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If a seller wants to increase revenue from the sale of a product with a price elasticity of demand coefficient of 1.6, then the seller should: A. decrease price because demand is inelastic B. decrease price because demand is elastic C. increase price because demand is inelastic D. increase price because demand is elastic

B

If electricity is a necessity with no close substitutes but the demand for electricity is not perfectly inelastic, a 10% increase in the price of electricity is likely to: A. lead to no change in the quantity demanded of electricity. B. lead to a decrease in the quantity demanded of electricity of more than 10%. C. lead to a decrease in the quantity demanded of electricity of less than 10%. D. none of the above are likely to happen in response to a 10% increase in the price of electricity.

B

In a competitive capitalist (market) company: A. Prices must be set by government in order to achieve equilibrium. B. The interaction of individual demanders and suppliers determines output prices. C. Shortages and surpluses do not occur. D. Centralized decision-making ensures optimum resource use,

B

In the market for used cars, a shortage of used cars would, ceteris paribus: A. put downward pressure on the price of used cars. B. put upward the pressure on the price of used cars. C. increase the demand for used cars. D. decrease the demand for used cars.

B

The ceteris paribus assumption is used to: A. Quantify economic relationships by assuming constant values for the variables under consideration. B. Isolate the relationship between two variables by holding other influences on the relationship constant. C. Explain the difference between an economic theory and an economic model. D. Separate normative economics from positive economics.

B

The fallacy of composition occurs when it is wrongly assumed that: A. Because society benefits from certain government taxing and spending programs, each member of society also benefits from those programs. B. Because some people benefit from certain government taxing and spending programs, all people must benefit from those programs. C. Event A cause event B simply because event B followed event A. D. Government should tax and spend because government can tax and spend.

B

The equilibrium price of a pumpkin in this market is: A. $6 because no buyers will pay a price above $6 for a pumpkin. B. $6 because no sellers will accept a price below $6 for a pumpkin. C. $6 because the quantity supplied of pumpkins is equal to the quantity demanded of pumpkins at a price $6 per pumpkin. D. $8 if sellers of pumpkins prefer to charge a higher price.

C

According to the law of demand, a decrease in the price of orange juice will, ceteris paribus; A. decrease the demand for orange juice. B. increase demand for orange juice. C. decrease the quantity demanded of orange juice. D. increase the quantity demanded for orange juice.

D

Ceteris Paribus, for a normal good, an increase in consumer income leads to: A. a decrease in demand and an increase in equilibrium price. B. an increase in demand and a decrease in equilibrium quantity. C. a decrease in demand and a decrease in both equilibrium and quantity. D. an increase in demand and an increase in both equilibrium price and quantity.

D

Combination Scarves Hats A - - - - - - - - 80 - - - - -0 B - - - - - - - - 60 - - - - -20 C - - - - - - - - 40 - - - - -40 D - - - - - - - - 20 - - - - -60 E- - - - - - - - - 0 - - - - -80 The opportunity cost of moving from combination C to combination D is: A. 60 hats B. 20 hats C. 40 scarves D. 20 scarves

D

IMAGE 1 If this economy is capable of producing on PPF 2, production is efficient at point(s): A. A. B. B, C, and D. C. A and E. D. E and F.

D

IMAGE 3 A market price of $8 per pumpkin will lead to a: A. shortage of 150 pumpkins. B. surplus 150 pumpkins. C. shortage 300 pumpkins. D. surplus 300 pumpkins.

D

If a 10% increase in the price of a product results in a 5% decrease in the quantity demanded of the product, then the absolute value of the price elasticity of demand coefficient is ______________ and demand is said to be _____________. A. 2; elastic B. 1/2; elastic C. 2; inelastic D. 1/2; inelastic

D

Which of the following would lead to a decrease in the supply of desktop computers, ceteris paribus? A. A decrease in the cost of producing desktop computers B. An increase in the number of desktop computers manufacturers C. A decrease in the demand for notebook computers D. an increase in the wages paid to desktop computer factory workers

D

An outward shift of a production possibilities frontier illustrates that: A. Economic growth has occurred. B. Unemployment has increased. C. Resources and technology are held constant. D. Production went from inefficient to efficient.

