Assignment 1,2,3- Micro
1. Suppose the price of burgers increases from $2 to $3 each. The degree to which quantity demanded responds to this price increase depends on the A) price elasticity of demand. B) the price elasticity of supply. C) income elasticity of demand. D) cross elasticity of demand.
A
14. The demand for movies is unit elastic if A) a 5 percent decrease in the price leads to an infinite increase in the quantity demanded. B) a 5 percent increase in the price leads to a 5 percent decrease in the quantity demanded. C) any increase in the price leads to a 1 percent decrease in the quantity demanded. D) a 5 percent increase in the price leads to a 5 percent increase in total revenue.
A
15) Increasing opportunity cost occurs along a production possibilities frontier because A) resources are not equally productive in all activities. B) increasing wants need to be satisfied. C) in order to produce more of one good decreasing amounts of another good must be sacrificed. D) production takes time.
A
17) Assuming farmers can plant either corn or soybeans, as U.S. farmers plant more corn to meet rising global demand, A) the opportunity cost of producing corn increases. B) the opportunity cost of producing corn decreases. C) the U.S. PPF for corn and other goods and services shifts outward. D) the United States produces at a point beyond its PPF.
A
18) Marginal cost is the ________ one more unit of a good and ________ of the good increases. A) opportunity cost of producing; increases as production B) opportunity cost of producing; decreases as production C) price that must be paid to consume; increases as consumption D) price that must be paid to consume; decreases as consumption
A
18. On a straight-line downward-sloping demand curve, the maximum elasticity of demand occurs A) at its vertical intercept. B) at its midpoint. C) at its horizontal intercept. D) where it intersects the supply curve.
A
19. To maximize its revenue, A) a firm facing inelastic demand should always raise its price. B) a firm facing elastic demand should always raise its price. C) a firm should always charge the highest price possible regardless of the elasticity of demand. D) None of the above answers is correct.
A
20. An increase in the expected future price of a good A) increases its demand. B) decreases its demand. C) increases its supply. D) has no effect on either its demand or its supply.
A
22. The taxicab fare in Newville is regulated. The fare currently charged is $6 a ride. Newville taxicab drivers want to obtain government's permission to lower the fare, which they think will increase their total revenue. From this we can conclude that the drivers believe that the demand for taxicab rides is A) elastic. B) inelastic. C) unit elastic. D) perfectly inelastic.
A
3. Suppose the price of a football is $20.00 and the price of a basketball is $10.00. The ________ of a football is ________. A) relative price; 2 basketballs per football B) relative price; 1/2 basketball per football C) opportunity cost; $20.00 D) opportunity cost; $10.00
A
30. A bakery can produce either cakes or cookies. If the price of cookies rises, then A) the supply curve of cake shifts leftward. B) the supply curve of cake shifts rightward. C) there is a movement downward along the supply curve of cakes. D) there is a movement upward along the supply curve of cakes.
A
33. The demand for food is most elastic in countries A) with low income levels. B) with intermediate income levels. C) with high income levels. D) that are highly urbanized.
A
7) Ted can study for his economics exam or go to a concert. He decides to study for his economics exam instead of going to the concert. The concert he will miss is Ted's ________ of studying for the exam. A) opportunity cost B) explicit cost C) implicit cost D) discretionary cost
A
13) Jane produces only corn, measured in tons, and cloth, measured in bolts. For her, the opportunity cost of one more ton of corn is A) the same as the opportunity cost of one more bolt of cloth. B) the inverse of the opportunity cost of one more bolt of cloth. C) the ratio of all the bolts of cloth she produces to all the tons of corn she produces. D) the ratio of all the tons of corn she produces to all the bolts of cloth she produces.
B
13. A hot dog vendor on a street corner could increase the quantity of hot dogs her customers demand by 12 percent if she lowers the price of a hot dog 10 percent. The demand for the hot dogs is A) cross elastic. B) arc elastic. C) unit elastic. D) elastic.
B
30. If the price of gasoline rose from $2.85 to $2.95 per gallon, your expenditure on gasoline would increase if your price elasticity of demand for gasoline equals A) 1.25. B) 1.00. C) 0.75. D) Total revenue would increase at all of the above elasticities.
C
38) Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following statements is correct? A) Homer has an absolute advantage in catching fish and Teddy has an absolute advantage in picking fruit. B) Homer has an absolute advantage in picking fruit and Teddy has an absolute advantage in catching fish. C) Homer has an absolute advantage in both catching fish and picking fruit. D) Teddy has an absolute advantage in both catching fish and picking fruit.
