Final Exam (HW Q's)
A situation in which a country does not trade with other countries is called A. autarky. B. self-actualization. C. autonomy. D. independence.
A
All of the following is counted as "capital" in economics except A. money. B. machine tools. C. factory buildings. D. warehouses.
A
Economists generally favor the use of tradable emissions allowances to reduce pollution. However, the use of these allowances has been criticized by some environmentalists. Which of the following describes this criticism? A. Some environmentalists believe the allowances give firms a license to pollute. B. Some environmentalists believe that the price of allowances is often too high for consumers to afford. C. Some environmentalists believe that Pigovian taxes are a more efficient way to reduce pollution. D. Some environmentalists oppose allowances on legal grounds; they believe the use of allowances is unconstitutional.
A
If a demand curve shifts to the right, then A. demand has increased. B. quantity demanded has increased. C. demand has decreased. D. quantity demanded has decreased.
A
If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set A. equal to the marginal external cost at the economically efficient level of pollution. B. equal to the marginal private cost of production at the economically efficient level of pollution. C. equal to the amount of the deadweight loss created in the absence of a pollution tax. D. at a level low enough so that producers can pass along a portion of the additional cost onto consumers without significantly reducing demand for the product.
A
If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots, then A. the price elasticity of demand for teapots is greater than 1 in absolute value. B. the demand for teapots is unit-elastic. C. the price elasticity of demand for teapots is equal to zero. D. the price elasticity of demand for teapots is less than 1 in absolute value.
A
The law of demand implies, holding everything else constant, that A. as the price of bagels increases, the quantity of bagels demanded will decrease. B. as the price of bagels increases, the demand for bagels will decrease. C. as the price of bagels increases, the quantity of bagels demanded will increase. D. as the price of bagels increases, the demand for bagels will increase.
A
Economists estimated that the cross-price elasticity of demand for beer and wine is -0.83 and the income elasticity of wine is 5.03. This means that A. beer and wine are substitutes and wine is an inferior good. B. beer and wine are complements and wine is a luxury good. C. beer and wine are substitutes and wine is a luxury good. D. beer and wine are complements and wine is an inferior good.
B
Government imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of A. the Pigovian method of pollution control. B. command and control approach to pollution reduction. C. Coasian solution to pollution reduction. D. a tradable emission allowance system of pollution control.
B
Households ________ final goods and services in the ________ market. A. purchase; factor B. purchase; product C. sell; factor D. sell; product
B
If in the market for peaches, the supply curve has shifted to the left A. the supply of peaches has increased. B. the supply of peaches has decreased. C. the quantity of peaches supplied has increased. D. the quantity of peaches supplied has decreased.
B
If the price of music downloads was to decrease, then A. the demand for MP3 players would decrease. B. the demand for MP3 players would increase. C. the supply of MP3 players would increase. D. the quantity demanded of MP3 players would decrease.
B
If you burn your trash in the back yard in spite of regulations against it, then you are A. acting economically irrationally and creating a social cost. B. avoiding the private costs associated with disposing your trash some other way and creating a social cost. C. acting rationally and creating a positive externality. D. saving landfill space and creating a social benefit.
B
If, in response to an increase in the price of chocolate the quantity of chocolate demanded decreases, economists would describe this as A. a decrease in demand. B. a decrease in quantity demanded. C. a change in consumer income. D. a decrease in consumers' taste for chocolate.
B
In 2004, hurricanes destroyed a large portion of Florida's orange and grapefruit crops. In the market for citrus fruit A. he supply curve shifted to the right resulting in an increase in the equilibrium price. B. the supply curve shifted to the left resulting in an increase in the equilibrium price. C. the demand curve shifted to the right resulting in an increase in the equilibrium price. D. the demand curve shifted to the left resulting in a decrease in the equilibrium price.
B
In the past the federal government often employed what is called a "command and control" approach to the reduction of pollution emissions. Many economists are critical of this approach because A. it does not lead to significant reductions in pollution. B. they believe a market-based approach will reduce pollution more efficiently. C. the "command and control" approach is designed to help firms at the expense of consumers. D. the "command and control" approach leads to negative externalities.
B
At a product's equilibrium price A. the product's demand curve is the same as the product's supply curve. B. the quantity of the product demanded is greater than the quantity of the product supplied. C. the quantity of the product demanded is less than the quantity of the product supplied. D. the product's demand curve crosses the product's supply curve.
