ECO 205 test 1
A farmer deciding whether or not to add fertilizer to his or her crops. If the farmer adds 1 pound of fertilizer per acre, the value of the resulting crop rises from $80 to $100 per acre. According to marginal analysis, the farmer should add fertilizer if it costs less than:
$20 per pound
Mikki decided to work five hours the night before her economics test. She earns an extra $75, but her exam grade is 10 points lower than it would have been had she stayed home and studied. Her opportunity cost is the:
10 points she lost on her exam
Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. The first unit of capital goods will cost the economy ___ units of consumption goods.
2
In Exhibit 2-2, the opportunity cost of coffee when moving from A to B is:
2 million bushels of corn
If society leaves some of its resources unemployed, then it will be operating at a point:
beneath its production possibilities curve
Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. The second unit of capital goods production will cost ___ units of consumption goods, and the third unit of capital goods production will cost ___ units of consumption goods.
4; 6
Susan wishes to buy gasoline and have her car washed. She finds that if she buys 9 gallons of gasoline at $1.50 per gallon, the car wash costs $1, but if she buys 10 gallons of gasoline, the car wash is free. For Susan, the marginal cost of the tenth gallon of gasoline is
50 cents
Which of the following is most likely to shift the demand curve for electricity to the left?
Consumers are becoming more energy conscious
Beginning from an equilibrium at point E2. In Exhibit 4-5, an increase in demand for good X, other things being equal, would movement the equilibrium point to:
E3
Which of the following is the most accurate definition of economics?
Economics is the study of how society chooses to allocate scarce resources.
Which of the following most accurately indicates the implications of an economy's production possibilities curve?
If all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.
With time, which one of the following strategies would most likely result in an outward shift in the production possibilities curve of an economy?
Instituting a tax policy encouraging investment at the expense of consumption
Which of the following changes could cause the computer market to change as shown in Exhibit 4-4?
Lower costs for computer chips and motherboards
Which of the following is not a resource?
Money
At a price of $5, Sam buys 10 units of a product; when the price increases to $6, Sam buys 8 units. Martha says Sam's demand has decreased. Which is the correct explanation?
No. Martha is incorrect. Sam's quantity demanded decreased, not his demand.
Along a production possibilities curve showing capital and consumption goods production, which of the following pairs are being held fixed?
Technology and number of resources
Bill has $10 to spend on a Superman, Batman, or an X-Men t-shirt. Bill buys the Superman shirt and the Batman shirt was a close second choice. What is the opportunity cost?
The Batman T-shirt
Which fundamental economic question is most closely related to the issues of income distribution and poverty?
The For Whom to Produce question
Which of the following best explains the determination of the equilibrium price of a product?
The interaction of supply and demand
In Europe during the 14th century, the Black Plague killed 24 million people or close to 37 percent of the population. How would this affect the production possibilities curve for the countries of Europe at the time?
The production possibilities curves for these countries would have shifted inward.
Which of the following is correctly lists the three fundamental economic questions?
What to produce? How to produce? For whom to produce?
A price floor is:
a minimum price set by the government above the equilibrium price
A normative economic statement is:
a statement of opinion in which advocates a particular position
A market consequences of a price floor program is that:
a surplus of the product will develop
A price ceiling that sets the price of a good below market equilibrium will cause:
all of the above (an increase in quantity demanded of the good, a decrease in quantity supplied of the good, a shortage of the good)
Production possibilities curve analysis includes the idea of:
all of the above (opportunity cost, scarcity, maximum production choices)
Which of the following is true of resources?
all of the above (resources are inputs used to produce goods and services, labor is the mental and physical capacity of workers to produce goods and services, entrepreneurship organizes resources to produce goods and services)
An efficient economy:
all of the above (uses available resources fully, uses the best decision of labor, produces an output combination at some point along the production possibility curve)
An efficient economy:
all of the above (uses available resources fully, uses the best division of labor, produces an output combination at some point along the production possibility curve)
The terms Ceteris paribus means that:
all other things remain unchanged
Suppose two variables are directly related. If one variable rises, then the other variable:
also rises
The opportunity cost of an activity means the:
amount of other things that must be sacrificed in order to engage in the activity.
