Econ Final
According to the total revenue test, a price cut increases total revenue if demand is 7) A) inelastic. C) perfectly inelastic. B) elastic. D) unit elastic.
b
An economic profit for a self-employed entrepreneur is 6) A) accounting profit over and above depreciation. B) a profit over and above normal profit. C) a normal profit minus depreciation. D) the same as a normal profit.
b
When a deadweight loss occurs in a market, we can be certain that 22) A) the market is a monopoly. B) there underproduction in the market. C) the entire society experiences a loss. D) taxes have been imposed in a market.
c
Which of the following statements regarding a total product curve is true? 23) A) All the points that lie below the total product curve are attainable and inefficient. B) All the points that lie below the total product curve are attainable and efficient. C) All the points that lie above the total product curve are attainable and efficient. D) All the points that lie above the total product curve are attainable and inefficient.
a
Which of the following will result in a leftward shift in the demand curve for hot dogs? 6) A) an increase in the price of a hot dog bun C) a decrease in the price of a hot dog bun B) an increase in the price of a hamburger D) an increase in the price of a hot dog
a
Stefano has just completed an original oil painting. After considering the production costs for 18) brushes, paint, canvas, and the value of Stefano's labor time, the opportunity cost of the painting is $1,000. Lucky Stefano. One art lover paid him $1,500. How much producer surplus did Stefano obtain? A) The amount of producer surplus cannot be determined from the information given. B) $500 C) $1,500 D) $1,000
b
The fallacy of composition is the false belief that A) the ceteris paribus condition does not apply.B) what is true for each part is also true for the whole. C) because event A occurred after event B, event A caused event B. D) because event A occurred before event B, event A caused event B.
b
The study of the decisions of individual units in the economy is known as 3) A) macroeconomics. B) microeconomics. C) ceteris paribus study. D) the study of incentives.
b
Total product is 15) A) maximum amount of amount of output produced by a given quantity of labor divided by price of the output. B) maximum output that a given quantity of labor can produce. C) the increase in output that results from a one-unit increase in the quantity of labor employed with all other inputs remaining the same. D) maximum amount of output produced by a given quantity of labor divided by the given quantity of labor employed.
b
When the average product of labor is greater than the marginal product of labor, 24) A) the marginal product of labor must be increasing as labor increases. B) the average product of labor is decreasing as labor increases. C) there must be increasing marginal returns. D) all of the above
b
When the price of a movie ticket increases from $5 to $7, the quantity of tickets demanded 2) decreases from 600 to 400 a day. What is the price elasticity of demand for movie tickets? A) 2.32 B) 1.20 C) 1.00 D) 0.83
b
Which market type has characteristics as follows: large number of firms, differentiated 9) product? A) monopoly B) monopolistic competition C) perfect competition D) oligopoly
b
Which market type has characteristics as follows: small number of firms, competition between 12) the firms? A) perfect competition B) oligopoly C) monopoly D) monopolistic competition
b
Which of the following would NOT shift the demand curve for broccoli? 10) A) a warning by the U.S. Surgeon General that broccoli causes schizophrenia B) an increase in the cost of fertilizer used to grow broccoli C) an increase in the price of spinach, a substitute for broccoli, because rodents gobbled up much of this yearʹs spinach crop D) a decrease in the price of spinach, a substitute for broccoli, because of a bumper crop of spinach this year
b
A market with the characteristics of many firms selling an identical product, many buyers, and 11) no restrictions on entry or exit to the market is A) an oligopolistic market. B) a monopoly market. C) a perfectly competitive market. D) a monopolistically competitive market.
c
When the marginal product of labor is greater than the average product of labor, 22) A) the total product must be increasing at an increasing rate as labor increases. B) the marginal product of labor must be increasing as labor increases. C) the average product of labor must be increasing as labor increases. D) all of the above
c
When the percentage change in the quantity demanded is less than the percentage change in 5) the price, then A) demand is unit elastic. B) demand is elastic. C) demand is inelastic. D) the good is an inferior good.
