Micro - Exam 1
The term human capital refers to
people's knowledge and skill
Human resources that perform the functions of organizing, managing, and assembling the other resources are called
physical capital.
The above table shows production points on Sweet-Tooth Land's production possibilities frontier. A movement from ________ represents the greatest opportunity cost of increasing cola production.
point B to point A
In the above figure, which point represents an unattainable production combination of the two goods?
point L
In the figure above, which movement could be the result of an increase in the wages paid to oil workers?
point a to point d
In the above figure, a change in quantity demanded with unchanged demand is represented by a movement from
point a to point e.
In the above figure, a change in quantity supplied with unchanged supply is represented by a movement from
point b to point a.
The figure above shows supply curves for soft drinks. Suppose the economy is at point a. An increase in the price of a soft drink is shown as a movement from point a to
point d.
The quantity of CDs that firms plan to sell this month depends on all the following EXCEPT the
quantity of CDs that people plan to buy.
In mid-2012 Delta increased the price of a New York to LA ticket by 10 percent. As a result of this price hike, there was a ________ shift in the demand curve for a ticket on Continental because the price of a ________ had risen.
rightward; substitute
Fill in the blanks In the supply and demand model, we would expect the price of toilet paper to _____ (rise/fall/stay the same) because the increase in (demand/quantity demanded).
rise, demand
Moving along a bowed-out PPF between milk and cotton, as more milk is produced the marginal cost of an additional gallon of milk
rises
You observe that an increase in the price of salsa decreases the demand for tortilla chips and increases the demand for potato chips. You can conclude that
salsa and tortilla chips are complements.
The wage rate paid by Walkman producers falls and at the same time the price of raw materials used in the production of Walkmans rises. You predict that the supply curve of Walkmans will
shift either leftward or rightward.
The quantity of shoes produced is measured along the horizontal axis of a PPF and the quantity of shirts is measured along the vertical axis. As you move down toward the right along the PPF, the marginal cost of
shoes increases.
In times of emergency, it might be illegal to raise prices. If there is an increase in demand for toilet paper and prices are not allowed to rise, the result will be a(n) _______ of toilet paper.
shortage
The above table shows the demand schedule and supply schedule for chocolate chip cookies. If the price is $4.00 per pound, there is a
shortage of 3 pounds of chocolate chip cookies.
In the above figure, a price of $15 per dozen roses would result in a ________ so that the price of roses will ________.
shortage; rise
People buy more of good 1 when the price of good 2 rises. These goods are
substitutes.
In the above figure, if the price is $8 then there is a
surplus of 200.
Microeconomics is the study of ________.
the choices that individuals and businesses make
In 2006, the base price of a Hummer SUV was about $30,000. By 2008 as gasoline prices increased,
the demand curve for Hummers shifted leftward and Hummer prices decreased.
Which of the following is a macroeconomic issue?
the effect of increasing the money supply on inflation
For consumers, goods A and B are complementary goods. The cost of a resource used in the production of A decreases. As a result
the equilibrium price of B will rise and the equilibrium price of A will fall.
In the above figure, if the demand curve is D2, then
the equilibrium price will be P1 and the equilibrium quantity will be Q2.
Using the above figure, suppose that roses are a normal good. If there is an increase in income
the equilibrium price will rise above $25 per dozen roses.
Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she is choosing at the margin when she compares
the extra revenue from selling a few additional printers to the extra costs of producing the printers.
Each point on the demand curve reflects
the highest price consumers are willing and able to pay for that particular unit of a good.
Jane produces only corn, measured in tons, and cloth, measured in bolts. For her, the opportunity cost of one more ton of corn is
the inverse of the opportunity cost of one more bolt of cloth.
Each point on a supply curve represents
the lowest price for which a supplier can profitably sell another unit.
An individual should continue doing an activity as long as:
the marginal benefits are greater than the marginal costs.
A supply curve shows the relation between the quantity supplied and
the price of the good. Usually a supply curve has positive slope.
