Micro first exam

(Table: The Market for Soda) Look at the table The Market for Soda. If the government imposes a price ceiling of $0.50 per can of soda, the quantity of soda demanded will be: 10 cans. 8 cans. 6 cans. 4 cans.

10 cans

Alexander has a straight-line, or linear, production possibility frontier when he produces soybeans and corn. If he uses all of his resources to grow soybeans, he can produce 200 bushels of soybeans; if he uses all of his resources for corn production, he can produce 400 bushels of corn. Alexander CANNOT produce _____ bushels of soybeans and _____ bushels of corn. 200; 0 200; 600 0; 400 100; 200

200; 600

In one day, Kessy can bake 10 cookies or mix 15 glasses of lemonade. His friend Ava can make 10 cookies or 10 glasses of lemonade. His other friend, Ian, can make 10 cookies or 20 glasses of lemonade. Who has the lowest opportunity cost in cookie production? Kessy Ava Ian Kessy and Ava have the same opportunity cost in cookie production.

Ava

In 2003, Congress passed a tax cut. The country did NOT incur any opportunity cost from this decision. True False

F

After eating three slices of pizza, you decide to eat one more piece. Your decision is an example of the economic principle called: opportunity-cost decision. people responding to incentives. equity decision. marginal decision making.

marginal decision making.

The incentives built into the market economy ensure that resources are put to good use and that opportunities to make people better off are not wasted. This means that: people usually are not selfish enough to exploit opportunities to make themselves better off. markets move toward equilibrium. resources should be used as efficiently as possible to achieve society's goals. markets usually lead to efficiency.

markets usually lead to efficiency.

Which of the following is NOT a factor of production? labor machines and buildings land money

money

The circular-flow diagram shows the flow of _____ and the flow of _____. goods and services; factors households; firms money; goods and services factors; money

money; goods and services

If the supply curve for clams is upward-sloping, a quota that is set below the equilibrium quantity will result in a supply price that is lower than the equilibrium price. True False

T

The gains from trade are the reason that consumers and producers are better off participating in a market economy than they would be if each tried to be self-sufficient. True False

T

The study of economics arises because of the necessity of choice, and the necessity of choice arises because of the fundamental problem of scarcity of resources. True False

T

Licenses allowing taxis to operate issued by New York City in the 1930s are called medallions. True False

True

The demand curve for season tickets for the Miami Dolphins is the graphical representation of the number of season tickets consumers want to buy at any given price. True False

True

Typically the government limits the quantity of a good that can be bought and sold by: licensing the suppliers. setting a price floor below the equilibrium price. maintaining the equilibrium price regardless of changes in demand and supply. setting a price ceiling above the equilibrium price.

licensing the suppliers.

Marginal analysis studies how individuals decide whether to: live on the margin of society. do a bit more of an activity versus a bit less of it. go to college. buy stocks or bonds.

do a bit more of an activity versus a bit less of it.

Largetown has a linear production possibility frontier, and it produces socks and shirts with 80 hours of labor. The table shows the number of hours of labor necessary to produce one pair of socks or one shirt. one shirt: 4 hours, one sock: 2 hours (Scenario: Linear Production Possibility Frontier) Look at the scenario Linear Production Possibility Frontier. If Largetown's labor resource decreases by 40 hours, the opportunity cost of producing shirts: increases. decreases. does not change. may or may not change depending upon the number of pairs of socks it wishes to produce.

does not change

One day, Martha wakes up and in frustration yells, "Decisions, decisions, decisions! Why do I have to make decisions about everything?" Martha's frustrations stem from the fact that: like all economic beings, she faces constraints and cannot have everything she wants. she doesn't realize she can have everything she wants. she is the only one who faces constraints in life. she really doesn't want anything.

like all economic beings, she faces constraints and cannot have everything she wants.

An economic model: is useful for explaining past economic conditions but not for predicting. often leads to faulty conclusions because of the ceteris paribus assumption. never allows anything to change in the economic situation that is being described. is a simplified version of reality used to understand real-world economic conditions.

is a simplified version of reality used to understand real-world economic conditions.

