Micro econ exam 1 (ch. 1,2,3) Bloodworth
______ occurs when economic benefits are distributed fairly.
Equity
Which of the following is not a factor of production?
$1,000 in cash
Pierre can produce either a combination of 20 bow ties and 30 neckties or a combination of 35 bow ties and 15 neckties. If he now produces 35 bow ties and 15 neckties, what is the opportunity cost of producing an additional 15 neckties?
15 bow ties
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?
25 silk leaves
"An Inquiry into the Nature and Causes of the Wealth of Nations" published in 1776 was written by
Adam Smith.
In economics, an organization that produces a good or service is called a
All of these are correct.
What is the difference between an "increase in demand" and an "increase in quantity demanded"?
An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.
What is the difference between an "increase in supply" and an "increase in quantity supplied"?
An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price.
Which of the following statements about an entrepreneur is false?
An entrepreneur sells his entrepreneurial services in the output market.
Which of the following statements is correct?
An increase in the price of C will decrease the demand for complementary product D.
Professor Bloodworth decreased his consumption of grape jelly when the price of peanut butter increased. For Professor Bloodworth, peanut butter and grape jelly are
Complements
Let D= demand, S = supply, P = equilibrium price, and Q= equilibrium quantity. What happens in the market for walnuts if the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower levels of bad cholesterol?
D increases, S no change, P and Q increase.
Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This statement is most consistent with which explanation for the law of demand?
Diminishing marginal utility
Which of the following statements about economic resources is true?
Economic resources are also called factors of production.
Pookie's Pinball Palace restores old Pinball machines. Pookie has just spent $300 purchasing and cleaning a 1960s-era machine which he expects to sell for $2,000 once he is finished with the restoration. After having spent $300, Pookie discovers that he will need to rewire the entire machine at a cost of $1,100 in order to finish the restoration. Alternatively, he can sell the machine "as is" now for $1,000. What should he do?
He should sell the machine now to make the most profit.
The simple circular flow model shows that
Households are on the selling side of the resource market and on the buying side of the product market.
For each pound of salami that Hungary produces, it gives up the opportunity to make 10 bottles of beer. Slovakia gives up the opportunity to produce of 1 pound of salami for every 8 bottles of beer it produces. Which of the following is true about the comparative advantage between the two countries?
Hungary has the comparative advantage in beer.
Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to
Increase the demand for tacos and decrease the demand for sod
Which of the following statements is true?
Individuals who have never been the best at doing anything can still have a comparative advantage in producing some product.
How are the fundamental economic decisions determined in Canada?
Individuals, firms, and the government interact in a market to make these economic decisions.
What is an economic model?
It is a simplified version of some aspect of economic life used to analyze an economic issue.
For each bottle of wine that Italy produces, it gives up the opportunity to make 10 pounds of cheese. France gives up the opportunity to produce of 1 bottle of wine for every 25 pounds of cheese it produces. Which of the following is true about the comparative advantage between the two countries?
Italy has the comparative advantage in wine.
Joe sold gold coins for $1,000 that he bought a year ago for $1,000. He says, at least I didn't lose any money on my financial investment. His economist friend points out that in effect he did lose money because he could have received a 3 percent return on the $1,000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of
Opportunity costs
One reason some manufacturing companies have moved production from overseas locations back to the United States is rising foreign labor costs. Assuming that managers at these companies used all available information, including the rising cost of foreign labor, when making the decision to move production back to the United States exemplifies which key economic idea?
People are rational.
The production possibilities frontier model assumes which of the following?
The economy produces only two products.
One reason some manufacturing companies have moved production from overseas locations back to the United States is an increasing preference by U.S. consumers for products made in the United States. If buyers have increased their preference for domestically produced goods and manufacturers believe they can increase revenues by supplying more of these goods, firms are following which key economic idea when they return production to the United States?
People respond to economic incentives.
The law of demand states that, other things equal
Price and quantity demanded are inversely relate
Which of the following statements is true about profit?
Profit is the difference between revenue and cost
Which of the following is a fundamental characteristic of the market system?
Property rights
Which of the following statements is true about revenue?
Revenue is the total amount received for selling a good or service.
Let D= demand, S = supply, P = equilibrium price, and Q= equilibrium quantity. What happens in the market for tropical hardwood trees if the governments restrict the amount of forest lands that can be logged?
S decreases, D no change, P increases, Q decreases.
In economics, choices must be made because we live in a world of
Scarcity
For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries?
Switzerland has the comparative advantage in watches.
Assume that California Merlot is a normal good. Prices of California Merlot have risen steadily in recent years. Over this same period, prices for French oak barrels used for wine storage have dropped and consumer incomes have risen. Which of the following best explains the rising prices of California Merlots?