Which of the following is a microeconomic topic?
the reasons why Kathy buys less orange juice
Human capital is
the skill and knowledge of workers.
Farmers can use their land to grow soy beans or corn. If the price of corn rises,
the supply of soybeans decreases and the soybean supply curve shifts leftward.
Which of the following is NOT a factor of production?
the wages paid to workers.
In terms of dollars, the marginal benefit of working five days a week instead of four days a week is
the wages received for the fifth day of work.
Suppose the equilibrium price for soft drinks is $1.00. If the current price in the soft drink market is $1.25 each
there will be a surplus of soft drinks.
The production possibilities frontier is the boundary between
those combinations of goods and services that can be produced and those that cannot.
To obtain the gains available from comparative advantage, individuals or countries must do more than specialize; they must also
trade.
All economic questions arise because we
want more than we can get.
When a firm decides to produce more electric cars and conventional gas powered cars, it is most directly answering the ________ part of one of the two big economic questions.
what
When an economy produces more houses and fewer typewriters, it is answering the ________ part of one of the two big economic questions.
what
When firms in an economy start producing more computers and fewer televisions, they are answering the ________ part of one of the two big economic questions.
what
If the United States can increase its production of automobiles without decreasing its production of any other good, the United States must have been producing at a point
within its PPF.
On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is
working out at the gym.
If Taco Bell decides to produce more tacos and fewer burritos, Taco Bell is answering the ________ part of one of the two big economic questions.
"what"
During the summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. In terms of dollars, the opportunity cost of attending summer school is
$10,300.
You decide to take a vacation and the trip costs you $2,000. While you are on vacation, you do not go to work where you could have earned $750. In terms of dollars, the opportunity cost of the vacation is
$2,750.
In the above figure, what is the minimum supply price for the fourth gallon of ice cream?
$5.00
Bill Bonecrusher graduates from college with a choice of playing professional football at $2 million a year or coaching for $50,000 a year. He decides to play football, but eight years later, though he could continue to play football at $2 million a year, he quits football to make movies for $3 million a year. His opportunity cost of playing football at graduation was ________ and eight years later the opportunity cost of making movies was ________.
$50,000; $2 million
The equilibrium price in the above figure is
$6
Grant started a business this year. He earned $200,000 in revenues and had $150,000 in expenses. His other alternative would have been to go back to his old job, where he earned $70,000. What are Grant's "true" profits from his business?
-$20,000
Suppose you are working four nights per week at your courses and your grade point average is 3.5. You want a higher grade and decide to study an extra night each week. Your GPA now rises to 3.8. What is your marginal benefit from studying for one additional night a week?
0.3
Jerry is studying three nights per week and his grade point average is 3.1. He wants a higher GPA and decides to study an extra night each week. His GPA now rises to 3.5. Had Jerry not decided to study an extra night, he would have spent this night with his friends. Jerry's marginal benefit from studying for one additional night a week is _____________ and his marginal cost of increasing the study time by one night per week is _____________.
0.4; a night spent with his friends that he gives up
Fill in the blanks For each worker employed, Colorado has to give up ___ pairs of skis in order to produce one computer. Montana has to give up ___ pairs or skis to produce one computer.
0.5, 0.2
Suppose the market for eggs is in equilibrium. Then, suppose there is an increase in consumer preferences for eggs. What happens?
1. there is an increase in consumer preferences 2. The market experiences a rightward shift in demand for eggs 3. At the current egg price, there will now be a shortage of eggs 4. The price of eggs in the market starts to rise 5. The egg market reaches a new equilibrium with a higher equilibrium price and a higher equilibrium quantity.
Which of the following is NOT a factor of production?
175 shares of Microsoft stock
If consumers in Derby want to consume 450 pounds of pasta, how many shirts must Derby stop producing to free up enough resources and labor? Answer as a whole number.
