Micro Unit 1

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CH 1: A rational decision maker takes an action only if the ?

Marginal Benefit is greater than the Marginal cost.

CH 1: Which of the following is the best statement about markets?

Markets are usually a good way to organize economic activity.

CH3:Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that the opportunity cost of 1 chair for

Mike is 1/5 table and 1/3 table for Sandy

CH2: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 could NOT explain the change?

None of the above are correct

CH6:Refer to Figure 6-12. The equilibrium price before the tax is

P1

CH4:What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell?

Price will fall and the effect on quantity is ambiguous.

CH3:Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that

Sandy has a comparative advantage in tables

CH 1: Economics deals primarily with the concept of

Scarcity

CH5:Last year, Sheila bought 6 pairs of shoes when her income was $40,000. This year, her income is $50,000 and she purchased 10 pairs of shoes. All else constant, it is obvious that Sheila

considers shoes to be a normal good

CH3:With trade a

country's consumption possibilities frontier can be outside its production possibilities frontier

CH6:Suppose that a tax is placed on books. If the buyer pays the majority of the tax we know that the

demand curve is more inelastic than the supply curve

CH2:When a production possibilities frontier shifts outward, it is demonstrating the concept of

economic growth

CH2:Macroeconomics is the study of

economy-wide phenomena

CH5:When quantity demanded responds substantially to changes in price, demand is said to be

elastic

CH5:Refer to Figure 5-11. When a new, more productive strawberry was developed which caused supply to increase, strawberry farmers' total revenue

fell from $6000 to $5250 since demand is inelastic

CH3:Imports are

goods produced abroad and sold domestically

CH5:Demand is elastic if elasticity is

greater than 1

CH2:Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 50 units of food and 30 machines. This year it experienced a technological advance in its machine-making industry. As a result, this year the society wants to produce 55 units of food and 30 machines. Which of the following statements is true?

he technological advance reduced the amount of resources needed to produce 30 machines. These resources could be used to produce more food.

CH2: In the markets for factors of production,

households provide firms with labor, land, and capital

CH5:Refer to Figure 5-6. The price elasticity of this demand curve between $10 and $15 is

inelastic

CH6:A price ceiling

is a legal maximum on the price at which a good can be sold

CH2:Refer to Figure 2-2. Money spent by households

is earned from the sale of factors of production

CH4:If a seller is supplying a product that is slightly different from that of many close competitors and is able to charge a different price than competitors, then the seller

is participating in a monopolistically competitive market

CH4:Alyssa rents 5 movies per month when the price is $3.00 each and 7 movies per month when the price is $2.50. Alyssa has demonstrated the

law of demand

CH6:The equilibrium wages of teenagers tend to be

low because teenagers are among the least skilled and least experienced workers

CH6:Under rent control, tenants can expect

lower rent and lower quality housing

CH6:Researchers have found that a 10 percent increase in the minimum wage will

lower teen employment by 1 to 3 percent

CH 1: A donut shop sells fresh baked donuts from 5 a.m. until 3 p.m. every day but Sunday. The cost of making and selling a dozen glazed donuts is $1.00. Since this shop does not sell day-old donuts the next day, what should the manager do if he still has 10 dozen left at 2:30 p.m.?

lower the price of the remaining donuts even if the price falls below $1.00

CH6:Refer to Figure 6-11. In which market will the tax be most equally divided between the buyer and the seller?

market (c)

CH4:Which of the following is NOT a characteristic of a perfectly competitive market?

market power

CH5:Assume that a 4 percent increase in income results in a 6 percent decrease in the quantity demanded of a good. The income elasticity of demand for the good is

negative and therefore the good is an inferior good

CH2: Refer to Figure 2-8.. If this economy puts all of its resources into the production of bathtubs it could produce

no barrels and 16 bathtubs

CH2:The point where both x and y are zero is known as the

origin

CH5:Chocolate Chip Cookie Dough ice cream would tend to have very elastic demand because

other flavors of ice cream are almost perfect substitutes

CH6:Refer to Figure 6-1. A binding price ceiling is shown in

panel (b)

CH 1: When the government redistributes income from the rich to the poor?

people work less and produce fewer goods and services

CH5:If the quantity supplied is the same regardless of price, then the supply curve would be

perfectly inelastic

CH5:Which of the following is NOT a determinant of the price elasticity of demand for a product?

price

CH4:Buyers and sellers who have no influence on market price are referred to as

price takers

CH4:Suppose that the American Medical Association announces that men who shave their heads are less likely to die of heart failure. We could expect the current demand for

razors to increase

CH6:The tax incidence is equivalent

regardless of whether the tax is levied on buyers or sellers

CH2:In the early 19th century, the Russian government sent doctors to southern Russian villages to provide assistance during a cholera epidemic. The villagers noticed that wherever doctors appeared, people died. Therefore, many doctors were chased away from villages, and some were even killed. This reaction to the correlation between doctors and deaths is most likely a problem of

reverse causality

CH5:Refer to Figure 5-12. Which supply curve is perfectly inelastic?

