Econ Exam 1

What does it mean if a person makes a "decision at the margin"? A. The person compares additional benefits and additional costs when deciding what to do. B. The person weighs the good against the bad and then decides what to do. C. The person is more likely to say yes than to say no. D. The person compares marginal benefits and total costs and then decides what to do. E. The person makes a decision based on a condition.

A. The person compares additional benefits and additional costs when deciding what to do.

Over the elastic portion of the demand curve, a decrease in price causes: A. an increase in total revenue B. a decrease in total revenue C. no change in total revenue D. an increase in quantity demanded, but anything can happen to revenue E. is a stretch

A. an increase in total revenue

When a tax on a good is enacted, A. buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers. B. buyers always bear the full burden of the tax. C. sellers always bear the full burden of the tax. D. sellers bear the full burden of the tax if the tax is levied on them; buyers bear the full burden of the tax if the tax is levied on them. E. the tax burden won't fall on anyone if the proponents of a tax say no one will be forced to pay the tax.

A. buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers.

8. Someone says, "Even though the equilibrium wage rate is $8 an hour in the unskilled labor market, if we impose a minimum wage of $10 an hour, no one currently working will lose his or her job." This person must believe that the A. demand curve for unskilled labor is vertical. B. demand curve for unskilled labor is downward-sloping. C. firms that hire unskilled laborers are earning high profits. D. firms that hire unskilled laborers have relatively low costs. E. none of the above.

A. demand curve for unskilled labor is vertical.

An increase in equilibrium price of a good and a decrease in equilibrium quantity of that good could be caused by a(n): A. increase in resource (input) prices used to make that good B. increase in demand for the good C. increase in supply of the good D. favorable shift in tastes and preferences towards that good E. improvement in production technology for the good

A. increase in resource (input) prices used to make that good

We would expect the cross price elasticity of demand between tennis racquets and tennis balls to be: A. negative B. positive C. zero D. one E. depends on who is endorsing the product

A. negative

If the demand curve for a good shifts leftward, A. quantity demanded is less at each price. B. quantity demanded remains constant at each price. C. quantity demanded is greater at each price. D. demand is greater at each price. E. demand is less at each price

A. quantity demanded is less at each price.

Market equilibrium occurs at the price for which: A. quantity supplied equals quantity demanded B. cost equals the wage to labor C. the surplus quantity drives increased demand D. quantity supplied exceeds quantity demanded E. quantity supplied is less than quantity demanded

A. quantity supplied equals quantity demanded

A product would be more "demand price inelastic": A. the shorter the time the consumer has to adjust to price changes B. the higher the price of the good C. the greater the number of good substitutes for the product D. the less essential the nature of the good E. if the supply is more price elastic

A. the shorter the time the consumer has to adjust to price changes

12. Which of the following is a microeconomics topic? A. the study of how prices are determined in the computer industry B. the study of unemployment in the economy C.the study of how changes in the nation's money supply affect the nation's output D. a and c E. b and c

A. the study of how prices are determined in the computer industry

If the income elasticity of demand for air travel is positive, while the income elasticity of demand for bus travel is negative, we can conclude that: A. travel by plane is a normal good, but travel by bus is an inferior good B. travel by plane is a normal good and so is travel by bus C. travel by plane is an inferior good and so is travel by bus D. travel by plane is an inferior good, but travel by bus is a normal good E. people just want someone else to "do the driving."

A. travel by plane is a normal good, but travel by bus is an inferior good

Which of the following best describes an active market? A. A market where the price is slow to change B. A market where transactions occur frequently and prices adjust rapidly to clear surpluses or shortages C. A market where surpluses or shortages can persist for a longtime D. All of the above E. None of the above

B. A market where transactions occur frequently and prices adjust rapidly to clear surpluses or shortages

3. Which of the following statements is true? A. An increase in demand is the same thing as an increase in quantity demanded. B.An increase in demand will lead to a higher quantity demanded at any given price. C. An increase in demand can be represented by a movement along the demand curve. D. An increase in quantity demanded can be represented by a rightward shift in the demand curve E. An increase in quantity demanded can be represented by a leftward shift in the demand curve.