c
When the price of a pizza decreases from $12 to $10, 2) A) the income effect means people buy less pizza. B) the quantity demanded of pizza will not change. C) the substitution effect means people buy more pizza. D) None of the above answers is correct.
c
Which of the following are types of economic markets? I. perfectly competitive. II. oligopoly .III. monopoly. IV. multilateral.A) I and II B) II and III C) I, II and IIID) I and IV
c
Which of the following is characteristic of the long run? 14) D) I and IV A) The firm's plant is fixed. C) All resources can be varied. B) It must exceed 12 months in length. D) All of the above answers are correct.
c
A local pizzeria raised its price from $9 to $11 for each pizza and the sales of its pizza 3) decreased from 150 to 100 per day. What is the price elasticity of demand in this case? A) -1/2 B) 1/2 C) -2 D) 2
d
A price floor is 24) A) a price below which a seller cannot legally sell. B) a price above which a seller cannot legally sell. C) a price that creates a surplus of the good if it is set above the equilibrium price. D) Both answers A and C are correct.
d
A rent ceiling results in a shortage. As a result, which of the following do you expect? 23) A) Discrimination as landlords choose their tenants, possibly based on race, age, or gender. B) The shortage will persist as long as the ceiling is in effect. C) A black market for apartments whereby higher rents are obtained through various other charges. D) All of the above would be expected.
d
A positive statement is a statement about A) what is. C) what should be but is not. B) what is desirable. D) what is and what should be
a
A reduction in the amount of unemployment 20) A) moves the economy's point of production closer to the production possibilities frontier. B) shifts the production possibilities frontier outward. C) moves the economy's point of production further away from the production possibilities frontier. D) moves the economy's point of production along the production possibilities frontier.
a
A supply curve that is horizontal reflects a supply that 16) A) is elastic. B) is unit elastic. C) is inelastic. D) has a zero elasticity.
a
By itself, an increase in the number of suppliers in a market results in a 14) A) rightward shift in the supply curve. B) leftward shift in the supply curve. C) movement down along the supply curve. D) Both answers A and C are correct.
a
Economic scarcity arises from A) limited resources and limitless wants. B) ExplorationC) inefficient production. 1) D) limited wants and limitless resources.
a
If the price of gasoline fell from $1.35 to $1.25 per gallon, your expenditure on gasoline would 11) increase if your price elasticity of demand for gasoline equals A) 1.1. B) 0.9. C) 1.0. D) Total revenue would increase at all of the above elasticities.
a
Economists define the short run as a period of time so short that 13) A) only one resource can be varied. B) at least one resource cannot be varied. C) output cannot be varied at all. D) output cannot be varied except under diminishing marginal returns.
b
Normative economic statements 13) A) deal with economic hypotheses that are not well-established laws. B) describe what ought to be. C) describe what is rather than what ought to be. D) describe the process of economic policy-making.
b
A cost due to an increase in activity is called A) an incentive loss. C) a marginal cost.B) a negative marginal benefit. D) the total cost.
c
Which of the following is the best way to describe equilibrium in a market? At equilibrium, 18) A) the price charged is usually affordable to most people. B) the supply and demand curves can never shift again. C) the quantity supplied equals the quantity demanded. D) the price charged is the lowest possible.
c
Which of the following lists has variables that all shift a demand curve? 5) A) expectation of future price, price of the good, number of buyers, income B) price of the good, preferences, prices of substitution goods, income C) income, preferences, number of buyers, price of complementary good D) Both answers A and B are correct.
c
he figure above illustrates that if this country wishes to have F2 - F1 additional food by 22) moving from point A to point B, it will
c
We observe that both the equilibrium price of 35mm cameras and the equilibrium quantity of 23) cameras have decreased. Which of the following events could be responsible for this? A) Consumersʹ income rose and 35mm cameras are a normal good. B) The price of 35mm films fell. C) A technological advance lowered 35mm camera production costs. D) The price of digital cameras fell.
d
When the price of a good falls, ceteris paribus, the income effect for a normal good implies that 3) people buy A) less of that good because the relative price of the good has fallen. B) more of that good because the relative price of the good has risen. C) less of that good because they cannot afford to buy all the things they previously bought. D) more of that good because they can afford to buy more of all the things they previously bought.
