GMC MICROECONOMICS EXAM 1

Refer to Figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is: (Chapter 2 -refer to picture, #5)

All points on the production possibilities frontier are equally efficient.

Which of the following statements most likely lies within the realm of microeconomics?

An increase in labor costs will increase the additional cost of producing another bus.

Which of the following will not result in a leftward shift of the market demand curve for labor?

an increase in the wage rate

Many cooks view butter and margarine to be substitutes. If the price of butter rises, then in the market for margarine:

both the equilibrium price and quantity will rise.

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

budget constraint

In the ______________, households receive goods and services and pay firms for them.

goods and services market

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made.

government

The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves __________ spending.

government

Which of the following best describes a fiscal policy tool?

government spending

Refer to Figure 3-1. Using the graph above and beginning on D1, a shift to D2 would indicate a(n): (Chapter 3, picture, refer to #17)

increase in demand.

If the demand curve is perfectly elastic, then an increase in supply will:

increase the quantity exchanged but result in no change in the price.

Improvements in the productivity of labor will tend to:

increase wages.

If the demand for software engineers __________ slower than does supply, then wages of software engineers will __________.

increases; fall

The demand schedule for a good:

indicates the quantities that will be purchased at alternative market prices.

Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price.

inelastic

Refer to Figure 5-1. Graph B represents a demand curve that is relatively __________. Total revenue __________ as the price decreases from $10 to $5.

inelastic; decreases

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

normative statement

Attending college is a case where the ________________ exceeds the monetary cost.

opportunity cost

The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied.

price

The elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in __________.

price

In contrast to goods and services markets, _____________ are rare in labor markets, because rules that prevent people from earning income are not politically popular.

price ceilings

The downward slope of the demand curve again illustrates the pattern that as _____________ rises, _________________ decreases.

price, quantity demanded

A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and ____________, shown on the horizontal axis.

quantity

A demand curve shows the relationship between price and _________________ on a graph.

quantity demanded

_________________ refers to the total number of units that are purchased at that price

quantity demanded

When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _________________.

quantity supplied

A straightforward example of a _______________, often used for simplicity, is the interest rate.

rate of return

The price elasticity of demand measures the:

responsiveness of quantity demanded to a change in price

If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to:

rise and the equilibrium quantity to stay the same.

As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.

technology

As the _____________ complement for high-skill labor becomes cheaper, the demand curve for high-skill labor will shift to the right.

technology

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:

the benefit to his grades from studying for an hour

The opportunity cost of attending university is likely to include all except which of the following?

the cost of haircuts received during the school term

In a discussion of economics, which of the following would exert the most influence on an individual firm's decision to hire workers?

the macroeconomy

The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern.

utility

In economics, the demand for a good refers to the amount of the good that people:

will buy at various prices.

If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages __________.

will increase

Refer to Figure 5-1. With reference to Graph B, at a price of $5, total revenue equals:

$200.

Refer to Figure 5-1. With reference to Graph A, at a price of $10, total revenue equals: (Chapter 5 refer to #14)

$400.

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

$44

Refer to Figure 5-1. With reference to Graph A, at a price of $5, total revenue equals: (Chapter 5 refer to #14/15)

$500.

The demand for a product is unit elastic. At a price of $20, 10 units of a product are sold. If the price is increased to $40, then one would expect sales to equal:

5 units.

Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi's demand curve?

1.0

In the United States, a typical credit card interest rate ranges from ______________ per year

12% to 18%

Referring to Table 2-1: A student has only a few hours to prepare for two different exams this afternoon. The above table shows alternative possible exam scores with three alternative uses of the student's time. The opportunity cost of scoring a 94 on the economics exam rather than a 77 is: (Chapter 2, picture, refer to #13)

15 points on the history exam.

The United States has approximately ___________ credit card holders.

180 million

Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop?

3.0

Suppose that Bobo purchases 1 pizza per month when the price is $19 and 3 pizzas per month when the price is $15. What is the price elasticity of Bobo's demand curve?

