Econ Exam #1

39) 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) Figure A

27) Suppose that Germany, France, Estonia, and India all have the same production possibilities, illustrated in the figure above. Based on the production points in the figure, which country is most likely to expand its PPF to PPF1? A) India B) Estonia C) France D) France and Germany equally E) Germany

A) India

31) In one hour John can produce 20 loaves of bread or 16 cakes. In one hour Phyllis can produce 30 loaves of bread or 15 cakes. Which of the following statements is TRUE? A) John has a comparative advantage in producing cakes. B) Phyllis has a comparative advantage in producing both cakes and bread. C) Phyllis has an absolute advantage in both goods. D) John has an absolute advantage in both goods. E) Phyllis has a comparative advantage in producing bread.

A) John has a comparative advantage in producing cakes.

3) Suppose that an economy is currently producing at a point that lies inside of its production possibilities set. Which of the following would best explain this circumstance? A) The economy is experiencing a high level of unemployment. B) The prevailing level of technology prevents the economy from producing at a point closer to the frontier of the production possibilities set. C) The economy does not have enough resources to produce at a point closer to the frontier of the production possibilities set. D) Any of the above statements could explain this situation. E) None of the above statements could explain this situation.

A) The economy is experiencing a high level of unemployment.

31) Will, Bill, and Phil decide to study an extra hour for an exam. Instead of studying, they could have gone out to eat, played football, or watched TV. Which of the following statements is correct? A) The students could each have different opportunity costs. B) The marginal cost of the decision is the same if they make the same score on the exam. C) The benefit the three students receive must be the same because they all make the same choice. D) Going out to eat, playing football, and watching TV are all called sunk costs. E) The students made a rational choice as long as they face no scarcity.

A) The students could each have different opportunity costs.

43) When the Dallas Cowboys score more than 30 points in a game, they win the game. This is an example of A) a correlation. B) a statement on the margin. C) a normative statement. D) an economic theory. E) an incentive to win the game.

A) a correlation.

49) Increasing income tax rates will solve the "Social Security time bomb issue" is an example of A) a positive economic statement. B) business economic policy. C) globalization. D) marginal cost exceeding marginal benefit. E) answering the "how" question.

A) a positive economic statement.

39) A statement that argues that "if taxes on gasoline increase, gasoline consumption will decrease" is an example of what kind of statement? A) a positive statement B) a macroeconomic statement C) a normative statement D) a statement that violates rational choice E) a marginal statement

A) a positive statement

17) The opportunity cost of producing more of one good on a production possibilities frontier is A) a ratio of quantities. B) a ratio of prices. C) equal to the area inside the production possibilities frontier. D) a dollar amount. E) a theoretical concept which cannot be measured.

A) a ratio of quantities.

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

A) a tradeoff.

11) If macaroni and cheese is an inferior good, then a decrease in income results in A) an increase in the demand for macaroni and cheese. B) a decrease in the demand for macaroni and cheese. C) an increase in the supply of macaroni and cheese. D) a decrease in the supply of macaroni and cheese. E) Both answers A and D are correct.

A) an increase in the demand for macaroni and cheese.

41) Margo orders a MacBook Pro computer from The Apple Store online to use it in her graphic design business. How will this be reflected in the figure above? A) as a flow of a factor of production B) as a flow of goods and services bought C) as goods and services supplied D) as expenditures on goods and services E) It won't be shown in the figure because this transaction takes place neither in goods markets nor in factor markets.

A) as a flow of a factor of production

33) In the circular flow model with the government sector, transfers A) flow in the opposite direction as do taxes. B) to households flow in the same direction as do expenditures on goods and services. C) flow only through the goods market. D) to firms flow in the same direction as do rent, wages, interest, and profits. E) flow in the same direction as do taxes.

A) flow in the opposite direction as do taxes

15) The charitable organization Creating Hope International trains women in Afghanistan to become tailors. This effort reduces A) human capital differences between advanced and developing economies. B) manufacturing differences between advanced and developing economies. C) physical capital differences between advanced and developing economies. D) entrepreneurship differences between advanced and developing economies. E) agricultural differences between advanced and developing economies.

A) human capital differences between advanced and developing economies.