d
Which of the following shifts the demand curve for oranges? 4) A) an increase in the price of the fuel used to transport oranges to supermarkets B) disastrous weather that destroys about half of this yearʹs orange crop C) great weather that produces a bumper orange crop this year D) a decrease in the price of a pound of bananas, a substitute in consumption for oranges
d
Explicit costs differ from implicit costs in that A) explicit costs are paid in money, but implicit costs are often non-paid opportunity costs. B) implicit costs always present while some firms do not have any explicit costs. C) explicit costs are what an accountant would consider costs and are usually less than implicit costs. D) explicit costs are more important than implicit costs. 3)
a
For many goods, the price elasticity of demand increases over time after a price hike because 13) A) the ability to find good substitutes for the product whose price rose increases over time. B) inflation causes all prices and incomes to increase over time. C) consumer incomes tend to increase over time. D) ALL of the above answers are correct.
a
Fundamental economic problems basically arise from 2) A) our wants exceeding our scarce resources. B) the fact that society has more than it needs. C) the unequal distribution of income. D) turmoil in the stock market.
a
If the U.S. Surgeon General announced that increased grapefruit juice consumption could 21) cause lower cholesterol levels, what would happen to the equilibrium price and quantity of grapefruit juice? A) Price and quantity both increase. B) Price increases but quantity decreases. C) Price decreases but quantity increases. D) Price and quantity both decrease.
a
If the U.S. Surgeon General announces that increased wheat consumption could cause 19) heightened anxiety levels among children and adults, what happens to the equilibrium price and quantity of shredded wheat? A) The equilibrium price falls and the equilibrium quantity decreases. B) The equilibrium price rises and the equilibrium quantity increases. C) The equilibrium price rises and the equilibrium quantity decreases. D) The equilibrium price falls and the equilibrium quantity increases.
a
If the demand for a good is elastic, that means that when price increases A) the quantity demanded will decrease by a greater percentage than the price increased. B) the quantity demanded will decrease by a smaller percentage than the price increased. C) the demand will decrease. D) the quantity demanded will increase.
a
If there is an increase in demand for lumber, then, in the market for sawdust, (lumber and 15) sawdust are jointly produced) A) the supply curve of sawdust shifts rightward. B) the supply curve of sawdust shifts leftward. C) there would be a movement downward along the supply curve for sawdust. D) there would be a movement upward along the supply curve for sawdust.
a
Opportunity cost differs from the costs measured by an accountant because opportunity cost 2) includes all A) implicit costs. C) conventional depreciation. B) economic profit. D) profits.
a
Resource use is efficient when production is such that marginal social benefit is 19) A) equal to marginal social cost. B) greater than marginal social cost. C) at its maximum value. D) less than marginal social cost.
a
Suppose Frosty Pops cereal is an inferior good. An increase in income 9) A) leads to a decrease in the demand for Frosty Pops. B) leads to an increase in the demand for Frosty Pops. C) has no impact on the demand for Frosty Pops. D) has no income effect.
a
The closer the substitutes for a good, the 12) A) more elastic is the demand for the good. B) less elastic is the demand for the good. C) smaller the degree of substitutability between the goods. D) larger the proportion of income that is spent on the good.
a
The fact of increasing opportunity costs means that a production possibilities frontier will 24) A) bow outward. B) shift outward over time. C) reach a maximum and then gradually decrease. D) be a straight line.
a
The income elasticity of demand is ________ for a normal good and ________ for an inferior 15) good. A) positive; negative B) negative; negative C) positive; positive D) negative; positive
a
The term ceteris paribus means A) all other things remaining equal. C) the study of scarcity and choice.B) value free and testable. D) the greatest good for all.
a
The ʺlaw of demandʺ states that changes in 1) A) the quantity demanded of a good are inversely related to changes in its price. B) the quantity demanded of a good are not related to changes in the quantity supplied. C) demand are inversely related to changes in supply. D) demand are related directly to changes in supply.
