Economics Unit 1 Test

refer to the above figure. a minimum wage has been set at Wm. The amount of unemployment is

Qs minus Qd

which of the following is a statement with positive economic analysis

a reduction in the size of the budget deficit will reduce interest rates, slower money growth reduces inflation, lower wages increase employment and decrease the unemployment rate, *all of the above*

which of the following statements are correct?

a shortage occurs when the quantity demanded is greater than the quantity supplied at a price below the markets clearing price

If the price of Pepsi increases, then there will be _________ of Pepsi

an increase in the quantity supplied

economic growth is shown by

an outward shift of the production possibilities curve

price floors

create surpluses by setting the price above equilibrium

"Ceteris paribus" assumption means

that nothing else changes except the variables under consideration

which of the following is a macroeconomic concern

the national output of the United States

In the above graphs a direct relationship is shown by

*shown on graph*

a movement along a demand curve is

a change in the quantity demanded and is caused by a change in the price of the good

which of the following is not considered to be an economic resource -the telephone company repair truck -the local gas station -a view of the stars on a clear night -your economics professor

a view of the stars on a clear night

which of the following would likely cause an increase in the supply of espresso coffee makers

a widespread expectation that the price of espresso makers will fall in the future

the combination of psychology and economics to determine individual decision making is known as

behavioral economics

the terms of exchange are determined

by supply and demand

which of the following factors will lead to a shift in the demand curve

changes in consumers tastes and preferences

which of the following sets of terms describes the problem of scarcity in economics? -goods, land, and needs -choices, opportunity costs, and trade-offs -production, consumption, and wants -labor, needs, and opportunity costs

choices, opportunity costs, and trade-offs

in economics, international trade is based on the existence of

comparative advantage between countries

there is an increase in demand for cream when the price of coffee falls. Other things constant, we can conclude coffee and cream are

complementary goods

Which of the following is a microeconomic concern?

consumer behavior

the principle of comparative advantage implies that

everyone can benefit from international trade

the division of labor refers to

the assignment of different workers to different tasks

we know products g and h are relative goods because when the price of g increases,

the demand curve for h will shift to the left because g and h are complementary goods

the reason the production possibilities curve is bowed outward (concave) is

the law of increasing additional cost

the production possibilities curve represents

the maximum combination of goods and services that can be produced with fixed resources and technology, given efficient use of the resources

the price of a first class stamp in 1957 was 3 cents, and was 41 cents in 2007. From this we know that

the money price of first class stamps increased from 1957 to 2007, but we can't tell if the relative price of the first class stamps increased or decreased without more information

which of the following is a true statement? -the x-axis is the vertical line and the y-axis is the horizontal -the origin is (0,0) -it is impossible to graph negative values -graphs show the relationship between two dependent variables

the origin is (0,0)

Prices ration goods to

the people willing and able to pay the highest price

refer to the above figure. a surplus will exist when (equilibrium price is $6)

the price equals $10

if there is a surplus,

the price will decline to the equilibrium level

There has recently been an increase in the price of dairy products used in the production of ice cream. High temperatures have also induced people to consume more ice cream. In the market for ice cream, the effects these changes will have on equilibrium price and quantity are:

the price will increase, and the effect on quantity is indeterminate

refer to the above figure, if a price floor of $5 was set (above equilibrium)

the quantity sold would be 60 units

if the government imposes a per unit tax on sales of an industry's products, then we would expect

the supply curve in that industry would shift to the left

the rationing function of prices refers to

the synchronization of decisions by buyers and sellers that leads to equilibrium

Scarcity exists because

there are not enough resources available to produce all the goods that people want

the existence of scarcity means that

there are not enough resources to satisfy unlimited human wants

Consider the case of a teacher who tells students that those who miss more than three classes for any reason will automatically receive a lower grade.