s1

CH2:The y-coordinate is the

second number of an ordered pair and represents the point's vertical location

CH5:If sellers respond substantially to changes in price, then

sellers are considered to be relatively price sensitive

CH5:Suppose that you are in charge of pricing at a local sandwich shop. The business needs to increase revenue and your job is on the line. If the demand for sandwiches is elastic you

should decrease the price of sandwiches

CH6:When a tax is placed on the sellers of a product the

size of the market is reduced

CH 1: In a market economy decisions are guided by individual self-interest. Hence, there is?

still the ability to achieve desirable economic well-being for society as a whole

CH4:In a free market, who determines how much of a good will be sold and the price at which it is sold?

suppliers and demanders together

CH5:If sellers do not respond at all to a change in price

supply must be perfectly inelastic

CH5:Given the market for illegal drugs, if the government attempts to reduce the flow of drugs into the United States,

supply would fall and prices would rise

CH4:Refer to Figure 4-8. If price in this market is currently $14, there would be a

surplus of 40 units and price would tend to fall

CH4:Suppose roses are currently selling for $40.00 per dozen. The equilibrium price of roses is $30.00 per dozen. We would expect a

surplus to exist and the market price of roses to decrease

CH4:When it comes to people's tastes, economists generally believe that

tastes are based on historical and psychological forces

CH3:Tariffs are

taxes placed on imported products

CH2:Which of the following would be considered a topic of study in macroeconomics?

the effect of an increase in the price of imported oil on the U.S. inflation rate

CH2:In the simple circular-flow diagram, markets consist of

the market for goods and services and the market for factors of production

CH6:Water shortages can be most efficiently eliminated even in times of drought if

the market is allowed to adjust freely

CH3:A production possibilities frontier will be linear and not bowed out if

the tradeoff between the two goods is always at a constant rate

CH 1: The opportunity cost of going to college is ?

the value of the best opportunity a student gives up to attend college

CH4:If there is a shortage of farm laborers, we would expect

the wages of farm laborers to increase

CH 1: Taxes adversely affect the allocation of resources in society because ?

they distort prices and thus the decisions of households and firms

CH5:When quantity moves proportionally the same amount as price, demand is

unit elastic and the price elasticity of demand is 1

CH5:Refer to Figure 5-1. The point on the demand curve labeled B represents the

unit elastic section of the demand curve

CH6:If a tax is levied on the seller of a product the demand curve

will not change

CH4:You love peanut butter. You hear on the news that 50 % of the peanut crop in the South has been wiped out, which will cause the price to double by the end of the year. As a result,

your demand for peanut butter increases today

CH 1: In the United States, higher income tax rates on rich people could be justified on the basis of ?

Equity for society

CH5:An inelastic demand means that

consumers hardly respond to a change in price

CH6:Binding price ceilings in a market cause quantity demanded to be

greater than quantity supplied

CH5:If the cross-price elasticity of demand is 1.25, then the two goods would be

substitutes

CH4:A monopoly is a market _

with one seller

CH3:Refer to Table 3-3. The opportunity cost of 1 birdhouse for Montana is

1/3 basket

CH3:Refer to Table 3-4. The opportunity cost of 1 car for the United States is

1/4 airplane

CH6:Refer to Figure 6-9. The amount of the tax imposed in this market is

10

CH2:Refer to Table 2-1. What is the opportunity cost to Toyland of increasing the production of dolls from 200 to 300?

150 fire trucks

CH6:Refer to Figure 6-13. The equilibrium price before the tax is

16

CH6:Refer to Figure 6-13. The per unit burden of the tax on the sellers is

16

CH6:Refer to Figure 6-9. The price buyers will pay after the tax is imposed is

18

CH6:Refer to Figure 6-8. The amount of the tax that buyers would pay would be

2

CH3:Refer to Figure 3-4. The opportunity cost of 1 loaf of bread for Barney is

2 pies

CH5:Refer to Figure 5-2. The elasticity of demand from point A to point B, using the midpoint method would be

2.5

CH3:Refer to Table 3-3. The opportunity cost of 1 basket for Missouri is

3/4 birdhouse

CH4:Refer to Figure 4-8. If price in this market is currently $8, quantity supplied would be

40 and quantity demanded would be 60

CH4:Refer to Figure 4-9. If price is $15, quantity supplied would be

400

CH6:Refer to Figure 6-10. The equilibrium price in the market before the tax is imposed

5

CH6:Refer to Figure 6-8. The price buyers will pay after the tax is imposed is

8

CH4:Refer to Figure 4-10. Which of the four graphs represents the market for pizza delivery in a college town in September?

