Econ Exam 1

For which decision would marginal analysis be MOST relevant?

How many hours should I study for my exam?

For an economist, the cost of something is:

what you gave up to get it.

A new fast-food restaurant offered a prize—a free meal (valued at $5) each week for a year—to its first 100 customers. Ramona camped out for 48 hours before the opening to be one of the first 100 customers, and she successfully obtained the prize. The cost to Ramona of obtaining the "free meal a week for a year" prize was:

whatever else she would have done with the 48 hours.

Mickey

(Table: Bongos and Frisbees) Use Table: Bongos and Frisbees. Bill and Mickey make bongos and Frisbees. Who has the comparative advantage in producing Frisbees?

$15

(Table: Competitive Market for Good Z) Use Table: Competitive Market for Good Z. A surplus of the good will occur at a price of

$10 and 30 units.

(Table: Competitive Market for Good Z) Use Table: Competitive Market for Good Z. The equilibrium price and quantity in this market are, respectively:

90

(Table: Supply of Lemonade) Use Table: Supply of Lemonade. If the price of lemonade is $1 per cup, the total quantity of lemonade supplied will be _____ cups per day.

the United States has a comparative advantage in wheat and an absolute advantage in wheat.

(Table: Wheat and Aluminum) Use Table: Wheat and Aluminum. The United States and Germany can produce both wheat and aluminum. The table shows the maximum annual output combinations of wheat and aluminum that can be produced. Based on the table:

The United States would trade 1 ton of wheat to Germany for 1.5 tons of aluminum.

(Table: Wheat and Aluminum) Use Table: Wheat and Aluminum. The United States and Germany can produce both wheat and aluminum. The table shows, in tonnage, the maximum annual output combinations of wheat and aluminum that can be produced. Which choice represents a possible trade based on specialization and comparative advantage?

Which of the following is an assumption of the supply and demand model? (check all that apply)

- all products sold in the market are identical - many sellers - many buyers

Which statement is CORRECT?

- an economic situation is in equilibrium when no individual would be better off taking a different action

In the circular-flow diagram, the product market is where:

- households buy goods and services

In terms of the production possibility frontier, the inefficient use of available resources is shown by:

- production at a point inside the production possibility frontier.

Mr. Freezee operates a fleet of ice cream trucks that drive around neighborhoods selling ice cream. He is trying to decide whether he should buy another ice cream truck to add to his fleet. He determines that one more truck will add $750 to his revenue but that the truck will also increase his costs by $1,000. Based on marginal analysis, Mr. Freezee decides:

- that he should not purchase the truck since the costs outweigh the benefits

If farmer Sam MacDonald can produce 200 pounds of cabbages and no potatoes or no cabbages and 100 pounds of potatoes and if he faces a linear production possibility frontier, the opportunity cost of producing an additional pound of potatoes is _____ pound(s) of cabbage.

2

Frances has a linear production possibility frontier when she produces tomatoes and green beans. If she uses all of her resources, she can produce 400 bushels of tomatoes or 800 bushels of green beans. Frances is NOT producing efficiently if she produces _____ bushels of tomatoes and _____ bushels of green beans.

200; 200

Mark and Julie are going to sell brownies and cookies for their third annual fundraiser bake sale. In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15 brownies or 15 cookies. Based on this information, _____ has the comparative advantage in making brownies and _____ has the comparative advantage in making cookies.

Mark; Julie

(Figure: Shifts in Demand and Supply II) Use Figure: Shifts in Demand and Supply II. The graph shows how supply and demand might shift in response to specific events. Suppose a fall frost destroys one-third of the nation's grapefruit crop. Which panel BEST describes how this will affect the market for vitamin B12 tablets, which are a substitute in consumption for grapefruit?

Panel B

(Figure: Shifts in Demand and Supply IV) Use Figure: Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose half of the people in San Diego pack up and move to Colorado Springs. Which panel BEST describes how this will affect the supply of houses in San Diego?

Panel C

(Figure: Shifts in Demand and Supply IV) Use Figure: Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose oil becomes more expensive. Which panel BEST describes how this will affect the market for gasoline, which is made from oil?

Panel D

Determine which of the following statements are normative statements. (check all that apply)

a) Everyone in the country should be covered by national health insurance. d) The minimum wage is an important tool in fighting poverty and should be increased.

Determine whether each of the following statements are true. (check all that apply)

a) Very talented individuals, who can do most things better than most people, can benefit from specializing in doing one thing. c)Resource scarcity is a major economic concern for all countries.

Which factor is MOST likely to shift the supply of milk to the right?

a) a decrease in the price of feed given to dairy cows

An economic model:

a) is a simplified version of reality used to understand real-world economic conditions.

Abe starts exercising regularly, and after a few months he can do twice as much of everything. In a single day, Abe can now make 10 hamburgers or 8 milkshakes, rather than the 5 hamburgers and 4 milkshakes he made in the past. We now know that Abe's production possibility frontier has _____, but his opportunity costs of making milkshakes have _____.

a) shifted right; not changed

The basis of the circular-flow diagram is that:

a) the flow of money into each market or sector is equal to the flow of money coming out of that market or sector

If resources are scarce, it means that they:

are insufficient to provide enough goods and services to satisfy all human material wants and needs.

An economy is said to have a comparative advantage in the production of a good if it can produce that good:

at a lower opportunity cost than another economy.

The demand for meals at a local Chipotle will shift to the left if:

b) Saladworks offers a 10% discount coupon in the local newspaper

Determine which of the following statements are positive statements. (check all that apply)

b) the federal government spends half of its budget on national defense d) the rate of unemployment is 4%

Which of the following events will shift the supply curve for TVs to the left? (check all that apply)

b) the minimum wage increase by $2 d) The price of TVs is expected to rise next month

According to economic models of trade, when the United States and Mexico trade:

both Mexico and the United States will be better off.

If the demand for tires goes down when the price of gas goes up, then tires and gas are:

complements

Because of trade, a country may:

consume outside its production possibility frontier.

The law of demand implies that:

consumers will buy more at lower prices

If the value of homes in University City increases and, as a result, the people of University City spend more, incomes in University City will:

increase

An economy is efficient if it is:

not possible to produce more of one good without producing less of another good.

If the price of a commodity increases, you can usually expect the:

quantity supplied to increase

Consider the market for iPads. What happens if a fantastic new alternative tablet is developed by Samsung and, at the same time, a boat carrying a large shipment of iPads is attacked by pirates and sunk?

the change in price is indeterminate and quantity decreases