To be binding, a price ceiling must be set at a price: lower than the equilibrium price. higher than the equilibrium price. the same as the equilibrium price. Any price ceiling is binding.

lower than the equilibrium price.

As long as people have different _____, everyone has a comparative advantage in something. direct costs benefits utility opportunity costs

opportunity costs

In terms of the production possibility frontier, inefficient use of available resources is shown by: an increase in the labor force growth rate. a movement from one point to another along the production possibility frontier. an inward shift of the production possibility frontier due to the lack of opportunity. production at a point inside the production possibility frontier.

production at a point inside the production possibility frontier.

Alice goes to the local supermarket to purchase one package of her favorite taco shells. She often pays $1.50 for a package, but she finds they are on sale for $1 each. According to the law of demand, one can expect Alice to: purchase an alternative good. purchase more than one package of taco shells. decide not to purchase taco shells on this visit. buy only one package of taco shells.

purchase more than one package of taco shells.

If the price of a commodity increases, you can expect the: supply to increase. quantity supplied to increase. quantity supplied to decrease. supply curve to shift to the right.

quantity supplied to increase.

The difference between the demand price and the supply price at the quota limit amount is the: demand price. supply price. quota rent. price floor.

quota rent

Economists use models to explain real-life situations because: such models tend to be exactly what is occurring in each situation. assumptions found in such models tend to make analyzing the situation more difficult. simplifications and assumptions often yield results that can help to explain the more difficult real-life situations. real-life situations are not relevant to the building of models.

simplifications and assumptions often yield results that can help to explain the more difficult real-life situations.

(Figure: The Market for Butter) Look at the figure The Market for Butter. If a government price floor at $1.30 is imposed on this market, an inefficiency will result in the form of a _____ of _____ million pounds of butter. surplus; 4.5 surplus; 6.0 shortage; 6.0 shortage; 4.5

surplus; 6.0

For a student who owns his or her own home and doesn't plan to live in the dorm, the cost of going to college is: tuition and the cost of housing. tuition, the cost of housing, and the cost of books. tuition, the cost of books, and forgone income. forgone income only.

tuition, the cost of books, and forgone income.

The government of a small town has decided to ban smoking in all restaurants, stores, and government offices. This is an example of the principle that: one person's spending is another person's income. when markets fail to achieve efficiency, government intervention can improve society's welfare. there are gains from trade. resources should be used as efficiently as possible to achieve society's goals.

when markets fail to achieve efficiency, government intervention can improve society's welfare.

(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government imposes a quota limiting sales of shrimp to 250 pounds, the quota rent per pound is: $17.50. $10. $7.50. $0.

$10

(Table: Firm's Willingness) The table Firm's Willingness explains the relation between the number of reports a firm is willing to produce and the lowest price it is willing to accept to prepare those reports. If the price of a report is $11, what is the value of producer surplus for this firm? $11 $17 $27 $40

$17

(Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to see The Nutty Nutcracker is $75, then Dudley's producer surplus is: $15. $25. $50. $240.

$50

If farmer Sam MacDonald can produce 200 pounds of cabbages and no potatoes or no cabbages and 100 pounds of potatoes and if he faces a linear production possibility frontier, the opportunity cost of producing an additional pound of cabbage is _____ pound(s) of potatoes. 0.5 2 100 200

0.5

A persistent shortage may occur if: the government imposes a price ceiling. the government imposes a price floor. demand keeps falling. supply shifts rightward.

If the government imposes a price ceiling

Which of the following demonstrates one of the three principles of economy-wide interactions? A student chooses to rent a movie with friends rather than study for an economics quiz. Your roommate offers to pay for the movie tickets if you drive to the theater. A city builds a new public park on the grounds of an abandoned warehouse. In 2008, fearing a recession, Congress approved a White House proposal to rebate some taxes for 2007.

In 2008, fearing a recession, Congress approved a White House proposal to rebate some taxes for 2007.

Because of the opportunity cost, if the United States spends $87 billion in the rebuilding of Iraq, it has to forgo the opportunity to spend $87 billion on some other program. True False

T

Which of the following statements is TRUE? Some very talented people have a comparative advantage in everything they do. Some very untalented people have a comparative advantage in nothing they do. Some very talented people have a very low opportunity cost in everything they do. It is possible to have an absolute disadvantage but a comparative advantage in something.

