Microeconomics- test 1

Which of the following is a microeconomics question? A) Will government intervention lower the unemployment rate? B) How will Apple decide on a selling price for the iPad? C) Why do economics experience periods of recession? D) Why has growth in the economy slowed down over the past decade?

B) How will Apple decide on a selling price for the iPad?

Which of the following is a positive economic statement? A)The government should ban Diesel engines in automobiles B) Due to a decrease in state funding, university tuition has risen C) Foreign citizens should not be allowed to work without a work visa D) People should use public transportation more often

B)due to a decrease in state funding, university tuition has risen

Economics is the study of the _______ people make to attain their goals, given their _________ resources

choices; scarce

The circular flow model demonstrates

the roles played by households and firms in the market system.

In 2004, hurricanes destroyed a large portion of Florida's orange and grapefruit crops. In the market for citrus fruit

the supply curve shifted to the left resulting in an increase in the equilibrium

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

If in the market for peaches, the supply curve has shifted to the left

the supply of peaches has decreased

Economic Models

are simplified versions of reality

Which of the following would cause both the equilibrium price and equilibrium quantity of potatoes (assume the potatoes are normal goods) to decrease?

a decrease in consumer income

The price elasticity of an upward-sloping supply curve is always

positive

When you purchase a new surfboard you do so in the

product market

Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.

0.5

Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good. Calculate the price elasticity of supply and characterize the product.

0.5; the product is inelastic

The price elasticity of demand for Stork ice cream is -4. Suppose you're told that following a price increase, quantity demand fell by 10 percent. What was the percentage change in price that brought about this change in quantity demanded?

2.5 percent

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons. What is the absolute value of the price elasticity of demand

2.69

The Stogie Shop, a cigar store in the mall, sells hand-rolled cigars for $10 and machines-made cigars for $2.50 each. What is the opportunity cost of buying a hand-rolled cigar?

4 machine-made cigars

Which of the following is counted as "capital" in economic? A)the machines workers have to work with B)the labor force C)the money people have D)the wealth people have

A) the machines worker shave to work with

Which of the following is a normative economic statement? A)Tobacco products should be banned in all public spaces B)Better awareness of health risks has decreased tobacco use C) The increase in tobacco taxes has caused an increase in the price of cigarettes D) a reduction in tobacco subsides has caused the price of tobacco to increase

A) tobacco products should be banned in all public spaces

Which of the following is a macroeconomic question? A) How is the production quantity of digital cameras determined? B) What determines the unemployment rate? C) What factors determine the price of iPhones? D) What determines the wages and benefits of flight attendants?

B) What determines the unemployment rate?

Which of the following is an example of an economic trade-off that a firm has to make? A) deciding why consumers want its products B) deciding what profit margin it desires for its products C) whether it is cheaper to produce with more machines or with more workers D) whether or not consumers will buy its products

C) whether it is cheaper to produce with more machines or with more workers

In a market economy, who decided what goods and services will be produced?

Consumers and Producers

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?

Demand if likely to be relatively inelastic

When every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it, ________ occurs

Productive Efficiency

Assume there is a shortage in the market for digital music players. Which of the following statements correctly describes this situation

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

Opportunity Cost is defined as

The highest valued alternative that must be given up to engage in an activity

Ranchers can raise either cattle or sheep on their land. Which of the following would cause the supply of sheep to increase?

a decrease in the price of cattle

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 flower

Holding everything else constant, an increase in the price of MP3 players will result in

a decrease in the quantity of MP3 players demanded

Which of the following items is likely to have the highest income elasticity of demand?

a vacation home in the Swiss alps

An example of a factor of production is

a worker hired by an auto manufacturer.

An increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result bad weather reducing the number of fishermen trapping lobster, will result in

an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease

Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09. This means that

an increase in the price of beer will lead to a decrease in the quantity demanded of beer and beer is a necessity

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is

an inferior good

A production possibilities frontier with a ________ shape indicates increasing opportunity costs as more and more of one good is produces

bowed outward

Which of the following good would have the most inelastic demand?

bread

Individuals who have never been the best at doing anything

can still have a comparative advantage in producing some product

Allocative efficiency is achieved when

firms produce the goods and services that consumers value most

Price elasticity of demand measures

how responsive quantity demanded is to a change in price

The _______ effect refers to the change in quantity demanded for a good that results from the effect of a change in the good's price on consumer's purchasing power.

income

The demand for gasoline in the short run is

inelastic because there are no good substitutes for gasoline.

What is an economic model?

it is a simplified version of some aspect of encomium life used to analyze an economic issue

If demand is inelastic, the absolute value of the price elasticity of demand is

less than one

In a perfectly competitive market, there are _____ buyers and ______ sellers

many; many

Economists assume that rational people

respond to economic incentives

If the price of gasoline was to increase, then

the demand for automobile would decrease

When demand is inelastic, a fall in price causes total revenue to rise because

the increase in quantity sold is large enough to offset the lower price

The production possibilities frontier shows

the maximum attainable combinations of two products that may be produced in a particular time period with available resources

Increasing marginal opportunity cost implies that

the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity decreases

At a product's equilibrium price

the product's demand curve crosses the product's supply curve.

Consider a demand curve that has a constant elasticity value of 0. What happens to quantity demanded and total revenue when price increases?

the quantity demanded does not change but total revenue decreases

The resource income earned by those who supply labor services is called

wages and salaries