B. An increase in demand will lead to a higher quantity demanded at any given price.

The point where the PPF intersects the horizontal axis is A. unattainable. B. attainable and efficient. C. attainable but inefficient. D. attainable and neither efficient nor inefficient. E. unattainable but efficient

B. attainable and efficient.

16. Every time you make a _____________, you incur a (an) _______________. A. decision; unintended effect B. choice; opportunity cost C. competitive move; price D. decision; mistake E. none of the above

B. choice;opportunitycost

11. When economists speak of scarcity, they are referring to the A. condition in which society is not employing all its resources in an efficient way. B.condition in which people's wants outstrip the limited resources available to satisfy those wants. C. economic condition that exists in only very poor countries of the world. D. condition in which society produces too many frivolous goods and not enough socially desirable goods. E. condition in which people who deserve goods are not able to pay for them.

B. condition in which people's wants outstrip the limited resources available to satisfy those wants.

The opportunity cost of a particular activity A. is the same for everyone pursuing this activity B. may include both monetary costs and foregone income C. always decreases as more of that activity is pursued D. usually is known with certainty E. measures the direct benefits of that activity

B. may include both monetary costs and foregone income

If two goods are substitutes: A. they cannot be produced together B. the cross price elasticity of demand for these two goods will be positive C. the cross price elasticity of demand for these two goods will be negative D. the cross price elasticity of demand will be equal to one E. the cross price elasticity of demand will be equal to zero

B. the cross price elasticity of demand for these two goods will be positive

A tax placed on buyers of airline tickets shifts A. the demand curve for airline tickets downward, decreasing the price received by sellers of airline tickets and causing the quantity of airline tickets to increase. B. the demand curve for airline tickets downward, decreasing the price received by sellers of airline tickets and causing the quantity of airline tickets to decrease. C. the supply curve for airline tickets upward, decreasing the effective price paid by buyers of airline tickets and causing the quantity of airline tickets to increase. D. the supply curve for airline tickets upward, increasing the effective price paid by buyers of airline tickets and causing the quantity of airline tickets to decrease. E. neither the supply nor demand curve, and thus has no effect on the market.

B. the demand curve for airline tickets downward, decreasing the price received by sellers of airline tickets and causing the quantity of airline tickets to decrease.

Normative economics deals with A. what is. B. what should be. C. relatively small units in the economy. D. aggregates or the entire economy. E. Norm's opportunity cost.

B. what should be.

Which of the following is an example of a positive economic statement? A. The minimum wage should be abolished. B.Increasing the minimum wage will lead to more unemployment among unskilled workers. C. No American needs to own more than 5 pairs of shoes. D. The distribution of income in the United States is not fair. E. The distribution of income in the United States is fair.

B.Increasing the minimum wage will lead to more unemployment among unskilled workers.

If there is always a three-for-one tradeoff between goods X and Y, then the PPF between X and Y is A. a downward-sloping curve that is bowed outward. B. a downward-sloping curve that is bowed inward. C. a downward-sloping straight line. D. an upward-sloping straight line. E. none of the above

C. a downward-sloping straight line.

Society's resources include: A. land and labor B. laborandmachinery C. land, labor and capital D. land, capital and money E. labor, capital and money

C. land, labor and capital

An increase in demand is represented by a A. movement downward and to the right along a demand curve. B. movement upward and to the left along a demand curve. C. rightward shift of a demand curve. D. leftward shift of a demand curve. E. movement upward and to the right along the supply curve.

C. rightward shift of a demand curve.

Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the A. tax is placed on the sellers of the product. B. tax is placed on the buyers of the product. C. supply of the product is more elastic than the demand for the product. D. demand for the product is more elastic than the supply of the product. E. both C and D

C. supply of the product is more elastic than the demand for the product

Opportunity cost is the value of A. the chosen alternative. B. afreegood. C. the best forfeited alternative. D. all forfeited alternatives. E. none of the above

C. the best forfeited alternative.

Suppose Vans supermarkets raises the price of its steak and finds its total revenue from steak sales does not change. This is evidence that price elasticity of demand for steak is: A. perfectly elastic B. perfectly inelastic C. unitary elastic D. inelastic E. elastic

C. unitary elastic

Moving along a demand curve, which of the following is not held constant? A. The price of a substitute good B. The price of a complementary good C. Consumerincomes D. The price of the good represented by the demand curve. E. The cost of an input.