23) A professor changes the penalty for cheating on exams from getting a 0 on the exam to getting an F in the course. The professor has A) increased the marginal cost of cheating. B) decreased the marginal benefit of cheating. C) made all the students act in the social interest. D) recognized that students don't make rational choices. E) recognized that students don't respond to incentives.

A) increased the marginal cost of cheating.

27) Income equality has A) increased within countries but has narrowed across countries. B) decreased in the United States as manufacturing has increased. C) increased in developing economies as manufacturing has decreased. D) narrowed within countries but increased across countries. E) not changed in the advanced economies over the past 50 years.

A) increased within countries but has narrowed across countries.

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

A) increases

43) In the figure above, which of the following represents a money flow? A) interest B) services sold C) capital D) goods supplied E) goods purchased

A) interest

13) The productive resource that includes all the "gifts of nature" is called A) land. B) labor. C) capital. D) entrepreneurship. E) land if undeveloped and capital if developed.

A) land

43) The figure above shows a production possibilities frontier. In the figure, which of the following combinations of the two goods are efficient? A) no cell phones and 15 million DVDs B) 5 million cell phones and 15 million DVDs C) 4 million cell phones and 4 million DVDs D) 2 million cell phones and 13 million DVDs E) None of these combinations is efficient.

A) no cell phones and 15 million DVDs

11) Suppose that in a PPF graph, wheat is on the vertical axis and jets are on the horizontal axis. Moving down along the PPF, the A) number of jets increases and the opportunity cost of jets increases. B) number of jets increases and the opportunity cost of jets decreases. C) amount of wheat increases and the opportunity cost of wheat increases. D) opportunity cost of jets AND wheat both increase.E) amount of wheat increases and opportunity cost of wheat decreases.

A) number of jets increases and the opportunity cost of jets increases.

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

A) pay rent, wages, interest, and profit; earn rent, wages, interest, and profit

7) The income earned by entrepreneurs is A) profit or loss. B) wages. C) interest. D) rent, wages, and interest. E) a mixture of rent, wages, interest, and profit.

A) profit or loss

9) A demand schedule shows A) the quantities that people plan to buy at each different price when all other influences on buying plans remain the same. B) the quantities that people plan to buy in all possible circumstances. C) the quantities that people plan to buy at each different income when all other influences on buying plans remain the same. D) the quantities that people would plan to buy if they could afford them at each different price when all other influences on buying plans remain the same. E) the quantities that people plan to buy at each different price as long as producers are willing to supply that quantity.

A) the quantities that people plan to buy at each different price when all other influences on buying plans remain the same

35) Consider the market for feather pillows. If there is an increase in the price of feather dusters, a substitute in production for feather pillows, then A) the supply curve for feather pillows shifts leftward. B) the demand curve for feather pillows shifts leftward. C) the price of feather pillows decreases. D) the demand curve for feather pillows shifts rightward. E) there is a downward movement along the demand curve for feather pillows.

A) the supply curve for feather pillows shifts leftward.

19) The benefit from a good or service that you purchase is measured by A) what you are willing to give up to obtain the good or service. B) the dollar amount that is paid for the good or service. C) how strong the incentives were that lead to buying the good or service. D) the dollar amount you can get by selling the good or service. E) None of the above answers is correct because there is no way to measure the benefit you receive from purchasing a good or service.

A) what you are willing to give up to obtain the good or service.

35) Terri is enrolled in her first economics course. She is required to give a presentation about the circular flow. Which of the following statements should she include in her presentation? A) Households receive wages for the amount of entrepreneurship they provide firms. B) Households choose the amount of the factors of production to provide the firms. C) Firms pay wages for the amount of entrepreneurship they provide households. D) The flows of goods and services and payments for the goods and services flow in the same direction. E) Firms choose the amount of the factors of production to provide households.

B) Households choose the amount of the factors of production to provide the firms.

33) The above figure shows the market for pizza. The market is in equilibrium when some of the pizza firms go out of business. What point represents the most likely new price and quantity? A) A B) B C) C D) D E) E

B) B

23) Suppose India and France have the same PPF, shown in the figure above. Based on their current production points, which is India's most likely future PPF? A) PPF0 B) PPF2 C) PPF1 D) either PPF0 or PPF1 E) None of the above because economic growth will not happen in India.

