Make-up Econ Exam (Ch 1-3)

A certain production possibilities frontier shows production possibilities for two goods: wheat and shirts. Which of the following concepts cannot be illustrated by this model? a. the flow of dollars between sellers of wheat and shirts and buyers of wheat and shirts b. the tradeoff between production of wheat and production of shirts c. the opportunity cost of shirts in terms of wheat d. the effect of economic growth on production possibilities involving wheat and shirts

a.

A positive economic statement such as "Pollution taxes decrease the quantity of pollution generated by firms" a. would require data but not values in order to be evaluated. b. would likely be made by an economist acting as a policy advisor. c. would require values and data in order to be evaluated. d. could not be evaluated by economists acting as scientists.

a.

Economics deals primarily with the concept of a. scarcity. b. money. c. poverty. d. banking.

a.

Economists use the word equality to describe a situation in which a. each member of society has the same income. b. each member of society has access to abundant quantities of goods and services, regardless of his or her income. c. society is getting the maximum benefits from its scarce resources. d. society's resources are used efficiently.

a.

For a very long time Tropicland has had inflation of 12%. Suddenly its inflation rate drops to 4%. The drop in the inflation rate a. could be due to slower money supply growth. We would expect unemployment to be higher. b. could be due to slower money supply growth. We would expect unemployment to be lower. c. could be due to higher money supply growth. We would expect unemployment to be higher. d. could be due to higher money supply growth. We would expect unemployment to be lower.

a.

In the figure above, which movement reflects a decrease in quantity demanded but NOT a decrease in demand? a. From point a to point e. b. From point a to point b. c. From point a to point c. d. From point a to point d.

a.

Refer to Figure 2-8, Panel (a) and Panel (b). Which of the following is not a result of the shift of the economy's production possibilities frontier from Panel (a) to Panel (b)? a. production of 1 donut and 4 cups of coffee becomes efficient b. the tradeoff between the production of donuts and coffee changes c. the opportunity cost of a cup of coffee is higher at all levels of coffee production d. production of 4 donuts and 2 cups of coffee becomes possible

a.

Refer to Figure 2-8, Panel (a). Production is a. possible at points J, K, L, and M, but efficient only at points J, L, and M. b. possible at points J, K, L, and M, but efficient only at point K. c. possible at points J, L, M, and N, but efficient only at points J, L, and M. d. possible at points J, L, M, and N, but efficient only at point N.

a.

Refer to Figure 2-8, Panel (a). The opportunity cost of moving from point K to point L is a. 0 cups of coffee. b. 1 donut. c. 2 donuts. d. 4 cups of coffee.

a.

The overriding reason as to why households and societies face many decisions is that a. resources are scarce. b. goods and services are not scarce. c. incomes fluctuate with business cycles. d. people, by nature, tend to disagree.

a.

When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good a. increases as more of the good is produced. b. decreases as more of the good is produced. c. does not change as more of the good is produced. d. may increase, decrease, or not change as more of the good is produced.

a.

When computing the opportunity cost of attending a Broadway show you should include a. the price you pay for the ticket and the value of your time. b. the price you pay for the ticket, but not the value of your time. c. the value of your time, but not the price you pay for the ticket. d. none of the above

a.

Which of these terms are used interchangeably? a. "goods and services" and "inputs" b. "goods and services" and "factors of production" c. "inputs" and "factors of production" d. "land, labor, and capital" and "goods and services"

c.

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between a. guns and butter. b. efficiency and equality. c. inflation and unemployment. d. work and leisure.

b.

Any point on a country's production possibilities frontier represents a combination of two goods that an economy a. will never be able to produce. b. can produce using all available resources and technology. c. can produce using some portion, but not all, of its resources and technology. d. may be able to produce in the future with more resources and/or superior technology.

b.

Communist countries worked under the premise that a. markets were the best way to organize economic activity. b. central planners were in the best position to determine the allocation of scarce resources in the economy c. households and firms, guided by an "invisible hand," could achieve the most efficient allocation of scarce resources. d. allowing the market forces of supply and demand to operate with no government intervention would achieve the most efficient allocation of scarce resources.

b.

For which of the following problems can well-designed public policy enhance economic efficiency? a. externalities, but not market power b. both externalities and market power c. market power, but not externalities d. neither externalities nor market power

b.

