micro 1

International finance is generally studied in:

macro

The price elasticity of supply is calculated by the percentage change in

quantity supplied/percentage change in price

If you were not studying economics, you could be doing one of the following: sleeping in (which you value at $5), playing cards with your friends (which you value at $10), or working (you would have earned an extra $8). The opportunity cost of studying economics is therefore:

10

Suppose that the quantity demanded for a product falls by 9% as people's incomes fall by 3%. What is the income elasticity for this good?

3.00

A grocery store announced a 50% decrease in the price of local honey. Sales increased by 200%. Based on the information, the price elasticity of honey is:

4

Which statement is TRUE of microeconomics?

About 15% of teachers were laid off last week.

Which of these is NOT an example of market failure?

Competition leads firms to provide products at the lowest possible price.

An airline finds that its 6 A.M. flights are half-empty but the mid-afternoon flights are full. Which would be the MOST plausible statement for an economist to make?

Cut the price of the early morning flight and raise the price of the afternoon flight.

The concepts of absolute and comparative advantage were developed by

David Ricardo.

What is one of the risks involved in complete specialization?

Educational opportunities may be narrowed.

PPF shifts to the right as an economy grows as a result of:

Expanding resources improving technologies

Production efficiency

GOODS AND SERVICES ARE PRODUCED AT THEIR LOWEST POSSIBLE RESOURCE (OPPORTUNITY) COST.

A leather company produces shoes and belts. What will the company do if it expects the price of shoes to rise in the near future?

It will move resources from belt production to shoe production, thereby decreasing the supply of belts.

ABSOLUTE ADVANTAGE

ONE COUNTRY CAN PRODUCE MORE OF A GOOD THAN ANOTHER COUNTRY.

The graph we could draw to represent the combinations of two goods that are possible within a given society at full employment is a(n)

PPF

Whenever you construct a demand curve, which statement is TRUE?

The price of all other goods must be held constant

Can a country have a comparative advantage in producing a good without also having an absolute advantage in producing that good?

Yes, it can because each type of advantage has a different basis.

inferior good

a good for an increase in income results in declining demand

normal good

a good for which an increas in income results in rising demand

Sales of luxury consumer products for cats and dogs, such as pet spas and hotels, have experienced _____ over the past decade.

a large increase

Suppose that a major hurricane hits Florida, causing widespread damage to homes and businesses. If the legislature imposes price controls in order to keep reconstruction costs reasonable, which of these is the MOST likely result?

a shortage of building materials

The United States can grow a greater total quantity of wheat than Japan. The United States has a(n) _____ in wheat production.

absolute advantage

Ceteris paribus

an improvement in production technology

Which of these can lead to a decrease (leftward shift) in the production possibilities frontier?

banning a technology due to its adverse environmental effects

Government intervention in the market is helpful when:

consumers are forced to buy from just one firm.

When consumers are given more time to adjust to higher prices:

consumers have more choices from which to select.

If demand is inelastic

decrease in the price leads to an increase in total revenue.

A decrease in the quantity supplied of iPads is caused by a(

drop in the price of iPads.

an outward shift of the PPF means:

economic growth

If a country wants to maximize its GDP, it should always:

export goods in which it has a comparative advantage.

International trade:

increases consumption possibilities.

In general, the burden of taxes falls more on the buyer if demand for the product taxed is:

inelastic

The purpose of invoking ceteris paribus is to:

simplify the analysis being done.

Which of these is among the top five U.S. exports to China?

soybeans

If the cross elasticity of demand for good A with respect to good B is 2.3, then good A is a(n):

substitute for good B.

When the supply of citrus products decreases:

the whole supply curve shifts upward and to the left.

There would be no economic problems in a world where all resources are:

unlimited

Markets differ in:

location, products, and size.

The French term for "let it be" is

laissez-faire.

Natural resources such as copper deposits are:

land

Suppose that quantity supplied of a product equals 8 units and quantity demanded equals 5 units. This market is MOST likely:

experiencing a surplus of this product.

If a person gets a meningitis vaccination shot, there's a reduced chance that others around her will get meningitis. This is an example of:

external benefit

Suppose that the price of pork rises. We would expect that the supply of beef will:

fall because farmers will shift resources from beef production to pork production.

Consumer surplus is defined as the:

gap between the demand curve and the market price

Suppose your income falls from $35,000 to $33,000 and that your quantity demanded of a good increases from 40 units to 55 units. The good is said to be a

inferior good

The field of economics that is concerned about the broader issues in the economy, such as inflation, unemployment, and national output of goods and services is called:

macroeconomics.

