Econ exam #1

6. Suppose a gardener produces both tomatoes and squash in his garden. If the opportunity cost of one bushel of squash is 2/5 bushel of tomatoes, then the opportunity cost of 1 bushel of tomatoes is

b. 5/2 bushels of squash.

5. Refer to Table 2-3. What is the opportunity cost to Footville of increasing the production of shoes from 400 to 600?

b. 300 socks

3. Refer to Table 3-6. Which of the following combinations of toothbrushes and hairbrushes could Portugal produce in 30 minutes?

a. 1 toothbrush and 4 hairbrushes

10. To gain tractors by moving from point W to point V, society must sacrifice

a. 12 sofas.

2. Refer to Table 3-4. Assume that Andrea and Paul each has 480 minutes available. If each person divides his time equally between the production of wheat and beef, then total production is

a. 24 bushels of wheat and 64 pounds of beef.

5. Refer to Figure 3-5. If Hosne must work 0.5 hour to make each purse, then her production possibilities frontier is based on how many hours of work?

b. 5 hours

5. Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in

b. Mexican GDP, but it is not included in U.S. GDP.

7. When the "invisible hand" guides economic activity, prices of products reflect

c. both the values that society places on those products and the costs to society of producing those products.

20. Refer to Table 23-6. From 2012 to 2013, this country's output grew

b. 29.0%.

21. Refer to Table 23-6. This country's inflation rate from 2010 to 2011 was

b. 38.20%.

18. Refer to Table 23-6. In 2012, this country's real GDP was

c. $930.

9. Refer to Figure 2-10, Panel (a). Production at point Y is

c. possible but inefficient.

Refer to Table 23-6. In 2010, this country's nominal GDP was

a. $260.

12. In the economy of Talikastan in 2015, consumption was $3000, exports were $1200, GDP was $8000, government purchases were $1200, and imports were $600. What was Talikastan's investment in 2015?

a. $3200

9. Refer to Table 3-23. The opportunity cost of 1 pound of tomatoes for the rancher is

a. 1 pound of pork.

19. Refer to Table 23-6. In 2012, this country's GDP deflator was

a. 74.2.

8. Refer to Figure 4-14. Which of the following best describes the movement from E1 to E2?

a. a decrease in supply

11. A species of snakes became extinct due to pollution in a river where the snakes once lived. This is an example of

a. a market failure caused by an externality.

12. Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of

a. a market failure caused by an externality.

7. A U.S. publisher purchases new computers that were manufactured in the U.S. This purchase by itself makes

a. a positive contribution both to investment and to GDP.

10. The term market failure refers to

a. a situation in which the market on its own fails to allocate resources efficiently.

16. Changes in the GDP deflator reflect

c. both changes in prices and changes in the amounts being produced.

4. A rational decisionmaker takes an action if and only if

a. the marginal benefit of the action exceeds the marginal cost of the action.

3. If an economy is producing efficiently, then

a. there is no way to produce more of one good without producing less of another good.

8. Refer to Figure 2-6. The opportunity cost of this economy moving from point K to point H is

a. zero.

1. Refer to Table 3-3. Assume that England and France each has 40 labor hours available. If each country divides its time equally between the production of cheese and wine, then total production is

b. 24 units of cheese and 15 units of wine

13. In the economy of Talikastan in 2015, exports were $500, GDP was $6400, government purchases were $1700, imports were $400, and investment was $1800. What was Talikastan's consumption in 2015?

b. $2800

4. Which of the following trade-offs does the production possibilities frontier illustrate?

b. Once an economy has reached the efficient points on its production possibilities frontier, the only way of getting more of one good is to get less of the other.

4. Refer to Figure 3-1. The rate of tradeoff between producing chairs and producing couches is constant in

b. Panel (b).

9. Which of the following represents a transfer payment?

b. The government sends your grandfather his Social Security check.

7. Refer to Figure 2-6. If this economy moves from point F to point G, then which of the following statements is correct?

b. This economy has experienced economic growth.

8. Refer to Table 3-20. Brad should specialize in the production of

b. beef and Theresa should specialize in the production of wheat.

2. Any point on a country's production possibilities frontier represents a combination of two goods that an economy

b. can produce using all available resources and technology.

3. Grapes are considered intermediate goods

b. if the purchaser uses them to make wine to sell others but not if the purchaser eats them.