D
In economics, the accumulated skills and training that workers have is known as A. human capital. B. entrepreneurship. C. physical capital. D. innovation.
A
Price elasticity of supply is used to gauge A. how responsive suppliers are to price changes. B. how responsive suppliers are to changes in future prices. C. how responsive suppliers are to a change in demand. D. how responsive sales are to a change in input prices.
A
The Coffee Nook, a small cafe near campus, sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each. What is the opportunity cost of buying a cappuccino? A. 2 1/2 Russian tea cakes B. 2/5 of a Russian tea cake C. $2.50 D. $1.00
A
The demand by all the consumers of a given good or service is the ________ for the good or service. A. market demand B. quantity demanded C. law of demand D. scheduled demand
A
The larger the share of a good in a consumer's budget, holding everything else constant, the A. more price elastic is a consumer's demand. B. more vertical is a consumer's demand curve. C. more price inelastic is a consumer's demand. D. more unit-elastic is a consumer's demand.
A
Jonah lives in a small town where there is only one Mexican restaurant. Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant? A. Demand is likely to be perfectly inelastic. B. Demand is likely to be perfectly elastic. C. Demand is likely to be relatively elastic. D. Demand is likely to be relatively inelastic.
D
Markets promote A. equity and competition. B. voluntary exchange and equality. C. equity and equality. D. competition and voluntary exchange.
D
One Canoe One Sailboat G 10 60 H 15 75 What is Honduras's opportunity cost of producing one sailboat? A. 1/5 of a canoe B. 1.5 canoes C. 4 canoes D. 5 canoes
D
The attainable production points on a production possibility curve are A. the horizontal and vertical intercepts. B. the points along the production possibilities frontier. C. the points outside the area enclosed by the production possibilities frontier. D. the points along and inside the production possibility frontier.
D
The income effect of a price change refers to the impact of a change in A. income on the price of a good. B. demand when income changes. C. the quantity demanded when income changes. D. the price of a good on a consumer's purchasing power.
D
The primary purpose of ________ is to encourage the expenditure of funds on research and development to create new products. A. centrally planned economies B. government-run health care C. nationalizing oil companies D. patents and copyrights
D
Which of the following activities create a negative externality? A. cleaning up the sidewalk on your block B. graduating from college C. repainting the house you live in to improve its appearance D. keeping a junked car parked on your front lawn
D
An increase in the number of firms in a market will cause the quantity of a good supplied to increase. T/F
F
An inferior good is a good for which the quantity demanded decreases as the price increases, holding everything else constant. T/F
F
If Sanjaya can shuck more oysters in one hour than Tatiana, then Sanjaya has a comparative advantage in shucking oysters. T/F
F
If a country produces only two goods, it is possible to have a comparative advantage in the production of both those goods. T/F
F
If additional units of a good could be produced at a constant opportunity cost, the production possibility frontier would be bowed outward (concave). T/F
F
In the alcohol industry, both wine and spirits are considered to be substitutes for beer. T/F
F
Positive analysis is concerned with "what ought to be," while normative analysis is concerned with "what is." T/F
F
Scarcity is a problem that will eventually disappear as technology advances. T/F
F
The price elasticity of supply is calculated as the change in supply divided by the change in price. T/F
F
The process of countries becoming more open to foreign trade and investment is known as outsourcing. T/F
F
When production reflects consumer preferences, ________ occurs. A. allocative efficiency B. productive efficiency C. equity D. efficient central planning
A
Which of the following statements is true about scarcity? 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 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
A numerical limit imposed by a government on the quantity of a good that can be imported into the country is called a A. tariff. B. quota. C. quantity floor. D. barricade.
B
An inward shift of a nation's production possibilities frontier can occur due to A. a reduction in unemployment. B. a natural disaster like a hurricane or bad earthquake. C. a change in the amounts of one good desired. D. an increase in the labor force.
B
Assume that the demand curve for sunblock is linear and downward sloping. Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock are true? A. The slope and the price elasticity of demand are constant at all points along the demand curve for sunblock. B. The slope is constant, but the price elasticity of demand is not constant at all points along the demand curve for sunblock. C. The slope is not constant, but the price elasticity of demand is constant at all points along the demand curve for sunblock. D. The slope of the demand curve for sunblock is constant and equal to zero; demand is perfectly inelastic.