A

CH2:Which of the following statements is true? Different economic models employ different sets of assumptions. Good economic models should attempt to mimic reality as closely as possible. All economic models are created using the same set of basic assumptions. Economic models, to be accepted, must be tested by conducting experiments.

A:Different economic models employ different sets of assumptions.

CH5:Alice says that she would buy one banana split a day regardless of the price. If she is telling the truth,

Alice's demand for banana splits is perfectly inelastic

CH2:Figure 2.1 Which arrow shows the flow of the factors of production?

C

CH4:Beef is a normal good. You observe that both the equilibrium price and quantity of beef has fallen over time. Which of the following would be most consistent with this observation?

Consumer tastes have changed so as to prefer beef less than before.

CH2:The nation's antitrust laws are enforced by the

Department of Justice and the Federal Trade Commission

CH3:Which of the following would NOT occur if each person specializes in the good for which they have a comparative advantage?

Each person's production possibilities frontier will shift outward.

CH 1: An example of a monopoly would be?

Electric company in Nowhere, Arkansas.

CH4:Suppose that demand increases AND supply decreases. What would happen in the market for the good?

Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

CH 1: The invisible hand's ability to coordinate the decisions of the firms and households in the economy can be hindered by ?

Government actions that distort price

CH3:Assume that Greece has a comparative advantage in fish and Germany has a comparative advantage in cars. If these two countries specialize and trade according to their comparative advantage, which of the following would NOT be true?

Greece will benefit from trade more than Germany.

CH4:Which of the following would be most likely to increase the price of a new house?

Higher wages for carpenters, higher wood prices, increases in consumer incomes, higher apartment rents, increases in population and expectations of higher house prices in the future.

CH3:Refer to Table 3-4. The opportunity cost of 1 airplane for the United States is

4 cars

CH6:Refer to Figure 6-8. The price sellers receive after the tax is imposed is

5

CH2:Refer to Figure 2-6. The movement from point C to point D was most likely caused by

an increase in unemployment

CH4:If the demand for a product increases, we would expect equilibrium price

and equilibrium quantity to both increase

CH2:The foundation stones from which economic models are built are

assumptions

CH3:Refer to Table 3-3. If Montana and Missouri trade based on the principle of comparative advantage, Montana will export

birdhouses and Missouri will export baskets.

CH3:Refer to Table 3-2. Helen has an absolute advantage in

both goods and Carolyn has an absolute advantage in neither good

CH5:The price elasticity of demand measures how responsive

buyers are to a change in price

CH3:Refer to Table 3-4. The United States and Japan could benefit by the United States specializing in

cars and Japan specializing in airplanes

CH6:A newly imposed minimum wage set above the equilibrium wage in a labor market will

cause some workers to get a raise and some workers to lose their job

CH3:Refer to Table 3-5. If England and Spain trade based on the principle of comparative advantage, Spain will export which product to England?

cheese

CH5:The cross-price elasticity of demand can tell us whether goods are

complements or substitutes

CH 1: Which of the following is most likely to generate an externality?

Taxes that are collected to pay for public schools. (GOV ONLY)

CH5:Suppose that when the price of corn is $2 per bushel, farmers can sell 10 million bushels. When the price of corn is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true?

The demand for corn is price inelastic, and so an increase in the price of corn will increase the income of corn farmers.

CH4:Suppose that the incomes of buyers in a particular market for a normal good decline and there is also a reduction in input prices. What would we expect to occur in this market?

The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.

CH 1: After much consideration, you have chosen Cancun over Ft. Lauderdale for your Spring Break trip this year. For this decision to change, which of the following must occur?

The marginal benefit of Ft. Lauderdale must increase. (Marg. Benefit always must be greater that Marg. Cost to change answer.)

CH 1: Which is the most accurate statement about trade?

Trade can make every nation better off.

CH 1: In a market economy, prices reflect the?

Value of a good to society and cost to society of making the good

CH6:Rent control is

a common example of a price ceiling

CH6:A binding price ceiling in the computer market will cause

a shortage of computers

CH2: A model is

a simplification of real life

CH6:Refer to Figure 6-3. In panel (b), at the actual price there will be

a surplus of wheat

CH4:If a surplus exists in a market we know that the actual price is

above equilibrium price and quantity supplied is greater than quantity demanded

CH3:Refer to Table 3-4. If the United States and Japan trade based on the principle of comparative advantage, Japan will export what product to the United States?

airplanes

CH3:Trade

allows a person to consume at a point outside his production possibilities frontier

CH5:When demand is elastic in the current price range, _

an increase in price would decrease total revenue because the decrease in quantity demanded is greater than the increase in price


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