ECON 202 Midterm

If demand is price inelastic and the price is lowered, which of the following occurs?

) the total revenue of the firms selling the product decreases

On a production possibilities frontier, 500 pounds of apples and 1,200 pounds of bananas can be produced while at another point on the same frontier, 300 pounds of apples and 1,300 pounds of bananas can be produced. Between these points, what is the opportunity cost of producing a pound of apples?

0.5 a pound of bananas

When the price of a burrito increases from $2 to $4, the quantity demanded decreases from 50 to 40. Using the midpoint method, the price elasticity of demand equals

1/3

The United States can use all its resources to produce 250 DVDs or 500 shoes. China can use all of its resources to produce 30 DVDs or 300 shoes. The opportunity cost of producing a DVD in the United States is

500 shoes.

Hank requires 1 hour to cut the grass and 3 hours to clean the house. His sister Holly requires 1 hour to cut the grass and 4 hours to clean the house. Which of the following statements is true?

Holly has a comparative advantage in cutting the grass.

A major earthquake occurs in the central part of the United States. What impact would this have on the nation's production possibilities frontier and why?

It would shift inward because some of the nation's resources, such as capital and labor, would be destroyed.

Which of the following is an assumption used when drawing a production possibilities frontier?

Only two goods are considered and The level of technology is fixed and unchanging.

Scott and Cindy both produce only pizza and tacos. In one hour, Scott can produce 20 pizzas or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Based on these data,

Scott has a comparative advantage at producing tacos.

Why is a production possibilities frontier bowed out (concave)?

The bowed shape reflects increasing opportunity cost.

Suppose that the equilibrium price and quantity of new houses both increase. Which of the following could be a cause of this change?

The demand for new houses increased and the supply did not change.

In stores, it is common to find seasonal products marked down when the season ends. What explains this behavior?

The law of demand is being used to increase the quantity demanded

In stores, it is common to find seasonal products marked down when the season ends. What explains this behavior?

The law of demand is being used to increase the quantity demanded.

Suppose the current price of a pound of steak is $6 per pound and the equilibrium price is $9 per pound. What takes place?

There is a shortage, so the price rises and quantity demanded decreases.

A change in the demand for apples could result from any of the following EXCEPT

a change in the price of an apple.

Which of the following increases the supply of gasoline?

a decrease in the price of a resource used to produce gasoline, such as crude oil

Gasoline prices increase by 50 percent and other things remain the same. As a result, there is

a decrease in the quantity of gasoline demanded

A decrease in the price of a complement in production leads to

a decrease in the supply of the good in question

In a production possibilities frontier graph, the cost of producing more units of a good is measured by the

amount of the other good or service that must be forgone.

When production efficiency does NOT occur,

an economy is producing at a point within its PPF and there are unemployed resources.

A surplus of cardboard boxes means that

at the current price of a cardboard box, the quantity demanded is less than the quantity supplied.

The production possibilities frontier is the boundary between the

attainable and unattainable combinations of goods and services.

The production possibilities frontier is 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.

The price elasticity of demand is a measure of

buyers' responsiveness to changes in the price of a product.

If the production possibilities frontier between two goods were a straight line, then the opportunity cost of one good in terms of another would be

constant.

Consumers regard Dell computers and Apple computers as substitutes. If the price of a Dell computer decreases, the

demand for Apple computers decreases.

Consumers regard Dell computers and Apple computers as substitutes. If the price of a Dell computer decreases, the

demand for Apple computers decreases.

Car insurance and cars are complements. If the price of car insurance increases, the

demand for cars decreases.

If a substitute good is easy to find, then demand for a good is

elastic.

The law of supply states that, other things remaining the same,

if the price of a good increases, the quantity supplied increases

The law of supply states that, other things remaining the same,

if the price of a good increases, the quantity supplied increases.

To calculate the opportunity cost per unit, you divide the decrease in the quantity of the forgone item by the

increase in the quantity of the other item obtained.

During 2008 the supply of gasoline decreased while at the same time the demand for gasoline increased. If the magnitude of the increase in demand was greater than the magnitude of the decrease in supply, then the equilibrium price of gasoline ________ and the equilibrium quantity ________.

increased; increased

The market demand curve

is the horizontal sum of individual demand curves

Which of the following increases the supply of a product?

lower prices for the resources used to produce the product

The longer the time that has elapsed since the price of a good changed, the

more elastic the demand for that good.

An increase in the quantity demanded is shown as a

movement along the demand curve.

Suppose that tattoos gained immense popularity with retired people as well as college students. This gain in popularity best reflects which of the following influences on buying plans?

preferences

A country has a comparative advantage in the production of a good if it can

produce the good at the lowest opportunity cost.

The opportunity cost of a good increases as more of it is produced because

resources are not equally productive in all activities.

A reason the production possibilities frontier exists is

scarcity of resources.

If the demand for a good increases when people's incomes increase

the good is a normal good

Which of the following describes the law of demand? When other things remain the same, as

the price of gas falls, the quantity demanded of gas increases

When a surplus of rice occurs

the price of rice falls.

The law of demand refers to how

the quantity demanded changes when the price of the good changes.

In the production possibilities model, the vertical axis measures ________ and the horizontal axis measures

the quantity of a good or service; the quantity of another good or service

The "law of demand" refers to the fact that, other things remaining the same, when the price of a good rises,

there is a movement up along the demand curve to a smaller quantity demanded.

Perfectly inelastic demand means that consumers

will buy a certain quantity, regardless of price.