B
Assume there is a shortage in the market for digital music players. Which of the following statements correctly describes this situation? A. The demand for digital music players is greater than the supply of digital music players. B. Some consumers will be unable to obtain digital music players at the market price and will have an incentive to offer to buy the product at a higher price. C. The price of digital music players will rise in response to the shortage; as the price rises the quantity demanded will increase and the quantity supplied will decrease. D. The shortage will cause an increase in the equilibrium price of digital music players.
B
Comparative advantage means the ability to produce a good or service A. at a lower selling price than any other producer. B. at a lower opportunity cost than any other producer. C. of a higher quality than any other producer. D. at a higher profit level than any other producer.
B
Cross-price elasticity of demand is calculated as the A. percentage change in quantity demanded divided by percentage change in price of a good. B. percentage change in quantity demanded of one good divided by percentage change in price of a different good. C. percentage change in quantity sold divided by percentage change in buyers' incomes. D. percentage change in quantity supplied divided by percentage change in price of a good.
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
Economic models do all of the following except A. answer economic questions. B. portray reality in all its minute details. C. make economic ideas explicit and concrete for use by decision makers. D. simplify some aspect of economic life.
B
Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits. A. equitably B. rationally C. emotionally D. selfishly
B
Linesha, a college student working part-time receives a wage increase. An avid movie buff, she increased her purchases of Blu-ray discs and reduced her purchases of DVDs. Based on this information A. DVDs and Blu-ray discs are substitutes. B. Blu-ray discs are normal goods and DVDs are inferior goods. C. DVDs and Blu-ray discs are normal goods. D. the cross-price elasticity between DVDs and Blu-ray discs is negative.
B
Once a country has lost its comparative advantage in producing a good, its income will be ________ and its economy will be ________ if it switches from producing the good to importing it. A. higher; less efficient B. higher; more efficient C. lower; less efficient D. lower; more efficient
B
One Digital Camera Wheat China 100 4 South Korea 60 3 Refer to Table above. If the two countries specialize and trade, who should export wheat? A. There is no basis for trade between the two countries. B. China C. South Korea D. They should both be exporting wheat.
B
Since 1994, obesity rates in the United States A. have been on a slow and steady decline. B. have increased in all 50 states. C. have primarily increased in the Southeast and remained constant or slightly decreased in the remainder of the country. D. have remained fairly constant throughout the country.
B
Suppose the value of the price elasticity of demand is -3. What does this mean? A. A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent. B. A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. C. A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent. D. A $1 increase in price causes quantity demanded to fall by 3 units.
B
The market for smart phones has grown rapidly over the past few years, due in part to the overwhelming success of the Apple iPhone. Following the successful launch of the iPhone in 2007, companies such as Samsung, HTC, and LG have all introduced products to compete with the iPhone. The smart phones introduced to compete with the iPhone would be considered A. complements to the iPhone. B. substitutes for the iPhone. C. inferior goods compared to the iPhone. D. normal goods compared to the iPhone.
B
The production possibilities frontier shows the ________ combinations of two products that may be produced in a particular time period with available resources. A. minimum attainable B. maximum attainable C. only D. equitable
B
The selling of a product for a price below its cost of production is called A. fair competition. B. dumping. C. unfair competition. D. operating at a loss.
B
The three fundamental questions that any economy must address are A. What will be the prices of goods and services; how will these goods and services be produced; and who will receive them? B. What goods and services to produce; how will these goods and services be produced; and who receives them? C. Who gets jobs; what wages do workers earn; and who owns what property? D. How much will be saved; what will be produced; and how can these goods and services be fairly distributed?
B
Which of the following goods would have the most inelastic demand? A. ski vacations B. bread C. luxury cars D. big screen TVs
B
Which of the following must be present to reach a private solution to an externality problem? A. A majority of the parties affected by the externality must agree to a solution. B. The transaction costs to negotiate a solution must be relatively low. C. The total number of people, creators of the problem and those affected, must be relatively large to justify negotiating a solution. D. The government must approve the solution for it to be a legal solution.
B
_______ refers to reductions in a firm's costs that result from an increase in the size of an industry. A. Internal economies B. External economies C. Autarkial dominance D. Streamlining
B
A Federal Reserve publication proclaimed that "Trade is a win-win situation for all countries that participate." This statement is A. false since it ignores the workers who lose their jobs as result of international trade. B. false since not all countries participate in international trade. C. true because it refers to countries; individuals may be losers as a result of international trade. D. true because all consumers and workers benefit from international trade.
