Econ Exam #1

The extra cost that results from carrying out one additional unit of an activity is the ___ of the activity

Marginal cost

When a market is in equilibrium:

there is neither excess demand nor excess supply.

Refer to the accompanying table. According to the table, Corey has the absolute advantage in:

making pizza.

. On a graph of a production possibilities curve, an inefficient point is:

necessarily an attainable point.

If the demand for a good decreases as income decreases, then the good is a(n):

normal good.

If the demand for steak increases as income increases, then steak is a(n):

normal good.

Refer to the accompanying table below. The marginal benefit of the 5th unit of activity is:

$10

Refer to the accompanying table below. The average cost of 4 units of this activity is:

$25

Amy is thinking about going to the movies tonight. A movie ticket costs $15, and she'll have to cancel a $20 dog-sitting job that she would have been willing to do for free. The opportunity to Amy cost of going to the movies is:

$35

For the fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat all of the meals, your average cost for a meal is:

$4

Matt has decided to purchase his textbooks for the semester. His options are to purchase the books online with next day delivery at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $170. Last week he drove to campus to buy a concert ticket because they 25% off regular the regular price of $16. The benefit to Matt of buying his books at the university bookstore instead of online is:

$5

Refer to the accompanying table below. The marginal cost of the 4th unit of activity is:

$8

Refer to the accompanying table. ______ has the comparative advantage in making pies and ______ the comparative advantage in making cakes.

. Martha; Julia

Refer to the accompanying table. Corey's opportunity cost of delivering of a pizza is making:

2 pizzas

Refer to the accompanying figure. For Pat, the opportunity cost of removing one bag of trash is planting:

5 bulbs.

The accompanying figure shows the production possibilities curve for the island of Genovia: The opportunity cost of producing a car in Genovia is:

50 tons of agricultural products.

All else equal, relative to a person who earns minimum wage, a person who earns $30 per hour has:

A higher opportunity cost of taking the day off work

If a nation can produce a more computers per year than any other nation, that nation has a(n) ______ advantage in the production of computers.

Absolute

Choosing to study for an exam the extra benefit (e.g., improved score) equals the extra cost (e.g., the value of the foregone activities) is:

An application of the Cost Benefit Principle

What might cause a demand curve to shift to the right?

An increase in the price of a substitute

. fudge, she can make 3 pounds of fudge an hour, and if she devotes all her time to making toffee, she can make 2 pounds of toffee an hour. If Leo devotes all his time to making fudge, he can make 4 pounds of fudge an hour, and if he devotes all his time to making toffee, he can make 5 pounds of toffee an hour. Which of the following statements is correct?

Ana has the comparative advantage in fudge, but Leo has the absolute advantage in fudge.

Why do moderately priced refrigerators have a light in the refrigerator compartment but not in the freezer compartment?

Because the refrigerator door is opened more frequently than the freezer door

Why do many premium-priced refrigerators have lights not only in the refrigerator compartments but also in the freezer compartments?

Because willingness-to-pay for additional convenience is higher for high-income consumers than for low-income consumers.

According to the accompanying table, Julia has the absolute advantage in making:

Both pies and cakes

An individual has an absolute advantage in producing pizzas if that individual:

Can produce more pizzas in a given amount of time than anyone else

Which of the following statements is true?

Comparative advantage does not require absolute advantage.

State whether the following pairs of goods are complements, substitutes, or both: Birthday cake and birthday candles

Complements

State whether the following pairs of goods are complements, substitutes, or both: Tennis rackets and tennis balls

Complements

State whether the following pairs of goods are complements, substitutes, or both: Washing machines and dryers

Complements

Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. Which of the following statements is correct?

Dan has the comparative and absolute advantage in sandwiches.

. A rational person:

Makes choices based on added benefits and added costs

The Scarcity Principle applies to

Everyone

The marginal benefit of an activity is the:

Extra benefit associated with an extra unit of the activity

If a person takes an action if, and only if, the extra benefits from taking that action are at least as great as the extra costs, then that person is:

Following the Cost-Benefit Principle

Forest lives in complete isolation in Montana. He is self-sufficient and feeds himself through hunting, fishing, and farming. Which of the following statements about Forest is true?

Forest has to make trade-offs

Shelly purchases a letter purse for $400. Once can infer that:

Her reservation price is at least $400

Economic is best defined as the study of:

How people make choices in the face of scarcity and the implications of those choices for society as a whole

The supply curve illustrates that firms:

Increase the quantity supplied of a good when its price rises

If Jane can produce 3 pairs of shoes per hour, while Bob can produce 2, then ______ has a(n) ______ advantage in producing shoes.

Jane; absolute

Dent 'n' Scratch Used Cars and Trucks employs 3 salesmen. Data for their sales last month are shown in this table: Cars Sold Truck. Based on last month's data, ______ has an absolute advantage in selling cars and ______ has an absolute advantage in selling trucks.

Larry; Ralph

Suppose Cathy and Lewis work in a bakery making pies and cakes. Suppose it takes Cathy 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Lewis 2 hours to make a pie and 1.5 hours to make a cake. Which of the following statements is correct?

Lewis has a comparative advantage in pies, and Cathy has an absolute advantage in pies.