B) PPF2

1) Gasoline prices increase by 50 percent and other things remain the same. As a result, there is A) no change in the quantity of gasoline demanded. B) a decrease in the quantity of gasoline demanded. C) an increase in the demand for gasoline. D) a decrease in the demand for gasoline. E) More information is needed to determine if the demand for gasoline increases or decreases.

B) a decrease in the quantity of gasoline demanded.

13) Which of the following shifts the supply curve of rutabagas rightward? (A rutabaga is a potato-like vegetable.) A) an exceptionally cold summer that killed much of the rutabaga crop B) a fall in the price of fertilizer used to grow rutabagas C) an increase in the price of a rutabaga D) Both answers A and C shift the supply curve of rutabagas rightward. E) Both answers A and B shift the supply curve of rutabagas rightward.

B) a fall in the price of fertilizer used to grow rutabagas

29) A technological improvement lowers the cost of producing corn. As a result, the price of a pound of corn ________ and the quantity of corn ________. A) falls; does not change B) falls; increases C) rises; decreases D) falls; decreases E) rises; increases

B) falls; increases

9) While moving along a production possibilities frontier, the amount of labor ________, the amount of capital ________, and the level of technology ________. A) varies; is fixed; varies B) is fixed; is fixed; is fixed C) varies; is fixed; is fixed D) varies; varies; varies E) is fixed; is fixed; varies

B) is fixed; is fixed; is fixed

49) If a country is operating at a point of production efficiency A) it enjoys a free lunch when increasing production. B) it produces on its production possibilities frontier. C) it must specialize in the production of a good. D) it cannot be producing at its point of comparative advantage. E) it operates on its trade line.

B) it produces on its production possibilities frontier.

47) In the figure above, which of the following represents a real flow of a factor of production? A) firms' expenditures on factors of production B) labor C) services sold D) wages E) goods bought

B) labor

9) The functional distribution of income measures which of the following? A) the distribution of income among nations B) the distribution of earnings by the factors of production C) the distribution of income among households D) the proportion of income generated by the four types of expenditures on goods and services E) how federal tax revenues are related to the business function that employs taxpayers

B) the distribution of earnings by the factors of production

41) Consider the market for leather shoes. If producers believe the price of leather shoes will increase next month, today A) there is a movement along the supply curve for leather shoes. B) the supply curve for leather shoes shifts leftward. C) the equilibrium quantity of leather shoes increases. D) the equilibrium price of leather shoes falls. E) the supply curve for leather shoes shifts rightward.

B) the supply curve for leather shoes shifts leftward.

23) In the advanced economies, ________ of the factories use advanced capital equipment, and in the developing economies, ________ of the factories use advanced capital equipment. A) virtually all; virtually all B) virtually all; some C) virtually all; none D) some; some E) some; none of

B) virtually all; some

45) The table above gives the production possibilities frontier for two countries, Anaconda and Bear. This table shows that A) Bear is unable to gain from trade with Anaconda. B) when Anaconda and Bear specialize and trade, Anaconda should produce at its production point E. C) when Anaconda and Bear specialize and trade, Anaconda should specialize in the production of shoes. D) Bear can consume no more than 2 bushels of corn and 700 pairs of shoes. E) Anaconda has an absolute advantage in the production of corn and shoes.

B) when Anaconda and Bear specialize and trade, Anaconda should produce at its production point E.

39) The figure above shows a production possibilities frontier. In the figure, when the economy moves from point C to point B, what is the opportunity cost of a DVD? A) zero B) 2 million cell phones C) 0.5 cell phones D) 2 cell phones E) 0.5 million cell phones

C) 0.5 cell phones

19) The figure above illustrates a small country's production possibilities frontier. Moving from point A to point B, the per unit opportunity cost of a tablet is ________ per tablet. A) 1/2 of a computer B) 100 computers C) 2 computers D) 4/3 of a computer E) 1 tablet

C) 2 computers

37) The above figures show the market for HD televisions. If the price of the LCD screens used to produce these televisions falls, which figure shows the effect of this change in price? A) Figure A B) Figure B C) Figure C D) Figure D E) None of the figures represent this change.

