Exam 1 Micro-Economics

Suppose Jim and Tom can both produce baseball bats. If Jim's opportunity cost of producing baseball bats is lower than Tom's opportunity cost of producing baseball bats, then... A - Jim has a comparative advantage in the production of baseball bats B - Jim must have an absolute advantage in the production of baseball bats C - Tom has a comparative advantage in the production of baseball bats D - Tom must have an absolute advantage in the production of baseball bats

A - Jim has a comparative advantage in the production of baseball bats

Figure 2-7. This economy has the ability to produce at which point(s)? A - L, M, N, O, P B - L, M C - L, M, Q D - N, O, P

A - L, M, N, O, P

In economics, capital refers to... A - buildings and machines used in the production process B - the finances necessary for firms to produce their products C - the money households use to purchase firms' output D - stocks and bonds

A - buildings and machines used in the production process

A rational decision maker takes an action only if the... A - marginal benefit is greater than the marginal cost B - marginal benefit is greater than both the average cost and the marginal cost C - average benefit is greater than the average cost D - marginal benefit is less than the marginal cost

A - marginal benefit is greater than the marginal cost

If Max experiences a decrease in his income, then we would expect Max's demand for... A - normal goods to decrease B - each good he purchases to remain unchanged C - inferior goods to decrease D - luxury goods to increase

A - normal goods to decrease

When a society cannot produce all the goods and services people which to have, it is said that the economy is experiencing... A - scarcity B - inequalities C - surpluses D - inefficiencies

A - scarcity

The production possibilities frontier is a graph that shows the various combinations of output that an economy can possible produce given the available factors of production and... A - the available production technology B - the available demand for the output C - a fair distribution of the output D - society's preferences

A - the available production technology

Figure 2-6. The opportunity cost of this economy moving from point I to point H is... A - 120 blankets and 120 pillows B - 120 blankets C - 120 pillows D - 200 blankets

B - 120 blankets

Table 3-24. England has a comparative advantage in the production of A -neither good and Spain has a comparative advantage in the production of both goods B - cheese and Spain has a comparative advantage in the production of bread C - both goods and Spain has a comparative advantage in the production of neither good D - bread and Spain has a comparative advantage in the production of cheese

B - cheese and Spain has a comparative advantage in the production of bread

When the price of chai tea lattés is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month. Maxine's demand for chai tea lattés is... A - inelastic, and her demand curve would be relatively steep B - elastic, and her demand curve would be relatively flat C - inelastic, and her demand curve would be relatively flat D - elastic, and her demand curve would be relatively steep

B - elastic, and her demand curve would be relatively flat

Exceptionally favorable growing conditions in the vineyards of Napa Valley would cause a(n)... A - increase in the demand for wine, increasing price B - increase in the supply of wine, decreasing price C - decrease in the demand for wine, decreasing price D - decrease in the supply of wine, increasing price

B - increase in the supply of wine, decreasing price

If the demand for donuts is elastic, then a decrease in the price of donuts will... A - decrease total revenue of donut sellers B - increase total revenue of donut sellers C - not change total revenue of donut sellers D - there is not enough information to answer this question

B - increase total revenue of donut sellers

When a production possibilities frontier is bowed outward, the opportunity cost of producing and additional unit of a good... A - does not change as more of the good is produced B - increases as more of the good is produced C - may increase, decrease, or not change as more of the good is produced D - decreases as more of the good is produced

B - increases as more of the good is produced

The price elasticity of demand measures how much... A - quantity demanded responds to a change in income B - quantity demanded responds to a change in price C - price responds to a change in demand D - demand responds to a change in supply

B - quantity demanded responds to a change in price

Table 3-24. The opportunity cost of 1 unit of cheese for Spain is... A - 2 hours of labor B - 4 hours of labor C - 1/2 unit of bread D - 2 units of bread

C - 1/2 unit of bread

Figure 2-7. Efficient production is represented by which point(s)? A - L, M, N, P, Q B - Q C - L, M D - N, O, P

C - L, M

Figure 2-7. This economy cannot produce at which point(s)? A - L, M B - N, O, P, Q C - Q D - N, O, P

C - Q

Table 3-24. England has an absolute advantage in the production of... A - cheese and Spain has an absolute advantage in the production of bread B - neither good and Spain has an absolute advantage in the production of both goods C - both goods and Spain has an absolute advantage in the production of neither good D - bread and Spain has an absolute advantage in the production of cheese

C - both goods and Spain has an absolute advantage in the production of neither good

An improvement in production technology will... A - increase a firm's costs, increase its supply, and decrease the equilibrium price B - increase a firm's costs, decrease its supply, and increase the equilibrium price C - decrease a firm's costs, increase its supply, and decrease the equilibrium price D - decrease a firm's costs, decrease its supply, and increase the equilibrium price

C - decrease a firm's costs, increase its supply, and decrease the equilibrium price

Which of the following events must result in a lower price in the market for Snickers? A - demand for Snickers and supply of Snickers both increase B - demand for Snickers and supply of Snickers both decrease C - demand for Snickers decreases, and supply of Snickers increases D - demand for Snickers increases, and supply of Snickers decreases

C - demand for Snickers decreases, and supply of Snickers increases

In the markets for the factors of production in the circular-flow diagram... A - households are sellers and firms are buyers B - households are buyers and firms are sellers C - households and firms are both sellers D - households and firms are both buyers

C - households and firms are both sellers

Economics is the study of... A - the interaction of business and government B - production methods C - how society manages its scarce resources D - how households decide who performs which tasks

C - how society manages its scarce resources

When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good... A - does not change as more of the good is produced B - decreases as more of the good is produced C - increases as more of the good is produced D - may increase, decrease, or not change as more of the good is produced

C - increases as more of the good is produced

The smaller the price elasticity of demand, the... A - smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2 B - more strongly buyers respond to a change in price between any two prices P1 and P2 C - steeper the demand curve will be through a given point D - flatter the demand curve will be through a given point

C - steeper the demand curve will be through a given point

Figure 2-6. If this economy moves from point F to point G, then which of the following statements is correct? A - this economy has moved form a point of inefficient production to a point of efficient production B - this economy has experienced an decrease in employment C - this economy has experienced economic growth D - none of the above is correct

C - this economy has experienced economic growth

Factors of production are... A - assumed to be owned by firms in the circular-flow diagram B - also called output C - used to produce goods and services D - abundant in most economics

C - used to produce goods and services

If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about... A - 0.63, and supply is elastic B - 0.63, and supply is inelastic C - 1.60, and supply is inelastic D - 1.60, and supply is elastic

D - 1.60, and supply is elastic

If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a... A - 2.5 percent increase in the quantity demanded B - 6 percent increase in the quantity demanded C - 0.4 percent increase in the quantity demanded D - 3.6 percent increase in the quantity demanded

D - 3.6 percent increase in the quantity demanded

Which of the following would shift the demand curve for gasoline to the right? A - an increase in the price of cars, a complement for gasoline B - a decrease in the expected future price of gasoline C - a decrease in the price of gasoline D - an increase in consumer income, assuming gasoline is a normal good

D - an increase in consumer income, assuming gasoline is a normal good

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is... A - nothing, since she would have received less then $60 worth of enjoyment from going to the park B - the $60 minus the employment she would have received from going to the park C - the $60 she earns working D - the enjoyment she would have received has she gone to the park

D - the enjoyment she would have received has she gone to the park