eco

Ken and Tabitha are two woodworkers who both make tables and chairs. In one month, Ken can make 9 tables or 18 chairs, whereas Tabitha can make 16 tables or 80 chairs. Given this, we know that the opportunity cost of 1 chair is

1/2 table for Ken and 1/5 table for Tabitha.

Refer to Table 1. Assume that Cuba and Denmark each has 8 days available for production. Originally, each country divided its time equally between the production of coolers and radios. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of radios increased by

12

Refer to Table 2-5. Table 2-5 shows one set of production possibilities. What is the opportunity cost of increasing the production of corn from 400 bushels to 800 bushels?

400 bushels of wheat

Refer to Table 3-20. What is Theresa's opportunity cost of producing one pound of beef?

5/3 bushels of wheat

Refer to Table 3-20. What is Brad's opportunity cost of producing one bushel of wheat?

5/6 pound of beef

Refer to Table 1. What is the opportunity cost of increasing the production of rye from 700 bushels to 1200 bushels?

500 bushels of corn

Refer to Table 2-20. What is the opportunity cost to Supertown of increasing the production of toys from 200 to 300?

500 glasses

Refer to Table 4-4. If these are the only four sellers in the market, then the market quantity supplied at a price of $10 is

66 units.

Which of the following events would unambiguously cause a decrease in the equilibrium price of cotton shirts?

A decrease in the price of wool shirts and a decrease in the price of raw cotton

Abby bakes brownies and Liam grows flowers. In which of the following cases is it impossible for both Abby and Liam to benefit from trade?

Abby does not like flowers and Liam does not like brownies.

Refer to Table 2. The values in the table represent the amounts of lemonade and pizzas that Alice and Betty can produce in one week without and with specialization and trade. What are Alice and Betty's gains from specialization and trade?

Alice gains 9 pitchers of lemonade and 13 pizzas, while Betty gains 12 pitchers of lemonade and 8 pizzas.

Refer to Figure 2-3. Efficient production is represented by which point(s)?

C, D

Which of the following is not a result of rent control?

Higher quality housing

A worker in Thailand can earn $12 per day making cotton cloth on a hand loom. A worker in the United States can earn $82 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?

Labor is more productive making cotton cloth with a mechanical loom than with a hand loom.

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

Output

Which of the following is correct?

Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor.

Refer to Figure 4-9. All else equal, an increase in the price of the pulp used in the paper production process would cause a move from

Sb to Sa.

Which of the following events could cause an increase in the supply of ceiling fans?

The number of sellers of ceiling fans increases.

Which of the following would not increase in response to a decrease in the price of ironing boards?

The quantity of irons supplied at each possible price of irons

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs.. Given this, we know that

Traci has an absolute advantage in chairs.

Suppose scientists provide evidence that people who drink energy drinks are more likely to have a heart attack than people who do not drink energy drinks. We would expect to see

a decrease in the demand for energy drinks.

Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate. Each individual can devote 1200 minutes to producing wheat and beef.

beef and Theresa has a comparative advantage in the production of wheat.

Tom produces baseball gloves and baseball bats. Steve also produces baseball gloves and baseball bats, but Tom is better at producing both goods. In this case, trade could

benefit both Steve and Tom.

Refer to Figure 6-9. In this market, a minimum wage of $8 is

binding and creates unemployment.

Economists make assumptions to

focus their thinking on the essence of the problem at hand.

If the number of sellers in a market increases, then the

supply in that market will increase.

Economics is the study of how society manages its

unlimited wants and limited resources.

Consider Madison's decision to go to college. If she goes to college, she will spend $26,000 on tuition, $13,000 on room and board, and $1,500 on books. If she does not go to college, she will earn $14,000 working in a store and spend $7,000 on room and board. Madison's cost of going to college is

$47,500.

Refer to Table 4-6. The equilibrium price and quantity, respectively, are

$9 and 40 units.

