Economics Homework 1

The law of demand implies, holding everything else constant, that as the price of bagels increases A) the quantity of bagels demanded will decrease. B) the demand for bagels will decrease. C) the quantity of bagels demanded will increase. D) the demand for bagels will increase.

A

Which of the following statements about scarcity is true? A) Scarcity refers to the situation in which unlimited wants exceed limited resources. B) Scarcity is not a problem for the wealthy. C) Scarcity is only a problem when a country has too large a population. D) Scarcity only arises when there is a wide disparity in income distribution.

A

________ marginal opportunity cost implies that the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts. A) Increasing B) Decreasing C) Constant D) Negative

A

Refer to Figure 3-1. A decrease in the price of a substitute good would be represented by a movement from A) A to B. B) B to A. C) D1 to D2. D) D2 to D1.

D

The production possibilities frontier model shows that A) if consumers decide to buy more of a product, its price will increase. B) a market economy is more efficient in producing goods and services than is a centrally planned economy. C) economic growth can only be achieved by free market economies. D) if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

D

A grocery store sells a bag of potatoes at a fixed price of $2.30. Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes? A) marginal revenue B) gross earnings C) pure profit D) marginal costs E) net benefit

A

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is A) an inferior good. B) a neutral good. C) a necessity. D) a normal good.

A

Refer to Figure 2-1. Point B is A) technically efficient. B) unattainable with current resources. C) inefficient in that not all resources are being used. D) the equilibrium output combination.

A

Refer to Figure 2-2. What is the opportunity cost of one pound of vegetables? A) 3/4 pound of meat B) 1.2 pounds of meat C) 1 and 1/3 pounds of meat D) 12 pounds of meat

A

Refer to Table 2-1. Assume Tomaso's Trattoria only produces pizzas and calzones. A combination of 24 pizzas and 30 calzones would appear A) along Tomaso's production possibilities frontier. B) inside Tomaso's production possibilities frontier. C) outside Tomaso's production possibilities frontier. D) at the horizontal intercept of Tomaso's production possibilities frontier.

A

Refer to Table 3-1. The table above shows the demand schedules for loose-leaf tea of two individuals (Sunil and Mia) and the rest of the market. If the price of loose-leaf tea rises from $3 to $4, the market quantity demanded would A) decrease by 32 lbs. B) increase by 64 lbs. C) increase by 32 lbs. D) decrease by 64 lbs.

A

Buyers rush to purchase stocks in California vineyards following a forecast of a 30 percent decline in this year's grape harvest. What happens in the California wine market as a result of this announcement? A) The demand curve for California wine shifts to the left in anticipation of higher prices in the future. B) The demand curve for California wine shifts to the right in anticipation of higher prices in the future. C) The supply curve for California wine shifts to the right in anticipation of higher prices in the future. D) The supply curve for California wine shifts to the left in anticipation of lower quantities in the future.

B

DeShawn's Detailing is a service that details cars at the customers' homes or places of work. DeShawn's cost for a basic detailing package is $40, and he charges $75 for this service. For a total price of $90, DeShawn will also detail the car's engine, a service that adds an additional $20 to the total cost of the package. What is DeShawn's marginal benefit if he sells a basic detailing package? A) $35 B) $75 C) He makes a marginal loss of $15, not a marginal benefit. D) The marginal benefit cannot be determined

B

Holding all other personal characteristics-such as age, gender, and income-constant, economists would expect that A) people with health insurance are less likely to be overweight than people without health insurance. B) people with health insurance are more likely to be overweight than people without health insurance. C) people with health insurance are equally likely to be overweight as people without health insurance. D) there is no correlation between having health insurance and being overweight.

B

Refer to Figure 2-2. What is the opportunity cost of one pound of meat? A) 3/4 pound of vegetables B) 1 and 1/3 pounds of vegetables C) 1.6 pounds of vegetables D) 16 pounds of vegetables

B

The market for smartwatches has begun to grow, due in part to the success of the Apple Watch. Following the successful launch of the Apple Watch in 2015, companies such as Samsung, Sony, and LG have all developed products to compete with the Apple Watch. The smartwatches introduced to compete with the Apple Watch would be considered A) complements to the Apple Watch. B) substitutes for the Apple Watch. C) inferior goods compared to the Apple Watch. D) normal goods compared to the Apple Watch.

B

The principle of opportunity cost is that A) in a market economy, taking advantage of profitable opportunities involves some money cost. B) the economic cost of using a factor of production is the alternative use of that factor that is given up. C) taking advantage of investment opportunities involves costs. D) the cost of production varies depending on the opportunity for technological application

B

The production possibilities frontier shows the ________ combinations of two products that can be produced in a particular time period with available resources. A) minimum attainable B) maximum attainable C) only D) equitable

B

Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves. If she now produces 60 silk roses and 80 silk leaves, what is the opportunity cost of producing an additional 10 silk roses? A) 2.5 silk leaves B) 10 silk leaves C) 25 silk leaves D) 55 silk leaves

C

By definition, economics is the study of A) how to make money in the stock market B) how to make money in a market economy C) the choices people make to attain their goals, given their scarce resources D) supply and demand

C

DeShawn's Detailing is a service that details cars at the customers' homes or places of work. DeShawn's cost for a basic detailing package is $40, and he charges $75 for this service. For a total price of $90, DeShawn will also detail the car's engine, a service that adds an additional $20 to the total cost of the package. Should DeShawn continue to offer the engine detailing service? A) Yes, he still makes a profit by selling the engine detailing service with the basic detailing package. B) yes, but only if he raises the price of the basic detailing package C) No, his marginal benefit is less than his marginal cost. D) More information is needed for DeShawn to make this decision

C

In economics, the term ________ refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade. A) collective B) cooperative C) market D) trade-off

C

Increasing opportunity cost is represented by a ________ production possibilities frontier. A) linear B) bowed in C) bowed out D) vertical

C

Refer to Figure 3-1. An increase in the expected future price of the product would be represented by a movement from A) A to B. B) B to A. C) D1 to D2. D) D2 to D1.

C

Consider the following statements: a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area. b. Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment. c. Firms produce more of a particular DVD when its selling price rises. Which of the above statements demonstrates that economic agents respond to incentives? A) a only B) b only C) c only D) a and b E) a, b, and c

E