1800.0
In the table above, country B is producing 4 units of X and 6 units of Y. For country B, the opportunity cost of producing an additional unit of Y is
2/3 unit of X per unit of Y.
The most anyone is willing to pay for another purse is $30. Currently the price of a purse is $40, and the cost of producing another purse is $50. The marginal benefit of a purse is
30$
If Derby wants to produce both shirts and pasta, how many shirts must it give up for every pound of pasta it produces? Answer as a whole number.
4.0
The table above represents the marginal cost and marginal benefit associated with pizza (in terms of movies). What quantity of pizza should be produced if resources are to be used efficiently?
7 pizzas
The Miami Dolphins play football in Joe Robbie Stadium which holds 76,500 seats. In 2009, attendance averaged about 70,000 fans per game. This means that the quantity supplied of seats is
76,500.
When trading with Okun, how many shirts does Derby give up to buy 450 lbs of pasta?
900.0
In the above figure, once on PPF2, a country would grow slowest by producing at point
A
How could the shoe firm shift their PPF outward to produce more shoes?
All of the above would shift the PPF outward.
The reason people bought more toilet paper at the beginning of the COVID-19 pandemic was due to:
An increase in demand
Which of the following is consistent with the law of demand?
An increase in the price of a soda causes a decrease in the quantity of soda demanded.
Which of the following is NOT an example of an opportunity cost?
Because Mary is now being paid a higher wage, she can afford to buy a new car even though she is moving into a bigger apartment.
Suppose Joe can prepare 10 sandwiches or 5 pizzas in an hour and Beth can produce 12 sandwiches or 9 pizzas. Which of the following is TRUE?
Beth should produce pizza because she has a lower opportunity cost of producing pizza than does Joe.
A marginal cost curve
Both answers is upward sloping and shows that as more of a good is produced, opportunity costs of producing another unit increase are correct.
If consumers anticipate shortages of a good, how might they react when they see a stock of that good on the shelves of a grocery store?
Buy a lot more of the good than they needed today and hoard it.
The figure above shows the market for airline tickets. If airline tickets are a normal good, then the recession in 2008 that caused people's incomes to decrease lead to a shift from
D0 to D1.
In economics, what do we mean by "capital"?
Factories, machines, and manufactured equipment that firms use in the production process.
The above figures show the market for hamburger meat. Which figure(s) shows the effect of a new report by the U.S. Surgeon General that beef consumption is healthier than previously believed?
Figure A
Based on the above, which figure shows the impact of a decrease in the population available to work?
Figure D
Maria has three choices of what to do for the next hour. She prefers to watch TV. Her next choice would be to go for a walk and her third preference would be to study. Maria watches TV. In this scenario, what is Maria's opportunity cost?
Going for a walk.
What are some plausible strategies for the pizza parlor to apply in order to meet the new demand? (select all that apply.)
Hire another worker. Buy a new oven. Remain open for longer.
What will happen to the equilibrium price and equilibrium quantity of ice cream cones when consumers' incomes decrease?
If ice cream cones are a normal good, then the equilibrium price and quantity of ice cream cones will decrease.
Assuming raising prices is illegal, how can grocery stores prevent people from buying more toilet paper than they need in an effort to make sure everyone has a chance to buy?
Impose quantity buying restrictions on customers
People bought a lot more toilet paper all of a sudden. Identify which of the following scenarios represents an increase in demand vs. an increase in quantity demanded. Increase in demand: Increase in quantity demand:
Increase in demand: People knew they would just need more toilet paper because they would be spending more time at home. Increase in quantity demand: People wanted to buy more toilet paper than normal since the price was lower than normal
Assume toilet paper production costs didn't change and prices are allowed to change. If there is an increase in demand for toilet paper, how would the supply side of the market see this as the market adjusts to a new equilibrium?
Increase in quantity supplied
What action is the government most likely to use to prevent the hoarding and arbitrage (reselling goods) of consumer goods like toilet paper that are in high demand during an emergency?
