Econ 224 Final University of South Carolina

When a firm experiences diseconomies of scale, a. long-run average total cost increases as output increases. b. long-run average total cost decreases as output increases. c. short-run average total cost is minimized. d. long-run average total cost is minimized.

a

The efficient scale of the firm is the quantity of output that a. maximizes profit. b. minimizes average variable cost. c. minimizes average total cost. d. maximizes marginal product.

c

The goal of rent control is to a. help the poor by assuring them an adequate supply of apartments. b. facilitate controlled economic experiments in urban areas. c. help the poor by making housing more affordable. d. help landlords by assuring them a low vacancy rate for their apartments.

c

The overriding reason why households and societies face many decisions is that: a. goods and services are not scarce. b. incomes fluctuate with business cycles. c. resources are scarce. d. people, by nature, tend to disagree.

c

to calculate opportunity cost for one coconut, put

coconuts on top

Minimum-wage laws dictate a. both a minimum wage and a maximum wage that firms may pay workers. b. a maximum wage that firms may pay workers. c. the exact wage that firms must pay workers. d. a minimum wage that firms may pay workers

d

When society gets the most it can from its scarce resources then the outcome is: a)equitable b)normal c)efficacious d)efficient

d

Specialization and trade _____ total production and total consumption

increase

specialization

the division of labor into specific tasks and roles intended to increase the productivity of workers

output problem example

I can make 3 cakes in one hour

input problem example

I need 2 hours to make 1 cake

Tom produces 5 T-shirts and 3 birdhouses. Jerry produces 3 t-shirts and 2 birdhouses. Who has the absolute advantage?

Tom has absolute advantage in both t-shirts and birdhouses

A professor spends 10 hours a day giving lectures. For the professor, a graph shows his various possible mixes of output is called his: a)production possibilities fronteir b)consumption possibilities frontier c) line of tastes d) trade off curve

a

A statement describing how the world is: a. is a positive statement. b. would only be made by an economist speaking as a policy adviser. c. is a normative statement. d. would only be made by an economist employed by the government.

a

An increase in quantity demanded: a) results in a movement downward and to the right along a demand curve. b) shifts the demand curve to the right. c) shifts the demand curve to the left. d) results in a movement upward and to the left along a demand curve.

a

Consumer surplus equals the a. value to buyers minus the amount paid by buyers. b. amount received by sellers minus the cost to sellers. c. amount received by sellers minus the amount paid by buyers. d. value to buyers minus the cost to sellers.

a

Guns and butter are used to represent the classic societal tradeoff between spending on: a. national defense and consumer goods. b. durable and non-durable goods. c. imports and exports. d. law enforcement and agriculture.

a

Look at figure 3-15. Perry should specialize in the production of: a)poems b) neither goods c) novels d) both goods

a

Real GDP will increase a. only when output increases. b. All of the above are correct. c. when prices increase or output increases. d. only when prices increase.

a

Refer to Figure 14-6. Firms will shut down in the short run if the market price a. is less than P1. b. exceeds P3. c. is greater than P1 but less than P3. d. exceeds P2.

a

Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. Which of the following is correct? a. Sellers will bear more of the burden of the tax than buyers will. b. Buyers will bear more of the burden of the tax than sellers will. c. Buyers and sellers will share the burden of the tax equally. d. Any of the above is possible.

a

Refer to figure 7-24. At equilibrium, consumer surplus is a. $18. b. $54. c. $72. d. $36.

a

Shelley's Salsa produces and sells organic salsa. Last year it sold 3 million tubs of salsa at a price of $3 per tub. For last year, the firm's a. total revenue was $9 million. b. explicit costs were $9 million. c. economic profit was $9 million. d. accounting profit was $9 million.

a

Slow growth in US incomes during the 1970s and 1980s were primarily due to: a) slow productivity growth in the US. b) increased competition from European countries. c) increased competition from Japan. d) a rapid decrease in the quantity of money in the economy.

