ECON - TEST 1

When we move along a given demand curve,

all nonprice determinants of demand are held constant.

The slow growth of U.S. incomes during the 1970s and 1980s can best be explained by

slow productivity growth in the U.S.

At a price of $35, there would be a

surplus of 400 units

The primary determinant of a country's standard of living is

the country's ability to produce goods and services

People are willing to pay more for a diamond than for a bottle of water because

the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water

The term market failure refers to

a situation in which the market on its own fails to allocate resources efficiently

The equilibrium price and quantity, are

$6 and 30 demanded and 30 supplied

Figure 3-3 If Dina must work 0.25 hour to produce each taco, then her production possibilities frontier is based on how many hours of work?

100 hours

The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes from whose 1776 book?

Adam Smith

Which of these activities will most likely result in a external benefit?

An elderly woman plants a flower garden on a vacant lot

Which of the following firms is likely to have the greatest market power?

An electric company

Which of the following statements does not apply to a market economy?

Government policies are the primary forces that guide decisions of firms and households.

The rate of trade-off between producing chairs and producing couches depends on how many chairs and couches are being produced in

Graph (a) - curved line

The rate of trade-off between producing chairs and couches is constant in

Graph (b) - straight line

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

A likely example of complementary goods for most people would be

chips and salsa

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

efficient

When the government redistributes income from the wealthy to the poor,

equality is improved, but efficiency is not

Large or persistent inflation is almost always caused by

excessive growth in the quantity of money

A circular-flow diagram is a model that

explains how the economy is organized

Pizza is a normal good if the demand

for pizza rises when income rises

Soup is an inferior good if the demand

for soup falls when income rises.

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

A popular celebrity that is paid highly for her time should probably not mow her own lawn because

her opportunity cost of mowing her lawn is higher than the cost of paying someone to mow it for her

Microeconomics is the study of

how individual households and firms make decisions.

Trade between countries tends to

increase both competition and specialization.

Where can an economy not produce?

outside its production possibilities frontier

In a market economy, economic activity is guided by

self interest and prices

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

sell the ticket because the marginal benefit exceeds the marginal cost

Productivity is defined as

the quantity of goods and services produced from each unit of labor input

A production possibilities frontier is bowed outward when

the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

The marginal benefit Sabrina gets from purchasing a third pair of gloves is

the total benefit she gets from purchasing three pairs of gloves minus the total benefit she gets from purchasing two pairs of gloves.

Economics is the study of how society manages its

unlimited wants and limited resources

Which of the following statements about trade is false?

with trade, one country loses and one country wins