Econ Ch. 1-3, 5

(Four Markets for DVDs Diagram) Look at the figure Four Markets for DVDs. Which of the graphs shows what may happen if D1 or S1 is the original curve and D2 or S2 is the new curve and if some of the stores that rent DVDs close? A. C B. D C. A D. B

D

(PPS2 Diagram) Look at the table Production Possibilities Schedule II. If an economy is producing at X, the opportunity cost to it of producing at Y is _____ units of consumer goods per period. A. 1 B. 2 C. 18 D. 6

D

(Shifts in Demand and Supply 2 Diagram) Look at the figure Shifts in Demand and Supply II. The figure shows how supply and demand might shift in response to specific events. Suppose the birthrate decreases. Which panel BEST describes how this will affect the market for diapers? A. Panel C B. Panel D C. Panel A D. Panel B

D

(Wine and Wheat Diagram) Look at the figure Wine and Wheat. If this economy is producing on the production possibility frontier, what would allow it to produce at point C? A. a decrease in resources B. elimination of unemployment C. a decrease in production D. an improvement in technology

D

A leftward shift of a supply curve is caused by: A. a technological improvement in production. B. an increase in the number of sellers. C. an increase in the number of buyers. D. an increase in the cost of an input.

D

A production possibility frontier that is a straight line sloping down from left to right suggests that: A. more of both goods could be produced moving along the frontier. B. there are no opportunity costs. C. the two products must have the same price. D. the opportunity costs of the products are constant.

D

An increase in the price of sugar (an ingredient for soft drinks) and an increased concern about tooth decay caused by the consumption of soft drinks will result in which of the following in the soft drink market? A. There will be a decrease in both equilibrium price and quantity. B. Equilibrium quantity will increase, but equilibrium price may decrease, increase, or stay the same. C. There will be an increase in both the equilibrium price and quantity. D. Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.

D

Assuming that desktop computers are normal goods, which of the following will NOT increase demand for desktop computers? A. cool new computer games that can only be played on desktop computers B. the price of notebook computers increasing C. an increase in the incomes of computer users D. a very large computer company going out of business

D

Economists generally believe that a country should specialize in the production of a good or service if: A. the country can produce the product using more resources than any other country. B. the production possibility frontier is closer to the origin than that of any other country. C. the production possibility frontier is further from the origin than that of any other country. D. the country can produce the product while forgoing fewer alternative products than any other country.

D

Florida schools offered cash bonuses to students who scored high on the state's standardized exams. The cash bonuses are an example of this economic principle: A. Resources are scarce. B. There are gains from trade. C. The real cost of something is what you must give up to get it. D. People usually take advantage of opportunities to make themselves better off.

D

If the price elasticity of demand between two points on a demand curve is 0.75, then the demand between those two points is: A. unknown. B. price-elastic. C. price unit-elastic. D. price-inelastic.

D

Look at the figure Linear Demand Curve II. If price was initially set at $8 and then increased to $10, total revenue would: A. increase, as the price effect dominates the quantity effect. B. stay the same, but the price effect is dominated by the quantity effect. C. stay the same, as both the price and quantity effects remain unchanged. D. decrease, as the price effect is dominated by the quantity effect.

D

Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is: A. whatever she would have earned had she not been in college. B. $10,000. C. whatever she would have purchased with the $10,000 instead. D. whatever she would have purchased with the $10,000 plus whatever she would have earned had she not been in college.

D

Sometimes the government varies its spending, depending on the needs of the country. This statement best represents economic concept that: A. when markets don't achieve efficiency, government intervention can improve society's welfare. B. resources should be used as efficiently as possible to achieve society's goals. C. overall spending sometimes gets out of line with the economy's productive capacity. D. government policies can change spending.

D

Suppose at $10 the quantity demanded is 100. When the price falls to $8, the quantity demanded increases to 130. The price elasticity of demand (using the midpoint formula) between $10 and $8 is approximately: A. 1.50. B. 0.85. C. 1.00. D. 1.17.

D

The circular flow diagram shows how: A. the work force is educated and trained to increase labor productivity. B. the various levels of government allocate tax revenues to meet the needs of society. C. banks receive deposits and create money. D. money, goods and services, and factors of production flow through the economy.

D

Trade can be beneficial to an economy because: A. it prevents specialization in activities in which countries have a comparative advantage. B. it prevents unemployment. C. it results in a more efficient use of the combined resources of some of the trading countries, even though it reduces efficiency in others. D. more goods and services can be obtained at lower opportunity cost.