a
The ʺlaw of supplyʺ states that, other things remaining the same, 13) A) firms will produce more of a good the higher its price. B) firms will produce less of a good as the required resources become scarcer. C) firms will produce less of a good the more it costs to produce it. D) firms will produce more of a good the less it costs to produce it.
a
When the demand and supply curves both shift rightward, which of the following happens? 25) A) The equilibrium quantity increases and any change in the equilibrium price cannot be determined. B) The equilibrium price falls and any change in the equilibrium quantity cannot be determined. C) The equilibrium price falls and the equilibrium quantity increases. D) The equilibrium price rises and the equilibrium quantity decreases.
a
Which market type has characteristics as follows: one firm, good or service produced has no 10) close substitutes, barriers to entry prevent new firms from entering into the industry?A) monopoly B) perfect competition C) oligopoly D) monopolistic competition
a
Which of the following is correct? Factors of production are 5) A) the inputs used to produce goods and services. B) land, labor, the price system, and capital. C) the fundamental source of abundance. D) only land and labor.
a
An increase the expected future price of a good 8) A) has no effect on either its demand or its supply. B) increases its demand. C) decreases its demand. D) increases its supply.
b
At that amount of output where diminishing marginal returns first sets in, 25) A) average product will begin to decline. C) total product will begin to decline. B) marginal product will begin to decline. D) all of the above
b
Bicycles are made out of steel. If the price of steel increases, there is a shift in the supply curve 24) of bicycles that leads to A) a permanent surplus of bicycles. C) a temporary surplus of bicycles. B) an increase in the price of a bicycle. D) a shift in the demand curve for bicycles.
b
Jefferson's Cleaners Labor Total product (workers) (suits cleaned per day) 0 0 1 12 2 26 3 46 4 60 5 73 6 84 7 94 8 102 9 109 18) Based on the above table, what is the marginal product of the 6th worker hired at Jefferson's 18) Cleaners? A) 10 suits per day C) 84 suits per day B) 11 suits per day D) 14 suits per day
b
Jefferson's Cleaners Labor Total product (workers) (suits cleaned per day) 0 0 1 12 2 26 3 46 4 60 5 73 6 84 7 94 8 102 9 109 Using the above table, what is the average product of labor when Jefferson's Cleaners employs 19) six workers? A) 11 suits per day B) 14 suits per day C) 12 suits per day D) 13 suits per day
b
Joe receives consumer surplus on the new computer he buys if 17) A) the price of the computer is marked down by 25 percent. B) the price of the computer is less than the marginal benefit he receives from buying the computer. C) the price of the computer is equal to his willingness to pay for the computer. D) he pays for the computer with money he earned from the stock market.
b
A firm's basic goal is to maximize its 1) A) revenue. B) cost. C) profit. D) production.
c
A lawn service is deciding whether to add an additional employee to its summer crew. The 10) marginal cost of hiring this worker depends on the A) the additional revenue created by having an additional worker. B) total amount paid to previously hired workers. C) total amount paid to the new worker. D) the total amount paid to all the workers, both the new one and the previously hired workers.
c
Cable television companies nation-wide must pay increased charges by the networks for the 11) programs the cable companies carry. As a result, they raise the price of cable television. Thus A) the demand curve for cable television service shifts rightward. B) there is a movement down the demand curve for cable television to a higher quantity demanded. C) there is a movement up the demand curve for cable television to a smaller quantity demanded. D) the demand curve for cable television service shifts leftward.
c
Coffee and sugar are complements. If a poor sugar harvest leads to an increase in the price of 20) sugar, there will also be A) an increase in coffee prices as well. B) a leftward shift of the supply curve of coffee. C) a decrease in coffee prices. D) a rightward shift in the demand curve for coffee.
c
Economic depreciation is the 5) A) return that an entrepreneur can expect to receive on average. B) forgone return on the funds used to buy capital. C) change in the market value of capital over a given period. D) firm's opportunity cost of using its own capital.
c
Economic profit is equal to A) normal profit. B) explicit costs plus implicit costs. C) total revenue minus opportunity cost. D) total revenue minus economic depreciation.