C
17. Oatmeal is a normal good and cold cereal is a substitute for oatmeal. Raisins are a complement for oatmeal. Which of the following increases the demand for oatmeal? A) an increase in the price of raisins B) a decrease in income C) a decrease in population D) an increase in the price of cold cereal
D
11. If a 20 percent increase in the price of a used car results in a 10 percent decrease in the quantity of used cars demanded, then the demand for used cars is A) elastic. B) inelastic. C) unit elastic. D) arc elastic.
B
11. When the price of a pizza decreases from $12 to $10, it is definitely the case that the A) income effect means people buy less pizza. B) substitution effect means people buy more pizza. C) quantity demanded of pizza will not change. D) None of the above answers is correct.
B
14) The principle of increasing opportunity cost leads to A) a production possibilities frontier (PPF) that is bowed inward from the origin. B) a production possibilities frontier (PPF) that is bowed outward from the origin. C) an inward shift of the production possibilities frontier (PPF). D) an outward shift of the production possibilities frontier (PPF).
B
15. If the demand curve for oranges is a downward sloping straight line, the price elasticity of demand will increase the A) higher the price of oranges. B) higher the price of other fruits. C) higher the income level of consumers. D) lower the price of oranges.
B
16. The demand for computer chips is a downward sloping straight line. If there is an increase in the supply of computer chips, this change will A) increase the price elasticity of demand for computer chips. B) decrease the price elasticity of demand for computer chips. C) have no effect on the price elasticity of demand for computer chips. D) have an unpredictable effect on the price elasticity of demand for computer chips.
B
16. Which of the following shifts the demand curve for oranges? A) disastrous weather that destroys about half of this year's orange crop B) a decrease in the price of a pound of bananas, a substitute in consumption for oranges C) an increase in the price of the fuel used to transport oranges to supermarkets D) great weather that produces a bumper orange crop this year
B
17. At the midpoint of a downward sloping straight-line demand curve, the demand A) is elastic. B) is unit elastic. C) is inelastic. D) has an elasticity exactly equal to zero.
B
2) Harry produces 2 balloon rides and 4 boat rides an hour. Harry could produce more balloon rides but to do so he must produce fewer boat rides. Harry is ________ his production possibilities frontier. A) producing inside B) producing on C) producing outside D) producing either inside or on
B
2. Joe pays $8,000.00 in tuition. The 8,000 dollar tuition Joe pays is an example of what economists call A) a relative price. B) a money price. C) an indexed price. D) an opportunity price.
B
20. At a local ice cream parlor, when the price of half-gallons of chocolate ice cream was lowered by fifty cents per half-gallon, total revenue from the sale of chocolate ice cream decreased. This result indicates that A) there are more people who like vanilla ice cream than there are people who like chocolate ice cream. B) the demand for chocolate ice cream is inelastic. C) the demand for chocolate ice cream is elastic. D) None of the above answers is correct.
B
21. A local transit authority charges $1 for a bus ride. An economics study suggests that in the price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.1. To increase its revenue, the transit authority should A) raise the fare. B) lower the fare. C) leave the fare as it is.
B
24. Total revenue received by surfboard manufacturers increases by $2 million when the price of a surfboard decreases by $10. The price the elasticity of demand for surfboards is A) between 0 and 1. B) greater than 1. C) equal to 0. D) some amount that is impossible to determine without more information.
B
25) If the marginal benefit of a good exceeds its marginal cost, A) we've achieved efficient resource use. B) we should produce more to achieve the allocatively efficient use of resources. C) we should produce less to achieve the allocatively efficient use of resources. D) we cannot tell if more or less should be produced to achieve the allocatively efficient use of resources.
B
25. The price elasticity of demand for corn is 0.4. A new hybrid of corn is discovered and all farmers start to use it, which increases the quantity of corn they can produce from each acre. What happens to the farmers' total revenue? A) The total revenue will increase. B) The total revenue will decrease. C) The total revenue will not change. D) There is not enough information to determine what happens to the total revenue.