Make it illegal to price gouge and resell goods at higher prices
Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. If these two states were to engage in trade, which of the following is TRUE?
Missouri would specialize in pecan production and trade pecans to Washington for pears.
In the U.S. economy, which of the following statements is TRUE?
More services are produced than goods.
After the Raptors won the NBA championships, consumers bought 8,000 pairs of running shoes and 30,000 pairs of basketball shoes. Would this be possible for the firm to produce with their current production capabilities?
No
Given the PPF curve, would you expect the pizza parlor to meet the new demand?
No, it is not possible with the current inputs.
In economics we learn that
None of these answers is correct.
The above table shows production points on Sweet-Tooth Land's production possibilities frontier. Which of the following statements is TRUE?
Producing 0 chocolate bars and 100 cans of cola is both attainable and efficient.
The figure above shows the market for airline tickets. In early 2008 the price of jet fuel rose. This change is shown in the figure as a shift from
S0 to S1.
The figure above shows the market for airline tickets. In early 2008 firms negotiated lower wages with their workers. This change is shown in the figure as a shift from
S1 to S0.
Based on the production capabilities of one worker in Colorado or Montana, indicate which state has a comparative advantage in producing skis or computers.
Skis-Colorado Computers-Montana
How did you adjust the above graph to represent the pizza parlor's decision to stay open longer hours?
Slid the curve upwards along the pizza axis, no change to the breadsticks axis.
You've been waiting in line for a roller coaster ride at the amusement park for 60 minutes. You're at the front of the line when you hear an announcement that the ride is broken and will take 30 minutes to repair. Upon hearing this announcement, what is your opportunity cost of going on the ride?
The 30 minutes to wait for repairs
If the actions outlined in Problem 2.3 were the only available options, what would the firm have to consider when deciding which to take?
The cost of each action. How much each action increases output.
How would pasta makers in Derby be affected by the trade with Okun?
They won't be able to compete with the price for Okun pasta.
As we increase the production of computers, we find that we must give up larger and larger amounts of DVD players per computer.
This situation illustrates increasing opportunity cost.
Suppose a scientific breakthrough made free solar power available in unlimited quantities in the United States. The effect of this invention would be to move the
U.S. production possibilities frontier outward.
With regards to the firm's PPF, how would you describe the combination of shoes that the firm would need to produce in order to satisfy all shoe demands?
Unattainable.
Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. Which of the following statements is TRUE?
Washington has an absolute advantage in the production of both pecans and pears.
If Colorado had 200 workers available and Montana has 300 workers available, should Colorado specialize in one good?
Yes, Colorado should specialize in skis because Montana has a lower opportunity cost of producing computers.
Should Derby trade with Okun?
Yes, the opportunity cost per pound of pasta is lower when trading with Okun.
In 2014, the price of peanuts was rising, which lead peanut butter sellers and peanut butter buyers to expect the price of peanut butter would rise in the future. Consequently, in the current market for peanut butter there was ________ which resulted in a ________ in the price of peanut butter and ________ in the quantity of peanut butter.
a decrease in supply of peanut butter and an increase in demand for peanut butter; rise; an increase, decrease or possibly no change
A changes in which of the following shifts the demand curve for hamburgers?
a fall in the price of french fries, a complement for hamburgers
Which of the following raises the price of a used car and increases the equilibrium quantity sold?
a new 8 percent federal excise tax placed on all new car purchases
General Electric (GE) produces wind turbines that generate wind power. Over the past 10 years, the advances in technology used to produce wind turbines has resulted in
a rightward shift in the supply curve for wind-generated power.
If the quantity demanded exceeds the quantity supplied, then there is
a shortage and the price is below the equilibrium price.
Ticket scalpers at the NCAA basketball tournament last year charged prices high above the printed ticket price. This observation is evidence of
a shortage at printed ticket prices.
In the above figure, a price of $15 per dozen for roses would result in
a shortage.