Refer to Figure 2-11. The shift of the production possibilities frontier from A to B can best be described as a. a downturn in the economy. b. economic growth. c. an enhancement of equality. d. an improvement in the allocation of resources.

b.

Refer to Figure 2-2. Enid regularly buys fruits and vegetables at a grocery store. Santo regularly pays a lawn-care company to mow his lawn. If the flow of fruits and vegetables from the grocery store to Enid is represented by an arrow from Box C to Box B of this circular-flow diagram, then the money paid by Santo to the lawn-care company is represented by an arrow a. from Box A to Box D. b. from Box B to Box C. c. from Box C to Box B. d. from Box D to Box A.

b.

Refer to Figure 2-8, Panel (a). The opportunity cost of one cup of coffee is highest when the economy produces a. 0 cups of coffee. b. 6 cups of coffee. c. 2 cups of coffee. d. 4 cups of coffee.

b.

Refer to Figure 4-12. All else equal, buyers expecting turkey to be more expensive in the future would cause a current move a. from DA to DB. b. from DB to DA. c. from x to y. d. from y to x.

b.

Refer to Figure 4-9. In this market, equilibrium price and quantity, respectively, are a. $10 and 30. b. $10 and 50. c. $10 and 70. d. $4 and 50.

b.

The primary determinant of a country's standard of living is a. the country's ability to prevail over foreign competition. b. the country's ability to produce goods and services. c. the total supply of money in the economy. d. the average age of the country's labor force.

b.

Which of the following statements about the circular-flow diagram is correct? a. One must imagine that the economy operates without money in order to make sense of the diagram. b. The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms c. The government cannot be excluded as a decision maker in a circular-flow diagram. d. All of the above are correct.

b.

A tradeoff exists between a clean environment and a higher level of income in that a. studies show that individuals with higher levels of income pollute less than low-income individuals b. efforts to reduce pollution typically are not completely successful c. laws that reduce pollution raise costs of production and reduce incomes d. employing individuals to clean up pollution causes increases in employment and income

c.

An economy's production of two goods is efficient if a. all members of society consume equal portions of the goods. b. the goods are produced using only some of society's available resources. c. it is impossible to produce more of one good without producing less of the other. d. the opportunity cost of producing more of one good is zero.

c.

An example of an externality is the impact of a. bad weather on the income of farmers. b. the personal income tax on a person's ability to purchase goods and services. c. pollution from a factory on the health of people in the vicinity of the factory. d. increases in health care costs on the health of individuals in society.

c.

For which of the following individuals would the opportunity cost of going to college be highest? a. a promising young mathematician who will command a high salary once she earns her college degree b. a student with average grades who has never held a job c. a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree d. a student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball

c.

In a particular country in 2000, the average worker needed to work 40 hours to produce 55 units of output. In that same country in 2008, the average worker needed to work 30 hours to produce 45 units of output. In that country, the productivity of the average worker a. decreased by about 6 percent between 2000 and 2008. b. remained unchanged between 2000 and 2008. c. increased by about 9 percent between 2000 and 2008. d. increased by about 18 percent between 2000 and 2008.

c.

In competitive markets, buyers a. are price takers, but sellers are price setters. b. are price setters, but sellers are price takers. c. and sellers are price takers. d. and sellers are price setters.

c.

Laws that penalize pollution in public places (like the side of the highway) are examples of government intervention that is intended to reduce a. efficiency. b. equality. c. externalities. d. productivity.

c.

Market economies are distinguished from other types of economies largely on the basis of a. the political affiliations of government officials. b. the process by which government officials are elected or appointed. c. the ways in which scarce resources are allocated. d. the number of retail outlets available to consumers.

c.

Refer to Figure 2-8, Panel (a) and Panel (b). A shift of the economy's production possibilities frontier from Panel (a) to Panel (b) could be caused by a. unemployment. b. an improvement in coffee production technology. c. an improvement in donut production technology. d. an improvement in both donut and coffee production technology.

c.

Refer to Figure 4-4. The graphs show the demand for cigarettes. In Panel (b), the arrows are consistent with which of the following events? a. The price of cigarettes increased. b. A tax was placed on cigarettes. c. The prohibition of cigarette advertisements on television. d. Tobacco and marijuana are complements and the price of marijuana decreased.

c.

Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is a. the improvement in his grades from studying for the hour. b. the improvement in his grades from studying minus the enjoyment of playing tennis. c. the enjoyment and exercise he would have received had he played tennis. d. zero. Since Russell chose to study rather than to play tennis, the value of studying must have been greater than the value of playing tennis.

c.

The slow growth of U.S. incomes during the 1970s and 1980s can best be explained by a. unstable economic conditions in Eastern Europe. b. increased competition from abroad. c. a decline in the rate of increase in U.S. productivity. d. a strong U.S. dollar abroad, hurting U.S. exports.

c.

Tom is restoring a car and has already spent $3500 on the restoration. He expects to be able to sell the car for $5000. Tom discovers that he needs to do an additional $2000 of work to make the table worth $5000 to potential buyers. He could also sell the car now, without completing the additional work, for $2800. What should he do? a. He should sell the car now for $2800. b. He should keep the car since it wouldn't be rational to spend $5500 restoring a car and then sell it for only $5000. c. He should complete the additional work and sell the car for $5000. d. It does not matter which action he takes since the outcome will be the same either way.

c.

31. Which of the following statements is correct about the roles of economists? a. Economists are best viewed as policy advisers. b. Economists are best viewed as scientists. c. In trying to explain the world, economists are policy advisers; in trying to improve the world, they are scientists. d. In trying to explain the world, economists are scientists; in trying to improve the world, they are policy advisers.

d.

Economists speaking like policy advisers make a. positive statements. b. descriptive statements. c. claims about how the world is. d. claims about how the world should be.

d.

Efficiency means that a. society is conserving resources in order to save them for the future. b. society's goods and services are distributed equally among society's members. c. society's goods and services are distributed fairly, though not necessarily equally, among society's members. d. society is getting the maximum benefits from its scarce resources.

d.

If the production possibilities frontier is bowed outward, then "?" could be a. 340. b. 330. c. 320. d. 310.

d.

In the simple circular-flow diagram, a. households own the factors of production. b. households buy all the goods and services that firms produce. c. land, labor, and capital flow from households to firms. d. All of the above are correct.

d.

Rational people make decisions at the margin by a. following marginal traditions. b. behaving in a random fashion. c. thinking in black-and-white terms. d. comparing marginal costs and marginal benefits.

d.

Refer to Figure 2-8, Panel (a). The movement from point M to point K could be caused by a. an advance in production technology. b. an improvement in efficiency. c. economic growth. d. unemployment.

d.

Refer to Figure 4-9. If price in this market is currently $14, then there would be a(n) a. surplus of 20 units and the law of supply and demand predicts that the price will rise from $14 to a higher price. b. excess supply of 20 units and the law of supply and demand predicts that the price will fall from $14 to a lower price. c. surplus of 40 units and the law of supply and demand predicts that the price will rise from $14 to a higher price. d. excess supply of 40 units and the law of supply and demand predicts that the price will fall from $14 to a lower price.

d.

The circular-flow diagram a. is an economic model. b. incorporates two types of decision makers: households and firms. c. represents the flows of inputs, outputs, and dollars. d. All of the above are correct.

d.

The country of Econoland produces two goods, textbooks and widgets. Last year, it produced 200 textbooks and 500 widgets. This year, it produced 250 textbooks and 600 widgets. Given no other information, which of the following events could not explain this change? a. Econoland experienced a reduction in unemployment. b. Econoland experienced an improvement in widget-making technology. c. Econoland acquired more resources. d. Any of these events could, in fact, explain the change.

d.

When government policies are enacted, a. equality can usually be enhanced without an efficiency loss, but efficiency can never be enhanced without a reduction in equality. b. efficiency can usually be enhanced without a reduction in equality, but equality can never be enhanced without an efficiency loss. c. it is always the case that either efficiency and equality are both enhanced, or efficiency and equality are both diminished. d. None of the above are correct.

d.

Which of the following is not a reason people choose to depend on others for goods and services? a. to improve their lives b. to allow them to enjoy a greater variety of goods and services c. to consume more of each good without working any more hours d. to allow people to produce outside their production possibilities frontiers

d.

Which of the following transactions does not take place in the markets for factors of production in the circular-flow diagram? a. a landowner leases land to a farmer b. a farmer hires a teenager to help with harvest c. a retired farmer sells his combine to a new farmer d. a woman buys corn for dinner

d.