ECON exam 1

At a price of $10, the quantity demanded of wine is 1,250 bottles. When the price increases to $20, the quantity demanded of wine is 750 bottles. Then the price elasticity of demand for wine is a. 3/4 b. 2/5 c. 1/3 d. 4/3

a. 3/4

Which of the following statements is true? a. A point of allocative efficiency is also a point of production efficiency b. A point of production efficiency is also a point of allocative efficiency c. Both a and b are true d. Both a and b are false

a. A point of allocative efficiency is also a point of production efficiency

Microsoft is planning to increase the price of its new operating system. The price elasticity of demand for this system is calculated to be 0.6. The total revenue from the sales of the system after the price increase is likely to a. increase b. decrease c. remain unchanged d. cannot be determined from the information given in the problem.

a. increase

If good A is an inferior good, an increase in income will a. shift the demand curve for good A leftward. b. shift the demand curve for good A rightward. c. not affect the demand for good A. d. none of the above.

a. shift the demand curve for good A leftward

Bob decided to go on a year-long cruise he won after graduation instead of working, although he got an offer from company A with a salary of $40,000 per year and an offer from company B with a salary of $35,000 per year. What is the opportunity cost per year for Bob to be on the cruise? a. $5,000 b. $40,000 c. $35,000 d. $75,000

b. $40,000

If a baseball ticket costs $25 and a basketball ticket cost $50, then the opportunity cost of 2 baseball tickets is a. 2 basketball tickets. b. 1 basketball ticket. c. ½ basketball ticket. d. 4 basketball tickets.

b. 1 basketball ticket

Suppose that in one day Harry can produce 5 pens or 10 pencils while John can produce 3 pens or 9 pencils. Then a. Harry should specialize in the production of pencils. b. John should specialize in the production of pencils. c. Harry has an absolute advantage in the production of pens while John has an absolute advantage in the production of pencils. d. Harry has an absolute advantage in the production of pencils while John has an absolute advantage in the production of pens.

b. John should specialize in the production of pencils.

Which of the following statements is true? a. Demand curves slopes downward because of technological advance. b. There will be a "shortage" of a good at any price which is lower than the equilibrium price. c. When shortages occur, we say we have a "buyer's market." d. all of the above.

b. There will be a "shortage" of a good at any price which is lower than the equilibrium price.

A fall in the price of Coke, ceteris paribus, will a. increase the quantity supplied for Coke b. decrease the quantity supplied for Coke c. increase the supply for Coke d. decrease the supply for Coke e. both b and d

b. decrease the quantity supplied for Coke

When the future price of a TV is expected to rise, ceteris paribus, what happens to the demand for TV's? a. Demand for TV's shifts to the left. b. Demand for TV's shifts to the right. c. There is no change in the demand for TV's. d. None of the above.

b. demand for TV's shifts to the right

If a 10 percent increase in the price of a used car results in a 20 percent decrease in the quantity of used cars demanded, then the price elasticity of demand is a. inelastic b. elastic c. unitary d. cannot be determined.

b. elastic

If the demand for a commodity is inelastic at the current price , a 2 % price cut will a. increase the quantity sold by less than 2 percent and total revenue will increase. b. increase the quantity sold by less than 2 percent and total revenue will decrease. c. increase the quantity sold by more than 2 percent and thus total revenue will increase. d. increase the quantity sold by more than 2 percent and thus total revenue will decrease.

b. increase the quantity sold by less than 2 percent and total revenue will decrease.

A point outside (i.e., to the northeast of) the Production Possibilities Frontier a. is currently attainable b. is not currently attainable c. represents unemployment d. none of the above.

b. is not currently attainable

Remembering the circular flow diagram, a. real goods and services go from firms to households in the Factor Market. b. real goods and services go from households to firms in the Factor Market. c. money flows from firms to households in the Goods Market. d. money flows from households to firms in the Factor market.

b. real goods and services go from households to firms in the Factor Market.

All of the following would cause an increase in the supply of steaks EXCEPT a. improvements in meatpacking technology. b. a fall in the price of cattle feed. c. an increase in steak prices. d. an increase in the number of steak processing companies.

c. an increase in steak prices.

