Economics exam 1

Let V1 equal the value of a variable in period 1 and V2 equal the value of the same variable in period 2. What is the rate of growth between periods 1 and​ 2? A.) ((V1 + V2)/2)x100 B.) V2-V1 C.) (V2-V1)/(V1+V2) D.) ((V2-V1)/V1) x100

((V2-V1)/V1) x 100

A college must decide if it wants to offer more Internet-based classes. This decision involves answering the economic question of "what to produce." TRUE/FALSE

False

Crude oil is not an example of a factor of production, but when crude oil is processed into gasoline, it is a factor of production. TRUE/FALSE

False

If Sanjaya can shuck more oysters in one hour than Tatiana, then Sanjaya has a comparative advantage in shucking oysters. TRUE/FALSE

False

If a country only produces two goods, it's possible to have a comparative advantage in the production of both of them. TRUE/FALSE

False

If the decision is optimal we can say that the marginal cost that involves the decision is equal to zero True/false

False

In the market for factors of production, firms earn income by selling goods and services to households. TRUE/ FALSE

False

On a diagram of a ppf, The opportunity cost of a good on the vertical axis is represented by the slope of the ppf TRUE/FALSE

False

TRUE/FALSE. Positive analysis is concerned with "what ought to be" while normative analysis is concerned with "what is"

False

Which of the following statements is most consistent with positive economic analysis A.) the us should produce at home the goods that it now imports- that way the nation can generate additional jobs here at home B.) The United States would be better off if it specialized in the production of some goods, and then traded some of them to other countries. C.) the us would be better off self sufficient, so it wouldn't need to rely on other nations D.) the us should establish trade with friendly countries and avoid trade with enemies

The United States would be better off if it specialized in the production of some goods, and then traded some of them to other countries.

To increase gas mileage, automobile manufacturers make cars small and light. Large cars absorb more of the impact of an accident than small cars but yield lower gas mileage. These facts suggest that a negative relationship exists between safety and gas mileage (T/F)

True

Which of the following generates productive efficiency? A.) competition among sellers B.) competition among buyers C.) government inspectors D.) government production rules and regulations

competition among sellers

By definition, economics is the study of A.) how to make money in the stock market B.) how to make money in a market economy C.) the choices people make to obtain their goals given their scarce resources D.) supply and demand

the choices people make to attain their goals, given their scarce resources

What is the purpose of an economic hypothesis? A.) to make a statement based on fact B.) to determine the validity of statistical analyses used in testing a model C.) to establish a causal relationship D.) to establish behavioral assumption

to establish a causal relationship

Economists assume that rational people do all of the following except A.) use all available info as they act to achieve their goals B.) undertake activities that benefit others and hurt themselves C.) weigh the benefits and costs of all possible alternative actions

undertake activities that benefit others and hurt themselves

Marginal analysis involves undertaking an activity A.) until its marginal costs start declining B.) only when it's marginal benefits are positive C.) until it's marginal benefits equal marginal costs D.) only if it's marginal costs are greater than its marginal benefits

until its marginal benefits equal marginal costs.

Suppose the revenues from selling alcoholic beverages between 2006 and 2008 increased from $42 to $52 million. Using this information calculate the percentage change in sales of alcohol beverages between these two years. A.) 40% B.) 73.3% C.) 23.8 % D.) 42.9%

23.8

Assume that Apple computer can earn an addition $65 million of revenue from making 150,000 more iPhones. What must the additional cost of producing these 150,000 be to make the additional output economically rational? A.) $66 million B.) $67 million C.) $64 million D.) in order to determine the economic rationality of the output one should take into account not only the additional but also previously incurred costs of production

64 million

When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of? A.) marginal analysis B.) a market C.) scarcity

A market

If property rights are not well enforced, all of the following are likely to occur except: A.) a significant number of people will be willing to risk their funds by investing them in a local business B.) fewer goods and services will be produced C.) economic efficiency will be reduced D.) an economy will produce inside its ppf

A significant number of people will be willing to risk their funds by investing them in a local business

Which of the following is the textbook's definition of a supply schedule? A.) A table that shows the relationship between the price of a product and the quantity of the pricier supplied B.) the quantity of a good or service that a firm is willing and able to supply at a given price C.) none of the above D.) a curve that shows the relationship between the price of a product and the quantity

