ECON Exam 1

Which of the following statements is correct about the roles of economists?

In trying to explain the world, economists are scientists; in trying to improve the world, they are policy advisers.

A hair stylist currently cuts and colors hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients

Suppose Jim and Tom can both produce two goods: baseball bats and hockey sticks. Which of the following is not possible?

Jim has a comparative advantage in the production of baseball bats and in the production of hockey sticks.

Which of the following events would cause a movement upward and to the left along the demand curve for olives?

The price of olives rises.

Dee is an accomplished actress and a homeowner who pays a landscaper to maintain her lawn rather than do it herself. Dee has determined that she can earn more in the hour it would take her to work on her lawn than she must pay her landscaper. This scenario is an example of which principle of economics?

Trade can make everyone better off.

In the circular-flow diagram, in the markets for

goods and services, households are buyers and firms are sellers.

The "invisible hands" ability to coordinate the decisions of the firms and households in the economy can be hindered by

government actions that distort prices.

Which of the following would likely be studied by a microeconomist rather than a macroeconomist?

The effect of a sales tax on the cigarette industry

Another term for factors of production is

inputs

Which of the following statements best represents the principle represented by the adage, "There ain't no such thing as a free lunch"?

Dani must decide between going to Florida or Brazil for spring break.

In the simple circular-flow diagram, which of the following is not true.

Firms own the factors of production.

Which of the following statements exemplifies a principle of individual decision making?

The cost of something is what you give up to get it.

Who gets scarce resources in a market economy?

Whoever is willing and able to pay the price

When we move along a given demand curve,

all nonprice determinants of demand are held constant.

Trade between countries

allows each country to consume at a point outside its production possibilities frontier.

A likely example of complementary goods for most people would be

chips and salsa.

Positive statements are

claims about how the world is.

Making rational decisions at the margin means that people

compare the marginal costs and marginal benefits of each decision.

A decrease in the price of a good will

decrease quantity supplied

Total output in an economy increases when each person specializes because

each person spends more time producing that product in which he or she has a comparative advantage.

When society gets the most it can from its scarce resources, then the outcome is called

efficient.

The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good,

has an absolute advantage in the production of that good.

A circular-flow diagram is a model that

helps to explain how the economy is organized.

Trade between countries tends to

increase both competition and specialization.

A farmer has the ability to grow either corn or cotton or some combination of the two. Given no other information, it follows that the farmer's opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton

is equal to 1.

Economists at the Department of the Treasury

provide advice on tax policy to the President.

As a student, Jordyn spends 40 hours per week writing term papers and completing homework assignments. On one axis of her production possibilities frontier is measured the number of term papers written per week. On the other axis is measured the number of homework assignments completed per week. Jordyn's production possibilities frontier is a straight line if

she can switch between writing term papers and completing homework assignments at a constant rate.

A rational decisionmaker...

takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.

Suppose there are only two people in the world. Each person's production possibilities frontier also represents his or her consumption possibilities when

they choose not to trade with one another.