Econ 100C test 1 practice

A country produces only apples and bananas. Moving from point A to point B along its production possibilities frontier, 5 apples are forgone and 4 bananas are gained. What is the opportunity cost of a banana? A. 5/4 of an apple B. 4/5 of an apple C. 4 apples D. 1 banana E. None of the above answers is correct.

A

Factors of production are the A. productive resources used to produce goods and services. B.productive resources used by government to increase the productivity of consumption. C. goods and services produced by the economy. D. goods that are bought by businesses to produce productive resources. E. goods that are bought by individuals and used to provide personal enjoyment.

A

If there is unemployment in an economy, then the A. economy is producing at a point inside the production possibilities frontier. B. economy is operating at an unattainable point. C. production possibilities frontier will shift outwards. D. production possibilities frontier must be bowed inward. E. production possibilities frontier will shift inwards.

A

Most of the world's population lives in A. developing economies. B. island nations. C. transition economies. D. emerging market economies. E. advanced economies.

A

The above figures show the market for HD televisions. If people's incomes increase and HD televisions are a normal good, which figure shows the effect of this change? A. Figure A B. Figure B C. Figure C D. Figure D E. None of the figures represent this change.

A

When the demand curve shifts rightward and the market moves to a new equilibrium, then the A. quantity supplied increases. B. supply increases. C. price falls to restore the equilibrium. D. supply decreases. E. quantity supplied decreases.

A

When one person (or nation) is more productive than another—needs fewer inputs or takes less time to produce a good or perform a production task.

Absolute advantage

A rational choice is one that A. is made in the social interest rather than the self-interest. B. uses the available resources to most effectively satisfy the wants of the person making the choice. C. must be made with perfect information D. always turns out for the best for the decision maker. E. creates no costs for the decision maker.

B

A time series graph A. depicts a series of good economic times a nation had. B. shows how a certain variable changes over time. C. uses bars rather than lines. D. is not useful if the goal is to determine a variable's trend. E. shows points that are scattered.

B

If the demand for a good increases when people's incomes increase, A. the good is an inferior good. B. the good is a normal good. C. the good is a substitute good for an inferior good. D. the good's demand curve must be slope upward. E. the law of demand is violated.

B

In the factor market, firms ________ and households ________. A. purchase goods and services; supply goods and services B. pay rent, wages, interest, and profit; earn rent, wages, interest, and profit C. hire land, labor, capital, and entrepreneurship services; purchase goods and services D. supply land, labor, capital, and entrepreneurship services; hire land, labor, capital, and entrepreneurship services E. supply goods and services; purchase goods and services

B

The above figure shows the production possibility frontier for an economy. The point or points that are attainable and production efficient are A. points B and C. B. points A, B, and C. C. point E. D. points A, B, C, and D. E. points A and D.

B

What determines the revenue flows received by businesses? A. their ownership of factors of production, how much they sell in the factor markets, and the prices received when sold B. what they choose to produce, how much is sold, and the price received when sold C. what they pay the factors of production they employ D. an agency of the Federal government E. financial institutions such as banks

B

Which of the following is the best definition of economic growth? A. the opportunity cost of capital B. the sustained expansion of production possibilities C. the investment in capital and consumption goods by an economy D. increased development of land and entrepreneurship E. the opportunity cost of consumption

B

The benefit of something is the gain or pleasure that it brings, measured by what you are willing to give up to get it.

Benefit

Changes in which of the following factors do NOT shift the demand curve? A. the number of buyers B. the price expected in the future C. the price of the good D. the price of a substitute good E. buyers' incomes

C

Comparative advantage is most closely related to which of the following concepts? A. competition B. efficiency C. opportunity cost D. productivity E. fairness

C

Consider a production possibility frontier with jeans on the vertical axis and shoes on the horizontal axis. As the country moves along the frontier closer to the horizontal axis, A. free lunches occur. B. the country eventually chooses an unattainable point. C. more shoes are produced. D. more tradeoffs occur. E. more jeans are produced.

C

If there is no scarcity, A. all marginal benefits would equal zero. B. choices are no longer rational. C. an action would have zero opportunity cost. D. marginal cost of an action is greater than its marginal benefit. E. the opportunity cost of an action would be greater than its sunk cost.

C

In order for Ireland to grow more potatoes, wool production must decrease. This situation is an example of A. a free lunch. B. opportunity benefit. C. a tradeoff. D. producing at a point that lies beyond the PPF. E. zero opportunity cost.

C

Payments to the factors of production are A. rent, wages, profit or loss, and bonus. B. rent, mortgage, interest, and bonds. C. rent, wages, interest, and profit or loss. D. rent, interest, bonds, and profit or loss. E. land, labor, capital, and entrepreneurship.

C

The concept of human capital describes A. the number of machines (capital) that have been produced by people (humans). B. the number of machines per employed worker. C. human skills, that is, the quality of labor. D. human population, that is, the quantity of labor. E. the number of workers per operating machine.