a

The field of economics is traditionally divided into two broad sub-fields: a. Microeconomics and macroeconomics b. National economics and international economics. c. Private sector economics and public sector economics. d. Consumer economics and producer economics.

a

The invisible hand refers to: a) the free market. b) the government. c) the social planner. d) large businesses

a

Which of the following is not a reason people choose to depend on others for goods and service? 26. Which of the following is not a reason people choose to depend on others for goods and services? a. to allow people to produce outside their production possibilities frontiers b. to consume more of each good without working any more hours c. to allow them to enjoy a greater variety of goods and services d. to improve their lives

a

Which of the following is not an example of the principle that trade can make everyone better off? a)All of the following statements are correct. b) A homeowner hires the kid next door to mow the lawn. c) Americans buy tube socks from China. d) Residents of Maine drink orange juice from Florida.

a

Which of the following is not correct?a. Economic policies rarely have effects that their architects did not intend or anticipate. b. As policy advisers, economists use their theories to help change the world for the better. c. As scientists, economists develop and test theories to explain the world around them. d. Economists have two roles: scientist and policy adviser.

a

Who is a price taker in a competitive market? a. both buyers and sellers b. sellers only c. buyers only d. neither buyers nor sellers

a

comparative advantage

a person/nation can produce the product at a lower domestic opportunity cost

An example of an opportunity cost that is also an implicit cost is a. a lease payment. b. the value of the business owner's time. c. the cost of raw materials. d. All of the above are correct.

b

Assume that Andrea and Paul each has 480 minutes available. If each person divides his time equally between the production of wheat and beef, then the total production is: a) 21 bushels of wheat and 33 pounds of beef b) 24 bushels of wheat and 64 pounds of beef c) 5 bushels of wheat and 24 pounds of beef d) 16 bushels of wheat and 48 pounds of beef

b

Donald produces nails at a cost of $350 per ton. If he sells the nails for $500 per ton, his producer surplus is a. $500. b. $150. c. $350. d. $850.

b

George produces cupcakes. His production cost is $10 per dozen. He sells the cupcakes for $16 per dozen. His producer surplus per dozen cupcakes is a. $16. b. $6. c. $10. d. $26

b

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. William can arrange 18 bouquets per day. What would be the total daily output of Kate's firm if she hired her husband? a. 19 bouquets b. 38 bouquets c. 20 bouquets d. 18 bouquets

b

Refer to figure 2-8. For this economy, as more and more hammmers are produced, the opportunity cost of an addition hammock produced, in terms of nails:a. remains constant. b. increases. c. decreases. d. This answer cannot be determined from the graph.

b

Refer to figure 3-8. If Chile and Colombia each divides its time equally between making coffee and making soybeans, then total production is:total production is a. 12 pounds of coffee and 12 pounds of soybeans. b. 14 pounds of coffee and 9 pounds of soybeans. c. 16 pounds of coffee and 6 pounds of soybeans. d. 28 pounds of coffee and 18 pounds of soybeans.

b

Refer to figure 7-24. At equilibrium, total surplus is a. $108. b. $54. c. $18. d. $36

b

Refer to table 4-4. Suppose the market consists of Adam, Barb, and Carl. If the price falls by $5, the quantity demanded in the market increases by: a) 10. b) 20. c) 14. d) 6.

b

Senator Jackson argues that replacing the federal income tax with a national sales tax would increase the level of output. Senator Feldman objects that this policy would benefit the rich at the expense of the poor. a. Senator Jackson's argument is primarily about equality, while Senator Feldman's argument is primarily about efficiency. b. Senator Jackson's argument is primarily about efficiency, while Senator Feldman's argument is primarily about equality. c. Both senators' arguments are primarily about efficiency. d. Both senators' arguments are primarily about equality.

