ECON 201: Exam 1 Aplia
Hans can do 4 loads of laundry per hour, and he can type 6 pages per hour. Maria can do 12 loads of laundry per hour, and she can type 8 pages per hour. Hans and Maria would both be better off if: a. Hans specialized in typing and Maria in doing laundry, trading with each other for the other service. b. Hans did all of the typing and all of the laundry. c. each did their own laundry and typing. d. Maria did all of the typing and all of the laundry. e. Hans specialized in doing laundry and Maria in typing, trading with each other for the other service.
a
Identify a statement that is true about a linear demand curve. a. Along a linear demand curve, the slope is constant, but the price elasticity varies. b. Along a linear demand curve, total revenues are constant. c. Along a linear demand curve, both the slope and price elasticity are constant. d. Along a linear demand curve, the price elasticity is constant, but the slope varies. e. Along a linear demand curve, total revenues are negative.
a
If Monica has a comparative advantage in baking and George has a comparative advantage in sewing, then: a. we can conclude nothing about absolute advantage. b. George must have an absolute advantage in baking. c. George must have an absolute advantage in sewing. d. Monica must have an absolute advantage in sewing. e. Monica must have an absolute advantage in baking.
a
If the cross-price elasticity of demand between Good x and Good y is 0.4, then: a. a 10 percent decrease in the price of good y leads to a 4 percent decrease in the demand for good y. b. the demand for good x is highly responsive to changes in the price of good y. c. good x is a normal good and good y is an inferior good. d. a 10 percent increase in the price of good y leads to a 0.4 percent increase in the quantity demanded of good x. e. good x and good y are complements.
a
"An increase in the price of a product causes consumers to purchase more of that product" is an example of a positive economic statement. a. True b. False
a
A 5 percent increase in income leads to a 10 percent increase in the quantity demanded for a service. This service is a(n) _____ good, and the demand is _____. a. normal; elastic b. inferior; inelastic c. normal; unit elastic d. normal; inelastic e. inferior; elastic
a
A perfectly elastic demand curve is: a. a horizontal straight line. b. an upward-sloping straight line. c. a downward-sloping straight line. d. u-shaped. e. a vertical straight line.
a
A point outside the production possibilities frontier: a. cannot be reached using the available technology. b. represents unemployment of resources. c. would not represent an efficient combination of goods. d. is less desirable than one that lies inside the frontier. e. represents full employment of resources.
a
A tax is said to be progressive if: a. the proportion of income paid as taxes increases as income increases. b. the proceeds are used to pay for liberal political programs. c. the absolute size of the tax (in dollars) increases as income increases. d. the average tax rate falls as income rises. e. the wealthy pay a smaller percentage of their income than the poor.
a
A university administration's decision to raise tuition in order to increase revenue will be successful if: a. demand is inelastic. b. the demand curve slopes downward. c. supply is inelastic d. supply is elastic. e. demand is elastic.
a
Along a linear demand curve, as the price increases from zero: a. total revenue first increases but eventually decreases. b. quantity demanded increases. c. demand decreases. d. total revenue first decreases but eventually increases. e. demand increases.
a
As price decreases along a linear demand curve, the price elasticity of demand decreases. a. True b. False
a
Economic decision makers will continue to acquire information only as long as the expected additional benefit exceeds the expected additional cost of the information. a. True b. False
a
Economics is the only social science and the only business discipline for which the Nobel Prize is awarded. a. True b. False
a
If the price elasticity of demand is −0.5, then a: a. 1 percent decrease in price leads to a 0.5 percent increase in quantity demanded. b. 50 percent decrease in price leads to a 1 percent increase in quantity demanded. c. 50 percent decrease in quantity demanded leads to a 1 percent decrease in price. d. 1 percent decrease in quantity demanded leads to a 0.5 percent decrease in price. e. 50 percent decrease in price leads to a 100 percent increase in quantity demanded.