A table that shows the relationship between the price of a product and the quantity of the pricier supplied

What types of economics require that answers be given to the following questions: what goods and services will be produced, how will the goods and services be produced, and who will receive the goods and services produced? A.) mixed economies B.) centrally planned economies C.) market economies D.) all of the above

All of the above

Voluntary exchange between buyers and sellers generates _ in a market economy. A.) scarcity B.) allocative efficiency C.) productive efficiency D.) ewuity

Allocative efficiency

Which of the following is achieved when a good or service is produced up to the point where the marginal benefit to consumers is equal to the marginal cost of producing it? A.) allocative efficiency B.) equality C.) equity D.) productive efficiency

Allocative efficiency

Economic models A.) are simplified versions of reality B.) make no assumption in order to remain as accurate as possible C.) magnify the complexity of economic issues in order to provide useful data D.) cannot be used to analyze real-world issues

Are simplified versions of reality

The decision about what goods and services will be produced made in a market economy is made by A.) lawmakers in the government voting on what will be produced B.) workers deciding to produce only what the boss says must be C.) consumers and firms choosing which goods and services to buy or produce D.) consumers dictating to firms what they need most

Consumers and firms choosing which goods and services to buy or produce

Which of the following would shift a nation's ppf outward? A.) decrease in unemployment rate B.) discovering a cheap way to convert sunshine into electricity C.) an increase in demand for the nations products D.) a law requiring workers to retire at 50

Discovering a cheap way to convert sunshine into electricity

The primary purpose of patents and copyright is to A.) protect domestic firms from foreign competitors B.) protect firms from being taken advantage of by competing firms C.) provide owners with large profit forever D.) encourage the expenditure of funds on research and development to create new products

Encourage the expenditure of funds on research and development to create new products

Which of the following terms best refers to a fair distribution of economic benefits? A.) productive efficiency B.) equity C.) voluntary exchange D.) allocative wfficiency

Equity

Which of the following is an example of a positive question? A.) should the college cut tuition to increase enrollments? B.) if the college increased tuition, would class sizes decline C.) should the university provide more financial aid assistance to students? D.) should the university offer free parking to students?

If the college increased tuition, would class sizes decline?

Which of the following is a positive economic statement? A.) the standard of living in United States should be higher B.) if the price of iPhones falls, a larger quantity of iPhones will be purchased C.) the government should revamp the healthcare system D.) the us government should not have bailed out us auto manufacturers

If the price of iPhones falls, A larger quantity of iPhones will be purchased

According to Adam smith, which of the following is true? A.) market prices can come to reflect the prices desired by all consumers B.) markets work because producers, aside by government, ensure that neither too many nor too few goods are produced. C.) individuals usually act in a rational, self-interested way D.) all of the above

Individuals usually act in a rational, self interested way

What is an economic model? A.) a simplified version of some aspect of economic life used to analyze an economic issue B.) a description of an economic issue based on official government information C.) a description of an economic issue that includes all possible related information D.) a detailed version of some aspects of economic life used to analyze an economic issue

It is a simplified version of some aspect of economic life used to analyze an economic issue.

If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced. A.) bowed out B.) non-linear C.) linear D.) bowed in

Linear

Which of the following best describes the characteristics of models used in economics? A.) models are usually complex abstractions of reality that simulate practical problems. B.) models are approximations to reality that capture as many details as possible C.) models are simplifications of reality that include only essential elements and exclude less relevant details D.) models are concerned with what economic policies ought to be

Models are simplifications of reality that include only essential elements and exclude less relevant details.