D. The price of the good represented by the demand curve.

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will A. fall entirely on the buyers of fast-food French fries. B. fall entirely on the sellers of fast-food French fries. C. be shared equally by the buyers and sellers of fast-food French fries. D. be shared by the buyers and sellers of fast-food French fries but not necessarily equally. E. Will be outweighed by the health benefits of having people switch from eating French fries to eating kale.

D. be shared by the buyers and sellers of fast-food French fries but not necessarily equally.

5. In a market economy, most of what we consume is obtained by: A. a command system B. greed C. altruism D. exchange E. central planning

D. exchange

Price elasticity of supply refers to the: A. percentage increase in the price in response to a percentage increase in the quantity demanded B. percentage decrease in price in response to a percentage increase in income C. minimum amount that consumers will pay for a percentage change in quantity demanded or supplied D. responsiveness of quantity supplied to a change in the price of a good E. none of the above

D. responsiveness of quantity supplied to a change in the price of a good

Which of the following is a determinant of the market supply curve but not a determinant of an individual seller's supply? A. production technology B. expectations C. inputprices D. the number of sellers E. none of the above

D. the number of sellers

Price elasticity of demand is defined as: A. the percentage increase in price to an increase in quantity demanded B. the unit change in quantity demanded to the dollar change in price C. the maximum amount that consumers will pay to increase quantity D. the percentage change in quantity demanded to the percentage change in price, all other things being equal E. the bounce you take off of the wall as you see gasoline prices rising above $4.75 a gallon

D. the percentage change in quantity demanded to the percentage change in price, all other things being equal

When quantity demanded has increased at every price, it might be because A. the number of buyers in the market has decreased. B. income has increased, and the good is an inferior good. C. the costs incurred by sellers producing the good have decreased. D. the price of a complementary good has decreased. E. the price of a complementary good has increased.

D. the price of a complementary good has decreased.

When all resources used in the production of two goods are not perfectly substitutable: A. specialization does not lead to greater production B.the economy or firm is producing at a point outside of its production possibility frontier C. therewillbeconstantopportunitycosts D. the production possibilities frontier will be concave (bowed outward) E. the economy or firm will only produce one good

D. the production possibilities frontier will be concave (bowed outward)

Which of the following best describes what could happen in the labor market for unskilled day laborers if a slowdown in the economies of the United States and Mexico increased the supply of unskilled day laborers in the United States, while at the same time decreasing the demand for day laborers in the United States? A. The equilibrium quantity of day laborers hired in the United States could decrease, while the equilibrium wage for day laborers in the United States could increase. B. The equilibrium quantity of day laborers hired in the United States could increase, while the equilibrium wage for day laborers in the United States could decrease. C. The equilibrium quantity of day laborers hired in the United States could remain unchanged, while the equilibrium wage for day laborers in the United States could increase. D. The equilibrium quantity of day laborers hired in the United States could decrease, while the equilibrium wage for day laborers in the United States could decrease. E. Both B and D are possible

E. BothBandDarepossible

The study of economics would be superfluous (unnecessary) if ______________ did not exist. A. demand B. capital C. corporations D. profit E. scarcity

E. Scarcity

Which of the following would we not expect from a binding price ceiling? A. illegal trades B. fewer exchanges C. non price rationing devices D. shortage E. surplus

E. Surplus

Which of the following is a positive economic statement? A. We should raise the minimum wage in order to provide a decent wage for more people. B.Consumers bought fewer cars when the relative price of cars increased. C. The budget deficit has been declining in recent years. D. Federal government spending ought to be curtailed. E. bandc

E. b and c

Economics is the study of: A. scarcity under the conditions of democracy B. choicewithinasystemofcapitalism C. financialmarkets D. the role of government in a market system E. choice under conditions of scarcity

E. choice under conditions of scarcity