a
If the price of Pepsi-Cola increases from 40 cents to 50 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the value of the price elasticity of demand for Pepsi-Cola is: a. −3. b. −2. c. −0.25. d. −1. e. −0.5.
a
If the price of potato chips increases, other things constant, demand for potato chip dip will: a. decrease because the goods are complements. b. decrease because the goods are substitutes. c. decrease because potato chip is an inferior good. d. increase because the goods are complements. e. increase because the goods are substitutes.
a
In a circular-flow model, households supply all of the following except: a. goods and services. b. labor. c. entrepreneurial ability. d. natural resources. e. capital.
a
Jennifer expects the price of CDs to go up by 10 percent next week. Which of these is most likely to result from such an expectation? a. Jennifer's demand for CDs will increase during this week. b. Jennifer's demand for CD players will increase during the following week. c. Jennifer's demand for CDs will increase during the following week. d. Jennifer's demand for CD players will decrease during this week. e. Jennifer's demand for CDs will decrease during this week.
a
25. Chapter mc1mc11r, Section .04, Problem 083 The table given below shows the quantity supplied and the quantity demanded for a good at different prices. If the price of the good described in the table given below is $1.60, then there is a: a. shortage of 30 units. b. surplus of 30 units. c. surplus of 10 units. d. shortage of 20 units. e. surplus of 20 units.
b
A normative economic statement: a. is a statement of fact. b. is a statement of what ought to be, not what is. c. indicates what will occur if certain assumptions are true. d. enables economists to test hypotheses. e. is a hypothesis used to test economic theory.
b
Which of the following is an example of a normative economic statement? a. Incomes increase when national production increases. b. Women should earn the same income as men. c. The more time you spend studying for chemistry, the higher your economics test score will be. d. When the price of a good rises, people will buy more of it. e. The more time you spend studying, the higher your economics test scores will be.
b
A tariff is: a. a legal limit on quantities of goods that can be imported. b. a tax on imports. c. a subsidy for exports. d. a voluntary limit on quantities of goods that can be imported. e. a quality restriction on imports.
b
Along a bowed-out production possibilities frontier, as more of one good is produced, _____. a. the opportunity cost of producing both goods must remain constant b. technology remains constant c. the opportunity cost of producing that good decreases d. efficiency decreases e. the opportunity cost of producing that good remains constant
b
As consumers have a longer time period to respond, the demand for a product typically becomes more inelastic. a. True b. False
b
Barter occurs when: a. goods are used to buy money. b. one product is exchanged directly for another product. c. money is used to buy goods. d. two people share everything. e. money is exchanged directly for other money.
b
College graduates with history or literature as their major tend to earn more than those who choose more quantitative disciplines like economics. a. True b. False
b
Demand is more elastic: a. for necessities than for luxuries. b. for goods with many substitutes than for goods with only a few. c. for goods with no substitutes. d. for broadly defined goods than for narrowly defined ones. e. in the short run than in the long run.
b
Figure 5.1 shows the demand curve for a firm. In the figure below, the total revenue at point a is _____. a. $4 b. $50 c. $5 d. $10 e. $100
b
Figure 5.10 shows two upward-sloping linear supply curves that pass through the origin. The price elasticity of supply between $10 and $20 on the supply curve S is _____. a. infinity b. 1 c. 2 d. 10 e. 0
b
Figure 5.5 shows the total revenue curve for a firm. Which of the following statements is true at a quantity of 10? a. Demand is inelastic. b. Demand is unit elastic. c. Demand is elastic. d. Demand is perfectly inelastic. e. Demand is perfectly elastic.
b
If an increase in price from $1.20 to $2 per unit leads to an increase in quantity supplied from 20 to 100 units, then: a. supply is inelastic. b. supply is elastic. c. supply is perfectly inelastic. d. supply is perfectly elastic. e. supply is unit elastic.
b
A good that takes up a very large percentage of a consumer's budget will tend to have: a. a perfectly elastic demand. b. an inelastic demand. c. an elastic demand. d. an upward-sloping demand curve. e. many close substitutes.
