Microeconomics Unit 1 Test

In the Circular Flow Model do businesses demand or supply? (tricky question, think about it, there are two markets in the model) a.) Both b.) Demand c.) Supply d.) Neither

a.) Both

What does a budget constraint show? a.) Various combinations of goods or services an individual can purchase with their income. b.) The items a person wants, but cannot afford c.) Government Spending Budget Wish List d.) The ups and down of the stock market

a.) Various combinations of goods or services an individual can purchase with their income.

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be. a.) normative statement b.) budget constraint c.) trade-off d.) opportunity cost

a.) normative statement

As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left. a.) technology b.) high-skill labor c.) lower wage d.) market

a.) technology

The opportunity cost of attending university is likely to include all except which of the following? a.) the cost of haircuts received during the school term b.) the income you forgo in order to attend classes c.) tuition fees d.) the cost of required textbooks

a.) the cost of haircuts received during the school term

Is the product market (goods market) and the factor market (AKA resource market) the same thing? a.) True b) False

b.) False

In the market for labor. What happens to real wages when there is an increase in the demand curve? a.) will stay the same b.) will decrease c.) will increase d.) may increase, decrease or stay the same depending on the relative slopes.

c.) will increase

Match the changes with the outcomes. These are concerning shifts in supply and demand. _____ Price goes down because of a change in demand _____ Price goes up because of a change in demand _____ Price goes up because of a change in supply _____ Price goes down because of a change in supply 1. Demand goes up 2. Demand goes down 3. Supply goes up 4. Supply goes down

__2__ Price goes down because of a change in demand __1__ Price goes up because of a change in demand __4__ Price goes up because of a change in supply __3__ Price goes down because of a change in supply

What is a chart that shows all possible combinations a country can produce of two different goods. It shows the trade off of producing more of one good over another one. a.) A Productions Possibility Frontier b.) Scarcity c.) Incentives d.) Opportunity Cost

a.) A Productions Possibility Frontier

Who wrote: "The Wealth of the Nations"? a.) Adam Smith b.) Karl Marx c.) John Maynard Keynes d.) Milton Friedman

a.) Adam Smith

If a window gets broken and somebody says, 'do not fret, this creates wealth because it creates a job for the glass maker'. What is that an example of: a.) Broken Window Fallacy b.) Scarcity c.) Choices d.) Production Possibilities Frontier

a.) Broken Window Fallacy

Which one looks at the big picture? a.) Macroeconomics b.) Microeconomics

a.) Macroeconomics

A surplus happens when a.) Market price is above market equilibrium b.) Market price is below market equilibrium c.) Quantity demanded is greater than quantity supplied d.) When supply is greater than demand e.) Equilibrium price is above market price

a.) Market price is above market equilibrium

Most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers. a.) Market-oriented economy b.) Macroeconomy c.) Microeconomy d.) Command economy

a.) Market-oriented economy

Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market." a.) The statement is correct. b.) The statement would be correct if "quantity of wheat demanded" were substituted for "quantity of wheat supplied." c.) The statement is incorrect because it confuses a change in quantity supplied with a change in supply. d.) The statement would be correct if it read that a "decrease in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."

a.) The statement is correct.

Does the budget constraint imply there is an opportunity cost when choosing between two goods? a.) True b.) False

a.) True

The circular flow diagram of economic activity is a model of the: a. flow of goods, services, and payments between households and firms. b. influence of government on business behaviour. c. role of unions and government in the economy. d. interaction among taxes, prices, and profits.

a.) flow of goods, services, and payments between households and firms

The 'law of supply' functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied. a.) price b.) demand c.) supply d.) quantity

a.) price

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good. a.) the production possibilities frontier b.) allocative efficiency c.) scarcity d.) utility

a.) the production possibilities frontier

The budget constraint line shows opportunity cost goes away with a rise in income. a.) True b.) False

b.) False

Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel? a.) There is an increase in the cost of producing steel, which shifts the supply curve of steel to the right, thereby increasing the price of steel. b.) There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel. c.) There is a decrease in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel. d.) The increase in wage costs will shift the demand curve for steel to the left, increasing the cost of steel.

b.) There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of: a.) all consumers b.) buyers and sellers c.) producers and input suppliers d.) producers and government planning committees

b.) buyers and sellers

Specialization a.) leads to greater self-sufficiency. b.) can lead to an increase in overall production. c.) allows workers to develop skills by working on a large number of tasks d.) is always the result of an inefficient use of resources

b.) can lead to an increase in overall production

If new manufacturers enter the computer industry, then (ceteris paribus): a.) the supply curve shifts to the left. b.) the supply curve shifts to the right. c.) the demand curve shifts to the left. d.) some established manufacturers must exit the industry.

b.) the supply curve shifts to the right.

In a market for a good, if there is a shift in supply (supply goes up). What happens to demand? a.) Demand goes down b.) Demand goes up c.) There is a movement down along the demand curve. d.) There is a movement up along the demand curve e.) None of the above

c.) There is a movement down along the demand curve.

Which of the following will not result in a rightward shift of the market supply curve for labor? a.) a decrease in non-wage income b.) an increase in the working-age population c.) an increase in labor productivity d.) an increase in immigration

c.) an increase in labor productivity

Which of the following will not result in a leftward shift of the market demand curve for labor? a.) a decrease in labor productivity b.) a decrease in demand for the firm's product c.) an increase in the wage rate d.) a decrease in the firm's product price

c.) an increase in the wage rate

Improvements in the productivity of labor will tend to: a.) decrease wages b.) decrease the supply of labor c.) increase wages d.) increase the supply of labor

c.) increase wages

In the ____________, households work and receive payment from firms. a.) financial investment market b.) financial capital market c.) labor market d.) savings market

c.) labor market

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________. a.) income gap b.) market equilibrium c.) law of demand d.) price model

c.) law of demand

When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being: a.) balanced budget b.) prudent monetary policy c.) low inflation d.) assuring competition between firms

c.) low inflation

A more efficient means of processing algae to produce an anticancer drug is discovered. As a result, the supply curve for the drug will: a.) shift to the right, increasing the price of the drug. b.) shift to the left, increasing the price of the drug. c.) shift to the right, decreasing the price of the drug. d.) shift to the left, decreasing the price of the drug.

c.) shift to the right, decreasing the price of the drug

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 _______________________. a.) remain unchanged. b.) shift to the left. c.) shift to the right. d.) achieve equilibrium.

c.) shift to the right.

A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the __________________ . a.) demand curve to the right b.) supply curve to the left c.) supply curve to the right d.) demand curve to the left

c.) supply curve to the right

"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: a.) $0 b.) $4 c.) $40 d.) $44

d.) $44

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect: a.) Andy's demand for pizza to increase. b.) Andy's demand for pizza to decrease. c.) Andy's quantity of pizza demanded to decrease. d.) Andy's demand for beer to increase.

d.) Andy's demand for beer to increase.

The information that markets generate to guide the distribution of resources is called: a.) Opportunity cost b.) Magic c.) Scarcity d.) Price Signals e.) Economics

d.) Price Signals

Which of the following results in a rightward shift of the market demand curve for labor? a.) a decrease in labor productivity b.) a decrease in the firm's product price c.) an increase in the wage rate d.) an increase in demand for the firm's product

d.) an increase in demand for the firm's product

Scarcity exists because of: a.) the market mechanism. b.) specialization and division of labor. c.) the allocation of goods by prices d.) unlimited wants and limited resources.

d.) unlimited wants and limited resources.

Please list these in the order they go in _____ The supply of fruit goes down _____ A frost freezes fruit

1. A frost freezes fruit 2. The supply of fruit goes down