If we have equilibrium in the market for a good, and then demand increases and supply decreases, we expect a. equilibrium price will increase and equilibrium quantity will decrease. b. equilibrium price will decrease and equilibrium quantity will decrease. c. equilibrium price will increase and equilibrium quantity cannot be determined. d. equilibrium price will decrease and equilibrium quantity cannot be determined.

c. equilibrium price will increase and equilibrium quantity cannot be determined.

Suppose that ketchup is a complement for a Big Mac. If the price of a Big Mac goes down, then the demand for ketchup will a. decrease b. not change c. increase d. disappear

c. increase

If the demand for a commodity is elastic at current price, a 1 percent price cut will a. increase the quantity demanded by less than 1 percent and total revenue will increase. b. increase the quantity demanded by less than 1 percent and total revenue will decrease. c. increase the quantity demanded by more than 1 percent and total revenue will increase. d. increase the quantity demanded by more than 1 percent and total revenue will decrease.

c. increase the quantity demanded by more than 1 percent and total revenue will increase.

Suppose that an increase in the price of good A causes an increase in the demand for good B, ceteris paribus. Then goods A and B are a. normal b. inferior c. substitutes d. complements

c. substitutes

Which of the following is not a demand shifter ? a. prices of related products b. population c. technological advance d. income

c. technological advance

During the last decade, the price of lobster increased substantially yet people bought more lobsters. This result most likely means that a. the law of demand does not apply to this case b. the law of supply does not apply to this case c. the demand curve of lobster shifted rightward d. the supply curve of lobster shifted leftward

c. the demand curve of lobster shifted rightward

Consider two people -- Betty and Ann. With one day's labor, Ann can produce 8 hats or 4 coats. With one day's labor Betty can produce 6 hats or 2 coats. Which of the following is true? a. Ann has both absolute and comparative advantage in producing hats. b. Betty has both absolute and comparative advantage in producing coats. c. Ann has comparative advantage in producing hats. d. Betty has comparative advantage in producing hats.

d. Betty has comparative advantage in producing hats.

Suppose two countries, A and B, both are engaged in the production of two goods, a and b. If country A has comparative advantage in producing good a, then a. Country A must also have absolute advantage in producing good a. b. Country A must also have comparative advantage in producing good b. c. Country B must have absolute advantage in producing good a. d. Country B must have comparative advantage in producing good b.

d. Country B must have comparative advantage in producing good b.

A perfectly inelastic demand curve usually implies that this commodity a. has few close substitutes. b. is a necessary product. c. takes a small part of the consumer's income. d. all of the above.

d. all of the above

Which of the following is the best example of a positive statement? a. Equal distribution of national income is a desirable goal for society. b. A wage rate of $8.00 per hour is degrading; therefore the minimum wage should be increased to $9.50 per hour. c. It is bad for the country to import goods. d. If import prices rise, consumers will buy fewer imports.

d. if import prices rise, consumers will buy fewer imports.

If the population increases at the same time that the price of resources used as inputs in autos increases, ceteris paribus, then in the market for autos a. the equilibrium price falls and the equilibrium quantity cannot be determined. b. the equilibrium quantity falls and the equilibrium price cannot be determined. c. the equilibrium quantity rises and the equilibrium price cannot be determined. d. the equilibrium price rises, and the equilibrium quantity cannot be determined.

d. the equilibrium price rises, and the equilibrium quantity cannot be determined.

Coke and Pepsi are substitutes. If the price of Pepsi rises, ceteris paribus, then which of the following is NOT true? a. The demand for Coke increases. b. The quantity demanded for Pepsi decreases. c. The equilibrium price of Coke will increase. d. The quantity sold of Coke will decrease.

d. the quantity sold of coke will decrease

If the marginal cost of a good is less than the marginal benefit, then a. We have not achieved allocative efficiency. b. We should produce more of the good. c. We should produce less of the good. d. We cannot tell whether to produce more or less. e. both (a) and (b)

e. both (a) and (b)

Which of the following is NOT considered to be a resource (or input factor) by economists? a. land b. labor c. capital d. entrepreurship e. none of the above

e. none of the above