c
Figure 5.3 shows a linear demand curve. Between points A and B, the demand is: a. unitary. b. inelastic. c. elastic. d. perfectly inelastic. e. perfectly elastic.
c
If a firm facing a perfectly elastic demand curve raises its price, then: a. it will lose its market share. b. its sales will increase. c. its sales will fall to zero. d. it will lose some, but not all, of its sales. e. it will still sell exactly the same amount of output as it did at the lower price.
c
If an increase in the price of peanut butter causes a decline in the demand for jelly, then: a. both goods are necessities. b. the goods are substitutes. c. the goods are complements. d. peanut butter is an inferior good. e. jelly is an inferior good.
c
If the cross-price elasticity of demand is −3, then: a. one of the two goods is an inferior good b. the goods are unrelated. c. the goods are complements. d. one of the two goods is a luxury. e. the goods are substitutes
c
Table 5.6 shows the change in the quantity demanded for Good A and Good B as a result of a change in income. Use the information in the table below to calculate the value of the income elasticity of demand for Good A. Table 5.6 Quantity Income Good A 100 $1,000 120 $2,000 Good B . 200 . $20 140 . $35 a. 2/9 b. 1 c. 3/11 d. 9/2 e. 11/3
c
The market supply curve of a particular product indicates the total quantities: a. of complements offered for sale. b. that buyers are willing to purchase at alternative prices. c. that sellers are willing and able to offer at alternative prices. d. that are actually sold during a given time period. e. that sellers are willing to offer for sale at a fixed price
c
The price elasticity of demand for milk when quantity is measured in gallons will be _____ the price elasticity when quantity is measured in quarts. a. less than b. four times c. the same as d. two times e. one-fourth of
c
When drawing a production possibilities frontier for two goods, all of the following are usually assumed except one. Which is the exception? a. Resources can be shifted from the production of one good to the other. b. The production possibilities frontier is drawn for a particular time period. c. The quantity of resources is rapidly growing. d. Resources are fully and efficiently employed. e. Technology is fixed.
c
Which of the following is not a gain from division of labor? a. Workers' abilities are matched to tasks. b. The introduction of labor-saving machinery is possible. c. Workers' morale increases as tasks become more specialized. d. Workers gain experience from the repetition of the tasks. e. Workers save time by not moving to different tasks.
c
Consumers need information to make good choices. In the context of this information, which of the following is correct? a. Brand names offer no informational content. b. Advertising is always harmful to consumers. c. Marginal analysis does not apply to the acquisition of information. d. Information is scarce and therefore valuable. e. Acquiring more information is always rational.
d
Economic theory: a. expresses normative values. b. invents imaginative and interesting stories. c. predicts the behavior of a specific economic decision maker after an economic change. d. predicts the average behavior of a group of similar economic decision makers after an economic change. e. uses only perfect and complete information.
d
The figure below shows the production possibilities frontier for Good A and Good B. In the figure below, given the quantity of resources and level of technology, which of the following points is unattainable? a. b. b. g. c. i. d. e. e. h.
d
24. Chapter mc1mc11r, Section .05, Problem 111 For which of the following goods is the value of income elasticity most likely to be negative? a. Airline tickets. b. Toothpaste. c. Clothes. d. Champagne. e. Macaroni and cheese.
e
Sunk costs: a. can only be measured in monetary terms. b. lower the efficiency of production. c. are opportunity costs. d. should influence a person's choice if that person is a marginal decision maker. e. should not be considered when making economic decisions.
e
Which of the following is the category to which the largest portion of households' personal income is allocated? a. Purchases of nondurable goods b. Taxes collected by government c. Purchases of durable goods d. Savings e. Purchases of service
e
Consider a market for coffee that is initially in equilibrium. If tea harvest is bad in a particular year, then identify the most likely impact on the equilibrium price and quantity of coffee. a. The price of coffee will decrease while the quantity of coffee will increase. b. Both the price and the quantity of coffee will decrease. c. The price of coffee will increase, while the quantity of coffee will decrease. d. There will be no impact on the equilibrium price and quantity of coffee. e. Both the price and the quantity of coffee will increase.
