exam 1 review

Refer to Figure 4-5. What is the area that represents consumer surplus after the imposition of the ceiling?

A) A + B + D

Which of the following best describes the invisible-hand concept?

A) The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest.

The legislation passed in 2010 that was intended to reform regulation of the financial system was the

A) Wall Street Reform and Consumer Protection Act.

If an increase in income leads to a decrease in the demand for salami, then salami is

A) an inferior good.

Through specialization and international trade a nation:

A) can attain some combination of goods lying outside its production possibilities curve.

When misallocation of resources for production of a good results in spillover effects on third parties, there is a:

A) market failure.

Allocative efficiency is concerned with:

A) producing the combination of goods most desired by society.

A demand curve shows the relationship between

A) the price of a product and the quantity of the product demanded at every point on the demand curve.

Productive efficiency refers to:

A) the use of the least-cost method of production.

Refer to the above diagram, which shows three demand curves for coffee. Which would cause the change in the demand for coffee illustrated by the shift from D1 to D3?

A. A decrease in the price of tea

Refer to Figure 2-6. If the economy is currently producing at point A, what is the opportunity cost of moving to point B?

B) 12 thousand forks

Refer to Figure 4-5. What is the area that represents the producer surplus after the imposition of the ceiling?

B) F

Which is a determinant of supply?

B) Number of Sellers

One reason some manufacturing companies began moving production to China in the early 2000s was due to lower wages that could be paid to Chinese workers. Moving manufacturing to China to take advantage of lower wages so goods could be produced at a lower cost than if produced in the United States exemplifies which key economic idea?

B) People respond to economic incentives.

Refer to Figure 4-5. With rent control, the quantity supplied is Q1. Suppose apartment owners ignore the law and rent this quantity for the highest rent they can get. What is the highest rent they can get?

B) R1

When the price of one fruit increases, consumers buy more of another fruit. This situation is an illustration of:

B) The substitution effect

Economics is the study of the ________ people make to attain their goals, given their ________ resources.

B) choices; scarce

Assume you and your best friend set up a partnership and your lawyer tells you that as the owners, you could each stand to lose your personal wealth if the business goes bankrupt. This means a partnership

B) faces unlimited liability.

The legal system provided by the government is necessary for the smooth working of markets because.

B) it defines and protects property rights.

The concept of ________ is that the economic cost of using a factor of production is the alternative use of that factor that is given up.

B) opportunity cost

Refer to the above figure. If a price floor of $5 was set,

B) the quantity sold would be 60 units.

The opportunity cost of a new football stadium is the:

B. Other goods and services that must be sacrificed to construct the new stadium

Which of the following statements, if any, is correct for a nation that is producing only consumer and capital goods?

B. Other things equal, the more capital goods a nation produces, the greater will be its future growth rate.

Refer to the above diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market:

B. demand has increased and equilibrium price has decreased.

Refer to the above graph. A decrease in quantity demanded would be a movement from point:

C) 2 to 5

The principal concept behind comparative advantage is that a nation should:

C) Concentrate production on those products for which it has the lowest domestic opportunity cost

Refer to Figure 4-5. What is the area that represents the portion of producer surplus transferred to consumers as a result of the rent ceiling?

C) D

Which is a key feature of the market system?

C) The right to own private property and control resource use

One way that the government encourages the production of a good with positive externalities is to offer A) an effluent fee.

C) a subsidy.

Other things being equal, you can make $20,000 a year teaching, $25,000 a year typing, $30,000 a year driving a cab, and $40,000 a year as a chef. You have a comparative advantage in

C) being a chef.

Subprime mortgages are

C) mortgages issued to borrowers with flawed credit histories.

Assets minus liabilities equals

C) net worth.

The Sarbanes-Oxley Act of 2002

C) requires that CEOs personally certify the accuracy of financial statements.

By drawing a demand curve with price on the vertical axis and quantity on the horizontal axis, economists assume that the most important determinant of the demand for a good is

C) the price of the good.

From an economic perspective, when a student decides to attend another year of college, the student has concluded that the marginal:

C. Benefits of attending college are greater than the marginal costs

Suppose that goods A and B are close substitutes and the price of good B falls. We would then expect an:

C. Increase in the quantity demanded of good B and a decrease in the demand for good A

If two goods are complements:

C. a decrease in the price of one will increase the demand for the other.

Published in 1776, ________ was written by Adam Smith.

D) "An Inquiry into the Nature and Causes of the Wealth of Nations"

After graduating from high school, Ron Willis plans to go to college. The college tuition is $15,000 a year. But, instead of going to college, Ron could take a full-time job paying $20,000. If Ron decides to go to college, what is his opportunity cost for attending for one year?

D) $35,000

Refer to Figure 4-5. What area represents the deadweight loss after the imposition of the ceiling?

D) C + E

In 2017, President Trump considered imposing a tariff on automobiles assembled by U.S. manufacturers in Mexico that were to be sold in the United States. If this tariff was imposed and as a result, some of these manufacturers moved their automobile assembly from Mexico back to the United States, these firms would be reacting to which of the three key economic ideas?

D) People respond to economic incentives.

Free trade based on comparative advantage is economically beneficial because:

D) of all of these reasons.

Price controls in Venezuela resulted in a thriving black market in many goods. The black market arose because the price controls that were implemented by the Venezuelan government were ________ which resulted in a ________ of products.

D) price ceilings; shortage

All of the following are shown on a firm's income statement except

D) rate of return for investors

Refer to the above figure. If a price ceiling of $3 was set,

D) there would be a shortage of 20 units.

If service stations raise the price of gasoline and experience a decrease in demand for automobile tires, then gasoline and tires are:

D. Complementary goods

Which of the following best describes an assumption economists make about human behavior?

They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.

Macroeconomics focuses on:

Total output and the general level of prices in the economy

The demand curve is downward sloping because

a reduction in the price of a good causes individuals to increase their purchase of that good

The circular flow model demonstrates

the roles played by households and firms in the market system.