Refer to Figure 6-4. A government-imposed price of $6 in this market could be an example of a

(i) and (iv) only

Refer to Figure 6-4. A government-imposed price of $16 in this market could be an example of a

(ii) and (iii) only

Refer to Table 3-11. Cuba's opportunity cost of one cooler is

0.5 radios, and Denmark's opportunity cost of one cooler is 0.125 radios.

Refer to Table 3-23. The opportunity cost of 1 pound of tomatoes for the rancher is

1 pound of pork.

Refer to Table 3-11. At which of the following prices would both Cuba and Denmark gain from trade with each other?

1 radio for 4 coolers

Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of fish per year, and a worker in Farmland can produce either 25 units of wheat or 5 units of fish per year. There are 10 workers in each country. Political pressure from the fish lobby in Farmland and from the wheat lobby in Boatland has prevented trade between the two countries on the grounds that cheap imports would kill the fish industry in Farmland and the wheat industry in Boatland. As a result, Boatland produces and consumes 25 units of wheat and 125 units of fish per year while Farmland produces and consumes 125 units of wheat and 25 units of fish per year. If the political pressure were overcome and trade were to occur, each country would completely specialize in the product in which it has a comparative advantage. If trade were to occur, the combined output of the two countries would increase by

100 units of wheat and 100 units of fish.

Refer to Table 3-20. At which of the following prices would both Brad and Theresa gain from trade with each other?

12 bushels of wheat for 8 pounds of beef

Refer to Table 4-3. If the law of supply applies to this good, then Q1 could be

170

Refer to Table 1. Cuba and Denmark would not be able to gain from trade if Denmark's opportunity cost of one radio changed to

2 coolers.

Refer to Table 1. Assume that Cuba and Denmark each has 6 days available for production. Originally, each country divided its time equally between the production of coolers and radios. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of coolers increased by

36

If consumers often purchase muffins to eat while they drink their coffee at local coffee shops, what would happen to the equilibrium price and quantity of coffee if the price of muffins rises?

Both the equilibrium price and quantity would decrease.

Refer to Figure 4-8. All else equal, an increase in the income of buyers who consider turkey to be an inferior good would cause a move from

Da to Db.

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

Economists typically pay closer attention to natural experiments through history than lab experiments.

Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good?

Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market?

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

If Korea is capable of producing either shoes or toy trains or some combination of the two, then

Korea's opportunity cost of shoes is the inverse of its opportunity cost of toy trains.

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation?

New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy.

Refer to Figure 4-10. Which of the following movements would illustrate the effect of an increase in the price of beach towels on the market for bathing suits?

Point A to Point D

Refer to Figure 4-10. Which of the following movements would illustrate the effect of an increase in the incomes of parents with school-aged children on the market for lacrosse lessons?

Point C to Point B

Refer to Figure 4-10. Which of the following movements would illustrate the effect of an improved high-speed mixer that allows bakers to produce cakes in less time on the market for cakes?

Point C to Point D

In the short run, which of the following is not correct?

Policies that encourage higher employment will also induce a lower rate of inflation.

Refer to Figure 2-4, Graph (a) and Graph (b). Which of the following is not a result of the shift of the economy's production possibilities frontier from Graph (a) to Graph (b)?

Production of 2 donuts and 2 cups of coffee becomes efficient.

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

The effect of changes in the money supply on the inflation rate

What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that reduced the amount of labor necessary to produce them?

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

Suppose the United States had a short-term shortage of farmers. Which market mechanisms would adjust to remove the shortage?

The prices of food and the wages of farmers would adjust.

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

Suppose the cost of flying a 200-seat plane for an airline is $200,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is

This cannot be determined from the information given.

Productivity is defined as the

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

Refer to Figure 4-6. The shift from S' to S could be caused by

an increase in input prices.

Refer to Figure 4-4. The movement from point A to point B on the graph is caused by

an increase in the price of the good.