e
Consider the market for a good that is initially in equilibrium. For a given upward-sloping supply curve, an increase in demand will typically: a. increase quantity but price could change in either direction. b. increase price but quantity could change in either direction. c. increase price but leave quantity unchanged. d. decrease both quantity and price. e. increase both quantity and price.
e
Figure 5.3 shows a linear demand curve. Between points C and D, the demand is: a. perfectly elastic. b. elastic. c. perfectly inelastic. d. unitary. e. inelastic.
e
If a firm raises the price of its product, its total revenue will: a. increase only if demand is price elastic. b. always increase. c. remain constant regardless of the price elasticity of demand. d. never increase. e. increase only if demand is price inelastic.
e
If you enjoy playing golf, the opportunity cost of cleaning your room: a. is smaller on sunny days than it is on rainy days. b. is the same on sunny days as it is on rainy days. c. is equal to the opportunity cost of any other chore you have to do that day. d. does not change with weather conditions. e. is greater on sunny days than it is on rainy days.
e
In the figure given below, a price floor set at $20.00 will: a. increase the equilibrium price. b. reduce the equilibrium quantity. c. lead to a surplus of 20 units. d. lead to a surplus of 10 units. e. have no impact on the equilibrium price and quantity.
e
Sugar and honey are viewed as substitutes for each other in many cooking applications. If the price of sugar rises, we would expect: a. the demand for honey to increase. b. the quantity demanded of honey to decrease. c. the price of honey to decrease. d. the demand for honey to decrease. e. the quantity demanded of honey to increase.
a
Which form of business organization is the most common in the United States? a. Sole proprietorship b. Partnership c. S corporation d. Corporation e. Nonprofit organization
a
As resources are not perfectly adaptable to the production of both Good A and Good B, _____. a. the opportunity cost of Good A increases as the production of Good A increases. b. the opportunity cost of Good B is constant. c. the opportunity cost of Good A decreases as the production of Good A increases. d. it is impossible for the economy to produce both Good A and Good B. e. the opportunity cost of Good A is constant.
a
Economics is best defined as the study of how: a. individuals decide to use scarce resources in an attempt to satisfy their unlimited wants. b. to run a business. c. the government should deal with unemployment and inflation. d. to eliminate the problem of scarce resources. e. individuals can make money.
a
Goods and services are exchanged in: a. product markets. b. inventory markets. c. classified markets. d. resource markets. e. government markets.
a
If Good B is a complement to Good A, then a decrease in the price of Good B: a. increases the demand for Good A. b. will cause the demand for Good B to increase. c. decreases the demand for Good A. d. increases the quantity demanded of Good A. e. decreases the quantity demanded of Good A.
a
If Helen can paint one room in the time it takes her to bake 40 cakes and Josh can paint one room in the time it takes him to bake 60 cakes, Helen's opportunity cost of baking one cake is: a. painting 1/40 of a room. b. painting 2/3 of a room. c. painting 1/60 of a room. d. painting 3/2 of a room. e. painting one room.
a
If a 5 percent increase in price leads to an 8 percent decrease in quantity demanded, demand is: a. elastic. b. inelastic. c. perfectly elastic. d. perfectly inelastic. e. unit elastic.
a
On a given production possibilities frontier, which of the following is not assumed to be fixed? a. Production of each item b. The amount of capital available c. The level of technology d. The amount of land and natural resources available e. The amount of labor available
a
Rent is the payment received by resource owners for the use of their natural resources. a. True b. False
a
The assumption of rational self-interest does not rule out the possibility of concern for other individuals. a. True b. False
a
The assumption that individuals act rationally implies that: a. people implicitly calculate the costs and benefits of an activity to decide if it is worthwhile. b. the greater the cost of a charitable deed to a benefactor, the more likely he or she is to perform that deed. c. people only consider the costs of an activity to decide whether it is worthwhile. d. people undertake all those activities that yield benefits to themselves. e. people think only of themselves and disregard the well-being of others.