1. GDP

b. is used to monitor the performance of the overall economy and is the single best measure of a society's economic well-being.

2. If the price of ice cream rose to $30 per gallon, consumers would purchase fewer gallons of ice cream than if the price were $4 per gallon. If the price of chocolate sauce fell to $0.50 per can, consumers would purchase more chocolate sauce than if the price were $5 per can. These relationships illustrate the

b. law of demand.

3. The opportunity cost of going to college is

b. the value of the best opportunity a student gives up to attend college.

10. Refer to Table 3-23. The farmer has an absolute advantage in the production of

b. tomatoes.

11. Refer to Table 3-23. The farmer has a comparative advantage in the production of

b. tomatoes.

11. Refer to Figure 4-18. At what price would there be an excess supply of 200 units of the good?

c. $30

11. In the economy of Talikastan in 2015, consumption was $5000, exports were $400, government purchases were $1000, imports were $600, and investment was $1200. What was Talikastan's GDP in 2015?

c. $7000

7. Refer to Table 3-20. What is Theresa's opportunity cost of producing one bushel of wheat?

c. 3/5 pound of beef

8. Prices usually reflect

c. both the value of a good to society and the cost to society of making the good.

1. Assume Leo buys coffee beans in a competitive market. It follows that

c. Leo cannot influence the price of coffee beans even if he buys a large quantity of them.

15. Which of the following is correct?

c. Nominal GDP equals real GDP in the base year.

5. Refer to Figure 4-9. The graphs show the demand for cigarettes. In Panel (a), the arrows are consistent with which of the following events?

c. The price of cigarettes increased.

6. Which of the following events would cause a movement downward and to the left along the supply curve for mangos?

c. The price of mangos falls.

10. When an American household purchases a bottle of Italian wine for $100,

c. U.S. consumption increases by $100, U.S. net exports decrease by $100, and U.S. GDP does not change.

12. Refer to Figure 2-12. Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B?

c. a general technological advance

A shift of the economy's production possibilities frontier from Panel (a) to Panel (b) could be caused by

c. an improvement in tractor production technology.

14. Changes in nominal GDP reflect

c. both changes in prices and changes in the amounts being produced.

6. U.S. GNP

c. excludes production of foreigners working in the U.S. but includes production by U.S. citizens working in foreign countries.

4. Gasoline is considered a final good if it is sold by a

c. gasoline station to a motorist in Los Angeles.

8. consumer goods that are produced, go into inventory, and are not sold during the current period are

c. included in current period GDP as inventory investment.

3. If muffins and bagels are substitutes, a higher price for bagels would result in a(n)

c. increase in the demand for muffins.

13. There is no shortage of scarce resources in a market economy because

c. prices adjust to eliminate shortages.

1. Efficiency

c. refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society.

9. One reason we need government, even in a market economy, is that

c. the invisible hand is not perfect.

2. James owns two houses. He rents one house to the Johnson family for $10,000 per year. He lives in the other house. If he were to rent the house in which he lives, he could earn $12,000 per year in rent. How much do the housing services provided by the two houses contribute to GDP?

d. $22,000

7. Refer to Figure 4-13. If Producer A and Producer B are the only producers in the market, then the market quantity supplied when the price is $6 is

d. 18 units.

6. Refer to Figure 2-6. If this economy devotes all of its resources to the production of blankets, then it will produce

d. 360 blankets and 0 pillows.

6. A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate?

d. People respond to incentives.

12. Which of the following movements would illustrate the effect in the market for Ramen noodles of a decrease in the incomes of young adults, assuming that Ramen noodles are an inferior good?

d. Point A to Point D

5. Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is

d. This cannot be determined from the information given.

2. When the government attempts to improve equality in an economy the result is often

d. a reduction in efficiency.

4. Refer to Figure 4-8. Suppose the figure shows the market demand for laptop computers. Suppose the price of wireless printers, a complementary good, decreases. Which of the following changes would occur?

d. a shift from D2 to D1

1. For economists, historical episodes

d. are worthy of study because they serve as valuable substitutes for laboratory experiments.

10. Refer to Figure 4-18. At a price of $35, there would be

d. excess supply, and the price would tend to fall from $35 to a lower price.

9. Suppose roses are currently selling for $40 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a

d. surplus to exist and the market price of roses to decrease.