B
26. The price elasticity of demand for gasoline is 0.40. If the price of gasoline rises by 20 percent, there will be A) a decrease of more than 20 percent in the quantity of gasoline demanded. B) an increase in the total revenue received from the sale of gasoline. C) a loss of total revenue for gasoline producers, because at a higher price the quantity of gasoline demanded decreases. D) no change in the quantity of gasoline sold because people need gasoline.
B
27. The quantity of CDs that firms plan to sell this month depends on all of the following EXCEPT the A) number of producers of CDs. B) quantity of CDs that people plan to buy. C) wage rate of workers who produce CDs. D) price of a CD.
B
28. The price of milk rises, so the supply of ice cream decreases. there is, as a result a 5 percent increase in the price of ice cream and a 3 percent decrease in the quantity of ice cream sold. The revenue received by ice cream suppliers will ________ because the demand for ice cream is ________. A) decrease; price inelastic B) increase; price inelastic C) increase; price elastic D) decrease; price elastic
B
3) Suppose the country of Popcorn produces only jets and corn. If Popcorn cannot produce any more jets without giving up corn, we say that Popcorn has achieved A) the highest marginal benefit. B) production efficiency. C) the lowest marginal cost. D) the highest opportunity cost.
B
34. The air route from Dallas to Mexico City is served by more than one airline. The demand for tickets from American Airlines for that route is probably A) inelastic but more elastic than the demand for all tickets for that route. B) elastic and more elastic than the demand for all tickets for that route. C) inelastic and less elastic than the demand for all tickets for that route. D) elastic but less elastic than the demand for all tickets for that route.
B
35. Of the following, demand is likely to be the least elastic for A) diamonds. B) insulin for diabetics. C) iceberg lettuce. D) pink grapefruit.
B
36) Suppose Joe can prepare 10 sandwiches or 5 pizzas in an hour and Beth can produce 12 sandwiches or 9 pizzas. Which of the following is true? A) Beth should produce pizza because she has a higher opportunity cost of producing pizza than does Joe. B) Beth should produce pizza because she has a lower opportunity cost of producing pizza than does Joe. C) Joe should produce pizza because he has a higher opportunity cost of producing pizza than does Beth. D) Joe should produce pizza because he has a lower opportunity cost of producing pizza than does Beth.
B
41. During the past twenty years, the prices of prescription drugs, relative to the prices of other goods, have risen, yet Americans buy more prescription drugs than ever. This might be because A) with higher incomes and more older Americans, we have moved rightward along our demand curve for drugs. B) with higher incomes and more older Americans, the demand curve for prescription drugs has shifted rightward. C) more new firms entered the pharmaceutical industry each year, which caused a rightward shift in the supply curve of prescription drugs. D) Both answers A and C are correct.
B
10. Suppose the price elasticity of demand for oil is 0.1. In order to lower the price of oil by 20 percent, the quantity of oil supplied must be increased by A) 200 percent. B) 20 percent. C) 2 percent. D) 0.2 percent.
C
20) Marginal benefit is the benefit A) that your activity provides to someone else. B) of producing a good or service when the total benefit from the good or service exceeds its total cost. C) that is received from consuming one more unit of a good or service. D) of consuming another good or service divided by the total number of goods or services produced.
C
23. If consumers' incomes increase and the demand for bus rides decreases, A) bus rides are a normal good. B) consumers are behaving irrationally. C) bus rides are an inferior good. D) none of the above
C
28) The most anyone is willing to pay for another purse is $30. Currently the price of a purse is $40, and the cost of producing another purse is $50. The marginal benefit of a purse is A) $50. B) $40. C) $30. D) an amount not given in the answers above.
C
29. As the price of cell phones fell during the last decade, consumers' total expenditures on cell phones increased. If the demand curve for cell phones did not shift, this fact means that the demand for cell phones A) must have shifted leftward. B) must be upward sloping. C) is elastic. D) is inelastic.
C
32. The demand for ________ is more elastic than the demand for ________. A) chewing gum; cars B) all personal computers; Dell computers C) Pepsi; all soft beverages D) food; exotic vacations
C
48. If the demand curve for bottled water shifts rightward and the supply curve of bottled water shifts rightward, the equilibrium A) price of bottled water definitely increases. B) price of bottled water definitely decreases. C) quantity of bottled water definitely increases. D) quantity of bottled water definitely decreases.
C
7. The quantity demanded is A) always equal to the equilibrium quantity. B) independent of the price of the good. C) the amount of a good that consumers plan to purchase at a particular price. D) independent of consumers' buying plans.
