ECON 2302 Quiz 1

Assume the price of product Y (the quantity of which is on the vertical axis) is $15 and the price of product X (the quantity of which is on the horizontal axis) is $3. Also assume that money income is $60. The absolute value of the slope of the resulting budget line is A. 5. B. 1/5. C. 4. D. 20.

1/5.

Refer to the diagram. Starting at point E, the production of successive units of bread will cost A. A constant 8 units of tractors. B. A constant 6 units of tractors. C. 1/8, 1/6, 1/4, and 1/2 units of tractors. D. 1/2, 1/4, 1/6, and 1/8 units of tractors.

1/8, 1/6, 1/4, and 1/2 units of tractors.

Economists use the term "demand" to refer to A. A particular price-quantity combination on a stable demand curve. B. The total amount spent on a particular commodity over a fixed time period. C. An upsloping line on a graph that relates consumer purchases and product price. D. A schedule of various combinations of market prices and amounts/quantities demanded.

A schedule of various combinations of market prices and amounts/quantities demanded.

Firms are motivated to minimize production costs because A. It is the most environmentally friendly way to produce goods. B. Least-cost production techniques use the smallest total quantity of resources. C. Competitive pressures in the market will drive out higher-cost producers. D. The government provides tax credits and subsidies to low-cost producers.

Competitive pressures in the market will drive out higher-cost producers.

An increase in the price of a product will reduce the amount of it purchased because A. The higher price will signal to consumers that the good is of low quality. B. The higher price means that real incomes have risen. C. Consumers will substitute other products for the one whose price has risen. D. Consumers substitute relatively high-priced for relatively low-priced products.

Consumers will substitute other products for the one whose price has risen.

People enjoy outdoor holiday lighting displays and would be willing to pay to see these displays but can't be made to pay. Because those who put up lights are unable to charge others to view them, they don't put up as many lights as people would like. This is an example of a A. Negative externality. B. Supply-side market failure. C. Demand-side market failure. D. Government failure.

Demand-side market failure.

Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This statement is most consistent with which explanation for the law of demand? A. Diminishing marginal utility B. The rationing function of prices C. The substitution effect D. The income effect

Diminishing marginal utility

The relationship between quantity supplied and price is _____, and the relationship between quantity demanded and price is _____. A. Direct; Inverse B. Inverse; Direct C. Inverse; Inverse D. Direct; Direct

Direct; Inverse

If a competitive industry is neither expanding nor contracting, we would expect A. Total revenue to be zero. B. Economic profits to be zero. C. Total opportunity cost to be zero. D. More resources to flow to that industry.

Economic profits to be zero.

Refer to the diagram. Given production possibilities curve a, the combination of civilian and war goods indicated by point X is unattainable to this economy. A. True B. False

False

Refer to the diagram. The movement from curve a to curve c suggests an improvement in civilian goods technology but not in war goods technology. A. True B. False

False

In a graph showing the relationship between variables X and Y, ceteris paribus means that A. X is inversely related to Y. B. X is positively related to Y. C. X and Y are independent. D. Other variables not shown are held constant.

Other variables not shown are held constant.

A country can achieve some combination of goods outside its production possibilities curve by A. Idling some of its resources. B. Specializing and engaging in international trade. C. Buying the debt (bonds and stocks) of foreign nations. D. Producing more capital goods and fewer consumer goods.

Specializing and engaging in international trade.

(Consider This) An exception to the advice "go to college, stay in college, and earn a degree" occurs when A. Tuition expenses are high and rising. B. The opportunity cost of attending college is extraordinarily high. C. The price of textbooks is high and rising. D. The economy is growing rapidly and jobs are plentiful.

The opportunity cost of attending college is extraordinarily high.

When the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls and fewer adidas soccer balls. Which of the following best explains Ronaldo's decision to buy more Nike soccer balls? A. The substitution effect B. The income effect C. An increase in the demand for Nike soccer balls D. The price effect

The substitution effect

The marginal cost curve is A. Upsloping because of increasing marginal opportunity costs. B. Upsloping because successive units of a specific product yield less and less extra utility. C. Downsloping because of increasing marginal opportunity costs. D. Downsloping because successive units of a specific product yield less and less extra utility.

Upsloping because of increasing marginal opportunity costs.

Refer to the diagram. Assuming equilibrium price P1, producer surplus is represented by areas A. a + b. B. a + b + c + d. C. c + d. D. a + c.

c + d.

The typical production possibilities curve is A. An upsloping line that is bowed out from the origin. B. A downsloping line that is bowed in toward the origin. C. A downsloping line that is bowed out from the origin. D. A straight upsloping line.

A downsloping line that is bowed out from the origin.

A decrease in supply of X increases the equilibrium price of X, which reduces the demand for X and automatically returns the price of X to its initial level. A. True B. False

False

A decrease in the price of digital cameras will cause the demand for memory cards to shift to the left. A. True B. False

False

Surpluses drive market prices up; shortages drive them down. A. True B. False

False

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the A. Cost effect. B. Inflationary effect. C. Income effect. D. Substitution effect.

Income effect.

According to economists, economic self-interest A. Is a reality that underlies economic behavior. B. Has the same meaning as selfishness. C. Means that people never make wrong decisions. D. Is usually self-defeating.

Is a reality that underlies economic behavior.

If demand increases and supply simultaneously decreases, equilibrium price will rise. A. True B. False

True

In a competitive market, every consumer willing to pay the market price can buy a product and every producer willing to sell the product at that price can sell it. A. True B. False

True