C

The opportunity cost of economic growth is A. the increase in the nation's capital stock and/or its technology. B. a slower accumulation of human capital. C. the decrease in the current production of consumption goods. D. 0, because it means an expansion of production possibilities. E. the decrease in the current production of productive factors.

C

When you make the decision to spend your time attending class, which economic question are you answering? A. For whom? B. Is this in the social interest? C. What? D. Why? E. How?

C

Which figure above shows the effect of a decrease in the number of pizza sellers? A. Figure A B. Figure B C. Figure C D. Figure D E. Both Figure B and Figure C

C

Which of the following shifts the demand curve for movies rightward? A. an increase in movie star salaries B. an increase in the price of HDTV sets C. an increase in the price of NetFlix, a substitute for movies D. an increase in the price of movie tickets E. a decrease in the price of move tickets

C.

Tools, instruments, machines, buildings, and other items that have been produced in the past and that businesses now use to produce goods and services.

Capital

Goods bought by businesses and governments to increase productive resources and to use over future periods to produce other goods and services.

Capital goods

A change in the quantity that people plan to buy when any influence on buying plans other than the price of the good changes.

Change in demand

A change in the quantity of a good that people plan to buy that results from a change in the price of the good with all other influences on buying plans remaining the same.

Change in the quantity demanded

A model of the economy that shows the circular flow of expenditures and incomes that result from decision makers' choices and the way those choices interact to determine what, how, and for whom goods and services are produced.

Circular flow model

A good that is consumed with another good

Complement

Goods and services that individuals and governments buy and use in the current period.

Consumption goods and services.

A graph that shows the values of an economic variable for different groups in a population at a point in time.

Cross-section graph

A demand curve A. has an upward slope. B. has a downward slope. C. is a graph of the relationship between quantity demanded of a good and its price. D. Both answers B and C are correct. E. Both answers A and C are correct.

D

A graph shows the price of a pound of cucumbers on the vertical axis and the quantity of new cars sold by Honda on the horizontal axis. The price of a pound of cucumbers remains constant as the quantity of new cars sold increases. The graph of these data is a A. curve with a maximum. B. vertical line. C. positively sloped line. D. horizontal line. E. negatively sloped line

D

The decisions of firms and households are A. unexplainable by the circular flow model. B. coordinated by but not totally controlled by the government. C.made independently of one another. D. coordinated by markets. E. controlled by but not totally coordinated by the government.

D

The marginal cost of an activity________as you do more of it. A. changes ONLY IF the marginal benefit of the activity changes. B. doesn't change C. changes ONLY IF the marginal benefit of the activity does not change D. increases E. decreases

D

The primary focus of microeconomics is A. to study how we managed to eliminate scarcity. B. the levels of employment and inflation C. to examine the operation of the entire (aggregate) economy. D. to examine the behavior and operation of the individual units or sectors that make up the economy. E. our government's monetary policy,

D

The table above shows a nation's production possibilities frontier. If the nation wants to produce 4 robots and 34 pizzas, A. it will shift the production possibilities frontier. B. the nation will then be producing at a production efficient point. C. the nation will be producing inefficiently. D. it will be unable to do so because the production point is unattainable. E. the opportunity cost is 9 pizzas.

D

The total amount the federal government has borrowed to make expenditures that exceed tax revenue is called A. the net government revenue. B. personal income taxes. C. federal expenditures. D. the national debt. E. total government spending.

D

When the total U.S. production of goods and services is divided into consumption goods and services, capital goods, government goods and services, and export goods and services, the largest component is A. government goods and services. B. capital goods C. export goods and services. D. consumption goods and services. E. capital goods and government goods and services tie for the largest component.

D

Whenever people's incomes increase, they buy more guitars. Hence a scatter diagram shows that the relationship between income and guitars purchased is A. a negative relationship. B. some sort of relationship, but whether it is positive or negative depends on whether income is plotted on the vertical or horizontal axis. C. a U-shaped relationship. D. a positive relationship. E. a linear relationship

D

Which of the following is an example of a normative statement? A. If cars become more expensive, fewer people will buy them. B. Cars emit pollution. C. Fewer people die in larger cars than in smaller cars. D. Car prices should be affordable. E. If wages increase, firms will fire some workers.

D

The relationship between the quantity demanded and the price of a good when all other influences on buying plans remain the same

Demand

A graph of the relationship between the quantity demanded of a good and its price when all the other influences on buying plans remain the same.

Demand curve

A list of the quantities demanded at each price when all the other influences on buying plans remain the same.

Demand schedule

The relationship between the quantity demanded and the price of a good when all other influences on buying plans remain the same.

Demanded

A demand schedule A. is a graph showing a relationship between the quantity demanded and the price of a good. B. shows how the demand changes when the supply changes. C. shows that demand is on schedule. D. shows the quantity demanded at one price. E. is a list of the quantities demanded at each different price when all other influences on buying plans remain the same.