C
1. A relative price is the A) slope of the demand curve. B) difference between one money price and another. C) slope of the supply curve. D) ratio of one money price to another.
D
12. If the price of salt increases and the quantity demanded does not change, then A) the price elasticity of demand is equal to zero. B) demand is perfectly inelastic. C) the demand curve for salt is horizontal. D) Both answers A and B are correct.
D
13. Apples are a normal good, so if the price of an apple increases from 50¢ to 60¢, the quantity of apples demanded decrease because of A) the substitution effect only. B) the income effect only. C) a change in income. D) the substitution and income effects.
D
23. The marketing people at Ben and Jerry's Ice Cream Company believe that if they lower the price of their Cherry Garcia flavor ice cream by 25 percent, the quantity demanded will increase by 5 percent. If they are correct in their belief, then A) the demand for Cherry Garcia is price elastic. B) their total revenue from Cherry Garcia will increase if they lower the price. C) the demand for Cherry Garcia is income elastic. D) their total revenue from Cherry Garcia will decrease if they lower the price.
D
27. When Monica's Catering lowered the price of catered meals from $60 per person to $20 per person, the quantity demanded doubled from 500 meals to 1,000 meals. You can conclude that the demand for Monica's catered meals over the price range of $20 to $60 is A) upward sloping. B) unit elastic. C) elastic. D) inelastic.
D
31. Because there are numerous choices for fast food purchases, the price elasticity of demand for Taco Bell food is likely A) inelastic. B) unitary elastic. C) perfectly inelastic. D) elastic.
D
12) In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue's opportunity cost of changing oil is ________ than Fred's and her opportunity cost for changing tires is ________ than Fred's. A) greater; less B) less; greater C) less; less D) greater; greater
A
26) Allocative efficiency occurs when A) we cannot produce more of any good without giving up some other good that we value more highly. B) we cannot produce more of any one good without giving up some other good. C) marginal benefit exceeds marginal cost. D) opportunity costs are decreasing.
A
29) If the marginal benefit from another computer exceeds the marginal cost of the computer, then to use resources allocatively efficiently, A) more resources should be used to produce computers. B) fewer resources should be used to produce computers. C) if the marginal benefit exceeds the marginal cost by as much as possible, the efficient amount of resources are being used to produce computers. D) None of the above is correct because marginal benefit and marginal cost have nothing to do with using resources allocatively efficiently.
A
31) After Hurricane Katrina devastated parts of Mississippi and New Orleans in 2005, we can be sure that the production possibilities frontier for that area temporarily A) shifted inward, toward the origin. B) shifted outward, away from the origin. C) became flatter. D) became steeper.
A
33) President Obama has proposed a goal that everyone complete at least one year of formal education or training beyond high school. This policy would A) increase human capital and increase economic growth. B) increase physical capital and increase economic growth. C) increase financial capital and increase economic growth. D) eliminate opportunity costs and increase economic growth.
A
33. Which of the following shifts the supply curve of broccoli? A) an increase in income B) a newly discovered increase in the nutritional value of broccoli C) a newly discovered link between broccoli consumption and tooth decay D) the destruction of much of this year's broccoli crop by hurricanes
A
35) In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eight-hour day, Bob can produce either 8 loaves of bread or 8 pounds of butter. Andy has a comparative advantage in the production of A) bread, while Bob has a comparative advantage in the production of butter. B) butter, while Bob has a comparative advantage in the production of bread. C) bread, and neither has a comparative advantage in the production of butter. D) both bread and butter.
A
35. If the price of a video download is below its equilibrium price, the quantity supplied is ________ than the quantity demanded. If the price of a video download is above its equilibrium price, the quantity supplied is ________ than the quantity demanded. A) less; greater B) greater; less C) less; less D) greater; greater
A
38. In March, the quantity of orange juice sold in the town of Jackson was 3000 cartons and the price $3. In May, the quantity of orange juice sold in the town of Jackson was 3500 cartons and the price was $3.20. This change in the price and quantity sold could have been the result of A) the release of a medical study suggesting that consuming orange juice helps prevent cancer. B) a reduction in the number of orange juice coupons provided by local markets. C) the after effects of a cold winter in Florida that killed half of the orange crop. D) the after effects of a warm winter in Florida that increased the orange crop yield by 50 percent.