C
A positive externality causes A. the marginal social benefit to be equal to the marginal private cost of the last unit produced. B. the marginal social benefit to be less than the marginal private cost of the last unit produced. C. the marginal social benefit to exceed the marginal private cost of the last unit produced. D. the marginal private benefit to exceed the marginal social cost of the last unit produced.
C
According to ________, in a market with an externality, private parties would voluntarily negotiate an efficient outcome without government intervention. A. A. C. Pigou B. Adam Smith C. Ronald Coase D. John Maynard Keynes
C
According to an article in the Wall Street Journal, unlike airlines, even elite hotels don't have sophisticated systems that can react quickly to changes in demand. Even if they could, many hoteliers say people don't respond that much to lower rates. "We've tested this, cutting our rates by $50 [per night], and we didn't see an appreciable response in occupancy," says Jim Schultenover, a vice president for Ritz-Carlton. Source: Jesse Drucker, "In Times of Belt-Tightening, We Seek Reasonable Rates," Wall Street Journal, April 6, 2001. Based on the information above, the demand for hotel rooms is A. elastic. B. unit-elastic. C. inelastic. D. perfectly elastic.
C
All of the following are critical functions of the government in facilitating the operation of a market economy except A. protecting private property. B. enforcing property rights. C. ensuring an equal distribution of income to all citizens. D. enforcing contracts.
C
All of the following are examples of spending on factors of production in the circular flow model except A. Bima hires two students to work at his ice-cream store. B. "Get Fit Together" purchases 3 new treadmills for its gym. C. Iris buys a dozen roses for her mother's birthday. D. The Banyan Tree rents a much larger property so that it can add a restaurant to its facilities.
C
An externality is A. a benefit realized by the purchaser of a good or service. B. a cost paid for by the producer of a good or service. C. a benefit or cost experienced by someone who is not a producer or consumer of a good or service. D. anything that is external or not relevant to the production of a good or service.
C
Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen. One can conclude that A. the law of demand has been violated. B. the number of tarot card readers has increased. C. the demand for tarot card readers has increased. D. tarot card readers are deliberately charging high prices because they provide services for superstitious clients.
C
At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week. When he raised her price to $12 per dozen, he still sold 40 dozen per week. Based on this information, the demand for his tamales is A. perfectly elastic. B. inelastic. C. perfectly inelastic. D. unit-elastic.
C
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
Hours Open Total Revenue 1 $25 2 45 3 70 4 90 5 105 6 110 Thuy Anh runs a small flower shop in the town of Florabunda. She is debating whether she should extend her hours of operation. Thuy Anh figures that her sales revenue will depend on the number of hours the flower shop is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $16 per hour. Refer to Table above. Using marginal analysis, how many hours should Thuy Anh extend her flower shop's hours of operations? A. 2 hours B. 3 hours C. 4 hours D. 5 hours
C
If a commercial dairy farm wants to raise funds to purchase feeding troughs, it does so in the A. output market. B. product market. C. factor market. D. dairy products market.
C
It is difficult for a private market to provide the economically efficient quantity of a public good because A. by law governments cannot use cost-benefit analysis to determine this quantity. B. public goods produce positive and negative externalities. C. individual preferences are not revealed in the market for the good. D. it is too expensive to produce the necessary amount of the good.
C
One Digital Camera Wheat China 100 4 South Korea 60 3 Table above shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea. Refer to Table Above. Does either China or South Korea have an absolute advantage and if so, in what product? A. South Korea has an absolute advantage in wheat. B. China has an absolute advantage in wheat. C. South Korea has an absolute advantage in both products. D. China has an absolute advantage in digital cameras.