C) Figure C

39) If a product becomes more popular and consumers want more produced, which of the following best describes what happens to move more factors of production into that industry? A) Factor owners voluntarily move their factors because they want to satisfy the interests of consumers. B) Consumers increase their demand for the products and, as a result, the taxes the producers must pay decrease enabling the producers to hire more factors of production. C) Wages, rent, interest, and profit increase in that industry, thereby giving factors the incentive to move to that industry. D) The chief executive officers or presidents of corporations require that factors leave one industry and move to the other industry. E) An agency of the Federal government directs the movement of factors.

C) Wages, rent, interest, and profit increase in that industry, thereby giving factors the incentive to move to that industry.

27) A statement that "All children should receive free health care" is an example of what kind of statement? A) a natural experiment statement B) a statement on the margin C) a normative statement D) a positive statement E) a fair statement

C) a normative statement

15) Instead of studying for an additional two hours for the economics final, Leann decides to watch a movie. Leann is making A) a decision that is not on the margin because she will see the entire movie. B) a rational decision if her marginal cost from the movie is greater than her marginal benefit. C) a rational decision if her marginal benefit from the movie is greater than her marginal cost. D) an irrational decision because studying is more important than watching a movie. E) a decision that does not involve an opportunity cost.

C) a rational decision if her marginal benefit from the movie is greater than her marginal cost.

29) A market is defined as A) another name for a store. B) the physical place where goods (but not services) are sold. C) any arrangement that brings buyers and sellers together. D) the physical place where goods and services are sold. E) a place where money is exchanged for goods.

C) any arrangement that brings buyers and sellers together.

11) Items bought by businesses to help produce other goods and services are called A) productive goods. B) consumption goods and services. C) capital goods. D) exports of goods and services. E) government goods and services.

C) capital goods.

7) When a landscaping company decides to use drafting software and computers instead of hiring designers to draw design plans by hand, it is answering the ________ question. A) why B) opportunity cost C) how D) what E) for whom

C) how

3) When Ethan continues his education beyond high school, he is increasing his A) quantity of labor. B) rent. C) human capital. D) wage rate. E) capital.

C) human capital.

11) People must make choices because A) making choices is in the social interest. B) there are many goods available. C) of scarcity. D) most people enjoy shopping. E) the question "What goods and services are produced?" is not adequately answered.

C) of scarcity

43) Consider the market for camera film. If more people start using digital cameras, which do not require film A) the supply curve of film shifts rightward. B) there is a movement down along the demand curve for film. C) the demand curve for film shifts leftward. D) there is a movement up along the demand curve for film. E) neither the demand curve nor the supply curve for film shifts; instead there is a movement along both.

C) the demand curve for film shifts leftward.

3) The market demand curve for mousetraps is A) found by summing the prices of mousetraps at each quantity of mousetraps demanded by each buyer. B) found by summing the quantities of mousetraps demanded at each income level by each buyer. C) the horizontal sum of the individual demand curves for mousetraps of all the buyers. D) Both answers B and C are correct. E) Both answers A and C are correct.

C) the horizontal sum of the individual demand curves for mousetraps of all the buyers.

47) Correlation means A) a natural experiment has been conducted. B) "after this, therefore because of this." C) the tendency for the values of two variables to move in a predictable and related way. D) other things remaining the same. E) "on the margin."

C) the tendency for the values of two variables to move in a predictable and related way.

19) Which of the following correctly describes how the "global pie is baked"? A) The increase in manufacturing has taken place in mainly the advanced economies. B) Emerging economies account for about 25 percent of the global pie. C) The United States' share of economic pie is increasing while China's share is decreasing. D) Advanced economies account for about 40 percent of the value of the world's production. E) Asia accounts for about 40 percent of the global pie.

D) Advanced economies account for about 40 percent of the value of the world's production.

35) If Country A can produce an extra plane by giving up two boats, and Country B can produce an extra plane by giving up three boats, then A) Country B has a comparative advantage over Country A in the production of planes. B) Country A has an absolute advantage in producing planes and a comparative advantage in producing boats. C) The two countries have no incentive to trade with one another. D) Country A has a comparative advantage over Country B in the production of planes. E) Country A would like to trade with B, but B cannot gain by trading with A.

D) Country A has a comparative advantage over Country B in the production of planes.

33) Using the figure above, if Jack and Jill specialize and gain from trade, then A) Jack produces equal amounts of gallons of water and bottled water. B) Jack specializes in the production of soda. C) Jack and Jill produce beyond their PPF. D) Jack specializes in the production of bottled water. E) Jack specializes on the production of soda and water.

