ECON FINAL REVIEW

According to the theory of comparative advantage, a good should be produced where a production can occur with the greatest increase in employment. b its opportunity costs are least. c production can occur with the lowest increase in employment. d the cost of real resources used is least. e its explicit costs are least.

B

Which of the following statements would be studied in Microeconomics? a. Disposable income for Americans has kept up with inflation since World War II b. Exxon's profits increased by 25 percent as a result of the Persian Gulf conflict. c. Inflation this year will increase by 5 percent. d. The GDP of the U.S. was 4 trillion dollars. e. National income is up 5 percent over last year.

B

Suppose that Habib has a weekly fixed budget and spends it all on music downloads and snacks. At his current combination of consumption, the marginal utility of the last dollar spent on music downloads is greater than the marginal utility of the last dollar spent on snacks. Has Habib maximized his utility? a Yes, because he has purchased the maximum possible with his limited budget. b Yes, because changing his current consumption combination will reduce his total utility. c No, because he can increase his total utility by purchasing more music downloads and fewer snacks. d Yes, because he has purchased the two goods in proportion so that he can get the maximum utility from each. e No, because he can increase his total utility by purchasing fewer music downloads and more snacks.

C

The best use of the term scarcity in defining economics is the a study of the satisfaction of limited wants with unlimited resources b study of the satisfaction of limited wants with limited resources c study of the satisfaction of unlimited wants with limited resources d lack of money relative to production e study of the satisfaction of unlimited wants with unlimited resources

C

What effect can specialization have on the allocation and production of resources in a society? a Allocation: No change; Production: Decreased b Allocation: Less efficient; Production: Increased c Allocation: More efficient; Production: Increased d Allocation: Less efficient; Production: Decreased e Allocation: More efficient; Production: Decreased

C

In the circular flow model all of the following statements are correct EXCEPT: a Households are suppliers of resources and demanders of products. b Household consumption occurs in the product market. c Expenditures on products and payments to owners of resources to produce those products are known as the circular flow of income. d Household consumption occurs in the resource market. e Businesses are demanders of resources and suppliers of products.

D?

A rational decision maker will choose to act only if a the average benefit of the action is greater than the marginal cost of that action. b the marginal benefit of the action is less than the average cost of that action. c the average benefit of the action is less than the average cost of that action. d the marginal benefit of the action is greater than the average cost of that action. e the marginal benefit of the action is greater than the marginal cost of that action.

E

Money paid to the providers of land, labor, capital and entrepreneurial ability, respectively, is a rent, wages, profit and interest b wages, rent, interest and profit c wages, profit, rent and interest d interest, wages, profit and rent e rent, wages, interest and profit

E

If the cost of producing automobiles increases, the price, equilibrium quantity, and consumer surplus will most likely change in which of the following ways? a. Price Increase; Quantity Decrease; Consumer Surplus Decrease b. Price Increase; Quantity Increase; Consumer Surplus Increase c. Price Decrease; Quantity Increase; Consumer Surplus Decrease d. Price Increase; Quantity Decrease; Consumer Surplus Increase e. Price Decrease; Quantity Decrease; Consumer Surplus Decrease

a. Price Increase; Quantity Decrease; Consumer Surplus Decrease

If the import quotas on Japanese automobiles coming into the U.S. were removed and Japanese and U.S. automobiles are close substitutes, graphically, what would the effect be on U.S. automobiles? a. a shift from D to D1 b. a shift from D to D2 c. movement from A to B d. movement from B to A e. a shift from D2 to D1

a. a shift from D to D1

If new technology reduces the cost of producing phones, this would be represented by a. a shift from S to S1 b. a shift from S to S2 c. movement from A to B d. movement from B to A e. a shift from S2 to S1

a. a shift from S to S1

Which statement is true of this supply and demand curve? a. Price OA will result in surpluses of the product. b. Price OB is an equilibrium price. c. Price OC will result in shortages of the product. d. Price OA is an equilibrium price. e. At price OC suppliers will compete for more buyers by raising their prices.

b. Price OB is an equilibrium price.

The city of Atlanta has decided to enact legislation making private rental housing subject to rent control. The rent control price is set below market price. The rent control price would be represented by a change from a. OB to OC b. OC to OA c. OB to OA d. OA to OB e. OC to OB

c. OB to OA

Which of the following statements about price controls is true? a. A price ceiling causes an increase in demand if the price ceiling is set below the equilibrium price. b. A price ceiling causes a shortage if the ceiling price is above the equilibrium price. c. A price ceiling causes a decrease in demand if the price ceiling is set above the equilibrium price. d. A price floor causes a surplus if the price floor is above the equilibrium price. e. A price floor causes a surplus if the price floor is below the equilibrium price.

d. A price floor causes a surplus if the price floor is above the equilibrium price.

Which of the following explains why the supply curve is upward sloping? a. At a higher quantity, producers are more able to control the market price. b. Producers receive subsidies as they increase production. c. At a lower price, consumers are able to buy more of the good. d. At a higher price, producers are willing to sell more to increase their profits. e. At a higher price, consumers are willing to buy more of the good.

d. At a higher price, producers are willing to sell more to increase their profits.

An increase in the quantity supplied would be represented by a. a shift from S to S2 b. a shift from S2 to S1 c. a shift from S to S1 d. movement from A to B e. movement from B to A

d. movement from A to B

If the price of lunch at the school cafeteria increases and the cafeteria revenue remains constant, the price elasticity of demand for a school lunch must be a. Perfectly Elastic b. Perfectly Inelastic c. Inelastic d. Elastic e. Unit Elastic

e. Unit Elastic

An increase in price would result in a. no change in quantity supplied b. an increase in supply c. a decrease in quantity supplied d. a decrease in supply e. an increase in quantity supplied

e. an increase in quantity supplied

An inferior good is one in which the relationship between demand and income is a. Vertical b. Direct c. Inverse d. Equal e. Horizontal

inverse

when marginal product goes negative

total revenue decreases