a
The figure below shows the production possibilities frontier for Good A and Good B. In the figure below, which of the following points represents an inefficient use of the economy's resources? a. f. b. h. c. e. d. i. e. d.
a
Hans can do 4 loads of laundry per hour, and he can type 6 pages per hour. Maria can do 12 loads of laundry per hour, and she can type 8 pages per hour. Maria's opportunity cost of typing one page is: a. 6 loads of laundry. b. 3/2 of a load of laundry. c. 2/3 of a load of laundry. d. 4 loads of laundry. e. impossible to compute without additional information.
b
In economics, money is an example of capital. a. True b. False
b
Opportunity cost is defined as the: a. value of all alternatives not chosen. b. value of the best alternative not chosen. c. dollar cost of what is purchased. d. difference between the benefits from a choice and the benefits from the next best alternative. e. difference between the benefits from a choice and the costs of that choice.
b
To say that people make decisions at the margin means that: a. if given a choice, most people would prefer to make their own decisions concerning the things that affect their lives. b. they weigh the additional costs and the additional benefits of various activities before they make a decision. c. they usually wait until the last minute before making a decision to buy. d. most people just barely get by on the incomes they earn and live from day-to-day on the very edge of subsistence. e. they consider the total cost and the total benefit of various activities before they make a purchase.
b
Consider a system in which a person earning $10,000 pays $1,000 in taxes, a person earning $25,000 pays $2,000, and someone earning $60,000 pays $4,000. This is an example of: a. proportional taxation. b. regressive taxation. c. progressive taxation. d. a tax based on the benefits-principle of taxation. e. a property tax.
b
If the production possibilities frontier is a straight line, _____. a. resources must not be used efficiently b. resources must be equally adaptable at producing either product c. resources must be unemployed d. society must not be using the latest technology e. its slope will equal −1
b
It is always rational to acquire more information before making a decision. a. True b. False
b
Profit is the payment received by resource owners for the use of their capital. a. True b. False
b
Suppose you have purchased a nonrefundable plane ticket and, at the last moment, cannot take the trip. You can, however, sell the ticket. If you paid $700 for the ticket, the cost of sending the ticket to someone through overnight mail is $20, and you spend $10 on a courier to get the ticket to the post office for overnight delivery, what is the minimum you should accept for the ticket? a. $720 because that is the cost of the ticket and of getting it to the buyer b. $30 because the $700 is a sunk cost c. $700 because that is what the ticket cost d. More than $730, so that you can make a profit e. $730 because that is the total cost of the ticket and getting it to the buyer
b
The figure given below shows the production possibilities frontier for education and food. In The opportunity cost of moving from point c to point b is _____. a. 12 units of education b. 22 units of education c. 3 units of food d. 62 units of education e. 1 unit of food
b
The law of comparative advantage says that a person should produce a good if he or she: a. is equally good at producing this good as someone else is. b. has the lowest opportunity cost of producing that good. c. has a comparative advantage in a related activity. d. has the greatest desire to consume that good. e. has an absolute advantage in a related activity.
b
The law of comparative advantage says that: a. comparative advantage exists only when one person has an absolute advantage in the production of two goods. b. the individual with the lowest opportunity cost of producing a particular good should produce it. c. gains from trade are possible only when one person has a comparative advantage in producing both goods. d. whoever has an absolute advantage in producing a good also has a comparative advantage in producing that good. e. whoever has a comparative advantage in producing a good also has an absolute advantage in producing that good.