It is possible to have an absolute disadvantage but a comparative advantage in something.

Which of the following is an example of individual choice? The government announces plans to ban smoking in all Florida restaurants. Lauren spends her allowance on pillows for her bed. France decides to withhold funding to rebuild Iraq. Africa decides to accept U.S. aid for humanitarian efforts.

Lauren spends her allowance on pillows for her bed.

Which of the following principles underlies the economics of individual choices? There are gains from trade. Markets move toward equilibrium. People usually exploit opportunities to make themselves better off. Resources should be used as efficiently as possible to achieve society's goals.

People usually exploit opportunities to make themselves better off.

(Table: Competitive Market for Good Z) Look at the table Competitive Market for Good Z. If the demand curve for good Z is linear, it can be expressed as: Q d = 3P. Q d = 50 - 2P. Q d = Qs. Q d = 100 - 2P.

Q d = 50 - 2P.

Which of these is one of the four principles of individual choice? Resources are usually renewable. The real cost of something is impossible to measure. People take advantage of opportunities to make themselves better off only if there is no risk involved. Resources are scarce.

Resources are scarce.

For which of the following decisions would marginal analysis be most relevant? Should I go to college or work after graduating from high school? Should I eat another doughnut? Should I use $20,000 as a down payment on a house or to buy a car? Should I get married?

Should I eat another doughnut?

Consider the market for corn. What happens if there is an increased demand for corn tortillas and at the same time a new corn seed becomes available that dramatically increases the yield per acre? Price and quantity decrease. The change in price is indeterminate; quantity decreases. The change in price is indeterminate; quantity increases. Price increases; the change in quantity is indeterminate.

The change in price is indeterminate; quantity increases.

Suppose Indiana produces only steel and corn, with fixed amounts of land, labor, and capital resources. Which of the following best sets the stage for economic growth? The unemployment rate in Indiana rises from 5% to 6%. The Midwest has a devastating drought. The percentage of Indiana residents with a college degree rises from 25% to 30%. The United States imports more and more low-cost steel from Asian countries.

The percentage of Indiana residents with a college degree rises from 25% to 30%.

Which of the following principles underlies the interaction of individual choices? Resources are scarce. There are gains from trade. Marginal analysis is used for "how much" decisions. People usually exploit opportunities to make themselves better off.

There are gains from trade

Floyd's cost of selling haircuts is the lowest price at which he is willing to sell haircuts. True False

True

An announcement that smoking will harm your ability to think clearly will most likely result in: an increase in the quantity of cigarettes demanded. a decrease in the demand for cigarettes. no change in smoking habits. an increase in the price of cigarettes.

a decrease in the demand for cigarettes.

If the government sets out to help low-income people by establishing a maximum amount that can be paid for rent: a price floor has been set, and a shortage of rental units may occur. a price ceiling has been set, and a shortage of rental units may occur. in the long run more rental units will appear. the quality of rental units will be inefficiently high.

a price ceiling has been set, and a shortage of rental units may occur.

Assuming that desktop computers are normal goods, which of the following will NOT increase demand for desktop computers? an increase in the incomes of computer users cool new computer games that can only be played on desktop computers a very large computer company going out of business the price of notebook computers increasing

a very large computer company going out of business

An economy is efficient when: the problem of scarcity is eliminated. output is distributed equitably. all opportunities to make some people better off without making other people worse off have been taken. all opportunities to make some people worse off without making other people better off have been taken.

all opportunities to make some people better off without making other people worse off have been taken.

The trade-off between equity and efficiency occurs because: the efficient allocation of resources is bad for business and industry. allocating resources fairly may cause inefficiency. everyone must pay more tax to ensure equity. efficiency is politically unpopular.

allocating resources fairly may cause inefficiency.

Pizza is a normal good. If students' incomes at your college increase, the effect on pizza will be: an increase in the demand. an increase in the quantity demanded. a decrease in the demand. no change in the demand.

an increase in the demand.