The extra cost associated with undertaking some action is its:

marginal cost

The economist Henry George proposed that all tax revenue be collected by taxes on land. If land were perfectly inelastic in supply, then a property tax on land would:

result in no deadweight loss.

If a graph between hot chocolate sales and temperature is downward sloping, then sales of hot chocolate:

rise as temperature falls.

In a market-based economy, scarce resources are allocated by:

the price system

Which is an example of capital in the production process of an amusement park?

the roller coaster

If a given product has a diagonal downward-sloping demand curve, then Ed will:

vary throughout the range of the curve

A unitary elastic demand means that if the percentage change in price is _____, then the percentage change in quantity demanded is _____.

5%; 5%

occurs when the mix of goods society decides to produce is produced at the lowest possible resource or opportunity cost.

Production efficiency

Which statement is TRUE about markets?

They can contain legal or illegal activity conducted by any individual or business.

Which statement is NOT correct about markets?

They require a physical location for transactions to take place.

Which circumstance will cause a decrease in demand?

an increase in the price of a complementary good

If a store sells a good with a highly elastic demand, then a decrease in the price would lead to:

an increase in total revenue.

Before a house is sold, the buyer usually inspects the property for problems. This reduces which cause of market failure?

asymmetric information

comparative advantage

countries opportunity cost is lower than another country's

If a price floor is set below the equilibrium price:

no impact is felt on the market

When resources are being used inefficiently, the:

economy is operating at a point inside its production possibility frontier.

If the income elasticity of demand for tea is 0.50, tea is a:

normal good

If supply increases and at the same time demand decreases, equilibrium price:

is indeterminate and equilibrium quantity increases.

If an economy is producing at a point inside its production possibilities frontier:

it is possible to produce more of one good without giving up some of the other good.

HOW WILL A RECESSION AFFECT A COUNTRY'S PPF?

it will produce at a point below an unchanged PPF

The _____ is so short that the output and the number of firms in an industry are fixed.

market period

In a _____ economy, individuals and firms own most resources, and in a _____ economy, the government controls most resources.

market; planned

A price ceiling is a legally mandated:

maximum price above which goods or services cannot be sold.

Consumer surplus is the difference between the:

maximum price the buyer is willing to pay and the market price.

When you move from one point to another on the production possibilities frontier (PPF) and the opportunity cost of producing one good in terms of the other good does not change, then the PPF:

must be a straight line.

If one person consumes a public good:

others cannot be excluded from enjoying it.

The introduction of the tablet computer to the U.S. economy would BEST be represented with a production possibilities frontier (PPF) as a:

outward shift of the PPF.

Assume the price of a good is $1 and total revenue is $200. If the price of the same good increases to $2 and total revenue increases to $400, you know that the demand for the product is:

perfectly inelastic.

Price gouging" laws are types of _____ and often result in _____.

price ceilings; shortages of a scarce good

What drives and disciplines markets?

prices and profits

Suppose that a customer's willingness to pay for a product is $1,480, and the seller's willingness to sell is $1,210. If the negotiated price is $1,479:

producer surplus is greater than consumer surplus.

The practical constraints on trade include all of these EXCEPT:

production possibilities frontiers for nations are linear.

When an economy is operating efficiently, the production of one more unit of a good will result in some loss of production of another good because:

resources are limited and efficiency implies that all resources are already in use.

Suppose the Terrific Tube Company ran a very successful advertising campaign. Economic analysis would suggest that the campaign would cause the equilibrium price to _____ and the equilibrium quantity to ____

rise rise

Ceteris paribus, an improvement in production technology:

shifts the supply curve to the right, reducing the equilibrium price and increasing equilibrium output.

production possibility frontier

shows the combinations of goods that can be produced outside: unattainable under: attainable but inefficient

Wheat is the main input in the production of flour. If the price of wheat increases, all else equal, we would expect the

supply of flour to decrease.

Implementing a price floor can cause:

surplus

demand schedule

table that shows the quantity of a good a consumer purchases at each price

opportunity cost

the cost of a good in terms of another that must be given up

The opportunity costs of attending college do NOT include

the expenditures for food.

Market failure means that:

the market has not provided a socially optimal amount of goods and services.

allocative efficiency

the mix of goods and services is just what society desires