Refer to Figure 4-4. The movement from point A to point B on the graph is called

an increase in the quantity supplied.

Two goods are substitutes when a decrease in the price of one good

decreases the demand for the other good.

If the number of buyers in a market decreases, then

demand will decrease.

Refer to Figure 2-12. The shift of the production possibilities frontier from A to B can best be described as

economic growth.

The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that

equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.

Large or persistent inflation is almost always caused by

excessive growth in the quantity of money.

Suppose the U.S. and Japan can both produce airplanes and televisions and the U.S. has a comparative advantage in the production of airplanes while Japan has a comparative advantage in the production of televisions. Also suppose the U.S. has an absolute advantage in the production of both airplanes and televisions. The U.S. should

export airplanes to Japan and import televisions from Japan.

Yvette buys and sells real estate. Two weeks ago, she paid $300,000 for a house on Maple 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 Maple 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.

Refer to Figure 2-2. Ethan works as an attorney for a corporation and is paid a salary in exchange for the legal services he performs. If Ethan'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.

The "invisible hand" refers to

how the decisions of households and firms lead to desirable market outcomes.

Two goods are complements when a decrease in the price of one good

increases the demand for the other good.

To say that a price ceiling is binding is to say that the price ceiling

is set below the equilibrium price.

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.

Refer to Figure 6-2. The price ceiling

makes it necessary for sellers to ration the good using a mechanism other than price.

Refer to Table 3-20. Brad has an absolute advantage in the production of

neither good and Theresa has an absolute advantage in the production of both goods.

A competitive market is a market in which

no individual buyer or seller has any significant impact on the market price.

Minimum-wage laws dictate

only a minimum wage that firms may pay workers.

Comparative advantage is related most closely to which of the following?

opportunity cost

The adage, "There ain't no such thing as a free lunch," means

people face tradeoffs.

Refer to Table 3-23. The rancher has a comparative advantage in the production of

pork

Which of the following is not a rationing mechanism used by landlords in cities with rent control?

price

If a nonbinding price floor is imposed on a market, then the

quantity sold in the market will stay the same.

When an economist points out that you and millions of other people are interdependent, he or she is referring to the fact that we all

rely upon one another for the goods and services we consume.

The quantity supplied of a good is the amount that

sellers are willing and able to sell.

When OPEC raised the price of crude oil in the 1970s, it caused the

supply of gasoline to decrease.

Refer to Figure 4-7. At a price of $30, there would be a

surplus of 400 units.

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that

the nation is not using all available resources or is using inferior technology or both.

When computing the opportunity cost of attending a rodeo as a spectator, you should include

the price you pay for the ticket and the value of your time.

Refer to Figure 6-7. Suppose a price ceiling of $5 is imposed on this market. As a result,

the quantity of the good supplied decreases by 20 units.

Refer to Table 3-23. Assume that the farmer and the rancher each has 24 labor hours available. If each person spends all his time producing the good in which he has a comparative advantage and trade takes place at a price of 1 pound of pork for 2 pounds of tomatoes, then

the rancher will gain from this trade, but the farmer will not.

A production possibilities frontier is a straight line when

the rate of tradeoff between the two goods being produced is constant.

If something happens to alter the quantity supplied at any given price, then

the supply curve shifts.

When two countries trade with one another, it is most likely because

the two countries wish to take advantage of the principle of comparative advantage.

Refer to Table 3-23. The farmer has an absolute advantage in the production of

tomatoes

Refer to Table 3-23. The farmer should specialize in the production of

tomatoes and the rancher should specialize in the production of pork.

In the simple-circular flow diagram, the flow of money from the firms to the markets for factors of production is called

wages, rent, and profit.

Adam Smith asserted that a person should never attempt to make at home

what it will cost him more to make than to buy.

An economy's production possibilities frontier is also its consumption possibilities frontier

when the economy is self-sufficient.