Practice exam 1

Pizza is a normal good if the demand

for pizza rises when income rises.

Which of the following would likely be studied by a microeconomist rather than a macroeconomist?

the effect of a sales tax on the cigarette industry

In the circular-flow diagram, which of the following is not a factor of production?

money

The point where both x and y are zero is known as the

origin

The production possibilities frontier provides an illustration of the principle that

people face trade offs

When a relevant variable that is not named on either axis changes,

the curve will shift

Suppose that you have received $300 as a birthday gift. You can spend it today or you can put the money in a bank account for a year and earn 5 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is

$315

If the four suppliers listed are the only suppliers in this market and the market demand schedule is:

$6.00 and 600 cases

If these are the only two consumers in the market, then the market quantity demanded at a price of $15 is

0 units

In the short run, which of the following rates of growth in the money supply is likely to lead to the lowest level of unemployment in the economy?

9 percent per year

If the demand for a good falls when income falls, then the good is called

A normal good

of the following is an example of an externality? a.Mia purchases a new dress. b.Harold sells a book to Sydney, who reads the book and then gives it to Zyavonta as a gift. c.Gloria watches a scary movie .d.Antonio's dog barks loudly during the night, waking his neighbors.

Antonio's dog barks loudly during the night, waking his neighbors.

The line that relates the price of a good and the quantity demanded of that good is called the demand

Curve, and it usually slopes downward

Which of the following is an important cause of inflation in an economy? a.Increases in productivity in the economy b.The influence of positive externalities on the economy c.Growth in the quantity of money in the economy d.Lack of property rights in the economy

Growth in the quantity of money in the economy

Which of the following is not an example of a market?

In the United States, a sick person cannot legally purchase a kidney.

Assume Lianna buys coffee beans in a competitive market. It follows that

Lianna cannot influence the price of coffee beans even if he buys a large quantity of them.

A bagel shop sells fresh-baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has eight dozen bagels left at 6:30 p.m. on a particular day, which of the following alternatives is most attractive?

Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen.

What would happen to the equilibrium price and quantity of lattés if the cost of producing steamed milk, which is used to make lattés, rises?

The equilibrium price would increase, and the equilibrium quantity would decrease.

If the four suppliers listed are the only suppliers in this market and the market quantity demanded is 300 cases when the price is $3.00, which of the following statements is correct?

The market is in equilibrium at a price of $3.00.

Which of the following is not a determinant of the demand for a particular good?

The prices of the inputs used to produce the good

How are economists not like mathematicians, physicists, and biologists?

They cannot run lab experiments in the same way that other scientists can.

You lose your job and, as a result, you buy fewer iTunes music downloads. This shows that you consider iTunes music downloads to be

a normal good

Productivity is defined as the

amount of goods and services produced from each unit of labor input.

If the demand for a product increases, then we would expect equilibrium price

and equilibrium quantity both to increase.

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

both Dale and Terrence are made better off by trade.

For a number of years country A had inflation of 3 percent but for the last five years has had inflation of 6 percent. Country B had inflation of 4 percent for many years, but very recently inflation unexpectedly rose to 9 percent. Other things the same, in which of the countries would the higher inflation rate be more likely to reduce unemployment?

country B but not country A

Refer to Table 2-2. Which of the following statements is correct? Selected Answer:a.The opportunity cost of an additional 200 shoes is constant at 200 socks. Answers: a.The opportunity cost of an additional 200 shoes is constant at 200 socks. b.The opportunity cost of an additional 200 shoes is constant at 300 socks. c.Footville's production possibilities frontier is a straight, downward-sloping line. d.The opportunity cost of an additional 200 shoes increases as more shoes are produced.

d

Yvette buys and sells real estate. Two weeks ago, she paid $300,000 for a house on Pine Street, intending to spend $50,000 on repairs and then sell the house for $400,000. Last week, the city government announced a plan to build a new landfill on Pine Street just down the street from the house Yvette purchased. As a result of the city's announced plan, Yvette is weighing two alternatives: She can go ahead with the $50,000 in repairs and then sell the house for $290,000, or she can forgo the repairs and sell the house as it is for $250,000. She should

forgo the repairs and sell the house as it is for $250,000.

Devin works as an attorney for a corporation and is paid a salary in exchange for the legal services he performs. If Devin's income is represented by a flow of dollars from Box D to Box B of this circular-flow diagram, then the revenue earned by a firm selling its product is represented by a flow of dollars

from box C to box A

Emily and Betsey are economists. Emily thinks that the wealthiest 10 percent of the U.S. population should be taxed a rate higher than the rest of society because they can better afford it. Betsey thinks that everyone should be taxed at the same rate because that is the fairest scenario and the wealthy should not be penalized for their success. In this example, Emily and Betsey

have different normative views about tax policy.

A circular-flow diagram is a model that

helps explain how the economy is organised

The x-coordinate of an ordered pair specifies the

horizontal location of the point.

Microeconomics is the study of

how individual households and firms make decisions.

Suppose that in Brazil total annual output is worth $600 million and people work 30 million hours. In Peru, to tal annual output is worth $800 million and people work 50 million hours. Productivity is higher

in Brazil. Most variation in the standard of living across countries is due to differences in productivity.

Which of the following statements is correct about the roles of economists?

in trying to explain the world, economists are scientists; in trying to improve the world, they are policy advisers.

Trade between countries tends to

increase both competition and specialization.

Suppose an increase in the price of rubber coincides with an advance in the technology of tire production. As a result of these two events, the demand for tires

is unaffected, and the supply of tires could increase, decrease, or stay the same.

A supply schedule is a table that shows the relationship between

price and quantity supplied

Which of the following steps does an economist not take when studying the economy?

publish theories before testing them

The law of supply states that, other things equal, when the price of a good

rises, the quantity supplied of the good rises.

If Miguel expects to earn a higher income next month, he may choose to

save less now and spend more of his current income on goods and services.

resources are

scarce for households and scarce for economies.

What term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have?

scarcity

Suppose roses are currently selling for $40 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a

surplus to exist and the market price of roses to decrease.

A baker recently has come to expect higher prices for bread in the near future. We would expect

the baker to supply less bread now than she was supplying previously.

When the quantity demanded has increased at every price, it might be because

the price of a complementary good has decreased.

The marginal benefit Sabrina gets from purchasing a third pair of gloves is

the total benefit she gets from purchasing three pairs of gloves minus the total benefit she gets from purchase

If the supply of a product increases, then we would expect equilibrium price

to decrease and equilibrium quantity to increase

The opportunity cost of an item is

what you give up to get that item.