Bulk MicroEconomics Exam 1

In the United States, a typical credit card interest rate ranges from ______________ per year.

12% to 18%

The United States has approximately ___________ credit card holders.

180 million

In 2010, Americans had about _____________ outstanding in credit card debts not paid on time.

900 billion

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

Marginal thinking is best demonstrated by: A. choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. B. deciding to never purchase a coat made with animal skins or furs C. acquiring the information relevant to a choice before making that choice D. measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake

A

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

Refer to Figure 2-2. At Point A in the production possibilities graph shown above, the economy: A. is not using its resources efficiently. B. is using its resources efficiently while producing clothing but no food. C. is using its resources efficiently while producing food but no clothing. D. is using its resources efficiently to produce both food and clothing

A

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________. A. allocative efficiency B. the production possibilities frontier C. trade-offs D. scarcity

A

The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern. A. utility B. marginal benefit C. opportunity cost D. sunk costs

A

The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options. A. sunk costs B. opportunity costs C. marginal analysis D. budget constraints

A

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the budget constraint, sometimes also called the _______________, a diagram which shows what choices are possible. A. opportunity set B. consumption choice C. time value of money D. risk premium

A

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

Economists refer to this pattern, the ___________________________________, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines. A. law of trade-offs B. law of diminishing marginal utility C. production possibilities frontier D. law of increasing marginal utility

B

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good. A. utility B. marginal analysis C. the budget constraint D. consumption

B

Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be. A. negative statements B. positive statements C. tradeoffs D. utilitarianism

B

Referring to Table 2-1: A student has only a few hours to prepare for two different exams this afternoon. The above table shows alternative possible exam scores with three alternative uses of the student's time. The opportunity cost of scoring a 94 on the economics exam rather than a 77 is: A. 8 points on the history exam. B. 15 points on the history exam. C. 14 points on the history exam. D. 17 points on the history exam.

B

Scarcity implies that: A. consumers would be willing to purchase the same quantity of a good at a higher price. B. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available. C. at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce. D. consumers are too poor to afford the goods and services available.

B

The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options. A. marginal utility B. sunk costs C. marginal analysis D. budget constraints

B

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible. A. consumption set B. budget constraint C. original budget D. income cap

B

Which of the following would most likely shift the production possibilities curve inward? A. an increase in the number of hours factories are in use B. a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time C. an increase in the production of capital goods D. technological progress

B

The law of ____________________________ explains why people and societies rarely make all-or-nothing choices. A. consumption B. marginal analysis C. diminishing marginal utility D. utility

C

The marginal benefit of a slice of pizza is the: A. total amount that a consumer is willing to pay for a whole pizza, divided by the number of slices B. difference between the value of the slice to the consumer and the price of the slice. C. maximum amount that a consumer is willing to pay for the slice. D. price of the slice of pizza

C

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. A. Opportunity cost B. productive efficiency C. budget constraint D. production possibilities frontier

C

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. A. personal preference B. utility level C. budget constraint D. opportunity set

C

Why is there scarcity? A. Because the opportunity set determines this. B. Because theory dictates it. C. Because our unlimited wants exceed our limited resources D. Because human wants are limited.

C

"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

Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good. A. utility B. opportunity cost C. benefit analysis D. marginal analysis

D

Refer to Figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is: A. Point B B. Point C C. Point D D. All points on the production possibilities frontier are equally efficient.

D

Refer to Figure 2-1. The most inefficient point depicted is: A. Point A B. Point C C. Point D D. Point G

D

Refer to Figure 2-2. When the economy moves from Point A to Point B in the diagram above: A. the economy begins using its resources efficiently to produce both food and clothing. B. the economy operates at its productive capacity once it reaches Point B. C. the economy increases production of both clothing and food. D. All of the above occur.

D

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

The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if: A. the economy moves along the production possibilities in the direction of a greater quantity of defense. B. the economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve. C. the production possibilities frontier shifts outward due to an improvement in technology. D. either b) or c) occurs, but not as a result of a).

D

The opportunity cost of an action: A. can be determined by considering both the benefits that flow from as well as the monetary costs incurred as a result of the action. B. can be determined by adding up the bills incurred as a result of the action. C. can be objectively determined only by economists. D. is a subjective valuation that can be determined only by the individual who chooses the action.

D

Are markets always in equilibrium?

No, but if there is no outside interference, they tend to move toward equilibrium.

If the demand for software engineers __________ slower than does supply, then wages of software engineers will __________.

increases: fall

If the demand for software engineers __________ slower than does supply, then wages of software engineers will __________.

increases; fall

Many economists believe that the trend toward greater wage inequality across the U.S. economy was primarily caused by _____________.

new technologies

Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be.

positive statements

The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied.

price

In contrast to goods and services markets, _____________ are rare in labor markets, because rules that prevent people from earning income are not politically popular.

price ceilings

A demand curve shows the relationship between price and _________________ on a graph.

quantity demanded

A straightforward example of a _______________, often used for simplicity, is the interest rate.

rate of return

it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.

scarcity

A more efficient means of processing algae to produce an anticancer drug is discovered. As a result, the supply curve for the drug will:

shift to the right, decreasing the price of the drug

As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.

technology

As the _____________ complement for high-skill labor becomes cheaper, the demand curve for high-skill labor will shift to the right.

technology

Whenever there is a surplus at a particular price, the quantity sold at that price will equal:

the quantity demanded at that price

Whenever there is a surplus at a particular price, the quantity sold at that price will equal:

the quantity demanded at that price.