D

When building a model, economists: A. attempt to duplicate reality in all of its complexity. B. ignore the facts and instead try to determine what the facts should be. C. are careful to avoid the scientific method. D. simplify reality to highlight what really matters.

D

When people want more goods and services than are available, the economy undergoes inflation. This statement best represents this economic concept: A. Resources are scarce. B. When markets don't achieve efficiency, government intervention can improve society's welfare. C. Government policies can change spending. D. Overall spending sometimes gets out of line with the economy's productive capacity.

D

Which of the following is likely to be associated with inelastic supply? A. The time under consideration is very short. B. The good is necessary for survival (e.g., a life-saving drug). C. The inputs necessary for production cannot readily be increased. D. The time under consideration is very short and the inputs necessary for production cannot readily be increased.

D

Which of the twelve basic principles of economics is at work in the following situation? You are better at performing lab experiments, and your lab partner is better at writing lab reports. So the two of you agree that you will do all the experiments, and she will write up all the reports. A. "How much?" is a decision at the margin. B. One person's spending is another person's income. C. The real cost of something is what you must give up to get it. D. There are gains from trade.

D

You have $1 to spend on a vending machine snack. A bag of chips will cost you $1 and a candy bar will also cost you $1. If you choose the bag of chips, the opportunity cost of buying the chips is: A. $1. B. $1 plus the enjoyment you would have received from the candy bar. C. $2 minus the enjoyment you received from the bag of chips. D. the enjoyment you would have received from the candy bar.

D

(Johnson's Income and Expenditures Diagram) Look at the table Johnson's Income and Expenditures. Johnson's income elasticity of demand for steaks is: A. 0. B. 1. C. greater than 1. D. between 0 and 1.

A

(Supply of Coconuts Diagram) Look at the figure Supply of Coconuts. If the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport coconuts decreased, it would be represented in the figure as a movement from: A. E to B B. B to A C. A to B D. C to A

A

(The Demand for Shirts Diagram) Look at the figure The Demand for Shirts. By the midpoint method, the price elasticity of demand for the segment AB is: A. greater than the price elasticity of demand for the segment BC. B. zero. C. less than the price elasticity of demand for the segment EF. D. less than the price elasticity of demand for the segment BC.

A

A decrease in demand and a decrease in supply will lead to _____ in equilibrium quantity and _____ in equilibrium price. A. a decrease; an indeterminate change B. an increase; an indeterminate change C. an indeterminate change; a decrease D. an indeterminate change; an increase

A

An increase in supply with no change in demand will lead to _____ in equilibrium quantity and _____ in equilibrium price. A. an increase; a decrease B. an increase; an increase C. a decrease; an increase D. a decrease; a decrease

A

Economists who are asked to choose between two government policies may disagree because: A. they base their conclusions on models that make different assumptions. B. as a matter of course, economists often take opposing points of view so that all sides of a question may be discussed. C. they make the same value judgments about the desirability of the policies. D. economists are trained to ignore facts and focus on theory.

A

Macroeconomics deal with: A. the working of the entire economy or large sectors of it. B. how individuals make decisions. C. bits and pieces of the economy. D. how a business unit should operate profitably.

A

Sometimes airlines raise ticket prices as the flight departure date approaches in the hope of increasing revenue on the assumption that consumer demand is: A. less price-elastic as departure time approaches. B. always unit elastic. C. very sensitive to price changes as the time of departure approaches. D. more price-elastic as departure time approaches.

A

The demand for strawberry ice cream tends to be relatively price-elastic because: A. for most people there are many close substitutes for strawberry ice cream. B. it has to be consumed very quickly. C. for most people there are many close substitutes for strawberry ice cream and it costs so little. D. it costs so little.

A

The importance of an economic model is that it allows us to: A. focus on the effects of only one change at a time. B. build an accurate mathematical model of the economy. C. avoid opportunity costs. D. build a complex and accurate model of the economy.

A

The pair of items that is most likely to have a negative cross-price elasticity of demand is: A. hot dogs and mustard. B. margarine and butter. C. aspirin and hamburgers. D. ketchup and coffee.

A

The price elasticity of demand for gasoline in the short run has been estimated to be 0.1. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total expenditures on gasoline in the short run, all other things equal? A. Quantity demanded will not change much, but total expenditures will rise. B. Quantity demanded will decrease, but total expenditures will rise. C. Quantity demanded will stay the same, but total expenditures will fall. D. Total expenditures will remain unchanged.