4.25

Which of the following will not result in a rightward shift of the market supply curve for labor?

an increase in labor productivity

Refer to Table 2-1. A student has only a few hours to prepare for two different exams tomorrow morning. The above table shows alternative possible exam outcomes with three alternative uses of the student's time. The opportunity cost of scoring an 84 on the history exam rather than 76 is: (Chapter 2, picture, refer to #14)

7 points on the economics exam

Why is there scarcity?

Because our unlimited wants exceed our limited resources

Refer to Figure 2-1. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from: (Chapter 2 -refer to picture, #4)

C to F

In which of the following countries will the national government have the greatest influence with respect to the nation's economy?

Cuba

In countries like _____________ the command economy predominates.

Cuba and North Korea

The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket revenues, an economist would advise:

Increasing the price of game tickets because demand is inelastic.

Refer to Figure 2-1. The most inefficient point depicted is: (Chapter 2 -refer to picture, #6)

Point G

Which of the following results in a rightward shift of the market demand curve for labor?

an increase in demand for the firm's product

Which of the following best denotes the reason for the existence of substantial black markets?

a command economy

Which of the following is most likely a topic of discussion in macroeconomics?

a decrease in the unemployment rate

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is:

a shift of the demand curve for beef to the left.

Any given demand or supply curve is based on the ceteris paribus assumption that ___________________.

all else is held equal

The term "ceteris paribus" means that:

all variables except those specified are constant.

The nature of demand indicates that as the price of a good increases:

buyers desire to purchase less of it.

Marginal thinking is best demonstrated by:

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

When demand is inelastic:

consumers are not very responsive to changes in price.

Refer to Figure 3-2. A change from Point A to Point B represents a(n): (Chapter 3, picture, refer to #18)

decrease in quantity demanded.

The labor ____________ curve(s) will shift _______________ if there is an increase in productivity or an increase in the demand for the final product.

demand; right

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.

division of labor

Demand is said to be ___________ when the quantity demanded is very responsive to changes in price.

elastic

A price cut will increase the total revenue a firm receives if the demand for its product is:

elastic.

Which of the following is generally accepted as a valid criticism of the production of useful goods and services?

environmental pollution

The ___________ is the only price where quantity demanded is equal to quantity supplied.

equilibrium price

Many states do have ____________, which impose an upper limit on the interest rate that lenders can charge.

usury laws

Which of the following best describes a monetary policy tool?

interest rates

Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?

international trade

The opportunity cost of an action:

is a subjective valuation that can be determined only by the individual who chooses the action.

Scarcity implies that:

it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.

In the ____________, households work and receive payment from firms.

labor market

Other things being equal, a __________ supply of workers tends to __________ real wages.

larger; decrease

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________.

law of demand

Since Baltimore passed the first _______________ in 1994, several dozen cities enacted similar laws in the late 1990s and into the 2000s.

living wage law

When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being:

low inflation

If a firm faces ________________________, while the prices for the output the firm produces remain unchanged, a firm's profits will increase.

lower costs of production

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

marginal analysis

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.

market-oriented economy

The marginal benefit of a slice of pizza is the:

maximum amount that a consumer is willing to pay for the slice.

The basic difference between macroeconomics and microeconomics is:

microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

The demand curve for a typical good has a(n):

negative slope because some consumers switch to other goods as the price rises.

Many economists believe that the trend toward greater wage inequality across the U.S. economy was primarily caused by _____________.

new technologies

Price elasticity of demand is defined as:

the percentage change in quantity demanded divided by the percentage change in price.

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good.

the production possibilities frontier

Macroeconomic topics do not usually include:

the profit maximizing decisions of an individual manufacturer.

When consumers and businesses have greater confidence that they will be able to repay in the future, _______________________.

the quantity demanded of financial capital at any given interest rate will shift to the right.

If new manufacturers enter the computer industry, then (ceteris paribus):

the supply curve shifts to the right.

When quantity demanded decreases in response to a change in price:

there is a movement up along the demand curve.

A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result:

total revenue will decrease

If macroeconomics looks at the economy as a whole, it focuses on which of the following?

unemployed people

Demand is said to be __________ when the quantity demanded changes at the same proportion as the price.

unit elastic

Scarcity exits because of:

unlimited wants and limited resources.

But nearly all supply curves share a basic similarity: they slope _______________.

up from left to right