A
39. If the U.S. Surgeon General announced that increased grapefruit juice consumption could help prevent heart attacks, what would happen to the equilibrium price and quantity of grapefruit juice? A) Price and quantity both increase. B) Price and quantity both decrease. C) Price increases but quantity decreases. D) Price decreases but quantity increases.
A
40) Markets are best defined as A) arrangements where buyers and sellers get together to buy and sell. B) specific geographic locations where people get together to buy and sell. C) hypothetical constructs used to analyze how people form their tastes and preferences. D) places where people can inspect goods and services carefully.
A
42. In 2011, the price of peanuts was rising, which lead peanut butter buyers to expect the price of peanut butter would rise in the future. Consequently, in the current market for peanut butter there was ________ which resulted in ________ in the price of peanut butter and ________ in the quantity of peanut butter. A) an increase in demand for peanut butter; an increase; an increase B) an increase in supply of peanut butter; a decrease; an increase C) a decrease in demand for peanut butter; a decrease; a decrease D) a decrease in supply of peanut butter; an increase; a decrease
A
44. The recent hurricanes in Florida are bringing financial gain to California citrus growers. Due to extensive damage to the Florida citrus crop, California citrus products are commanding their highest prices ever." Which of the following statements best explains the economics of this quotation? A) The supply of Florida oranges decreased, causing their price to increase, which then increased the demand for substitute California oranges. B) The supply of Florida oranges decreased, causing the supply of California oranges to increase and the price of California oranges to rise. C) The demand for Florida oranges decreased because of the hurricanes, causing a greater demand for California oranges and an increase in the price of California oranges. D) The demand for Florida oranges decreased, causing their prices to rise, therefore increasing the demand for California oranges.
A
45. If good growing conditions increase the supply of strawberries and hot weather increases the demand for strawberries, the quantity of strawberries bought ________. A) increases and the price might rise, fall or not change B) increases and the price rises C) doesn't change and the price falls D) doesn't change and the price rises
A
7. A 10 percent increase in the quantity of spinach demanded results from a 20 percent decline in its price. The price elasticity of demand for spinach is A) 0.5. B) 2.0. C) 10.0. D) 20.0.
A
9) Most students attending college pay tuition and are unable to hold a full-time job. For these students, tuition is A) part of the opportunity cost of going to college. So are their forgone earnings from not holding a full-time job. B) part of the opportunity cost of going to college. Their forgone earnings from not holding a full-time job are not part of the opportunity cost of attending college. C) not part of the opportunity cost of going to college, but their forgone earnings from not holding a full-time job are part of the opportunity cost of attending college. D) not part of the opportunity cost of going to college. Neither are their forgone earnings from not holding a full-time job.
A
18. Cupcakes and granola bars are substitutes in consumption. The price of a granola bar increases so the demand for A) granola bars will increase, that is, the demand curve will shift rightward. B) cupcakes will increase, that is, the demand curve will shift rightward. C) granola bars will decrease, that is, the demand curve will shift leftward. D) cupcakes will decrease, that is, the demand curve will shift leftward.
B
19) The quantity of shoes produced is measured along the horizontal axis of a PPF and the quantity of shirts is measured along the vertical axis. As you move down toward the right along the PPF, the marginal cost of A) shoes decreases. B) shoes increases. C) shirts increases. D) shoes and shirts is equal at the midpoint between the vertical and horizontal axis.
B
27) Resource use is allocatively efficient when marginal benefit is A) greater than marginal cost. B) equal to marginal cost. C) less than marginal cost. D) at its maximum value.
B
30) When economic growth occurs, the A) economy moves along its production possibilities frontier. B) production possibilities frontier shifts outward. C) production possibilities frontier becomes steeper. D) production possibilities frontier shifts outward but no longer limits the amount that can be produced.
B
36. Ticket scalpers at the NCAA basketball tournament last year charged prices high above the printed ticket price. This observation is evidence of A) a surplus at printed ticket prices. B) a shortage at printed ticket prices. C) the tournament not being televised. D) the tournament getting too much television exposure.
B
40. Suppose we observe that both the equilibrium price of digital cameras and the equilibrium quantity of digital cameras have increased. Which of the following events could be responsible for this? A) technological advances in digital camera production B) consumers' preferences changed in favor of digital cameras C) the price of film cameras fell D) workers who make digital cameras received a pay raise
B
46. Beef is a normal good and people's incomes fall. At the same time a bumper corn crop reduces the cost of feeding steers. These changes result in A) an increase in the equilibrium quantity of beef. B) an increase in the equilibrium quantity of beef if the shift in the demand curve is smaller than the shift in the supply curve. C) an increase in the equilibrium quantity of beef if the shift in the demand curve is larger than the shift in the supply curve. D) no change in the equilibrium quantity of beef.