D) Jack specializes in the production of bottled water.

23) Suppose that the equilibrium price and quantity of new houses both increase. Which of the following could be a cause of this change? A) The rent for nearby apartments might have fallen. B) The wage paid carpenters who build new houses might have risen. C) The cost of wood framing used to build houses might have fallen. D) More home buyers might have moved into the area. E) A technological advance in framing a new house might have occurred.

D) More home buyers might have moved into the area.

21) Suppose that Germany, France, Estonia, and India all have the same production possibilities, illustrated in the figure above. Based on the production points in the figure, India is most likely to expand its PPF to A) PPF3. B) PPF3 or PPF2. C) PPF1. or PPF2. D) PPF1. E) PPF2.

D) PPF1.

19) The law of supply states that other things remaining the same, a decrease in the price of a kayak leads to A) an increase in the supply of kayaks. B) a decrease in the supply of kayaks. C) an increase in the quantity of kayaks supplied. D) a decrease in the quantity of kayaks supplied. E) an increase in the supply of kayaks and a decrease in the quantity of kayaks supplied.

D) a decrease in the quantity of kayaks supplied.

49) In the figure above, which of the following represents a real flow? A) profit B) wages C) expenditures on real estate services D) capital E) both B and D

D) capital

5) 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) capital goods. B) export goods and services. C) government goods and services. D) consumption goods and services. E) capital goods and government goods and services tie for the largest component.

D) consumption goods and services.

45) Which of the following is a positive statement? A) Parking tickets on campus impose an excessive fee. B) The school needs more parking for students. C) An increase in college tuition is not fair to students. D) University bookstore prices are too high. E) A recession leads to higher enrollments at universities.

E) A recession leads to higher enrollments at universities.

41) The figure above shows how the PPF for cell phones and new cell-phone factories can expand. In the figure, if the economy produced 4 million cell phones using the resources efficiently, the PPF would A) expand along the vertical axis and not along the horizontal axis. B) expand evenly along both axes. C) not expand. D) expand, but not as far as shown in the figure. E) expand farther than shown in the figure.

D) expand, but not as far as shown in the figure.

35) Suppose that your public library charges a fixed monthly membership fee of $12. Members are allowed to check out as many books as they want under this plan. The average member checks out 4 books per month. Suppose that your public library changes its policy. Now each book costs $3 to check out but there is no longer a monthly membership fee. What effect do you think the new policy will have on the total number of books checked out from your library each month? The new policy is likely to ________ the number of booked checked out because ________. A) reduce; the marginal cost of checking out books is now higher under the new policy B) increase; the average benefit of checking out more than 4 books is now higher under the new policy C) reduce; the marginal benefit of checking out books is now lower under the new policy D) leave unchanged; members have already shown that they are willing to pay $12 to check out 4 books per month E) leave unchanged; the average cost of the library service is the same under both plans

D) leave unchanged; members have already shown that they are willing to pay $12 to check out 4 books per month

25) The percentage of the world's population that lives in the advanced economies is A) between 20 percent and 30 percent. B) between 31 percent and 50 percent. C) between 51 percent and 70 percent. D) less than 20 percent. E) more than 71 percent.

D) less than 20 percent.

21) The supply schedule A) shows one quantity at one price. B) is a curve showing the relationship between the amount the sellers are willing and able to sell and the price of that good when all relevant factors change. C) is the schedule that suppliers have to keep or else they will be late. D) shows the relationship between the quantity supplied and the price of a good when all other influences on selling plans remain the same. E) shows the relationship between the quantity supplied and the price of a good when all other influences on selling plans change.

D) shows the relationship between the quantity supplied and the price of a good when all other influences on selling plans remain the same.

21) Proponents of cuts in income tax rates argue that when income tax rates are cut, workers have an incentive to increase their work hours. This argument is based on the assumption that A) the marginal cost of each additional work hour is not important to most workers. B) workers make decisions based on the social interest. C) workers are irrational. D) workers make decisions based on the marginal benefit of each hour worked compared to the marginal cost of work. E) the opportunity cost of working is negative.

D) workers make decisions based on the marginal benefit of each hour worked compared to the marginal cost of work.

