Econ 201 exam

Unlike a private good, a public good:

has benefits available to all, including nonpayers.

The law of increasing opportunity costs states that

if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so.

If the supply curve shifts outward (to the right), consumer surplus will ______ and price will _______

increase, decrease

An efficiency loss (or deadweight loss):

is measured as the combined loss of consumer surplus and producer surplus.

When economists say that people act rationally in their self-interest, they mean that individuals:

look for and pursue opportunities to increase their utility.

microeconomics or macroeconomics The consumer price index rose by 3.8 percent from August 2011 to August 2012

macroeconomics

microeconomics or macroeconomics The unemployment rate in the United States was 8.1 percent in August 2012

macroeconomics

microeconomics or macroeconomics U.S. output, adjusted for inflation, decreased by 2.4 percent in 2009

macroeconomics

microeconomics or macroeconomics A U.S. software firm discharged 15 workers last month and transferred the work to India

microeconomics

microeconomics or macroeconomics An unexpected freeze in central Florida reduced the citrus crop and caused the price of oranges to rise

microeconomics

microeconomics or macroeconomics Last week Wells Fargo Bank lowered its interest rate on business loans by one-half of 1 percentage point

microeconomics

If one person's consumption of a good does not preclude another's consumption, the good is said to be:

nonrival in consumption.

Is production at a point outside the production possibilities curve currently possible

nope

Marginal Analysis

Making choices based on comparing marginal benefits with marginal costs:

Suppose that you are given a $100 budget at work that can be spent only on two items: staplers and pens. If staplers cost $10 each and pens cost $2.50 each, then the opportunity cost of purchasing one stapler is:

4 pens

The assertion that "there is no free lunch" means that

All production involves the use of scarce resources and thus the sacrifice of alternative goods.

A person should consume more of something when its marginal

Benefit exceeds its marginal cost.

The study of economics is primarily concerned with

Choices that are made in seeking the best use of resources.

True or False: A "change in quantity demanded" is a shift of the entire demand curve to the right or to the left.

False

What are the two major ways in which an economy can grow and push out its production possibilities curve?

Increases in resource supplies and advances in technology.

Which of the following will enable a nation to obtain a combination of consumer goods and capital goods outside its production possibilities curve?

International specialization and trade.

Opportunity costs exist because

The decision to engage in one activity means forgoing some other activity.

Opportunity cost

The next-best thing that must be forgone in order to produce one more unit of a given product:

Utility

The pleasure, happiness, or satisfaction obtained from consuming a good or service

Economics

The social science concerned with how individuals, institutions, and society make optimal (best) choices under conditions of scarcity

How (if at all) do each of the following events affect the location of a country's production possibilities curve? a. The quality of education increases: b. The number of unemployed workers increases: c. A new technique improves the efficiency of extracting copper from ore d. A devastating earthquake destroys numerous production facilities

a. Curve shifts outward b. No change c. Curve shifts outward d. Curve shifts inward

What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500? a. Small automobiles become more fashionable: b. The price of large automobiles rises (with the price of small autos remaining the same) c. Income declines and small autos are an inferior good: d. Consumers anticipate that the price of small autos will greatly come down in the near future: e. The price of gasoline substantially drops:

a. increase b. increase c. increase d. decrease e. Cannot be determined

The law of increasing opportunity costs is reflected in a production possibilities curve that is

bowed out from the origin.

Joe sold gold coins for $1,000 that he bought a year ago for $1,000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money because he could have received a 3 percent return on the $1,000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:

opportunity cost

The law of demand states that, other things equal:

price and quantity demanded are inversely related.

On a cold day, both the demand for ice cream and the supply of ice cream decrease. Price: Quantity:

price can not be determined quantity decreases

On a hot day, both the demand for lemonade and the supply of lemonade increase. Price: Quantity:

price can not be determined quantity increases

In a hot area of Arizona where they generate a lot of their electricity with wind turbines, the demand for electricity falls on windy days as people switch off their air conditioners and enjoy the breeze. But at the same time, the amount of electricity supplied increases as the wind turbines spin faster. Price: Quantity

price decreases quantity can not be determined

Supply is constant and demand decreases.

price decreases quantity decreases

Supply increases and demand is constant.

price decreases quantity increases

Supply increases and demand decreases

price decreases quantity indeterminate

Supply is constant and demand increases

price increases quantity increases

Supply decreases and demand increases.

price increases quantity indeterminate

When Hawaii's Mt. Kilauea erupts violently, the demand on the part of tourists for sightseeing flights increases but the supply of pilots willing to provide these dangerous flights decreases. Price: Quantity:

price increases quantity can not be determined

Supply decreases and demand is constant.

price increases quantity decreases

Supply decreases and demand decreases

price indeterminate quantity decreases

Supply increases and demand increases

price indeterminate quantity increases

The market system does not produce public goods because:

private firms cannot stop consumers who are unwilling to pay for such goods from benefiting from them.

Which characteristic of the production possibilities curve reflects the law of increasing opportunity costs

shape

The concept of opportunity cost

suggests that the use of resources in any particular line of production means that alternative outputs must be forgone.

Suppose that in the market for computer memory chips, the equilibrium price is $50 per chip. If the current price is $55 per chip, then there will be a ______ of memory chips.

surplus

You should decide to go to a movie if...

the marginal benefit of the movie exceeds its marginal cost.

Nonexcludability describes a condition where:

there is no effective way to keep people from using a good once it comes into being.

Graphically, if the supply and demand curves are linear, consumer surplus is measured as the triangle:

under the demand curve and above the actual price

Could a future advance in technology allow production beyond the current production possibilities curve

yes

Could international trade allow a country to consume beyond its current production possibilities curve

yes