital goods

Refer to the diagram. The economy will experience unemployment if it produces at point:

D

In which of the following instances is the effect on equilibrium price dependent on the magnitude of the shifts in supply and demand?

Demand rises and supply rises.

Which of the following statements is correct?

If supply increases and demand decreases, equilibrium price will fall.

Refer to the diagram. Which one of the following would shift the production possibilities curve from PP1 to PP2?

Immigration of skilled workers into the economy.

Refer to the diagram. Other things equal, this economy will achieve the most rapid rate of growth if:

It chooses point A

Which of the following is a fundamental characteristic of the market system?

Property Rights

If the supply and demand curves for a product both decrease, then equilibrium:

Quantity must decline, but equilibrium price may rise, fall, or remain unchanged.

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. Given D0, if the supply curve moved from S0 to S1, then:

Supply had decreased and equilibrium quantity has decreased.

Which of the following best describes the invisible-hand concept?

The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest.

Refer to the diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market the indicated shift in supply may have been caused by:

The development of more efficient machinery for producing this commodity.

Refer to the diagram. The equation that shows the relationship between Y and X is:

Y=50+1/4X

Refer to the table. For this economy to produce a total output of 3 units of capital goods and 13 units of consumer goods, it must:

achieve economic growth

Refer to the diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market:

an increase in demand has been more than offset by an increase in supply.

Refer to the diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market the indicated shift in demand may have been caused by:

an increase in incomes if the product is a normal good

The invisible hand concept suggests that:

assuming competition, private and public interests will coincide

The regulatory mechanism of the market system is:

competition

Refer to the given information. A reduction in the number of firms producing X will:

decrease S, increase P, and decrease Q

Private Property:

encourages owners to maintain or improve their property so as to preserve or enhance value.

The "coincidence of wants" problem associated with barter refers to the fact that:

for exchange to occur, each seller must have a product that some buyer wants.

Refer to the given information. An increase in income, if X is a normal good, will:

increase D, increase P, increase Q

Refer to the diagram, which shows supply and demand conditions in the competitive market for product X. A shift in the demand curve from D0 to D1 might be caused by a(n):

increase in the price of complementary good Y.

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. Other things equal, a shift of the supply curve from S0 to S1 might be caused by a(n):

increase in the wage rates paid to laborers employed in the production of X.

Broadly defined, competition involves:

independently acting buyers and sellers and freedom to enter or leave markets.

Unemployment:

is illustrated by a point inside the production possibilities curve

From society's point of view, the economic function of profits and losses is to:

reallocate resources from less desired to more desired uses.

When an economy is operating under conditions of full employment, the production of more of commodity A will mean the production of less of commodity B because:

resources are limited.

A nation's production possibilities curve is bowed out from the origin because:

resources are not generally equally efficient in producing every good.

A production possibilities curve illustrates:

scarcity