15) 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? A) 100 pounds of bananas B) 2 pounds of bananas C) 5/12 of a pound of bananas D) 2 pounds of apples E) 0.5 of a pound of bananas

E) 0.5 of a pound of bananas

7) The table above shows a production possibilities frontier for an economy. Which of the following combinations is unattainable? A) 100 loaves of bread and 800 books B) 300 loaves of bread and 200 books C) 0 loaves of bread and 800 books D) 0 loaves of bread and 0 books E) 200 loaves of bread and 800 books

E) 200 loaves of bread and 800 books

17) Going skiing will cost Adam $80 a day. He also loses $40 per day in wages because he has to take time off from work. Adam still decides to go skiing. A) The $80 price of skiing is not an opportunity cost and so did not affect Adam's decision. B) He loses a total of $120 per day, so his decision is irrational. C) Adam's lost $40 per day in wages is not an opportunity cost and so did not affect his decision. D) Adam is definitely making a decision that is in the social interest. E) His decision is rational if Adam's marginal benefit of spending a day skiing is greater than his marginal cost.

E) His decision is rational if Adam's marginal benefit of spending a day skiing is greater than his marginal cost.

13) The above figure shows the production possibility frontier for a country. Suppose the country is producing at point A. What would be the opportunity cost to increase the production of rice to 12 tons? A) 9 thousand bottles of wine B) 15 thousand bottles of wine C) 6 thousand bottles of wine D) 6 tons of rice E) Nothing, it is a free lunch.

E) Nothing, it is a free lunch.

31) Which of the following is the best explanation for why the price of gasoline increases during the summer months? A) Sellers have to earn profits during the summer to cover losses in the winter. B) The number of gas stations open 24 hours a day rises in the summer months and so the price must rise to cover the higher costs. C) Oil producers have higher costs of production in the summer. D) There is less competition among oil refineries in the summer. E) There is increased driving by families going on vacation.

E) There is increased driving by families going on vacation.

17) Nigeria would be classified by the International Monetary Fund as A) a resource-based economy. B) an advanced economy. C) a transition economy. D) an emerging market economy. E) a developing economy.

E) a developing economy.

17) The graph illustrates the supply of sweaters. Which of the following events will increase the quantity supplied of sweaters? A) a decrease in the number of sweater buyers B) an increase in the number of sellers of sweaters C) a rise in the expected future price of a sweater D) a rise in the wage rate paid to the workers who make sweaters E) a rise in the price of a sweater

E) a rise in the price of a sweater

31) An example of a U.S. export is A) diamonds mined in Africa sold to buyers in South America. B) a TV made in China sold to a buyer in Azerbaijan. C) matchbooks made in Mexico sold to a buyer in New Jersey. D) pasta made in Italy sold to buyers in Spain. E) a washing machine made in Indiana sold to a buyer in France.

E) a washing machine made in Indiana sold to a buyer in France.

7) A market is defined as A) a physical place where people buy only goods. B) a place where one good is bartered for another. C) a physical place where people buy both goods and services. D) a store where people buy physical goods. E) any arrangement that brings buyers and sellers together.

E) any arrangement that brings buyers and sellers together.

5) Microeconomics includes the study of the A) aggregate effects on the national economy. B) recessions and inflation in the global economy. C) nationwide unemployment rate. D) reasons why the government changes interest rates. E) choices made by individuals and businesses.

E) choices made by individuals and businesses.

25) In Great Britain, raising taxes on gasoline has increased the costs of supplying gasoline. As a result, the equilibrium quantity of gasoline ________ and the equilibrium price of gasoline ________. A) does not change; rises B) decreases; falls C) increases; rises D) increases; falls E) decreases; rises

E) decreases; rises

45) The graph illustrates the market for computers. If the number of buyers of computers increases and technology advances, you predict that the A) equilibrium price of a computer will rise. B) equilibrium quantity of computers might increase, decrease, or not change. C) equilibrium quantity of computers will decrease. D) equilibrium price of a computer will fall. E) equilibrium quantity of computers will increase.

E) equilibrium quantity of computers will increase.

3) When a home builder decides to computerize all of its production schedules, it directly answers the ________ question. A) why B) where C) what D) for whom E) how

E) how

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

E) human skills, that is, the quality of labor.