A market research team has come up with the demand and supply schedules for gasoline in Motorville in the table above. Use these data to analyze the situation in the market for gas in Motorville.Suppose the price is 330 cents per gallon. There is
a surplus and the price will decrease to restore equilibrium.
The marginal benefit is the
additional gain from one more unit of an activity.
The word "marginal" means
additional.
Which of the following shifts the supply curve for good X leftward?
an increase in the cost of the machinery used to produce X
In the market for magazines, the "income effect" means that
an increase in the price of magazines will reduce the total purchasing power of magazine readers, making them able to afford fewer magazines.
When the price of an inferior good falls, the substitution effect leads to ________ in the quantity purchased and the income effect leads to ________ in the quantity purchased.
an increase; a decrease
Consider the demand curves for soft drinks shown in the figure above. Initially the economy is at point a. If people come to expect that the price of a soft drink will increase in the future, there will be a movement to a point such as
b
A person has a comparative advantage in producing a particular good if that person
can produce it at lower opportunity cost than anyone else can.
An efficient allocation of resources occurs when we
cannot produce more of a good or service without giving up some other good or service that we value more highly.
Which of the following pairs of goods are most likely substitutes?
cola and lemon lime soda
an incentive
could be either a reward or a penalty.
Cupcakes and granola bars are substitutes in consumption. The price of a granola bar increases so the demand for
cupcakes will increase, that is, the demand curve will shift rightward.
The tradeoff between current consumption and the production of capital goods also reflects a tradeoff between
current consumption and future consumption.
Ham and eggs are complements. If the price of ham rises, the demand for eggs will
decrease and the demand curve for eggs will shift leftward.
A decrease in the expected future price of cars
decreases the current demand for cars, that is, there is a leftward shift of the demand curve for cars.
In the figure above, moving from production at point d to production at point a requires
decreasing the output of consumer goods in order to boost the output of capital goods.
The above figure shows the market for oil. Because of the development of a new deep sea drilling technology the
demand curve does not shift, and the supply curve shifts from S1 to S2.
The above figure shows the market for bicycles. When there is a physical fitness craze so that everyone wants to exercise the
demand curve for bicycles shifts from D1 to D2.
There are 72,922 seats in Lambeau Field where the Green Bay Packers play football. The Packers have sold out their season tickets since 1960. There were about 70,000 people on the waiting list to buy season tickets in 2010. Packers tickets are a normal good. As a result of the economic recession in 2010 during which people's incomes decreased, the
demand for Packers tickets decreased.
Marginal benefit curves slope
downward, but not because of increasing opportunity cost.
Macroeconomics is concerned with
economy-wide variables.
Which factor of production earns profit?
entrepreneurship
When there is a shortage in the market, the quantity sold is
equal to the quantity supplied.
If the price of a movie download falls, the rental rate of DVDs ________ and the equilibrium quantity of DVDs rented ________.
falls; decreases
True or False. Colorado has a lower opportunity cost for producing computers than Montana.
false
In the above figure, if 4000 bicycles are produced per month,
fewer bicycles should be produced to reach the allocatively efficient level of output.
The fact that people with higher incomes get to consume more goods and services addresses the ________ part of one of the two big economic questions.
for whom
The figure above shows the demand for fruit snacks. Which movement reflects a decrease in population?
from point a to point c
The figure above shows the demand for fruit snacks. Which movement reflects how consumers would react to an increase in the price of a fruit snack that is expected to occur in the future?
from point a to point d
In one day, Brandon can either plow 10 acres or plant 20 acres. In one day, Christopher can either plow 14 acres or plant 14 acres. Brandon and Christopher can
gain from exchange if Brandon specializes in planting and Christopher specializes in plowing.
The figure above illustrates Mary's production possibilities frontier. If Mary wants to move from point b to point c, she must
give up some of good Y in order to obtain more of good X.
From 8 to 11 p.m., Sam can either attend a basketball game, a hockey match or the symphony. Suppose that Sam decides to attend the hockey match and thinks to herself that if she did not go to the match she would go to the symphony. Then the opportunity cost of attending the hockey match is
going to the symphony.