A production possibilities curve shows the various:
combinations of goods the economy has the capacity to produce
The production possibilities in Exhibit 2-2 indicates that the opportunity cost of corn is:
constant
If the market demand and supply curves shift as given in Exhibit 4-6, the resulting new equilibrium will show a(n):
decrease in market price and an increase in the quantity exchanged
A leftward shift of a supply curve is called a/an ..
decrease in supply
Assuming gasoline and motor oil are complementary goods, the effect on the motor oil market of an increase in the price of gasoline, other things being equal, would be described as a/an...
decrease in the demand for motor oil
A hurricane destroyed the peach crop in South Carolina. Shortly thereafter, the price of peaches rose significantly. These events suggest that a(n)L
decrease in the supply of peaches caused the price of peaches to rise
Market equilibrium is...
defined as the condition under which the separately formulated plans of buyers and sellers exactly mesh when tested in a market
On a production possibilities curve, the opportunity cost of good X, in terms of good Y, is represented by the:
distance to the curve from the horizontal axis
The creative ability of persons to combine and direct resources to produce new products is known as:
entrepreneurship
If the equilibrium price of aspirins is $2.50 and a price ceiling is imposed at $3.00, the eventual result after market adjustment will be a(n):
equilibrium
Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. If this economy chooses the combination of goods at point A
every resource in the economy is being used in the production of consumption goods.
Price floors are instituted because the government wants to:
help producers
An increase in the demand for tattoos will lead to a:
higher price and a larger quantity sold
A demand curve...
illustrates the negative relationship between price and quantity demand
Labor resources:
include both physical and mental activities
Assuming that professional and college football are substitutes, an increase in the price of tickets for professional football, other thing being equal, will...
increase in the demand for college football tickets
Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. As additional units of capital goods are produced, the opportunity cost in terms of sacrificed units of consumption goods ___ because of ____
increases; the law of increasing costs
With time, which one of the following strategies would most likely result in an outward shift in the production possibilities curve of an economy?
instituting a tax policy encouraging investment at the expense of consumption
According to the Exhibit 1A-8, the relationship between the price and quantity purchased of pizza is:
inverse
The law of demand states that, ceteris paribus, price and quantity demanded are..
inversely related
The process through which an economy's production possibilities curve shifts outward is:
investment
A price ceiling:
is the highest price that the law will allow to be charged in the market
Positive economics:
is the scientific study of "what is" among economic relationships
If an economy is operating at a point inside the production possibilities curve,
its resources are not being used efficiently
Which of the following should an economist classify as capital?
lawyer's personal computer
The branch of economics that focuses on economywide variables like inflation and unemployment is called:
macroeconomics
"The government should provide health care for all citizens." This statement is an illustration of:
normative economic analysis
When the production possibilities curve is bowed out, resources are:
not equally suited to the production of both types of goods
A demand curve for the rock band's concert tickets would show the...
number of tickets that will be purchased at various prices
An inverse relationship exists when:
one variable increases and the other variable decreases
The highest valued alternative that must be given up in order to choose an option is called the:
opportunity cost
The perpetual problem in economics is:
our inability to satisfy everyone's wants with the available resources
Using a production possibilities curve, a technological advance that increases the amount of output the same amount of inputs would be illustrated by which of the following?
outward shift of the curve
The statement, "Violent crime has decreased in the last five years," is:
positive because it is testable
A direct relationship is expressed graphically as a:
positively sloped line or curve
If consumer incomes increase and Harley Davidson Co. motorcycles are a normal good, the effect on the demand for Harley Davidson motorcycles, ceteris paribus, will be a/an...
rightward shift in the demand curve for Harley Davidson motorcycles
When firms advertise their products, they are attempting to...
shift the demand curve for the product to the right
Microeconomics is concerned with:
some specific market in the economic system.
Which of the following would cause the supply of carrots to decrease?
the cost of fertilizer used in the production increases
Assume that milk and cookies are complementary goods. If the price of milk goes up, what happens to the demand for cookies?
the demand for cookies decreases
When economists say scarcity, they mean:
the human desire for goods exceeds the available supply of time, goods and resources.
When the opportunity cost of producing carrots increases as more carrots are produced, then:
the law of increasing costs is present
Price ceilings are impose if the government believes:
the market equilibrium price is too high
A good example of a price floor is:
the minimum wage law
Which of the following is an example of a normative economic statement?
the minimum wage should be increased so that low income workers can afford to keep up with the cost of living.
According to the law of supply, there is a direct relationship between quantity supplied and...
the price of a good
A change in supply cannot be caused by a chance in..
the price of good
All of the following apply to the description of a market in equilibrium, except...
the price of the good is decreasing
If equilibrium is present in a market...
the quantity demanded equals the quantity supplied
A decrease in supply means that....
the quantity supplied at each price will decrease
If the equilibrium price of bread is $2 and the government imposes a $1.50 price ceiling on the price of bread, then:
there will be a shortage of bread