c
If University of Nebraska increased its season football ticket sales from 43,000 to 47,000 when it 8) lowered price from $350.00 to $300.00, then its demand for season tickets must be A) inelastic because total revenue increased when the price was lowered. B) elastic because total revenue increased when the price was lowered. C) inelastic because total revenue decreased when the price was lowered. D) elastic because total revenue decreased when the price was lowered.
c
If the demand curve is a downward sloping straight line, the price elasticity of demand always 6) A) decreases with movements upward to the left along the demand curve. B) increases as the demand curve shifts leftward. C) increases with movements upward to the left along the demand curve. D) increases as the demand curve shifts rightward
c
If the price of chicken falls, then in the market for beef, 7) A) there would be a movement downward along the demand curve for beef. B) there would be a movement upward along the demand curve for beef. C) the demand curve for beef would shift leftward. D) the demand curve for beef would shift rightward.
c
If the price per bushel of apples increased from $7.00 to $8.00 because of a poor harvest, 12) A) the demand for apples decreases. B) the quantity of apples supplied decreases. C) the quantity of apples demanded decreases. D) Both answers A and B are correct.
c
Increasing opportunity cost while moving along a production possibilities frontier is the result 23) of A) the fact that it is more difficult to use resources efficiently the more society produces. B) firms' needs to produce profits. C) the fact that resources are not equally productive in alternative uses. D) taxes.
c
Marginal product is 16) A) total amount of output produced divided by the quantity of labor employed. B) total amount of output produced. C) the increase in output that results from a one-unit increase in the quantity of labor employed with all other inputs remaining the same. D) total amount of output produced divided by price of the output.
c
Suppose a country, when operating on its PPF, can produce 2 tons of butter and 200 cars OR 3 21) tons of butter and 150 cars. The opportunity cost of 1 ton of butter is A) 200 cars. B) 300 cars. C) 50 cars. D) 0.75 cars.
c
Suppose the equilibrium wage is $10 per hour. An effective ________ would be set at ________. 25) A) price ceiling; $10 per hour C) price floor; $12 per hour B) price floor; $8 per hour D) price ceiling; $12 per hour
c
The ________ describes the mistake of reasoning that event A causes event B just because event 17) A occurs prior to event B. A) fallacy of composition C) post hoc fallacy B) fallacy of supposition D) ceteris paribus fallacy
c
The average product of labor is equal to the 17) A) total number of workers hired divided by the total product. B) slope of the marginal product of labor curve. C) total product divided by the total number of workers hired. D) Both answers B and C are correct.
c
The law of diminishing returns makes it clear that as more a variable input is employed, 21) A) in the short-run the marginal product of the variable input will eventually rise. B) in the long-run the marginal product of the variable input will eventually fall. C) in the short-run the marginal product of the variable input will eventually fall. D) in the long-run the marginal product of the variable input will eventually rise.
c
The marginal benefit is the 8) A) additional cost from one more unit of an activity. B) forgone opportunity. C) additional gain from one more unit of an activity. D) loss of the highest-valued alternative.
c
The price elasticity of demand for corn is 0.4. A new hybrid of corn is discovered and all 10) farmers start to use it, which increases the quantity of corn they can produce from each acre. What happens to the farmers' total revenue? A) The total revenue will not change. B) The total revenue will increase. C) The total revenue will decrease. D) There is not enough information to determine what happens to the total revenue.
c
The production possibilities frontier represents A) combinations of goods and services among which consumers are indifferent. B) the maximum rate of growth of capital and labor in a country. C) the maximum levels of production that can be attained. D) the maximum amount of labor and capital available to society.
c
The statement "Unemployment should be kept at or below a level of 6 percent" is 14) A) a positive statement. C) a normative statement.B) an assumption. D) a prediction.
c
A firm incurs implicit costs when 4) A) it pays interest on loans to a bank. B) it hires labor services at the market wage. C) it rents capital equipment from another firm. D) the company uses capital equipment which it owns.