B
49. What will happen to the equilibrium price and quantity of coffee if it is discovered to help prevent colds and, at the same time, Brazil and Vietnam emerge in the global market as massive producers of coffee? A) The price will fall and the effect on the quantity is uncertain. B) The quantity will increase and the effect on the price is uncertain. C) The quantity will decrease and the price will rise. D) The quantity will increase and the price will remain unchanged.
B
6) When producing goods and services along a PPF, tradeoffs exist because A) not all production is efficient. B) society has only a limited amount of productive resources. C) buyers and sellers often must negotiate prices. D) human wants and needs are limited at a particular point in time.
B
6. Scarcity guarantees that A) demands will exceed wants. B) wants will exceed demands. C) demands will be equal to wants. D) most demands will be satisfied.
B
6. The price elasticity of demand for furniture is estimated at 1.3. This value means a one percent increase in the A) price of furniture will increase the quantity of furniture demanded by 1.3 percent. B) price of furniture will decrease the quantity of furniture demanded by 1.3 percent. C) quantity of furniture demanded will decrease the price of furniture by 1.3 percent. D) quantity of furniture demanded will increase the price of furniture by 1.3 percent.
B
8. The quantity demanded is A) always equal to the equilibrium quantity. B) independent of the price of the good. C) the amount of a good that consumers plan to purchase at a particular price. D) independent of consumers' buying plans.
B
9. The "law of demand" states that changes in A) always equal to the equilibrium quantity. B) independent of the price of the good. C) the amount of a good that consumers plan to purchase at a particular price. D) independent of consumers' buying plans.
B
9. When the price of a movie ticket increases from $5 to $7, the quantity of tickets demanded decreases from 600 to 400 a day. What is the price elasticity of demand for movie tickets? A) 0.83 B) 1.20 C) 1.00 D) 2.32
B
1) The production possibilities frontier is the boundary between A) those combinations of goods and services that can be produced and those that can be consumed. B) those resources that are limited and those that are unlimited. C) those combinations of goods and services that can be produced and those that cannot. D) those wants that are limited and those that are unlimited.
C
12. The "income effect" in the market for aspirin means that A) aspirin are generally taken by people with higher than average incomes. B) a decrease in the price of a substitute good like acetaminophen will make aspirin takers feel a little poorer than they were before. C) an increase in the price of aspirin will reduce the total purchasing power of aspirin takers, making them able to afford fewer aspirin. D) an increase in the price of aspirin will cause headache sufferers to look for a lower priced remedy.
C
14. The quantity of iPods that people plan to buy this month depends on all of the following EXCEPT the A) price of CD players. B) price of an iPod. C) technology used to produce an iPod. D) price of a music download from iTunes.
C
16) As we move along a bowed-out production possibility frontier, producing more tacos and less pizza, the opportunity cost of a pizza ________. A) increases B) remains the same C) decreases D) increases and then decreases
C
2. The price elasticity of demand is defined as the magnitude of the A) change in quantity demanded divided by the change in price. B) change in price divided by the change in quantity demanded. C) percentage change in quantity demanded divided by the percentage change in price. D) percentage change in price divided by the percentage change in quantity demanded.
C
22) A marginal benefit curve shows A) the efficient use of resources. B) the quantity of one good that must be forgone to get more of another good. C) the quantity of one good that people are willing to forgo to get another unit of another good. D) there are increasing opportunity costs.
C
24) Suppose that the government is trying to decide between allocating its resources to build more dams or to build more freeways. In terms of forgone dams, as more freeways are constructed, the marginal benefit of additional freeways ________ and the marginal cost of additional freeways ________. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases
C
24. Gruel is an inferior good. Hence, a decrease in people's incomes A) shifts the supply curve of gruel leftward. B) decreases the quantity of gruel supplied. C) shifts the demand curve for gruel rightward. D) shifts the demand curve for gruel leftward.
C
25. A change in which of the following alters buying plans for cars but does NOT shift the demand curve for cars? A) A 5 percent increase in people's income. B) A 10 percent decrease in the price of car insurance. C) A 20 percent increase in the price of a car. D) An increased preference for walking rather than driving.