this is an example of negative incentive for students to attend class

The idea of bounded rationality is used to address all of the following except

unbounded knowledge

the price system features

voluntary exchange that makes both the consumer and producer better off

when are black markets likely to arise

when the government enforces a price ceiling

the difference between quantity restrictions and price ceilings as to their effect on the market is that

while some consumers gain from price ceilings, no consumers gain from quantity resitrictions

If Irene can make either four chairs or one table in an hour and Greg can make either three chairs or two tables in an hour then

irene has the absolute advantage in the production of chairs

refer to the above figures, which panel demonstrates the law of demand

its an inverse relationship

which factor of production includes water

land

the long run effect of rent control on an area includes

less investment into the real estate market in the area

what is the type of mechanism that answers the basic economic questions through a decentralized decision making process

market system

the saying that "you cannot have your cake and eat it too" illustrates the economic concept of

opportunity cost

when two variables have a direct relationship, the slope is

positive

refer to the above figure. which panel demonstrates the law of supply

positive slope

refer to the above figure. a price control has been set which has led to a shortage this means that a (p1 is above equilibrium and p2 is below)

price ceiling has been set at p2

efficiency can correctly be defined as

producing the maximum output with given technology and resources

according to the above figure, a shortage will occur at a price at which

quantity demanded exceeds the quantity supplied

which of the following is one of the functions of a rental price

ration the use of existing housing for current consumers

in economics, the concept that individuals are motivated by self-interest and respond to opportunities for gain is know as

rational self-interest

in order to increase the supply of a good, producers must

reduce their per-unit costs of producing the good

the "real" price of a good is known as

relative price of a good

Agriculture price supports that establish a price floor at which agricultural products may be purchased that exceeds the market clearing price

result in the quantity of these products supplied exceeding the quantity demanded at the floor price

economics assumes that people are motivated by

self interest

suppose there is an improvement in technology in the market for Ipods. Which of the following is true

supply will increase and the market clearing price will fall

refer to the above table. suppose buyer 2 leaves the market, what is the new market quantity of DVDs demanded at a price of $10?

25

In the above figure, the opportunity cost of moving from producing 75 guitars and 25 ukuleles to producing 50 guitars and ukuleles is In the above figure, as more ukuleles are produced, the opportunity cost in terms of guitars is

25 guitars constant

Since the minimum wage rate began it has typically stayed at about what percentage of the average manufacturing wage?

40%-50%

One major assumption of economics is that people

act as if they systematically pursue self-interest

A limit on the amount of strawberries that can be imported into the United States is an example of

an import quota

A fundamental aspect of economics is to

analyze how choices are made

economic models

are simplified representations of the real world

If the production of capital goods is shown along the horizontal axis of a production possibilities curve, and the production of consumer goods is shown along the vertical axis of a production possibilities curve, and the economy desires to have a rapid rate of economic growth, then the economy should produce at a point A) near the middle of the curve dividing resources equally between the production of consumer and capital goods. B) at a point near the vertical axis concentrating on the production of consumer goods. C) at a point near the horizontal axis concentrating on the production of capital goods. D) at a point inside the curve allowing the economy to adjust rapidly to changes in economic activity.

at a point near the horizontal axis concentrating on the production of capital goods

if price increases and the quantity purchased increases, we know that

demand increased

which of the following would cause and increase in demand for digital cameras

digital cameras become easier to use

economic goods are

goods that are scarce, for which the quantity demanded exceeds the quantity supplied at zero price

economics is the study of

how people allocate their limited resources to satisfy their unlimited wants

which of the following is not one of the basic questions that an economic system attempts to answer -what to produce -how to eliminate choices -from whom goods and services will be produced -how much goods and services will be produced

how to eliminate choices

Which of the following statements is false?

if the price of a good rises, quantity demanded of the good decreases, and the demand curve shifts toward the origin as long as supply is static

how does an economy represented by a straight-line production possibilities curve differ from on represented by a traditional production possibilities curve with a bowed shape

in the economy represented by a straight-line production possibilities curve, the law of increasing relative cost does not apply

A subsidy to carrot farmers will

increase the supply of carrots.