d
After you graduate, you have decided to accept a position working at the Bureau of Labor 7) Statistics for $35,000.00 a year. The two other offers you received were working for Wal-Mart for $28,000 and working for Ernst and Young consulting for $32,000. What is the opportunity cost of accepting the position at the Bureau of Labor Statistics? A) the $32,000 you would have been paid working for Ernst and Young and the $28,000 you would have been paid working for Wal-Mart B) the $28,000 you would have been paid working for Wal-Mart C) the $35,000 you are paid for working at the Bureau of Labor Statistics D) the $32,000 you would have been paid working for Ernst and Young
d
Consider the market for broccoli. If the price of a pound of broccoli increases, what will 16) happen to the supply of broccoli? A) The supply of broccoli will increase. B) The supply of broccoli will decrease. C) There will be no change in the supply of broccoli, but instead will be a decrease in the quantity supplied of broccoli. D) There will be no change in the supply of broccoli, but instead will be an increase in the quantity supplied of broccoli.
d
During the last decade, the price of shoes rose substantially yet people bought more pairs of 22) new shoes each year. This experience suggests that A) the demand curve for shoes shifted leftward. B) the supply curve of shoes shifted rightward. C) the supply curve of shoes shifted leftward. D) the demand curve for shoes shifted rightward.
d
If peanut butter and jelly are complements their cross elasticity of demand must be 14) A) a number between zero and one. B) a positive number that might be greater than 1. C) infinitely high. D) a negative number.
d
In 1973 and again in 1979, the Organization of Petroleum Exporting Countries (OPEC) raised 9) the world price of crude oil and increased their revenue as well. Which of the following is a true statement regarding these OPEC price hikes? A) Their revenue would have increased regardless of income elasticity or price elasticity because oil is an imported product for most nations. B) Their revenue only increased because oil was already very expensive. C) Their revenue increased because the demand for oil was income inelastic. D) Their revenue increased because the demand for oil was price inelastic.
d
Opportunity cost is best defined as 6) A) how much money is paid for something, taking inflation into account. B) how much money is paid for something. C) all the alternatives that are given up to get something. D) the highest-valued alternative that is given up to get something.
d
Production possibilities Possibility Pizza Soda (cases per (per hour) hour) A 0 100 B 1 95 C 2 80 D 3 60 E 4 35 F 5 0 25) In the above table, the opportunity cost of the 2nd pizza is 25) A) 95 cases of soda. C) 0 cases of soda. B) 80 cases of soda. D) 15 cases of soda.
d
Suppose the country of Popcorn produces only jets and corn. If Popcorn cannot produce any 19) more jets without giving up corn, we say that Popcorn has achieved A) the lowest marginal cost. C) the highest marginal benefit. B) the highest opportunity cost. D) production efficiency.
d
The branch of economics that deals with the analysis of the whole economy is called 4) A) microeconomics. B) marginal analysis. C) ceteris paribus analysis. D) macroeconomics.
d
The decrease in consumer surplus and producer surplus that results from an inefficient level of 21) production is called the A) external benefit. B) big tradeoff. C) external cost. D) deadweight loss.
d
The price elasticity of demand equals the magnitude of 1) A) the slope of the demand curve. B) the percentage change in the price of a good divided by the percentage change in the quantity demanded. C) the inverse of the slope of the demand curve. D) the percentage change in the quantity demanded of a good divided by the percentage change in its price.
d
To decide whether to go to the beach for spring break, you should 11) A) not make the fallacy of composition. B) a negative marginal benefit. D) the total cost. B) unscramble cause and effect. C) not make the post hoc fallacy. D) compare marginal cost to the marginal benefit of taking the trip.
d
Using the data in the above table, which worker hired at Jefferson's Cleaners is the first to yield 20) diminishing marginal returns? A) the second B) the fifth C) the third D) the fourth
d
Which of the following shifts the supply curve for oranges? 17) A) a newly discovered increase in the nutritional value of oranges B) an increase in income for all orange consumers C) an increase in the price of bananas, a substitute in consumption for oranges D) disastrous weather that destroys about half of this yearʹs orange crop
d
________ can prevent the efficient allocation of resources. 20) A) Competitive markets C) The equilibrium price B) Marginal cost D) Price floors
d
