Micro Test 1

Economists generally believe that a country should specialize in the production of a good or service if the: A) Production possibility frontier is further from the origin than that of any other country B) Production possibility frontier is closer to the origin than that of any other country C) Country can produce the product using more resources than any other country D) Country can produce the product while forgoing fewer alternative products than any other country

Country can produce the product while forgoing fewer alternative products than any other country

Which decision is the BEST example of making a choice at the margin? A) Buying a new car B) Quitting your job C) Drinking another cup of coffee D) Attending college

Drinking another cup of coffee

The basis of the circular-flow diagram is that: A) The best models avoid making assumptions B) Goods and services flow in a circle in the factor market C) Resources are sold along with goods and services in the resource market D) The flow of money into each market or sector is equal to the flow of money coming out of that market or sector

The flow of money into each market or sector is equal to the flow of money coming out of that market or sector

The market for soybeans is initially in equilibrium. Because of mad cow disease, producers decide to replace bone meal with soybeans in cattle feed. The likely effect is that: A) Equilibrium price and quantity of soybeans will rise B) Equilibrium price and quantity of soybeans will fall C) Equilibrium quantity of soybeans will rise, but we can't determine what will happen to the equilibrium

Equilibrium price and quantity of soybeans will rise

A dozen friends got together to celebrate a birthday. If the birthday cake is cut into 12 pieces of the same size and each of the 12 partygoers gets a slice, this cake distribution is: A) Efficient but not equitable B) Equitable but not efficient C) Efficient and equitable D) Equitable

Equitable

Resources are being used efficiently when A) Scarcity is no longer an issue B) They are also used equitably C) Every opportunity to make people better off without making others worse off has been seized D) Gains from trade are still available

Every opportunity to make people better off without making others worse off has been seized

In the circular flow diagram, an organization that produces goods or services for sale is a: A) Market B) Household C) Factor D) Firm

Firm

When markets fail: A) Government intervention may help B) The market realizes the maximum possible gains from trade given the available resources C) There may still be an efficient allocation of resources. D) No goods and services are produced

Government intervention may help

A high school graduate who gets a college degree is adding to the economy's stock of: A) Labor B) Capital C) Human Capital D) Financial Capital

Human Capital

Which statement is positive? Which statement is normative? I. The federal minimum wage in 2016 was $7.25 an hour. II. The minimum wage should be high enough that families will not live in poverty. A) I is positive; II is normative B) I is positive; II is positive C) I is normative; II is positive D) I is normative; II is normative

I is positive; II is normative

After graduation from college, you might have an increase in your income from a new job. If as a result, you decide that you will purchase more T-Bone steak and less hamburger, then hamburger is an ____ good A) Normal B) Substitute C) Complementary D) Inferior

Inferior

An economic model: A) Allows nothing to change in the economic situation that is being described B) Often leads to faulty conclusions because of the ceteris paribus assumption C) Is a simplified version of reality used to understand real-world economic conditions D) Is useful for explaining past economic conditions but not for predicting future outcomes

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

Suppose small business owners decide to spend less. How will this affect an economy? A) It will have no impact, since this group makes up a small portion of any economy. B) It will decrease the level of income of other people, since one person's spending becomes someone else's income. C) It will cause prices for many goods to increase. D) It will increase the level of income in the economy, since other groups will spend more.

It will decrease the level of income of other people since one person's spending is someone's income

If they spend all night writing computer programs, Laurence can write 10 programs while Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 while Carrie Anne can make 4. We know that: A) Laurence; programs but not in sunglasses B) Laurence; both programs and sunglasses C) Carrie Anne; programs but not in sunglasses D) Carrie Anne; both programs and sunglasses

Laurence; both programs and sunglasses

People who live in large cities decide to spend less in their day-to-day activities. This will MOST likely lead to: A) Less income for other people B) More income for other people C) No impact for other people D) Inflation

Less income for other people

You are planning to study 8 hours this week for your economics final and are considering studying a ninth hour. You should: A) Compare the benefits of one more hour of study with the cost of one less hour of sleep B) Compare the benefits of one more hour of study with the cost of one less hour of studying C) Compare the benefits of one more hour of study with the cost of one less hour of work at your part time job D) Make your decision based on the cost of the next best alternative use of your time compared to the benefit of one more hour of study

Make your decision based on the cost of the next best alternative use of your time compared to the benefit of one more hour of study

The market for corn in Kansas is considered to be competitive. This means there are _____ buyers and _____ sellers of corn in Kansas. A) Many; few B) Few; many C) Many; many D) Few; few

Many; many

A simplified representation that is used to study a real situation is called a(n) A) Model B) Production possibility frontier C) Assumption D) Trade-off

Model

A central and fundamental theme in economics is that: A) Wants are limited B) The US is a rich country, but we are simply not aware of it C) People have unlimited wants but limited means to satisfy them D) Resources are unlimited

People have unlimited wants but limited means to satisfy them

Which factor is NOT an example of a resource? A) Land B) Labor C) Capital D) Production

Production

The ___ applies will decrease when apple prices rise. A) Demand for B) Quantity demanded of C) Supply of D) Equilibrium

