Econ final(exam 1)

Carl mows 2 lawns in a shift or washes 3 cars. David mows 4 lawns or washes 4 cars. Therefore: A) Carl has a comparative advantage in washing the car B) Carl has an absolute advantage in washing the car C) the opportunity cost of washing the car is greater for Carl D) the opportunity cost of mowing the lawn is greater for David E) Carl has an absolute advantage in mowing the lawn

A) Carl has a comparative advantage in washing the car

The price of a Pepsi decreases from $.99 to $.81 and quantity demands increased from 57 to 63 units. A) elasticity s -0.5 B) -0.25 C) -1 D) -3 E) -2

A) elasticity is -0.5

Suppose the cross-price elasticity of demand for automobiles with respect to the price for gasoline is -0.2. If gasoline prices rise 20 percent, then automobile sales should: A) fall 4% B) fall 20% C) rise 4% D) rise 20%

A) fall 4%

As more satisfaction is achieved from consuming a good with diminishing marginal utility, then total utility: A) increases at a decreasing rate B) decreased as long as marginal utility is negative C) decreased as long as marginal utility is positive D) is negative as long as marginal utility is decreasing

A) increases at a decreasing rate

If there is a short run shortage in the market for the athletic shoes A) the price should rise to eliminate the shortage B) inventories of athletic shoes are growing C) demand will decrease to restore equilibrium D) firms will reduce production to restore equilibrium E) supply will increase to restore equilibrium

A) the price should rise to eliminate the shortage

Recently, lobster feed has increased in price: A) the supply curve for lobster should shift down B) the supply curve for lobster should shift up C) there should be an increase in the quantity of lobster supplied D) there should be a decrease in the quantity of lobster supplied E) both supply and demand curves should shift to the right

A) the supply curve for lobster should shift down

A person who can produce more of a good than another is said to have an absolute advantage A) true B) false

A) true

C.P., if the price of a good X increased and as a result, the demand for good Y decreases A) goods X and Y are inferior goods B) good X and Y are complementary goods C) goods X and Y are substitute goods D) goods X and Y are normal goods

B) goods X and Y are complementary goods

Your friend notes that US auto sales and population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. His assumption: A) is correct only when the economy is in recession B) has mistakenly inferred causation from observation correlation C) has ignored secondary effects D) has committed the fallacy of composition E) is correct only when the U.S. enjoys PPF growth

B) has mistakenly inferred causation from observation correlation

Given a demand curve, a decrease in supply with typically A) decrease price, but the change in quantity could be in either direction B) increase price and decrease quantity C) decrease price but leave quantity unchanged D) decrease price but increase quantity E) increase both quantity and price

B) increase price and decrease quantity

Microeconomics is best described as the study of A) the behavior of small firms in the marketplace B) the economic behavior of individual decision makers C) the behavior of the economy as a whole D) how to use the fewest natural resources in production E) governments role as a producer in the economy

B) the economic behavior of individual decision makers

The income effect refers to the impact of change in A) income on the price of a good B) the price of a good in real income C) the general price level caused by the change in the price of a good D) the price of a substitute for the good under consideration E) demand when income changes

B) the price of a good in real income

Along a linear demand curve A) both the price and price elasticity are constant B) the slope is constant but the price elasticity varies C) total revenue is constant D) the price elasticity is constant but the slope varies E) both the slope and elasticity vary

B) the slope is constant but the price elasticity varies

The effect of a rise in consumer income on equilibrium price and quantity of Florida orange juice (a normal good) is A) to decrease equilibrium price and quantity B) to increase equilibrium price and quantity C) to increase equilibrium price and decrease equilibrium quantity D) to increase equilibrium quantity and decrease equilibrium price E) that equilibrium price and quantity remain constant

B) to increase equilibrium price and quantity

A rational decision maker will take only those actions for which the expected marginal benefit A) is positive B) is at its maximum level C) is greater than or equal to the expected marginal cost D) is less than the expected marginal cost E) exactly equals the expected marginal cost

C) is greater than or equal to the expected marginal cost

Bob has an income of $20K and pays taxes of $3K; bill has an income of $10K and pays taxes of $1K; therefore: A) the tax is regressive B) the tax is proportional C) the tax is progressive D) the tax is based in the benefits received E) there is insufficient information to answer the question

C) the tax is progressive

Which of the following is likely to have a price inelastic demand A) hamburger B) chicken C) veal D) pork E) beef

C) veal

If a price reduction leads to larger total revenue, demand is A) perfectly elastic B) inelastic C) unit elastic D) elastic E) perfectly inelastic

D) elastic

If the tea harvest is bad in a particular year, what will happen in the market for coffee? A) increased price and decreased quantity B) decreased price and decrease quantity C) decreased price and increased quantity D) increased price and increased quantity E) no change in equilibrium price and quantity

D) increased price and increased quantity

Which of the following is true of an increase in quantity supplied of a given good? A) it is represented by a rightward shift of the supply curve B) it could result from a technological improvement C) the price of a key resource used to produce the good could have decreased D) it is caused by an increase in the price of a good E) the price of an alternative good has increased

D) it is caused by an increase in the price of a good

The price elasticity of demand A) is of no use to producers B) tells producers what will happen to profit if they change price C) tells producers what will happen to quantity supplied if they change price D) tells producers what will happen to quantity demanded if they change price E) tells producers what will happen to price in the following time period

D) tells producers what will happen to quantity demanded if they change price

You drink more tea because the price of coffee has increased. This is explained by A) the law of supply B) tea and coffee are complements C) the income effect D) the substitution effect

D) the substitution effect

If you go to summer school, tuition and books are $2400. If you work all summer you could make $8000. Your rent for the summer is $1100 regardless of your choice. The opportunity cost of going to summer school is A) $3500 B) $11,500 C) $8,000 D) $9,100 E) $10,400

E) $10,400

Elasticity is always A) measured in dollars B) measured in dollars unit of quantity C) measured in units of quantity D) measured in units of quantity per dollar E) independent of the units of measurement

E) independent of the units of measurement

If all resources are used efficiently to produce goods and service, a nation would find itself producing A) inside its productions possibilities frontier B) someone on its production possibilities frontier C) outside of its productions possibility frontier D) at one extreme end of its PPF E) more of one product with no decrease in the production of the other product

E) more of one product with no decrease in the production of the other product