A

The production possibility frontier illustrates that: A. if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced. B. the economy will automatically end up at full employment. C. economic production possibilities have no limit. D. an economy's productive capacity increases one-for-one with its population.

A

The slope of a typical production possibility frontier is: A. negative B. positive C. 0 D. vertical

A

Which of the following is a normative statement? A. Government has grown too large and should be reduced. B. Government is subject to the same rules as all other institutions. C. The rate of inflation has increased. D. The money supply grew by 3% last year.

A

You are analyzing a trade-off when you compare the _____ and _____ of doing something. A. Costs; Benefits B. Direct Costs; Opportunity Costs C. Marginal Costs; Total Costs D. Marginal Benefits; Total Benefits

A

You decide whether to eat one more slice of pizza based on how hungry you feel. This statement best represents this economic concept: A. "How much" is a decision at the margin. B. The real cost of something is what you must give up to get it. C. Resources are scarce. D. There are gains from trade.

A

(Demand Curves Diagram) Look at the figure Demand Curves. Which graph shows a perfectly elastic demand curve? A. B B. D C. A D. C

B

(PPS1 Diagram) Look at the table Production Possibilities Schedule I. If the economy produces 24 units of capital goods per period, it also can produce at most _____ units of consumer goods per period. A. 3 B. 2 C. 5 D. 4

B

(Strawberries and Submarines Diagram) Look at the figure Strawberries and Submarines II. The downward slope of the production possibility frontier implies that resources: A. should not be wasted. B. are scarce. C. must be used efficiently. D. should be allocated so that approximately equal amounts of both goods are produced.

B

(Supply of Lemonade Diagram) Look at the table Supply of Lemonade. If the price of lemonade is $1 per cup, the total quantity of lemonade supplied will be: A. 25 cups B. 90 cups C. 50 cups D. 80 cups

B

A production possibility frontier illustrates the _____ facing an economy that _____ only two goods. A. trade-offs; sells B. trade-offs; produces C. shortages; produces D. prices; sells

B

After swimming 100 laps at the pool, Erik decides to swim 10 more before lifting weights. This statement best represents this economic concept: A. Resources are scarce. B. "How much" is a decision at the margin. C. The real cost of something is what you must give up to get it. D. There are gains from trade.

B

An economy is efficient when: A. output is distributed equitably. B. all opportunities to make some people better off without making other people worse off have been taken. C. the problem of scarcity is eliminated. D. all opportunities to make some people worse off without making other people better off have been taken.

B

Consider two competing motorcycle manufacturers, Harley-Davidson and Honda. If Harley-Davidson raises the price of its motorcycles, we can expect: A. a shift to the left in the supply curve of Hondas and higher prices for Hondas. B. a shift to the right in the demand curve for Hondas and higher prices for Hondas. C. a shift to the left in the demand curve for Hondas and lower prices for Hondas. D. a shift to the right in the supply curve of Hondas and lower prices for Hondas.

B

Corner offices in high-rise office buildings usually cost more to rent than other offices. This best illustrates the economic principle of: A. marginal analysis. B. scarce resources. C. resources being used as efficiently as possible to achieve society's goals. D. opportunity costs.

B

For consumers, pizza and hamburgers are substitutes. A rise in the price of a pizza causes _____ in the equilibrium price of a hamburger and _____ in the equilibrium quantity of hamburgers. A. a rise; a decrease B. a rise; an increase C. a fall; a decrease D. a fall; an increase

B

If every individual were required to be self-sufficient: A. living standards would rise. B. living standards would fall. C. living standards for some individuals would fall, but for others they would rise. D. it's impossible to say how living standards would change.

B

If the government wants to minimize the deadweight loss from taxes, it should tax goods for which: A. the price elasticity of demand is high. B. the price elasticity of demand is low. C. the price elasticity of supply is high. D. the demand is high.

B

If the price of a commodity increases, you can expect the: A. quantity supplied to decrease. B. quantity supplied to increase. C. supply to increase. D. supply curve to shift to the right.

B

If the supply and demand curves intersect at $47, then any price above that would result in: A. a shortage B. a surplus C. an increase in demand D. equilibrium

B

Market failure occurs when: A. prices of essential goods such as gas become very high. B. individual actions have side effects that are not properly taken into account. C. a business declares bankruptcy. D. mutually beneficial trades take place.

B

The price elasticity of demand measures the: A. responsiveness of demand when price is held constant and demand increases or decreases. B. responsiveness of quantity demanded to a change in price. C. responsiveness of price to a change in quantity demanded. D. extent to which prices are flexible and respond to market forces.