C
Suppose the price of gasoline is $3.50 per gallon, the quantity of gasoline demanded is 150 billion gallons per year, the price elasticity of demand for gasoline is -0.06, and the federal government decides to increase the excise tax on gasoline by $1.00 per gallon, which increases the price of gasoline by $0.75 per gallon. How much revenue does the federal government receive from the tax? A. $95.44 billion B. $111.20 billion C. $148.27 billion D. $161.61 billion
C
The term ________ in economics 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
Under autarky, consumer surplus is represented by the area A. above the supply curve and below the equilibrium price. B. above the supply curve and below the demand curve. C. below the demand curve and above the equilibrium price. D. above the demand curve and below the supply curve
C
What is a "social cost" of production? A. the cost of the natural resources used up in production B. the total costs of producing a product, both implicit and explicit costs C. the sum of all costs to individuals in society, regardless of whether the costs are borne by those who produce the products or consume the product D. the cost of the environmental damage created by production
C
Which of the following is a source of market failure? A. unforeseen circumstances which leads to the bankruptcy of many firms B. a lack of government intervention in a market C. incomplete property rights or inability to enforce property rights D. an inequitable income distribution
C
Which of the following statements about an entrepreneur is false? A. organizes the other factors of production into a working unit B. develops the vision for the firm and funds the producing unit C. sells his entrepreneurial services in the output market D. risks the personal funds provided
C
Workers in industries protected by tariffs and quotas are likely to support these trade restrictions because A. they do not want to offend their employers who want them. B. politicians lobby to convince workers the restrictions will make them better off. C. they believe the restrictions will protect their jobs. D. they don't understand that the restrictions will threaten their jobs.
C
Consider the following statements: a. Consumers buy more MP3 players from an electronics store that sells MP3 players at a lower price than other rival electronics stores in the area. b. Schools take steps to increase security since they believe it is more costly to allow vandalism than to hire additional security guards. c. Citrus growers produce more oranges when the selling price of oranges falls. 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.
D
Consider the following statements: a. Consumers buy more MP3 players from an electronics store that sells MP3 players at a lower price than other rival electronics stores in the area. b. Schools take steps to increase security since they believe it is more costly to allow vandalism than to hire additional security guards. c. Citrus growers produce more oranges when the selling price of oranges falls. 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.
D
Danielle Ocean pays for monthly pool maintenance for her home swimming pool. Last week the owner of the pool service informed Danielle that he will have to raise his monthly service fee because of increases in the price of pool chemicals. How is the market for pool maintenance services affected by this? A. There is an increase in the supply of pool maintenance services. B. There is a decrease in the demand for pool maintenance services. C. There is a decrease in the quantity of pool maintenance services supplied. D. There is a decrease in the supply of pool maintenance services.
D
Economists believe the most persuasive argument for protectionism is to protect infant industries. But the argument has a drawback. What is this drawback? A. Governments always make the level of protection for infant industries too high. B. Governments are usually too impatient and do not allow protection to remain in place long enough to allow industries to be competitive in international markets. C. Governments usually use tariffs, rather than quotas, to protect infant industries in order to collect tariff revenue. (Quotas do not result in government revenue). D. Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never "growing up."
D
If a firm expects that the price of its product will be higher in the future than it is today A. the firm will go out of business. B. the firm has an incentive to increase supply now and decrease supply in the future. C. the firm has an incentive to decrease quantity supplied now and increase quantity supplied in the future. D. the firm has an incentive to decrease supply now and increase supply in the future.
D
If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced. A. bowed out B. bowed in C. non-linear D. linear
D
If there is pollution in producing a product, then the market equilibrium price A. is too high and equilibrium quantity is too low. B. and equilibrium quantity are too low. C. and equilibrium quantity are too high. D. is too low and equilibrium quantity is too high.
D
Which of the following best illustrates the free rider problem? A. Since no one owns elephants and elephants are valued for their hide, meat and ivory, elephants can be hunted to extinction. B. For every purchase of a $30 fare card, you are entitled to five free bus rides. C. If your neighbors professionally landscape their front yards, it is likely that the market value of your property will increase. D. All three homeowners in a quiet cul-de-sac have expressed the desirability of security lighting in the common parking area. One of the homeowners installs the lighting and asks you to contribute toward the cost. You choose not to contribute.
D
Which of the following statements is false? A. An inverse relationship has a negative slope value. B. A direct relationship has a positive slope value. C. A curved line has slope values that change at every point. D. A straight line has a slope of zero.
D
________ is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors. A. Absolute advantage B. Specialization C. Autarky D. Comparative advantage
D
A quasi-public good differs from a public good in that unlike a public good, it is possible to keep out those who do not pay for the quasi-public good from enjoying the benefits of the good. T/F
T
If consumers believe the price of iPads will decrease in the future, this will cause the demand for iPads to decrease now. T/F
T
One example of human capital is the amount of skills that you have. T/F
T
The decisions Apple makes in determining production levels for its iPhone is an example of a microeconomics topic. T/F
T
The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases. T/F
T
When negative externalities exist, the competitive market supply curve does not include all of the costs borne by members of society. T/F
T