Quantity demanded of

Gains from trade arise because of: A) Specialization in production B) Specialization in consumption C) Marginal analysis D) Individual choice

Specialization in production

If a market is in disequilibrium: A) It will continue unless there is government intervention B) No individual will be better off doing something different C) There are opportunities for people to make themselves better off D) It must be because of the government has intervened in the market, resulting in the market's failure to reach equilibrium

There are opportunities for people to make themselves better off

Marla will make $10 by tutoring for an additional hour, but she will lose an hour of studying for her economics test. Marla decides to study rather than tutor. Marla's choice indicates that she: A) Values an additional hour of studying more than the $10 she would earn tutoring B) Values an hour of studying less than the $10 she would earn tutoring C) Does not understand that there is no benefit from studying D) Doesn't need the money

Values an additional hour of studying more than the $10 she would earn tutoring

Scarcity in economics means that: A) We often do not have sufficient resources to achieve our objectives B) The wants of people are limited C) There must be poor people in rich countries D) Shortages exist in nearly all markets

We often do not have sufficient resources to achieve our objectives

A new fast-food restaurant offered a free meal (valued at $5) a week for a year to its first 100 customers. Ramona camped out for 48 hours before the opening to be one of the first 100 customers. The cost of the free meal a week for a year for Ramona was: A) The cost is impossible to determine B) Zero C) Whatever else she would have done with the 48 hours D) $260

Whatever else she would have done with the 48 hours

Free trade between countries: A) Should be based on absolute advantage B) Always involves wealthy countries exploiting less developed nations C) Will shift the domestic production possibility frontier to the right D) Will allow for greater levels of consumption than without trade

Will allow for greater levels of consumption than without trade

You can spend $100 on either a new economics textbook or a new CD player. If you choose to buy the new economics textbook, the opportunity cost is: A) $100 B) Your enjoyment of the new CD player C) Both the $100 and your enjoyment of the new CD player D) Impossible to determine

Your enjoyment of the new CD player

A beneficial technological change is developed in the production of cranberries have significant health benefits. This will result in: A) An increase in both the equilibrium price and quantity in the cranberry market. B) An increase in the equilibrium price and an uncertain effect on the equilibrium price of cranberries C) A decrease in both the equilibrium price and quantity in the cranberry market. D) A decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of cranberries.

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

Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette cheese over boiled new potatoes. If the price of Raclette cheese decreased, we would expect to see: A) An increase in demand for Raclette cheese B) An increase in demand for new potatoes C) No effect on the demand for either of the Raclette ingredients since this is a traditional dish and its consumption does not depend on the prices of the ingredients D) An increase in the incomes of buyers

An increase in the incomes of buyers

The demand curve for monthly subscriptions to HBO has shifted to the right, what could have caused it? A) A fall the price of HBO subscriptions B) An increase in the price of HBO subscriptions C) An increase in the supply of HBO subscriptions D) An increase in the income of buyers

An increase in the incomes of buyers

In the market for tacos, you observe that the equilibrium price and quantity have increased. This can be caused only by: A) An increase in the price of beef B) An increase in the wages of taco shop workers C) Fewer taco shops D) An increase in the incomes of people who eat tacos

An increase in the incomes of people who eat tacos

A choice made _____ is a choice whether to do a little more or a little less of something. A) At the front end B) In the beginning C) At the margin D) ceteris paribus

At the margin

Jim is being paid $7.25 an hour to work at a restaurant. In the circular flow this is an example of a: A) Business selling goods and services in the product market B) Household buying goods and services in the product market C) Business buying a resource in the factor market D) Household buying a resource in the factor market

Business buying a resource in the factor market

The circular-flow diagram illustrates how households ____ goods and services and ________ factors of production A) Buy-Sell B) Buy-Buy C) Own-Buy D) Own-Sell

Buy Sell

A resource is anything that: A) Can be used in production B) You pay for C) Is in scarce supply D) Can be consumed

Can be used in production

If Brazil gives u 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 _________ and should specialize in __________ A) Automobile; Coffee B) Coffee, Automobiles C) Coffee, Coffee D) Automobiles, automobiles

Coffee, Coffee

An economy that has the LOWEST opportunity cost of producing a particular good is said to have a(n): A) Absolute advantage in production of that good B) Comparative advantage in production of that good C) Production possibility frontier D) Increasing opportunity cost in production of that good

Comparative advantage in production of that good

If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has: A) Zero slope B) Constant negative slope C) Increasing negative slope D) Decreasing negative slope

Constant negative slope

Which statement illustrates that law of demand? A) An increase in tuition encourages more students to enroll in college because of the quality of education has risen B) Consumers buy more personal computers because prices have fallen C) Oil companies drill for new sources because prices are higher D) Fewer people play golf because incomes are lower

Consumers buy more personal computers because prices have fallen

We have to make choices because: A) We have unlimited income B) Resources are scarce C) Resources are finite D) With good planning, trade-offs can be avoided

resources are scarce

The opportunity cost of something is: A) Larger during periods of rising prices B) Equal to the monetary cost C) Smaller during periods fo falling prices D) What is given up to acquire it

what is given up to acquire it