B

When a chef prepares a dinner for a customer, which of the following is physical capital? A. The chef B. The oven C. The food ingredients D. The chef's training and experience

B

When a factory closes, why does it spell bad news for the local restaurants? A. Sales taxes are likely to increase. B. Unemployed factory workers have lower incomes and are less likely to dine out. C. Unemployed factory workers are eligible for government unemployment benefits. D. The opportunity cost of dining out has fallen.

B

When individuals act in their own self-interest: A. equity is always achieved. B. society may be worse off in some cases. C. all opportunities have been taken to make some people better off without making other people worse off. D. efficiency is always achieved.

B

(Demand and Supply of Gasoline Diagram) Look at the figure Demand and Supply of Gasoline. Given the initial equilibrium of S1 and D, any price lower than _____ will exert pressure for the price to _____. A. $2.00; fall B. $2.50; fall C. $2.50; rise D. $3.00; rise

C

(Potatoes and Fish Diagram) Can Atlantis produce 500 pounds of fish and 800 pounds of potatoes? Where would this point lie relative to the production possibilities frontier? A. Yes, but this point would be inside the production possibilities frontier. B. Yes, this point would lie on the production possibilities frontier. C. No, this point would lie outside the production possibilities frontier. D. Yes, but this point would lie outside the production possibilities frontier.

C

(The Market for Candy Diagram) Look at the figure The Market for Candy. A surplus of the good will exist at a price of: A. P3. B. P2. C. P1. D. There are no surpluses in this market.

C

A decrease in the price of a good will result in: A. an increase in demand. B. more being supplied. C. an increase in the quantity demanded. D. an increase in supply.

C

A men's tie store sold an average of 30 ties per day at $5 per tie but sold 50 of the same ties per day at $3 per tie. The price elasticity of demand, by the midpoint method, is: A. greater than zero but less than 1. B. greater than 3. C. equal to 1. D. greater than 1 but less than 3.

C

An inward shift in the U.S. economy's production possibility frontier could represent U.S.: A. workers moving from New Jersey to Massachusetts. B. economic growth as workers move to different states. C. workers moving to Canada. D. economic growth.

C

Decreases in input costs and a longer time since a price change will tend to: A. have no impact on the price elasticity of supply. B. increase price elasticity of supply with decreases in input costs but decrease price elasticity of supply with length of time. C. increase the price elasticity of supply. D. decrease price elasticity of supply.

C

If goods A and B are substitutes, a decrease in the price of good B will: A. increase the demand for good A. B. increase the demand for good B. C. decrease the demand for good A. D. increase the demand for good B and decrease the demand for good A.

C

If the absolute value of the price elasticity of demand is greater than 1: A. changes in the price will have no impact on changes in the quantity demanded. B. small percentage changes in the price will lead to even smaller changes in the percentage change in the quantity demanded. C. small percentage changes in the price will lead to much larger percentage changes in the quantity demanded. D. percentage changes in the price will lead to equal percentage changes in the quantity demanded.

C

If the demand for tires goes down when the price of gas goes up, then tires and gas are: A. both inexpensive. B. both expensive. C. complements. D. substitutes.

C

Mark and Julie are going to sell brownies and cookies for their third annual fundraiser bake sale. In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15 brownies or 15 cookies. What is Mark's opportunity cost to produce one brownie? A. 1 cookie B. 0.5 brownie C. 0.5 cookie D. 1 brownie

C

The amount of tax levied per unit of good or service is called the tax: A. surplus. B. incidence. C. rate. D. revenue.

C

The federal government regulates how much carbon dioxide a factory can emit. This statement best represents this economic concept: A. Markets usually lead to efficiency. B. "How much" is a decision at the margin. C. When markets don't achieve efficiency, government intervention can improve society's welfare. D. Resources are scarce.

C

The percent change in quantity demanded of a good divided by the percent change in income, all other things unchanged, is the _____ elasticity of demand. A. price B. cross-price C. income D. quantity

C

Which of the twelve basic principles of economics is at work in the following situation? On your spring break trip, your budget is limited to $35 a day. A. Markets usually lead to efficiency. B. One person's spending is another person's income. C. Resources are scarce. D. People usually exploit opportunities to make themselves better off.

C

Which of the twelve basic principles of economics is at work in the following situation? You choose to shop at the local discount store rather than paying a higher price for the same merchandise at the local department store. A. Resources are scarce. B. Markets usually lead to efficiency. C. People usually exploit opportunities to make themselves better off. D. One person's spending is another person's income.

C