What type of economic analysis is concerned with the way things ought to be? A.) marginal analysis B.) positive analysis C.) rational behavior D.) normative analysis

Normative analysis

Which of the following is not an essential component of an economic model? A.) variables B.) hypothesis C.) assumptions D.) normative statements

Normative statements

If the price of a good or service rises, households have to choose whether to buy less of the product or spend less on other products. Studies have shown that when the price of healthcare rises, A.) people continue to consume the same amount of medical services and reduce spending on other services B.) people cut back on medical services C.) people consume more medical services because they're considered more valuable D.) there is no correlation

People cut back on medical services

Which of the following involves an estimation of the benefits and costs of a particular action? A.) normative analysis B.) the market mechanism C.) positive analysis D.) an irrational conclusion

Positive analysis

A decrease in the price of digital cameras will decrease the demand for film. This is an example of a.) positive statement V.) negative statement C.) normative statement D.) reactive statement

Positive statement

What type of statement would "a minimum wage actually reduces employment" be considered? A.) normative statement B.) positive statement C.) marginal statement D.) irrational conclusion

Positive statement

What does an economy achieve by producing a good or service at the least possible cost? A.) allocative efficiency B.) equity C.) voluntary exchange D.) productive efficiency

Productive efficiency

It is necessary for all economic systems to provide people with goods and services and also restrict them from getting as much of these goods and services as they wish, because failure to do this could _ the efficiency of the systems producing some goods and services that are _ A.) reduce, valued more than others B.) increase, valued more than others C.) increase, not as highly valuable as others D.) reduce, not as highly valuable as others

Reduce, not as highly valuable as others

_ is a problem that occurs when one concludes that a change in variable X causes a change in variable Y whereas in actuality it is the change in variable Y that causes a change in x A.) the omitted variable V.) the positive to negative relationship C.) reverse causality D.) nonlinear slope

Reverse causality

Which of the following statements best describes scarcity? A.) scarcity studies the choices people make to obtain their goals B.) scarcity is a situation in which unlimited wants exceed the limited resources C.) scarcity is an imbalance between buyers and sellers in a specific market D.) scarcity refers to a lack of trade-off.

Scarcity is a situation where unlimited wants exceed limited resources.

Economic growth is represented on a ppf model by the ppf A.) becoming flatter B.) becoming steeper C.) shifting inward D.) shifting outward

Shifting outward

Which of the following questions can be answered using normative economic reasoning? A.) should a college cut tuition to stimulate enrollments? B.) if a college offers free parking, will more students drive to campus? C.) if a college hires better qualified instructors, will more students attend? D.) if a college provides more financial aid, would more students go to college?

Should a college cut tuition to stimulate enrollments?

Opportunity cost is A.) the lowest value alternative that must be given up to engage in an activity B.) the highest valued alternative that must be given up to engage in an activity C.) the cumulative values of all alternatives that must be given up to engage in an activity D.) the estimated value of the average alternative that must be given up to engage in an activity

The highest-valued alternative that must be given up to engage in an activity.

How does a market system prevent people from getting as many goods and services as they wish? A.) governments interfere with market mechanism B.) the government imposes taxes C.) in a market mechanism, firms can charge any price they want, thus preventing poor people from getting as many goods and services as they wish D.) the market system allocates goods and services to those who are able to pay for those products and therefore income is a limiting factor

The market system allocates goods and services to those who are able to pay for those products and therefore income is a limiting factor.

Which of the following is a positive economic statement? A.) the minimum wage law causes unemployment B.) the number of work visas should not be limited by the government C.) the government should subsidize solar power for homeowners D.) people should not buy imported goods or vegetables

The minimum wage law causes unemployment.

The attainable production points on a production possibilities frontier are A.) the points along and inside the frontier The horizontal and vertical intercepts C.) the points along the ppf D.) the points outside the area enclosed by the ppf

The points along and inside the frontier

The term quantity supplied refers to A.) A table that shows the relationship between the price of a product in the quantity of the product supplied B.) The quantity of a good or service that a firm is willing and able to supply at a given price C.) A curve that shows the relationship between the price of a product and the quantity of the product demanded D.) none of the above

The quantity of a good or service that a firm is willing and able to supply at a given price

You explain to your roommate, who makes beaded headbands, about an economic theory which asserts that consumers will purchase more of a product at lower prices than they will at higher prices. She contends that the theory is incorrect because over the past two years she has lowered the price of her headbands and yet has seen a decrease in sales. How would you respond? A.) she is right and has evidence to support it. B.) she's making the mistake of assuming correlation implies causation C.) she is making the error of reverse causality: it is the decrease in demand that has caused her to lower her prices D.) there are some omitted variables that have contributed to a decrease in her sales such as changes in income

There are some omitted variables that have contributed to a decrease in her sales such as changes in income

In Estonia, the government pays working women who take time off after having a baby their entire salary for up to 15 months, and women who do not work receive $200 per month after having a baby. How will these benefits affect a woman's decision to have children?