b

The minimum wage is an example of a a. tax. b. price floor. c. price ceiling. d. wage subsidy

b

The phrase no such thing as free lunch means: a) people respond to incentives. b) people must face tradeoffs. c) trade can make everyone better off. d) rational people think at the margin.

b

Welfare economics is the study of a. how technology is best put to use in the production of goods and services. b. how the allocation of resources affects economic well-being. c. taxes and subsidies. d. government welfare programs for needy people.

b

Which of the following is correct? Price controls a. never help those they are designed to help. b. often hurt those they are designed to help. c. always help those they are designed to help. d. always hurt those they are designed to help.

b

refer to table 4-6. If these are the only four sellers in the market, then when the price decreases from 4 to 2, the market quantity supplied:a. increases by 10 units. b. decreases by 10 units. c. decreases by 20 units. d. decreases by 30 units.

b

. The marginal product of any input is the a. increase in total cost associated with a one-unit increase in production. b. change in total output associated with a $1.00 increase in total cost. c. increase in total output obtained from one additional unit of that input. d. increase in total cost resulting from the hiring of an additional worker

c

A production function describes a. the relationship between cost and output. b. how a firm maximizes profits. c. how a firm turns inputs into output. d. the minimal cost of producing a given level of output.

c

Barb's aunt gave her 150 for her birhtday with the condition that Barb buy herself something. In deciding how to spend the money, Barb narrows her options down to four choices. Option A, Option B, Option C and Option D. Each option costs 150. Finally she decides on Option A. The opportunity cost of this decision is: a. the value to Barb of Options B, C and D combined. b. $150. c. the value to Barb of the option she would have chosen had Option A not been available. d. the average of the values to Barb of Options B, C, and D.

c

Economies of scale occur when a firm's a. marginal costs are constant as output increases. b. marginal costs are equal to average total costs for all levels of output. c. long-run average total costs are decreasing as output increases. d. long-run average total costs are increasing as output increases.

c

For a particular good, an 8 percent increase in price causes a 4 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? (Hint: think about factors that influence the elasticity of demand.) a. The relevant time horizon is long. b. The good is a luxury. c. The good is a necessity. d. There are many close substitutes for this good.

c

For which of the following individuals would the opportunity cost of going to college be highest? a. a promising young mathematician who will command a high salary once she earns her college degree b. a student with average grades who has never held a job c. a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree d. a student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball

c

If Danielle sells 300 wrist bands for $0.50 each, her total revenues are a. $600. b. $299.50. c. $150. d. $300.

c

In a market economy, supply and demand are important because they: a) illustrate when a market is in equillibrium, but they are not helpful when a market is out of equilibrium, b) are direct policy tools used by government agencies to regulate the economy c) can be used to predict the impact on the economy of various events and policies d) all of the above are correct

c

In markets, prices move toward equilibrium because of: a) increased competition among sellers. b) buyers' ability to affect market outcomes. c) the actions of buyers and sellers. d) government regulations placed on market participants.

c

Justin builds fences for a living. Justin's outofpocket expenses (for wood, paint, etc.) plus the value that he places on his own time amount to his a. profit. b. producer surplus. c. cost of building fences. d. producer deficit.

c

One thing economist do to help them understand how the real world works is: a) try to capture every aspect of the real world in the models they construct. b) ignore the past. c) make assumptions. d) all of the above are correct.

c

Profit is defined as a. net revenue minus depreciation. b. average revenue minus average total cost. c. total revenue minus total cost. d. marginal revenue minus marginal cost.

c

Refer to Figure 7-23. The equilibrium price is a. P4. b. P3. c. P2. d. P1.

c

Refer to figure 4-3. If these are the only two consumers in the market, then the market quantity demanded at a price of 10 is: a) 0. b)5 units c) 8.33 units d) 25 units

c

Refer to figure 6-5. If the horizontal line on the graph represents a price floor, then the price floor is a. binding and creates a surplus of 20 units of the good. b. not binding, and there will be no surplus or shortage of the good. c. binding and creates a surplus of 60 units of the good. d. binding and creates a surplus of 40 units of the good.