C
29. Changes in which of the following shifts the supply curve of hamburgers? A) a rise in the price of soda, a complement for hamburgers B) new research that establishes a link between hamburgers and heart problems C) an increase in the price of meat used to produce hamburgers D) an economy-wide decrease in income because of a long recession
C
34) Suppose a scientific breakthrough made free solar power available in unlimited quantities in the United States. The effect of this invention would be to move the A) United States beyond its production possibilities frontier. B) United States inside its production possibilities frontier. C) U.S. production possibilities frontier outward. D) U.S. production possibilities frontier inward.
C
34. The equilibrium price is the price at which the quantity A) sold equals the quantity bought. B) demanded equals the quantity sold. C) demanded equals the quantity supplied. D) supplied equals the quantity bought.
C
37) Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. If Tom and Jerry trade A) Tom will benefit and Jerry will not. B) Jerry will benefit and Tom will not. C) both will benefit. D) none of them will benefit.
C
4. Twenty years ago a stove cost $300 and a refrigerator cost $1,500. Today a stove costs $600, while a refrigerator costs $1,800. Which of the following statements is true? A) The relative price of stoves and refrigerators has not changed. B) The relative price of a refrigerator has increased. C) The relative price of a stove has increased. D) The money price of a refrigerator has fallen.
C
43. If the price of crude oil falls, the equilibrium price of gasoline ________ and the equilibrium quantity ________. A) rises; increases B) rises; decreases C) falls; increases D) falls; decreases
C
5) Using the production possibilities frontier model, unemployment is described as producing at a point A) on the exact middle of the PPF curve. B) on either end of the PPF curve. C) inside the PPF curve. D) outside the PPF curve.
C
8) Opportunity cost is best defined as A) the amount of money that an individual is willing to pay to purchase a good that means a great deal to that person. B) the amount of money lost by one individual in an exchange process so that another individual might gain. C) the highest-valued alternative that is forgone when choosing among various alternatives. D) a situation in which one individual cannot have an absolute advantage over another individual in the production of all goods.
C
10) While producing on the production possibilities frontier, if additional units of a good could be produced at a constant opportunity cost, the production possibilities frontier would be A) bowed outward. B) bowed inward. C) positively sloped. D) a straight line.
D
10. The "law of demand" refers to the fact that, all other things remaining the same, when the price of a good rises A) the demand curve shifts rightward. B) the demand curve shifts leftward. C) there is a movement down along the demand curve to a larger quantity demanded. D) there is a movement up along the demand curve to a smaller quantity demanded.
D
11) At one point along a PPF, 50 tons of coffee and 100 tons of bananas are produced. At another point along the same PPF, 30 tons of coffee and 140 tons of bananas are produced. The opportunity cost of a ton of coffee between these points is A) 7/5 of a ton of bananas per ton of coffee. B) 1/2 of a ton of bananas per ton of coffee. C) 5/7 of a ton of bananas per ton of coffee. D) 2 tons of bananas per ton of coffee.
D
15. Ham and eggs are complements. If the price of ham rises, the demand for eggs will A) increase or decrease but the demand curve for ham will not change. B) decrease and the demand curve for ham will shift rightward. C) not change but there will be a movement along the demand curve for eggs. D) decrease and the demand curve for eggs will shift leftward.
D
19. Sweatshirts and tee-shirts are complements in consumption and the price of a sweatshirt increases. As a result, the demand for A) sweatshirts will increase, that is, the demand curve will shift rightward. B) tee-shirts will increase, that is, the demand curve will shift rightward. C) sweatshirts will decrease, that is, the demand curve will shift leftward. D) tee-shirts will decrease, that is, the demand curve will shift leftward.
D
21) Susan likes to drink sodas. The ________ soda Susan drinks, the ________ of the last soda. A) more; higher the marginal benefit B) less; higher the opportunity cost C) less; lower the marginal benefit D) more; lower the marginal benefit
D
22. When people's incomes increase, the demand for a good increases. The good is called A) an inferior good. B) a complement. C) a substitute. D) a normal good.
D
23) Marginal benefit curves slope A) upward because of increasing opportunity cost. B) upward, but not because of increasing opportunity cost. C) downward because of increasing opportunity cost. D) downward, but not because of increasing opportunity cost.