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 shift to the right.

Whenever there is a shortage at a particular price, the quantity sold at that price will equal:

the quantity supplied at that price.

When quantity demanded decreases in response to a change in price:

there is a movement up along the demand curve

Many states do have ____________, which impose an upper limit on the interest rate that lenders can charge.

usury laws

If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages __________.

will increase

On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50. What will the likely effect of this policy be?

Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate.

. In deciding how many hours to work, Beulah will make a choice that maximizes her _______; that is, she will choose according to her preferences for leisure time and income. A. budget constraint B. opportunity set C. utility D. production possibilities frontier

C

As a person receives more of a good, the _______________ from each additional unit of the good declines. A. utility B. sunk costs C. marginal utility D. budget constraint

C

Attending college is a case where the ________________ exceeds the monetary cost. A. budget constraint B. marginal analysis C. opportunity cost D. marginal utility

C

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is: A. nothing, because he enjoys playing basketball more than studying. B. the increase in skill he obtains from playing basketball for that hour. C. the benefit to his grades from studying for an hour D. nothing, because he had a free pass into the sports complex to play basketball.

C

In many cases, it is reasonable to refer to the ________________ as the price. A. budget constraint B. sunk cost C. opportunity cost D. budget constraint

C

Refer to Figure 2-1. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from: A. A to B B. B to E C. C to F D. G to F

C

Refer to Table 2-1. A student has only a few hours to prepare for two different exams tomorrow morning. The above table shows alternative possible exam outcomes with three alternative uses of the student's time. The opportunity cost of scoring an 84 on the history exam rather than 76 is: A. 10 points on the economics exam B. 8 points on the history exam C. 7 points on the economics exam D. 12 points on the economics exam

C

Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel?

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.

How do apple growers react to the news of medical research findings that suggest that eating apples leads to greater health benefits than were previously known?

They increase the quantity of apples supplied.

Which of the following best denotes the reason for the existence of substantial black markets?

a command economy

The supply curve of textbooks (which are produced using paper made from trees) will shift to the left in response to:

a sharp increase in the demand for and construction of wood-frame homes.

After widespread press reports about the dangers of contracting 'mad cow disease' by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is:

a shift of the demand curve for beef to the left.

If Congress and President imposed a law that gas stations could not charge more than $1.00/gallon for gas what impact would this have on the gasoline market?

a shortage

The imposition of a price ceiling on a market often results in:

a shortage

Any given demand or supply curve is based on the ceteris paribus assumption that ___________________.

all else is held equal

Which of the following results in a rightward shift of the market demand curve for labor?

an increase in demand for the firm's product

Which of the following will not result in a rightward shift of the market supply curve for labor?

an increase in labor productivity

Which of the following will result in an upward left movement along the market demand curve for labor and cause a reduction in quantity demanded for labor?

an increase in the wage rate

But nearly all supply curves share a basic similarity: they slope _______________. a. down from left to right b. up from left to right c. up from right to left d. down from right to left

b

Many cooks view butter and margarine to be substitutes. If the price of butter rises, then in the market for margarine:

both the equilibrium price and quantity will rise.

Macroeconomics primarily examines: a. the behaviour of individual households and firms. b. how prices are determined within individual markets. c. broad issues such as national output, employment and inflation. d. the output levels that maximize the profits of business firms

c

The basic difference between macroeconomics and microeconomics is that: a. microeconomics looks at the forest (aggregate markets) while macroeconomics looks at the trees (individual markets). b. macroeconomics is concerned with groups of individuals while microeconomics is concerned with single countries. c. microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets). d. macroeconomics is concerned with generalization while microeconomics is concerned with specialization.

c

Improvements in the productivity of labor will tend to:

increase wages.

Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories.

circular flow diagram

In the circular flow diagram model: a. households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses. b. businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households. c. households receive revenue for selling goods and services to businesses, and use that revenue to buy inputs from businesses. d. Both (a) and (b) are correct.

d

The leader of a federal political party made the following campaign promise: 'My administration will increase national defense without requiring sacrifices elsewhere in the economy.' The promise can be kept if: a. the economy moves along the production possibilities in the direction of a greater quantity of defense. b. the economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve. c. the production possibilities frontier shifts outward due to an improvement in technology. d. either b) or c) occurs, but not as a result of a).

d

The labor ____________ curve(s) will shift _______________ if there is an increase in productivity or an increase in the demand for the final product.

demand; right

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.

division of labor

_____________ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines.

economies of sale

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as:

excess demand

Other things being equal, a __________ supply of workers tends to __________ real wages.

larger; decrease

Economists refer to this pattern, the ___________________________________, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines.

law of diminishing utility

Since Baltimore passed the first _______________ in 1994, several dozen cities enacted similar laws in the late 1990s and into the 2000s.

living wage law

If a firm faces ________________________, while the prices for the output the firm produces remain unchanged, a firm's profits will increase.

lower costs of production

Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

marginal analysis