b
The payments in return for labor and capital are _____, respectively. a. rent and wages b. wages and interest c. interest and profit d. profit and wages e. profit and rent
b
What is the effect of a decrease in the price of potato chips on the market for pretzels, a substitute good, that is initially in equilibrium? a. Equilibrium price will increase and equilibrium quantity of pretzels will fall. b. Both equilibrium price and equilibrium quantity of pretzels will fall. c. Equilibrium price and equilibrium quantity of pretzels remain unchanged. d. Both equilibrium price and equilibrium quantity of pretzels will increase. e. Equilibrium price will fall and equilibrium quantity of pretzels will increase.
b
When quantity demanded of a good exceeds the quantity supplied at the prevailing market price, _____. a. the price of the good will decrease b. the price of the good will tend to increase c. the demand curve shifts rightward until the surplus is eliminated d. the market is in equilibrium e. the supply curve shifts leftward until the surplus is eliminated
b
Which of the following broad categories are resources divided into? a. Free, scarce, abundant, and unlimited b. Natural resources, labor, capital, and entrepreneurial ability c. People, money, and machines d. Human, technological, and government e. Savings, spending, investment, and capital
b
Which of the following is a reason why government is a participant in a market-oriented economy? a. To provide more inequality in the distribution of income b. To enforce contracts and protect private property c. To promote externalities d. To promote collusion e. To promote the growth of natural monopolies
b
If Sam can chop up more carrots per minute than Joe can, then: a. Sam must have a comparative advantage in carrot chopping. b. Joe must have a comparative advantage in carrot chopping. c. Sam has an absolute advantage in carrot chopping. d. Joe has an absolute advantage in carrot chopping. e. we can conclude nothing about absolute advantage.
c
In economics, the term marginal usually refers to: a. a low-quality product or resource. b. an unimportant and irrelevant economic variable. c. a small change in an economic variable. d. a footnote or minor point. e. an all-or-nothing economic decision.
c
Suppose you have a choice of working full-time during the summer or going full-time to summer school. Summer tuition and books are $2,200. If you worked, you could make $7,000. Your rent is $1,000 for the summer, regardless of your choice. If these are the only relevant costs to consider, the opportunity cost of going to summer school is: a. $7,000. b. $8,000. c. $9,200. d. $10,200. e. $2,200.
c
Which of the following is a disadvantage of a corporation compared to a sole proprietorship? a. Difficulty raising start-up money b. Vulnerability in the case of the death of an owner c. Double taxation of corporate income d. Lack of profitability e. Limited liability
c
Which of the following is an example of a positive economic statement? a. Workers with families should be paid at least the minimum wage. b. If crime rates reduced, the world would be a better place to live in. c. An increase in the price of gasoline will cause a reduction in the amount of gasoline purchased. d. Corrupt politicians ought to be voted out of office. e. Marginal tax rates should be reduced for individuals in the highest tax bracket.
c
A resource is something that: a. exists in unlimited quantities. b. is provided by nature, not produced by society. c. is used to produce goods and services. d. is always available free of cost. e. must be produced by a firm.
c
Which of the following is the best example of substitute goods? a. Coffee and cream b. Money and biscuits c. Tortillas and salsa d. Videotapes and VCRs e. Powdered and liquid laundry detergent
e
Consider the market for a good that is initially in equilibrium. Which of these is most likely to occur if both demand and supply for this good increases during a particular point in time? a. Equilibrium quantity will decrease b. Equilibrium price will increase c. Equilibrium quantity will increase d. Both equilibrium price and equilibrium quantity will decrease e. Equilibrium price will decrease
c
Figure 4.3 shows the supply curves for baby formula. In the figure given below, the development of more efficient production technologies for baby formula is likely to cause which of the following changes? a. A leftward shift of the supply curve from S2 to S1 b. A movement from point a to point b on the supply curve S1 c. A rightward shift of the supply curve from S1 to S2 d. A movement from point c to point d on the supply curve S2 e. A movement from point b to point a on the supply curve S1
c
If Daniel produces one pair of shoes in 4 hours and Sarah produces one pair of shoes in 3 hours, then: a. Sarah has a comparative advantage in shoemaking. b. Daniel has an absolute and a comparative advantage in shoemaking. c. Sarah has an absolute advantage in shoemaking. d. Sarah has an absolute and a comparative advantage in shoemaking. e. Daniel has a comparative advantage in shoemaking.