c

Refer to table 3-24. England has the absolute advantage in the production of: a. neither good and Spain has an absolute advantage in the production of both goods. b. bread and Spain has an absolute advantage in the production of cheese. c. both goods and Spain has an absolute advantage in the production of neither good. d. cheese and Spain has an absolute advantage in the production of bread.

c

Scenario 13-19 Doreen's Dairy produces and sells Swiss cheese. Last year, it produced 7,000 pounds and sold each pound for $6. In producing the 7,000 pounds, the dairy incurred variable costs of $28,000 and a total cost of $40,000. 10. Refer to Scenario 13-19. In producing the 7,000 pounds of cheese, the firm's average variable cost was a. $6.00. b. $1.71. c. $4.00. d. $5.71.

c

Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 181 units of output per day when 16 workers are hired, holding other inputs fixed. The marginal product of the 16th worker is a. 181 units of output. b. 10 units of output. c. 16 units of output. d. 11 units of output.

c

Total surplus is a. equal to consumer surplus minus producer surplus. b. equal to consumers' willingness to pay plus producers' cost. c. equal to the total value to buyers minus the total cost to sellers. d. greater than the sum of consumer surplus plus producer surplus.

c

What must be given up to obtain an item is called? 35. What must be given up to obtain an item is called a. Out of pocket cost. b. Comparative worth. c. Opportunity cost. d. Absolute value.

c

What would happen to the equilibrium price and quantity of lattes if coffee shops began using a machine that reduced the amount of labor necessary to produce them? a) both the equilibrium price and quantity would decrease. b) Both the equilibrium price and quantity would increase. c) the equilibrium price would decrease, and the equilibrium quantity would increase. d) the equilibrium price would increase, and the equilibrium quantity would decrease.

c

When an economy is operating at a point on its production possibilities frontier, then: a. consumers are content with the mix of goods and services that is being produced. b. equal amounts of the two goods are being produced. c. there is no way to produce more of one good without producing less of the other. d. All of the above are correct.

c

Which of the following is an example of a positive, as opposed to normative statement? a) When public policies are evaluated the benefits to the economy of innovated equality should be considered more important than the costs of reduced efficiency. b) inflation is more harmful to the economy than unemployment is. c) prices rise when the government prints too much money. d) If welfare payments increase the world will be a better place.

c

Which of the following is not a question addressed by macroeconomists? a. What, if anything, can the government do to promote growth in incomes, low inflation, and stable employment? b. Why do production and employment expand in some years and contract in others? c. What is the impact of foreign competition on the U.S. auto industry? d. Why is average income high in some nations but low in others?

c

. Refer to Figure 14-7. Let Q represent the quantity of output and suppose the price of the good is $125. Then marginal revenue is $125 at a. Q = 515. b. Q = 322. c. Q = 270. d. All of the above are correct.

d

A society allocates its scare resources to various jobs. These scare resources includ: a) machine b) people c) land d) all of the above are correct

d

Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic a. both in the short run and in the long run. b. neither in the short run nor in the long run. c. in the long run but not in the short run. d. in the short run but not in the long run

d

Bubba is a shrimp fisherman who catches 4,000 pounds of shrimp per year. He can sell the shrimp for $5 per pound. His average total cost of catching shrimp is $3 per pound. Bubba's annual total revenue is a. $12,000. b. $32,000. c. $8,000. d. $20,000.

d

Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is a. $350. b. $200. c. $550. d. $150.

d

Economists normally assume that the goal of a firm is to a. minimize its total cost. b. maximize its total revenue. c. minimize its explicit costs. d. maximize its profit.