Country A can produce 1 cello by giving up the production of 5 guitars. Country B can produce 1 guitar by giving up the production of 4 cellos. In which good does country A have a comparative advantage?
guitars
An art museum decides to offer tours by having visitors listen to cassette tapes rather than have tour guides. The museum is answering the ________ part of one of the two big economic questions.
how
All economic questions are about
how to cope with scarcity.
Joy is training to become a chef. The skills she is obtaining from her training and education will increase Joy's ________.
human capital
Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour. There can be gains from exchange
if Agnes specializes in the production of X and Brenda specializes in the production of Y.
George and Michael can gain from exchange
if each specializes in the production of the good for which he has the lower opportunity cost.
A president of the United States promises to produce more defense goods without any decreases in the production of other goods. This promise can be valid
if the United States is producing at a point inside its production possibilities frontier.
When an economist talks of scarcity, the economist is referring to the
inability of society to satisfy all human wants because of limited resources.
The option(s) selected in Problem 1.2 will meet the new demand because they:
increase inputs instead of reallocating them.
An increase in the demand for computers and a decrease in the number of sellers of computers will definitely ________.
increase the price of a computer
As a country that has a bowed-out production possibilities frontier produces more of one good, the opportunity cost of a unit of that good ________.
increases
The principle of decreasing marginal benefit means that as the quantity of a good consumed
increases, its marginal benefit decreases.
Which of the following best defines capital as a factor of production?
instruments, machines, and buildings used in production
When the government chooses to spend the tax dollars that it collects on homeland security, its choice
involves a tradeoff of other goods and services such as education for more homeland security.
Suppose Company A's profits increase by $10 million and nobody is made worse off. The CEO of Company A keeps all $10 million for herself. This situation
is definitely efficient
A student athlete is deciding whether to work out for an extra hour. Her marginal benefit from another hour of exercise
is the benefit she receives from exercising the additional hour.
The "gifts of nature" are included as part of which factor of production?
land
Factors of production include
land, labor, capital and entrepreneurship.
If the price of aluminum used to make bicycles increases, the price of a bicycle rises because of a
leftward shift of the supply curve of bicycles.
In every economic system, choices must be made because resources are ________ and our wants are ________.
limited; unlimited
Scarcity requires that people must
make choices
Economics is best defined as the study of how people, businesses, governments, and societies
make choices to cope with scarcity
In the figure above, if 4 million computers are produced per year then the ________ should be produced to achieve the allocatively efficient use of resources.
marginal cost of a computer exceeds the marginal benefit of a computer, so fewer computers
In the above figure, the curve labeled a is the ________ curve and the curve labeled b is the ________ curve.
marginal cost; marginal benefit
Studying the effects choices have on the individual markets within the economy is part of
microeconomics
In broad terms the difference between microeconomics and macroeconomics is that
microeconomics studies decisions of individual people and firms and macroeconomics studies the entire national economy
Studying the determination of prices in individual markets is primarily a concern of
microeconomics.
When the price of a good falls, the income effect for a normal good implies that people buy
more of that good because they can afford to buy more of all the things they previously bought.
People must make choices because
of scarcity
People must make choices because
of scarcity.
Marginal cost is the ________ one more unit of a good and ________ of the good increases.
opportunity cost of producing; increases as production
The loss of the highest-valued alternative defines the concept of
opportunity cost.
When the government hires people to serve in the army, these people are no longer available to do other work. This choice illustrates the concept of
opportunity cost.
When the production possibilities frontier bows outward from the origin
opportunity costs are increasing.
Scarcity exists because
our wants exceed the resources available to satisfy them.
Fundamental economic problems basically arise from
our wants exceeding our scarce resources.
In 2012 Nike reduced the price of its running shoes by 20 percent. As a result, the substitution effect caused
people to switch from Adidas shoes and buy more Nikes.