E

Deb and Pete have volunteered to help their favorite charity mail out fundraiser information. The figure above shows their production possibilities frontiers for assembling packets and stuffing envelopes. What is Deb's opportunity cost of assembling 1 packet? A. 160 envelopes B. 1/4 of an envelope C. 40 envelopes D. 4 packets E. 4 envelopes

E

If there is a surplus of tacos, then the A. quantity of tacos demanded is greater than the quantity of tacos supplied. B. quantity of tacos demanded equals the quantity of tacos supplied. C. market is at equilibrium. D. supply curve of tacos will shift leftward to eliminate the surplus. E. quantity of tacos demanded is less than the quantity of tacos supplied.

E

In examining two variables, we find that as one variable changes, the other changes. These variables are said to be A. independent. B. casually related. C. statistics. D. significantly related. E. correlated

E

Market demand curves are obtained by A. determining the price each consumer is willing to pay for the good and summing those prices across all consumers. B. averaging the quantities every consumer is willing to buy at each different price. C. observing the prices and quantities sold in a market over time and plotting those price-quantity combinations in a graph. D. observing the behavior of an individual consumer in a market. E. summing the quantities every consumer is willing to buy at each different price.

E

The emerging market economies are A. the nations with the highest standards of living. B. the largest grouping including the nations of China and India. C. most of the nations of Western Europe. D. the nations that are currently agricultural in nature. E. in transition from state-owned production to free markets.

E

The sustained expansion of production possibilities.

Economic growth

A description of the economy or a part of the economy that includes those features assumed necessary to explain the observed facts.

Economic model

The social science that studies choices that individuals, businesses, and governments make as they cope with scarcity, all the things that influence those choices, and the arrangements that coordinate them.

Economics

The human resource that organizes labor, land, and capital to produce goods and services.

Entrepreneurship

Markets in which the services of factors of production are bought and sold.

Factor markets

The productive resources that are used to produce goods and services-land-labor; capital, and entrepreneurship

Factors of production

The institutions that organize the production of goods and services.

Firms

The objects (goods) and the actions (services) that people value and produce to satisfy human wants.

Goods and Services

Markets in which goods and services are bought and sold

Goods markets

Individuals or groups of people living together.

Households

The knowledge and skill that people obtain from education, on-the-job training, and work experience.

Human capital

A reward or a penalty-a "carrot" or a "stick"-that encourages or discourages an action.

Incentive

A good for which the demand decreases as income increases and demand decreases as income increases

Inferior good

Income paid for the use of capital

Interest

The work time and work effort that people devote to producing goods and services.

Labor

The "gifts of nature," or natural resources, that we use to produce goods and services.

Land

Other things remaining the same, if the price of a good rises, the quantity demanded of that good decreases; and if the price of a good falls, the quantity demanded of that good increases.

Law of Demand

A relationship that graphs as a straight line.

Linear relationship

The study of the aggregate (or total) effects on the national and the global economy of the choices that individuals, businesses, and governments make.

Macroeconomics

A choice on the margin is a choice that is made by comparing all the relevant alternatives systematically and incrementally.

Margin

The opportunity cost that arises from a one-unit increase in an activity. The marginal cost of something is what you must give up to get one additional unit of it.

Marginal Cost

The benefit that arises from a one-unit increase in an activity. The marginal benefit of of something is measured by what you are willing to give up to get one additional unit of it.

Marginal benefit

Any arrangement that brings buyers and sellers together and enables them to get information and do business with each other.

Market

The study of the choices that individuals and businesses make and the way these choices interact and are influenced by governments.

Microeconomics

A relationship between two variables that move in opposite directions.

Negative or inverse relationship

A good for which the demand increases as when income increases and demand decreases as income decreases

Normal good

The opportunity cost of something is the best thing you must give up to get it.

Opportunity cost

A relationship between two variables that move in the same direction

Positive or direct relationship

A situation in which the economy is getting all that it can from its resources and cannot produce more of one good or service without producing less of something else.

Production efficiency

The boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced, given the available factors of production and the state of technology.

Production possibilities frontier

Income earned by an entrepreneur for running a business

Profit (or loss)

A choice that uses the available resources to best achieve the objective of the person making the choice.

Rational choice

Income paid for the use of land

Rent

The condition that arises because wants exceed the ability of resources to satisfy them

Scarcity

A graph of the value of one variable against the value of another variable.

Scatter diagram

The choices that are best for the individual who makes them.

Self-interest

The change in value of the variable measured on the y-axis divided by the change in the value of the variable measured on the x-axis.(2/-1)

Slope

The choices that are best for society as a whole.

Social interest

a good that can be consumed in place of another good

Substitute

Advanced economies; Emerging market and developing economies

The economies

A graph that measures time on the x-axis and the variable or variables in which we are interested on the y-axis.

Time-series graph

An exchange—giving up one thing to get something else.

Tradeoff

A general tendency for the value of a variable to rise or fall over time.

Trend

Income paid for the services of labor

Wages

The ability of a person to perform an activity or produce a good or service at a lower opportunity cost than anyone else.

comparative advantage

The amount of any good, service, or resource that people are willing and able to buy during a specified period at a specified price.

quantity demanded