The demand curve for Merlot has shifted to the right more than the supply curve has shifted to the right.
The Internet has created a new category in the book selling market, namely, the "barely used" book. How does the availability of barely used books affect the market for new books?
The demand curve for new books shifts to the left.
In September, buyers of silver expect that the price of silver will rise in October. What happens in the silver market in September, holding all else constant?
The demand curve shifts to the right.
Which of the following has occurred as the millennial generation has come of age?
The demand for golf equipment has decreased in the U.S. market.
Suppose a positive technological change in the production of disease-resistant corn caused the price of corn to fall. Holding everything else constant, how would this affect the market for wheat (a substitute for corn)?
The demand for wheat would decrease and the equilibrium price of wheat would decrease.
Macroeconomics is mostly focused on
The economy as a whole.
Which of the following is a normative economic statement?
The price of gasoline is too high.
Technology is defined as
The processes used to produce goods and services.
The decline in the popularity of clothing made from animal fur has enticed large department stores like J. C. Penney and Sears to discontinue sales of animal-fur products. How does discontinuing sales of these products by J.C. Penney and Sears affect the animal-fur clothing market?
The supply curve for animal-fur clothing shifts to the left.
Suppose that in October, market analysts predict that the price of platinum will fall in November. What happens in the platinum market in October, holding everything else constant?
The supply curve shifts to the right.
Competition means that
There are independently acting buyers and sellers in each market.
Which of the following describes a characteristic of a perfectly competitive market?
There are many buyers and sellers.
Which of the following statements about positive economic analysis is false?
There is much more disagreement among economists over positive economic analysis than over normative economic analysis.
Which of the following best describes an assumption economists make about human behavior?
They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.
Which of the following is a macroeconomic question?
What determines the inflation rate?
Which of the following is a microeconomic question?
What factors determine the price of carrots?
The town of Harmonia gives away all 500 tickets to its annual Founder's Day Free Concert-in-the-Park to local residents. Each year, more than 500 people wish to attend the concert, so some of the residents who receive the free tickets sell them for as much as $75 each. Is a transaction where someone pays a resident $75 for a "free ticket" economically efficient?
Yes, it was a voluntary exchange that benefited both parties.
If, in response to an increase in the price of chocolate the quantity of chocolate demanded decreases, then economists would describe this as
a decrease in quantity demanded.
Last year, the Pottery Palace supplied 8,000 ceramic pots at $40 each. This year, the company supplied the same quantity of ceramic pots at $55 each. Based on this evidence, The Pottery Palace has experienced
a decrease in supply.
Which of the following would shift the supply curve for smartphones to the right?
a decrease in the price of an input used to produce smartphones
Which of the following would cause the equilibrium price of white bread to decrease and the equilibrium quantity of white bread to increase?
a decrease in the price of flour
If the price of beef jerky rises, then the substitution effect due to the price change will cause
a decrease in the quantity of beef jerky demanded.
The term "market" in economics refers to
a group of buyers and sellers of a product and the arrangement by which they come together to trade.
An inward shift of a nation's production possibilities frontier can occur due to
a natural disaster like a hurricane or bad earthquake.
In 2004, hurricanes damaged a large portion of Florida's orange crop. As a result of this, many orange growers were not able to supply fruit to the market. If, following the hurricane, the price remained at its pre-hurricane level, we would expect to see
a shortage of oranges.
An example of a factor of production for Dell is
a worker hired by Dell.
Assume that potatoes are an inferior good. Which of the following would cause both the equilibrium price and equilibrium quantity of potatoes to decrease?
an increase in consumer income
Farmers can raise either goats or ostriches on their land. Which of the following would cause the supply of goats to decrease?
an increase in the price of ostriches
Which of the following would cause a decrease in the supply of milk?
an increase the price of a product that producers sell instead of milk
The development of a new good or a new process for making a good is called
an invention.
Which of the following is a factor of production?
an oven in a bakery
Comparative advantage means the ability to produce a good or service
at a lower opportunity cost than any other producer.
You have an absolute advantage whenever you
can produce more of something than others with the same resources.
Individuals who have never been the best at doing anything
can still have a comparative advantage in producing some product.
Economics is the study of the ________ people make to attain their goals, given their ________ resources.
choices; scarce
The ________ demonstrates the roles played by households and firms in the market system.
circular flow model
Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?
consume a combination of goods that lies outside its own production possibilities frontier
A(n) ________ is represented by a leftward shift of the demand curve while a(n) ________ is represented by a movement along a given demand curve.
decrease in demand; increase in quantity demanded
The law of demand implies, holding everything else constant, that as the price of gelato
decreases, the quantity of gelato demanded will increase
If a demand curve shifts to the right, then
demand has increased.