D
28. A supply curve shows the relation between the quantity of a good supplied and A) income. Usually a supply curve has negative slope. B) income. Usually a supply curve has positive slope. C) the price of the good. Usually a supply curve has negative slope. D) the price of the good. Usually a supply curve has positive slope.
D
3. The price elasticity of demand depends on A) the units used to measure price and the units used to measure quantity. B) the units used to measure price but not the units used to measure quantity. C) the units used to measure quantity but not the units used to measure price. D) neither the units used to measure price nor the units used to measure quantity.
D
31. Which of the following decreases the supply of popcorn? A) a decrease in the price of popcorn B) an increase in the price of popcorn C) a technological advance in the production of popcorn D) a decrease in the number of popcorn producers
D
32) Capital accumulation definitely A) has no impact on the production possibilities frontier. B) shifts the production possibilities frontier inward. C) makes the production possibilities frontier steeper. D) shifts the production possibilities frontier outward.
D
32. Which of the following shifts the supply curve of broccoli? A) an increase in income B) a newly discovered increase in the nutritional value of broccoli C) a newly discovered link between broccoli consumption and tooth decay D) the destruction of much of this year's broccoli crop by hurricanes
D
37. If the quantity of textbooks supplied is 10,000 per year and the quantity of textbooks demanded is 8,000 per year, there is a ________ in the market and the price will ________. A) shortage; rise B) shortage; fall C) surplus; rise D) surplus; fall
D
39) Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. Which of the following statements about opportunity cost is correct? A) The opportunity cost of a ton of pecans is 2 tons of pears per ton of pecans for Missouri and 1/4 ton of pears per ton of pecans for Washington. B) The opportunity cost of a ton of pears is 2 tons of pecans per ton of pears for Missouri and 1/4 ton of pecans per ton of pears for Washington. C) The opportunity cost of a ton of pecans is 1/2 ton of pears per ton of pecans for Missouri and 4 tons of pears per ton of pecans for Washington. D) Both answers B and C are correct.
D
4) A society that is producing on its production possibilities frontier is A) not utilizing all of its resources. B) not being technologically efficient. C) producing too much output. D) fully utilizing all of its productive resources.
D
4. The price elasticity of demand for oranges ________ change if the units of the quantity was changed from pounds to kilograms and ________ change if the units of the price was changed from dollars to cents. A) would; would B) would; would not C) would not; would D) would not; would not
D
47. Between 2000 and 2010, advances in PC production technology increased the supply of PCs sharply. The demand for PCs also increased, but not nearly as much as the supply did. As a result, the price of a PC ________ and the quantity of PCs sold ________. A) rose; decreased B)rose; increased C) fell; decreased D) fell; increased
D
5. A decrease in the price of eggs from $1.50 to $1.30 per dozen resulted in an increase in egg purchases in two cities. In Philadelphia, daily egg purchases increased from 6000 to 8000 dozens; in nearby Dover, Delaware, daily egg purchases increased from 300 to 400 dozens. The price elasticity of demand is therefore A) lower in the smaller city as would be expected. B) greater in the smaller city as would be expected. C) certainly affected by population differences in different markets. D) the same in Philadelphia as in Dover.
D
5. Demands differ from wants because A) demands are unlimited, whereas wants are limited by income. B) wants require a plan to acquire a good but demands require no such plan. C) wants imply a decision about which demands to satisfy, while demands involve no specific plan to acquire the good. D) demands reflect a decision about which wants to satisfy and a plan to buy the good, while wants are unlimited and involve no specific plan to acquire the good.
D
50. If the supply of bottled water decreases and at the same time the demand for bottled water increases, the equilibrium price ________ and the equilibrium quantity ________. A) might rise, fall, or stay the same; decreases B) might rise, fall, or stay the same; increases C) falls; increases D) rises; might increase, decrease, or stay the same
D
8. Taco Bell's economists determine that the price elasticity of demand for their tacos is 2.0. So, if Taco Bell raises the price of its tacos by 6.0 percent, the quantity demanded will decrease by ________ percent. A) 2.0 B) 3.0 C) 6.0 D) 12.0
D
companies carry. As a result, the price of cable television rises. Thus A) the demand curve for cable television service shifts rightward. B) the demand curve for cable television service shifts leftward. C) there is a movement down the demand curve for cable television to a higher quantity demanded. D) there is a movement up the demand curve for cable television to a smaller quantity demanded.
D