They will encourage women to have children and increase the birth rate

Entrepreneurs bring together the factors of production to produce goods and services

True

The slope of a straight line equals the change in value on the _ axis _ by the change in the value on the other axis between any two points on the line. A.) horizontal, divided B.) vertical, multiplied C.) horizontal, multiplied D.) vertical, divided

Vertical, divided

Which of the following terms summarizes the situation in which a buyer and a seller exchange a product in a market and, as a result, both are made better off by the transaction? A.) allocative efficiency B.) voluntary exchange C.) productive efficiency D.) equity

Voluntary exchange

Which of the following is a macroeconomics question? A.) what determines the inflation rate B.) what determines the production of dvds C.) what factors determine the price of carrots? D.) what determines the wage of auto workers?

What determines the inflation rate?

Which of the following is a microeconomics question? A.) how much will be saved and how much will be produced in the entire economy? B.) what will the level of economic growth be in the entire country? C.) what factors determine the price of carrots? D.) what determines the average price level and inflation?

What factors determine the price of carrots?

Which of the following is not among the fundamental economic questions that every society must solve? A.) what goods and services will be produced? B.) how will the goods and services be produced? C.) what goods and services will be exchanged? D.) who will receive the goods and services produced?

What goods and services will be exchanged?

Political candidates often hold fund raisers by charging "per plate" for dinner. Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate. Is this transaction economically efficient? A.) no, political candidates should never be allowed to overcharge for a fund raising dinner B.) yes, it was a voluntary exchange that benefited both parties. C.) no, Wendy paid too much for four dinners. D.) yes, It was efficient from the perspective of the Candidate but not from the perspective of Wendy

Yes, it was a voluntary exchange that benefited both parties

In what type of economy does the government decide how economic resources will be allocated? A.) centrally planned economy B.) none of the above C.) a mixed economy D.) a market economy

a centrally planned economy The government decides what products and services to produce, how to produce them, and who gets those goods and services. In a market economy the signals are provided by the market and the profit motive determines the answers to those questions. Most economies are mixed with some elements of both a centrally planned economy and a market economy.

Voluntary exchange between buyers and sellers generates _ in a market economy A.) scarcity B.) allocative efficiency C.) productive efficiency D.) equity

allocative efficiency

Who receives the goods and services produced in the United States depends largely on A.) What goods and services are produced B.) how income is distributed C.) government redistribution D.) how the goods and services are produced

how income is distributed

In economics, the accumulated skills and training that workers have is known as A.) human capital B.) entrepreneurship C.) physical capital D.) innovation

human capital

Fill in the blanks. In economics, as well as in life, optimal decisions are made _ A.) once all costs have been considered B.) only when all benefits have been considered C.) in their totality D.) at the margin

margin

Competition forces firms to produce and sell products as long as the _ to consumers exceeds the _ of production A.) marginal benefit, marginal cost B.) marginal benefit, marginal benefit C.) marginal cost, marginal benefit D.) marginal cost, marginal cost

marginal benefit; marginal cost

Which of the following is the best classification for the economies of the United States, Canada, Japan, and Western Europe? A.) none of the above B.) market economies C.) centrally planned economies D.) mixed economies

mixed economies

Every society faces trade-offs. This means A.) society's output cannot be made available to all B.) producing more of one good means less of another good can be produced C.) not everyone can have enough goods to survive D.) some people live better than others

producing more of one good means less of another good can be produced.

Adam smiths invisible hand refers to A.) the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole B.) the government's unobtrusive role in ensuring that the economy functions efficiently C.) the laws of nature that influence economists decisions D.) property ownership laws and the rule of the court system

the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole

A student comments to his roommate that the only way he will be able to pass his final exams is to not sleep for the next three days. This statement suggests that A.) students aren't concerned with good health B.) society should value sleep higher than grades C.) society should value good grades highly D.) there is a trade off between studying and sleep

there is a trade-off between studying and sleep.