d

Jamar used to work as an office manager, earning $40,000 per year. He gave up that job to start a life-coaching business. In calculating the economic profit of his life-coaching business, the $40,000 income that he gave up is counted as part of the life-coaching business's a. marginal costs. b. total revenue. c. explicit costs. d. opportunity costs.

d

Net exports equal a. exports plus imports. b. imports minus exports. c. GDP minus imports. d. exports minus imports.

d

Other things equal, when the price of a good rises, the quantity supplied of the good also rises, and when the price falls, the quantity supplied falls as well. This relationship between price and quantity supplied: a. applies only to a few goods in the economy. b. All of the above are correct. c. is represented by a downward-sloping supply curve. d. is referred to as the law of supply.

d

Refer to Table 14-12. What is the marginal cost of the 5th unit? a. $60 b. $55 c. $80 d. $68

d

Refer to figure 4-8. Suppose the figure shows the market demand for laptops. Suppose the price of wireless gadgets, a complementary good, decreases. Which of the following changes would occur? a) a shift from D1 to D2. b)a movement along D2 from point A to point B. c) a movement along D2 from point B to point A. d) a shift from D2 to D1.

d

Refer to figure 7-24. At equilibrium, consumer surplus is measured by the area a. ABD. b. BDF. c. AHG. d. AFB.

d

Some costs do not vary with the quantity of output produced. Those costs are called a. marginal costs. b. average costs. c. explicit costs. d. fixed costs.

d

Suppose that a country that has a high average wage level agrees to trade with a country that has a low average wage level. Which country can benefit? 28. Suppose that a country that has a high average wage level agrees to trade with a country that has a low average wage level. Which country can benefit? a. only the one with a high level of output per person. b. neither c. only the one with a low level of output per person. d. both

d

The amount by which total cost rises when the firm produces one additional unit of output is called a. fixed cost. b. average cost. c. variable cost. d. marginal cost.

d

The minimum wage has its greatest impact on the market for a. black labor. b. female labor. c. older labor. d. teenage labor

d

The principle that people face tradeoffs applies to: a. societies. b. families. c. individuals. d. All of the above are correct.

d

Total revenue minus only explicit costs is called a. implicit profit. b. economic profit. c. average total cost. d. accounting profit.

d

When economists talk about growth in the economy, they measure that growth as the a. percentage change in nominal GDP from one period to another. b. absolute change in nominal GDP from one period to another. c. absolute change in real GDP from one period to another. d. percentage change in real GDP from one period to another.

d

When studying changes in the economy over time, economists want a measure of the total quantity of goods and services the economy is producing that is not affected by changes in the prices of those goods and services. In other words, economists want to study a. the GDP deflator. b. GNP. c. nominal GDP. d. real GDP.

d

Which of the following is a correct statement about production possibilities fronteirs? a) an economy can produce at any point inside or outside a production possibilities frontier b) an economy can produce only on the production possibilities fronteir. c) an economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier. d) an economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier

d

Which of the following is a decision that economists study? a. how much people work b. what people buy c. how much money people save d. All of the above are correct.

d

Which of the following is not a characteristic of a perfectly competitive market? a) DIfferent sellers sell identical products. b) there are many sellers. c) sellers must accept the price the market determines. d) all of the above.

d

Which of the following measures of cost is best described as "the cost of a typical unit of output if total cost is divided evenly over all the units produced?" a. marginal cost b. average variable cost c. average fixed cost d. average total cost

d

economics is the study of: a. the interaction of business and government. b. production methods. c. how households decide who performs which tasks. d. how society manages its scarce resources.

d

if a firm is a price taker they operate in a: a) oligopoly market b) monopoly market c)monopolistic competitive market d)competitive market

d

absolute advantage

exists when a person/country can produce more of a certain good as someone else with the same amount of resources

interdependance

individuals and nations rely on specialized production and exchange as a way to address problems caused by scarcity

output problem

tells you how much of each good an individual can produce using a given set of resources

input problem

tells you how much resources is put in producing one unit of each product