A

Demand that is perfectly elastic graphs as a(n): A. horizontal line B. vertical line C. downward sloping line D. upward sloping line

A

Hours needed to produce one unit of: Wheat Corn Farmer Smith - - - - - - - 8 - - - - - - - - - - 4 Farmer Jones - - - - - - - 8 - - - - - - - - - - 12 For Farmer Smith, the opportunity cost of one unit of corn is: A. 1/2 units of wheat B. 2/3 units of wheat C. 1 1/2 units of wheat D. 2 units of wheat

A

In the simple circular flow model: A. Households are suppliers in resource (input) markets and demanders in product (output) markets. B. Households are demanders in both resource (input) and product (output) markets. C. Businesses are suppliers in resource (input) markets and demanders in product (output) markets. D. Businesses are demanders in both resource (input) and product (output) markets.

A

Suppose the income elasticity for medical care is 2 and the income elasticity for dental care is 1.5; these values imply that: A. medical care and dental care are both normal goods B. medical care and dental care are both inferior goods C. medical care and dental care are substitutes D. medical care and dental care are complements

A

Which of the following is an example of capital as a factor of production? A. Desktop computers used by bank tellers. B. Shares of stock in a corporation. C. A person that provides funding for a new business venture. D. Camera equipment used by parents to take pictures of their children.

A

If Karen can produce more baskets per hour than Janet, then; A. Janet has an absolute advantage in the production of baskets. B. Karen has an absolute advantage in the production of baskets C. Janet has a comparative advantage in the production of baskets. D. Karen has a comparative advantage in the production of baskets.

B

Any point inside a production possibilities frontier represents: A. Full employment of resources B. Inefficiency C. An unattainable combination of outputs D. Efficiency

B

Combination Scarves Hats A - - - - - - - - 80 - - - - -0 B - - - - - - - - 60 - - - - -20 C - - - - - - - - 40 - - - - -40 D - - - - - - - - 20 - - - - -60 E- - - - - - - - - 0 - - - - -80 A combination of 60 scarves and 40 hats: A. is not desirable because people don't want that many hats B. is unattainable given current resources and technology. C. is possible if current resources and technology are used efficiently. D. should never be produced by this economy.

B

Hours needed to produce one unit of: Wheat Corn Farmer Smith - - - - - - - 8 - - - - - - - - - - 4 Farmer Jones - - - - - - - 8 - - - - - - - - - - 12 According to the principle of comparative advantage, both farmers can gain from trade if Farmer Smith specializes in ___________________ and Farmer Jones specializes in ________________. A. both goods; neither good B. corn; wheat C. neither good; both goods D. wheat; corn

B

IMAGE 1 In order to move from PPF 1 to PPF 2, this economy needs, A. to stop using inefficient production methods and start using efficient production methods. B. an increase in the resources and/or technology used to produce both consumer and capital goods. C. an increase in the wants and needs of consumers. D. an increase in current consumption and a decrease in the production of capital goods.

B

IMAGE 2 The opportunity cost of 1 car is: A. 1 boat for country A and 1/2 boat for country B. B. 1 boat for country A and 2 boat for country B. C. The same for both countries D. Impossible to determine from the information provided.

B

The responsiveness of buyers to changes in the price of a product is measures by: A. equilibrium B. price elasticity of demand C. the change in supply relative to the change in price D. income elasticity of demand

B

Ceteris Paribus, a decrease in the supply of product leads to: A. a decrease in the equilibrium price of the product and a decrease in the equilibrium quantity of the product. B. a increase in the equilibrium price of the product and a increase in the equilibrium quantity of the product. C. a increase in the equilibrium price of the product and a decrease in the equilibrium quantity of the product. D. a decrease in the equilibrium price of the product and a increase in the equilibrium quantity of the product.