Economists spend much of their time
describing how choices are made and analyzing the results of those choices
An outward shift of a nation's production possibilities frontier represents
economic growth.
Tesla Motors manufactures its cars at a plant in Fremont, California. At this plant, Tesla is able to take advantage of the high level of technical training possessed by its American workers, but it also sacrifices the ability to pay lower wages had it chosen to open its plant in a low-wage country such as Mexico, India, or China. In deciding to open the Fremont plant, Tesla
faced a trade-off between higher cost and less technical skill.
If a commercial dairy farm wants to raise funds to purchase feeding troughs, it does so in the
factor market.
The natural resources used in production are made available in the
factor market.
Implicit cost for company X
forgone rental income.
All centrally planned economies
have been political dictatorships.
Microeconomics is the study of
how households and firms make choices.
In economics, the accumulated skills and training that workers have is known as
human capital.
The production possibilities frontier model shows that
if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.
If the amount of carbonated sodas consumed continues to decline as consumers continue to choose to buy healthier products, this will likely
increase the demand for premium water, because premium water and carbonated sodas are considered substitutes.
As women's wages have risen relative to men's wages, the opportunity cost to women of doing housework has ________ than has the opportunity cost to men.
increased more
Billie's Billiard Barn has seen its business slow down ever since Patti's Ping Pong Parlour opened up across the street. Since the opening of Patti's Ping Pong Parlour, the opportunity cost of shooting pool at Billie's Billiard Barn has ________ for Billie's customers who also like to play ping pong.
increased.
As job opportunities for women and the wages those jobs pay have increased, the opportunity cost of doing housework has ________, so many families have chosen to hire specialists in households chores, such as cleaning services and lawn care services, because the cost of these specialists is ________ than the cost of the wife (or husband) performing those chores.
increased; lower
In a production possibilities frontier, a point ________ the frontier is productively inefficient.
inside
The resource income earned by those who supply ________ is called wages.
labor
If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.
linear
An office supply store sells a ream of printer paper at a fixed price of $4.50. Which of the following is a term used by economists to describe the money received from the sale of an additional ream of paper?
marginal revenue
The demand by all the consumers of a given good or service is the ________ for the good or service.
market demand
The production possibilities frontier shows the ________ combinations of two products that can be produced in a particular time period with available resources.
maximum attainable
The primary purpose of ________ is to encourage the expenditure of funds on research and development to create new products.
patents and copyrights
The machines that workers have to work with are considered
physical capital.
Economic models do all of the following except
portray reality in all its minute details.
which of the following is a microeconomic statement?
price of smartphones declined 2.8%
The slope of Supply and Demand are inversely related in regards to _____ and _______.
price; quantity
When you purchase a new pair of jeans you do so in the
product market.
Households ________ final goods and services in the ________ market.
purchase; product
It is necessary for all economic systems to provide people with goods and services and also restrict them from getting as much of these goods and services as they wish, because failure to do this could ________ the efficiency of the system by producing some goods and services that are ________.
reduce; not as highly valued as others
Households
sell resources in the factor market.
If the best lawyer in town is also the best at operating a word processor, then according to the theory of comparative advantage, this person should
specialize in being a lawyer because its opportunity cost is lower.
If the best surgeon in town is also the best at cleaning swimming pools, then according to the theory of comparative advantage, this person should
specialize in being a surgeon because its opportunity cost is lower.
Which of the following is an example of an activity undertaken by an entrepreneur?
starting your own pet sitting business
Scarcity
stems from the incompatibility between limited resources and unlimited wants.
Households ________ factors of production and ________ goods and services.
supply; demand
The concept of opportunity cost is that
the economic cost of using a factor of production is the alternative use of that factor that is given up.
Macroeconomics is the study of
the economy as a whole.
Consider the following economic agents: a.the government b.consumers c.producers Who, in a centrally planned economy, decides what goods and services will be produced with the scarce resources available in that economy?
the government
The attainable production points on a production possibilities frontier are
the points along and inside the production possibility frontier.
The income effect of a price change refers to the impact of a change in
the price of a good on a consumer's purchasing power.
A firm has an incentive to decrease supply now and increase supply in the future if it expects that
the price of its product will be higher in the future than it is today.
At a product's equilibrium price
the product's demand curve crosses the product's supply curve.
If in the market for apples the supply has decreased, then
the supply curve for apples has shifted to the left.
Who receives the most of what is produced in a market economy?
those who are most willing and able to buy them
The points outside the production possibilities frontier are
unattainable.
Adam Smith's behavioral assumption about humans was that people
usually act in a rational, self-interested way.