c
If a business produces and sells only one unit of a good, its profit would be the: a. return paid to the firm's bank on its outstanding loans. b. price of the product minus the wages paid for the labor used to produce it. c. price of the product minus the cost of the resources used to produce the product. d. wages paid for the labor used to produce the product minus the price. e. price received for the good.
c
If corn and soybean are alternative crops grown by most farmers, an increase in the price of corn is likely to: a. increase the supply of soybeans. b. decrease the supply of corn. c. decrease the supply of soybeans. d. increase the supply of corn. e. decrease the demand for soybeans.
c
Table 5.4 shows the price and quantity combinations for a product. The demand for the good is _____, and an increase in the price of the product from $40 to $60 per unit will _____ total revenue. Table 5.4 Quantity Price Old 20 $40 New 10 $60 a. unit elastic; increase b. unit elastic; not change c. elastic; decrease d. inelastic; increase e. elastic; decrease
c
The figure below shows the production possibilities frontier for Good A and Good B. In the figure below, if all the economy's resources are used efficiently to produce only good B, then the economy will be at point: a. e. b. h. c. g. d. i. e. b.
c
The following figure shows the demand curves for baby formula. Which of the following changes is likely to happen if the price of baby formula increases? a. A movement along demand curve D1 from point a to point b b. A shift in the demand curve from D1 to D2 c. A movement along the demand curve D2 from point d to point c d. A shift in the demand curve from D2 to D1 e. A movement from point b on the demand curve D1 to point c on the demand curve D2
c
Which of the following would an economist classify as physical capital? a. A credit card b. 100 shares of Microsoft stock c. A lawyer's laptop d. A bauxite mine in Jamaica e. A $50 bill
c
Points inside the production possibilities frontier represent: a. currently unattainable combinations of outputs. b. currently unattainable combinations of resources. c. full and efficient use of all resources. d. inefficiency or unemployment. e. the most desirable combinations of outputs.
d
Which of the following would most likely increase the supply of college textbooks? a. Exodus of five major publishers from the industry b. An increase in the cost of paper used in books c. Expectation of a price rise in the future d. An increase in the wage rate of workers associated with printing e. An improvement in the technology used in book production
e
A rational decision maker will take only those actions for which the expected marginal benefit: a. is positive. b. exactly equals the expected marginal cost. c. is at its maximum level. d. is greater than or equal to the expected marginal cost. e. is less than the expected marginal cost.
d
One might commit the fallacy of composition by concluding that: a. an event that precedes another is necessarily the cause of the latter. b. statements that are true during prosperity are necessarily true during depression. c. intentions need not coincide with actions. d. what is good for the individual is necessarily good for the group. e. the composition of a complex product is not revealed by its exterior appearance.
d
Don can produce 10 pens or 20 pencils in one hour while Bob can produce 5 pencils or 15 pens in one hour. Which of the following statements is correct? a. Don does not have a comparative advantage in the production of either good. b. Bob has a comparative advantage over Don in the production of pencils. c. Don has a comparative advantage over Bob in the production of pens. d. Bob has an absolute advantage over Don in the production of pens. e. Bob has an absolute advantage over Don in the production of pencils
d
If Jason can wash a car in 20 minutes and wash a dog in 10 minutes and Megan can wash a car in 15 minutes and wash a dog in 15 minutes, which of the following statements is true? a. The opportunity cost of washing a car is greater for Megan. b. The opportunity cost of washing a car is one dog bath for Jason. c. Megan could wash two cars in the time it takes Josh to wash a dog. d. Jason has both a comparative and an absolute advantage in washing a dog. e. The opportunity cost of washing a dog is lower for Jason.