C

Combination Scarves Hats A - - - - - - - - 80 - - - - -0 B - - - - - - - - 60 - - - - -20 C - - - - - - - - 40 - - - - -40 D - - - - - - - - 20 - - - - -60 E- - - - - - - - - 0 - - - - -80 This production possibilities schedule: A. Implies that this economy is not using its available resources efficiently. B. Reflects the law of increasing opportunity costs. C. Results in a straight-line PPF and illustrates constant opportunity cost. D. Indicates that resources are better suited to the production of scarves.

C

IMAGE 2 If both countries produce the good for which each has a comparative advantage, Country A will produce ________________ and Country B will produce ___________________. A. boats; cars B. neither good; both goods C. cars; boats D. both goods; neither good

C

IMAGE 2 Initially assume Country A is producing and consuming 10 cars and 20 boats, while country B is producing and consuming 20 cars and 40 boats. The two countries then decide to specialize according to comparative advantage and engage in trade. The potential gains from trade for both countries combined work out to be: A. 10 cars and 10 boats, to be divided between the two countries. B. 20 cars, to be divided between the two countries. C. 20 boats, to be divided between the two countries. D. impossible to determine without knowing the terms of trade.

C

Market economies are characterized by all of the following except: A. Incentives for exchange. B. Private property. C. Government control of capital. D. Decentralized decision making/

C

Scarcity exists: A. If government fails to direct resources to the most deserving areas of the economy. B. Only when an economy is not able to operate at a point on its production possibilities frontier. C. Because the wants and needs of society exceed the resources available to satisfy them. D. Because the forces of supply and demand do not always efficiently answer the questions of what output to produce, how to produce it, and who gets to consume it.

C

If cotton clothing becomes more popular at the same time that the supply of cotton decreases, then basic supply and demand analysis predicts that: A. the equilibrium quantity of cotton clothing will increase but the change in the equilibrium price of cotton clothing cannot be determined from the information given. B. both the equilibrium price and quantity of cotton clothing will increase. C. the equilibrium price of cotton clothing will increase and the equilibrium quantity of cotton clothing will decrease. D. the equilibrium price of cotton clothing will increase but the change in the equilibrium quantity of cotton clothing cannot be determined from the information given.

D

If quantity demanded is 50 when price is $3 and quantity demanded is 25 when price $5, then total revenue ______________ if price increases from $3 to $5, implying that demand is ________________. A. increases; inelastic B. decreases; inelastic C. increases; elastic D. decreases; elastic

D

The demand for generic shampoo is likely to be: A. elastic because generic shampoo is a necessity. B. inelastic because generic shampoo is a luxury. C. inelastic if there are lots of good substitutes for generic shampoo available. D. elastic if there are lots of good substitutes for generic shampoo available.

D

The demand for potato chips will increase in response to all of the following except: A. a decrease in consumer income, if potato chips are inferior goods. B. a decrease in the price of chip dip, a complement for potato chips. C. an increase in the price of corn chips, a substitute for potato chips. D. an increase in the number of firms producing potato chips.

D

Use the midpoint formula to calculate the price elasticity of demand coefficient for a product if quantity demanded is 30 when price is $3 and quantity demanded is 20 when price is $5. A. 1.25 B. 0.2 C. 5.0 D. 0.8

D

Which of the following is a normative microeconomic statement? A. Unemployment, gross domestic product, and inflation should not be used as measures of economic activity in the overall economy. B. Many colleges and universities charge students to park on campus. C. Ceteris paribus, consumers respond to an increase in the price of a product by decreasing quantity demanded. D. Most US corporations have profit margins that are too high.

D

Which of the following pairs of goods is most likely to have a cross elasticity greater than zero? A. hotdogs and hotdog buns B. cereal and milk C. automobiles and steel D. beef and chicken

D