An implication of scarcity is that:

People must make trade-offs

Positive economic principles are those that:

Predict how people will behave

State whether the following pairs of goods are complements, substitutes, or both: Cloth diapers and disposable diapers

Substitutes

Ted can wax a car in 20 minutes or wash a car in 60 minutes. Tom can wax a car in 15 minutes or wash a car in 30 minutes. What is each man's opportunity cost of washing a car?

Ted's opportunity cost of washing one car is 3 wax jobs. Tom's opportunity cost of washing one car is 2 wax jobs.

The Scarcity tells us ___, and the Cost-Benefit Principle tells us ___.

That choices must be made; how to make good choices

Buyers in the market for electric cars learn of an increase in the price of electric cars.

The demand curve would remain unchanged.

Buyers in the market for pizza read a study linking pepperoni consumption to heart disease

The demand curve would shift to the left

Buyers in the market for gas-powered cars learn of an increase in the price of electric cars (a substitute for gas-powered cars).

The demand curve would shift to the right

The income of buyers in the market for Adirondack vacations increase

The demand curve would shift to the right

The economic surplus of an action is:

The difference between the benefit and the cost of taking an action

When a market is not in equilibrium:

The economic motives of sellers and buyers will move the market to its equilibrium

Dean should play golf instead of preparing for tomorrow's exam in economics if:

The economic surplus from playing golf if greater than the economic surplus fro studying

Suppose the most you would be willing to pay to have a freshly washed car before going out on a date is $6. The smallest amount for which you would be willing to wash someone else's car is $3.50. You are going out this evening and your car is dirty. How much economic surplus would you receive from washing it?

The economic surplus would be $ 2.50

A tornado sweeps through Iowa.

The supply curve for corn would shift to the left

Crop rotation techniques that yield high-quality soil are discontinued.

The supply curve for corn would shift to the left

The government offers reduced farming subsidies.

The supply curve for corn would shift to the left

The price of farmland falls. i. The supply curve for

The supply curve for corn would shift to the right

Refer to the accompanying figure. Suppose all the sellers in this market started out charging a price of $45 per unit. What is the most likely result?

They would lower their prices because at $45 there would be excess supply.

Ted can wax a car in 20 minutes or wash a car in 60 minutes. Tom can wax a car in 15 minutes or wash a car in 30 minutes. Who has a comparative advantage in washing cars?

Tom

. The accompanying figure shows Becky's daily production possibilities curve for dresses and skirts. . The accompanying figure shows Becky's daily production possibilities curve for dresses and skirts.

W

Of the labeled points, only ______ are attainable.

W, X, Y, Z, V, and T

Janie must choose to either mow the lawn or wash clothes. If she mows the lawn, she will earn $30, and if she washes clothes, she will earn $45. She dislikes both tasks equally and they both take same amount of time. Janie will therefore choose to ___ because it generates a ___ economic surplus.

Wash clothes; bigger

The Scarcity Principle states that:

With limited resources, having more of one thing means having less of another

You and your friend Joe have identical tastes. At 2 p.m., you go to the Ticketmaster outlet and buy a $30 nonrefundable ticket to a basketball game to be played that night in Syracuse, 50 miles north of your home in Ithaca. Joe plans to attend the same game, but because he cannot get to the Ticketmaster outlet, he plans to buy his ticket at the game. Tickets sold at the game cost only $25 because they carry no Ticketmaster surcharge. (Many people nonetheless pay the higher price at Ticketmaster, to be sure of getting good seats.) At 4 p.m., an unexpected snowstorm begins, making the prospect of the drive to Syracuse much less attractive than before (but ensuring the availability of good seats.) If both you and Joe are rational, is one of you more likely to attend the game than the other?

You are more likely to go to the game

The entire group of buyers and sellers of a particular good or service makes up:

a market.

Any combination of goods that can be produced with currently available resources is an:

attainable point

To understand how the price of a good is determined in a free market, one must account for the desires of:

buyers and sellers

Points that lie outside the production possibilities curve are ______, and points that lie inside the production possibilities curve are ______.

c. unattainable; attainable

If a country's economic decisions are made by an individual or small number of individuals, then it has a:

centralized economy

A movement along a demand curve from one price-quantity combination to another is called a:

change in quantity demanded

In general, individuals and nations should specialize in producing those goods for which they have a(n):

comparative advantage.

If the demand for gadgets increases as a result of a decrease in the price of widgets, the widgets and gadgets are:

complementary goods

A demand curve is ______ sloping because ______.

downward; fewer people are willing to buy an item at higher prices

If an increase in income leads to a decrease in the demand for ground beef, then ground beef is a(n):

inferior good.

If the demand curve for bologna shifts to the right as income falls then bologna is a(n):

inferior good.

The buyer's reservation price for a particular good or service is the:

largest price the buyer would be willing to pay for it.

A graph that illustrates the maximum amount of one good that can be produced for every possible level of production of the other good is called a:

production possibilities curve.

Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 is her:

reservation price

The textbook notes that the last time a major league batter hit .400 was in 1941. This is because:

specialization by pitchers, infielders, and outfielders has made it harder for batters to hit.

Excess demand occurs:

when price is below the equilibrium price

A price ceiling that is set above the equilibrium price:

will have no effect on the market.