d
In one week, Mohammed can knit 5 sweaters or bake 240 cookies. In one week, Aisha can knit 15 sweaters or bake 480 cookies. Which of the following is correct? a. Mohammed has an absolute advantage in both tasks and a comparative advantage in knitting sweaters. b. Aisha has an absolute and comparative advantage in both tasks. c. Mohammed has an absolute advantage in both tasks and a comparative advantage in baking cookies. d. Aisha has an absolute advantage in both tasks and a comparative advantage in knitting sweaters. e. Mohammed has an absolute and comparative advantage in both tasks.
d
In the figure given below that shows the demand for baby formula, which of the following changes will be caused by the discovery that breast milk provides more protection against a life threatening disease than baby formula? a. A movement along the demand curve D1 from point a to point b b. A shift in the demand curve from D1 to D2 c. A movement from point b on the demand curve D1 to point c on the demand curve D2 d. A shift in the demand curve from D2 to D1 e. A movement along the demand curve D2 from point d to point c
d
Suppose consumers spent $42 million on Christmas trees last year, when the average tree cost was $30. This year they spend $42 million, when the average tree costs $25. Assume that everything else remains constant. This data suggests that: a. the demand for trees is inelastic. b. the price of the Christmas trees stayed the same. c. consumers bought the same number of Christmas trees this year as last year. d. the demand for trees is unit elastic. e. total revenue to tree producers rose this year.
d
The table given below shows the quantity supplied and the quantity demanded for a good at different prices. If the market price of the good is $1.20, there will be a _____. a. surplus of 20 units b. shortage of 30 units c. surplus of 60 units d. shortage of 60 units e. surplus of 30 units
d
Unlike a service, a good: a. is abundant and free. b. is a resource. c. is desirable. d. is physical and tangible. e. uses resources to satisfy wants.
d
Which of the following is likely to bring about a movement along the supply curve for oranges? a. A change in the price of fertilizer b. A change in the demand for grapefruit c. A change in wages paid to orange pickers d. A change in the price of oranges e. A change in weather conditions
d
Which of the following is not a characteristic of pure capitalism? a. A reliance on prices to direct resources to their best uses b. Private property rights c. Competitive markets d. Central planning e. Laissez-faire policies
d
Which of the following will lead to an increase in quantity supplied of a given good? a. An increase in population b. A technological improvement c. An increase in the price of an alternative good d. An increase in the price of the good e. An increase in resource prices
d
You currently subscribe to two magazines and are trying to decide whether you should subscribe to a third. What should determine your decision if you are economically rational? a. The total cost of the magazines compared to the total satisfaction you would receive b. The total amount of satisfaction you would get from the magazines c. The cost of the third magazine including the time it takes to read it d. The enjoyment you would get from the third magazine e. The cost of the third magazine compared to the additional enjoyment you would get from it
e
Demand is inelastic only if the price elasticity of demand has an absolute value: a. greater than 1. b. of 1. c. greater than 5. d. greater than 0. e. greater than 0 but less than 1.
e
The price elasticity of demand is useful because it measures the responsiveness of _____ to changes in _____. a. taxpayers; demand b. producers; supply c. producers; income d. consumers; demand e. consumers; price
e
There are three consumers in the market for playing cards: Don, John, and Ron. At a price of $2 per pack, the quantities demanded by each are 3 packs, 2 packs, and 1 pack, respectively. At a price of $1.50 per pack, the quantities demanded by each are 4 packs, 5 packs, and 3 packs, respectively. Which of the following is true? a. At a price of $1 per pack, the quantity demanded in this market must be 20 packs. b. Don's behavior does not follow the law of demand. c. The price decrease causes Don's demand curve to shift more than that of John and Ron. d. The market demand curve for playing cards does not follow the law of demand. e. The decrease in price causes the quantity demanded in this market to increase by 6 packs.
e
Which of the following is most likely to cause the demand for ice cream, a normal good, to decrease? a. A warmer weather b. A decrease in the price of milk c. A decrease in the price of ice cream d. An increase in the number of consumers e. A decrease in consumer income
e