A beneficial technological change is developed in the production of cranberries. At the same time, scientists discover that cranberries have significant health benefits. This will result in: an increase in both the equilibrium price and quantity in the cranberry market. an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of cranberries. a decrease in both the equilibrium price and quantity in the cranberry market. a decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of cranberries.

an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of cranberries.

Economists in general agree that rent controls are: an efficient and equitable way to help low-income families. an inefficient but sometimes effective way to help low-income families. an efficient method of dealing with the shortages caused by price ceilings. the only way to solve the problem of poverty.

an inefficient but sometimes effective way to help low-income families.

In the circular-flow diagram, a firm is: an organization that produces goods or services for sale. an individual or a group of people who share their income. an organization that sells factors of production. an organization that purchases goods and services.'

an organization that produces goods or services for sale.

Suppose oranges and clementines are considered to be substitutes. Holding everything else constant, if the price of oranges increases, then the demand for _____ will _____. clementines; increase clementines; decrease oranges; increase oranges; decrease

clementines; increase

If Brazil gives up three automobiles for each ton of coffee it produces, while Peru gives up seven automobiles for each ton of coffee it produces, then Brazil has a comparative advantage in _____ production and should specialize in _____. automobile; coffee coffee; automobiles coffee; coffee automobile; automobiles

coffee; coffee

Because of an increase in the price of wheat, an important ingredient in the production of bread, combined with an increase in the number of people consuming bread: both the equilibrium price and quantity will increase. equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same. both the equilibrium price and quantity will decrease. equilibrium price will increase, but equilibrium quantity may decrease, increase, or stay the same.

equilibrium price will increase, but equilibrium quantity may decrease, increase, or stay the same.

The circular-flow diagram represents the market for _____ and the market for _____. goods and services; factors households; firms money; goods and services factors; money

goods and services; factors

Because one person's spending is another person's income: if one group in the economy spends more, the incomes of other groups will decrease. if one group in the economy spends less, the incomes of other groups will increase. if one group in the economy spends more, the incomes of other groups will increase. spending by one group does not influence the income of any other group.

if one group in the economy spends more, the incomes of other groups will increase.

By definition, in a black market, goods or services are bought and sold: at night. without any information about quality. without any information about price. illegally.

illegally.

A binding price floor in the market for wheat: increases the price paid by consumers. decreases the price paid by consumers. decreases the price received by farmers. does not change the price received by farmers.

increases the price paid by consumers.

The persistent unwanted surplus that results from a price floor causes inefficiencies that include all of the following EXCEPT: inefficiently low quality. inefficient allocation of sales among sellers. wasted resources. the temptation to break the law by selling below the legal price.

inefficiently low quality.

Consumer surplus for an individual buyer is equal to: the consumer's willingness to pay for the good minus the marginal cost of producing the good. the price of the good minus the marginal cost of producing the good. the consumer's willingness to pay for the good minus the price of the good. the marginal cost of the good minus the consumer's willingness to pay for the good.

the consumer's willingness to pay for the good minus the price of the good.

To achieve the gains from trade, each nation should specialize in the production of a good or service if: its production possibility frontier is farther from the origin than that of any other country. its production possibility frontier is closer to the origin than that of any other country. the country can make the product using fewer resources than any other country. the country can make the product while forgoing fewer alternative products than any other country.

the country can make the product while forgoing fewer alternative products than any other country.

(Figure: Supply and Demand) Look at the figure Supply and Demand. A binding price ceiling is represented by: the price P1. the price P2. the price P3. point C.

the price p3

How people choose among the alternatives available to them is: not part of the study of economics. impossible to describe. the study of microeconomics. not important in the study of microeconomics.

the study of microeconomics.

Total surplus is: the difference between price and the cost to the seller. the sum of consumer and producer surplus. equal to the area below the demand curve. always more for consumers than producers.

the sum of consumer and producer surplus.

The total producer surplus in the Wisconsin milk market is: the sum of the individual producer surpluses in this market. the sum of all prices paid multiplied by the number of gallons of milk sold. the total revenue of the milk producers in Wisconsin. the total cost of selling milk in Wisconsin.

the sum of the individual producer surpluses in this market.