37) The figure above shows a production possibilities frontier. In the figure, when the economy moves from point D to point C, the opportunity cost of producing one more DVD ________, and when it moves from point C to D, the opportunity cost of producing one more cell phone ________. A) decreases; increases B) increases; remains the same C) decreases; decreases D) increases; decreases E) increases; increases

E) increases; increases

29) If a nation has an absolute advantage in producing a good, then it A) will not have a comparative advantage in producing that good. B) will always specialize in that good. C) will have a comparative advantage in producing that good. D) will have no need to trade with other nations. E) might or might not have a comparative advantage in producing that good.

E) might or might not have a comparative advantage in producing that good.

21) Compared to the developing economies, the advanced economies have ________ human capital and ________ physical capital. A) the same; the same B) more; less C) less; more D) less; less E) more; more

E) more; more

27) If consumers buy a large number of plug-in electric cars, the equilibrium price of electricity will ________ and the equilibrium quantity of electricity will ________. A) fall; increase B) not change; increase C) fall; decrease D) rise; decrease E) rise; increase

E) rise; increase

9) Choices that are best for the individuals that make them are choices in pursuit of A) incentives. B) efficiency. C) equity. D) the social interest. E) self-interest.

E) self-interest

1) Which of the following is a topic studied in macroeconomics? A) how the wheat industry determines how much wheat to grow B) the impact of higher prices for gasoline on the number of SUVs people buy C) the pricing decisions in the computer hardware industry D) the impact of labor unions on wages E) the effect on economic growth if the government raises taxes

E) the effect on economic growth if the government raises taxes

29) Which of the following is TRUE? i. A rational choice is made on the margin. ii. Microeconomics is the study of the national economy while macroeconomics is the study of the global economy. iii. Economists try to understand how the economic world works by testing normative statements.

i. A rational choice is made on the margin.

13) Which of the following is a microeconomic topic? i. Gas prices increase after a hurricane hits the gulf coast. ii. Xavier starts a new business designing web pages. iii. Abby decides to practice an extra hour of soccer instead of studying.

i. Gas prices increase after a hurricane hits the gulf coast. ii. Xavier starts a new business designing web pages. iii. Abby decides to practice an extra hour of soccer instead of studying.

25) Economic growth depends upon which of the following? i. Increasing the quantity of labor ii. Lowering the prices of goods and services iii. Advancing technology

i. Increasing the quantity of labor iii. Advancing technology

47) Suppose that after specializing according to comparative advantage, a country is trading with another nation that also specializes according to its comparative advantage. Which of the following statements are TRUE for the first country? i. It enjoys gains from trade. ii. It must have an absolute advantage in the production of the good it produces. iii. It is producing at a point beyond its PPF.

i. It enjoys gains from trade.

33) Which of the following is TRUE? i. A rational choice is always made in the pursuit of social interest. ii. Economics is a social science. iii. Economists try to understand how the economic world works by testing positive statements.

ii. Economics is a social science. iii. Economists try to understand how the economic world works by testing positive statements.

37) Which of the following is TRUE regarding a normative statement? i. It uses the ceteris paribus assumption. ii. It is a value judgment. iii. It accounts for opportunity costs.

ii. It is a value judgment.

5) Which of the following is an assumption used when drawing a production possibilities frontier? i. Human wants and desires are limited to what is available. ii. Only two goods are considered. iii. The level of technology is fixed and unchanging.

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

45) In the figure above, which of the following transactions take place in the factor markets? i. Michael, a student, orders a computer from Dell online. ii. Peter gets a job at a Walmart store. iii. Apple Computer opens a new store in Georgia.

ii. Peter gets a job at a Walmart store. iii. Apple Computer opens a new store in Georgia.

5) If the price of a DVD falls i. the demand curve for DVDs will shift rightward. ii. the demand curve for DVDs will not shift. iii. there will be a movement along the demand curve for DVDs.

ii. the demand curve for DVDs will not shift. iii. there will be a movement along the demand curve for DVDs.

15) The United Auto Workers bargained for higher wages and more benefits for autoworkers. As a result of the higher wages and increased benefits i. the quantity of new automobiles supplied decreases. ii. the supply of new automobiles decreases. iii. the supply of new automobiles increases.

ii. the supply of new automobiles decreases.

41) A normative statement i. can be tested as to whether it is true or false ii. is considered negative iii. depends on a person's values

iii. depends on a person's values