Econ ch 1,2,3,4

Which pair does NOT relate?

land—revenue

There is no opportunity cost involved when the government decides to cut federal taxes.

False

Which question would be considered a normative question?

Should obstacle races be regulated to ensure the safety of its participants?

Using the productivity rates for Spain and Portugal, which statement is TRUE?

Spain has a comparative advantage in olives.

Entrepreneurs:

combine and manage inputs of land, labor, and capital.

Most trade is based on specialization, according to:

comparative advantage.

If a farmer can grow 100 tubs of grapefruit or 250 tubs of oranges per acre of land, what is the opportunity cost of growing one orange?

0.4 of a grapefruit

Suppose that in Japan one worker can produce either four cars or five tons of grain per year. What is the opportunity cost of producing one car in Japan?

1.25 tons of grain

At an amusement park, Sue achieves an enjoyment value of 10 on her first roller coaster ride and an enjoyment value of 6 on her second ride. Her marginal benefit from her second ride is:

6

Which shaped curve reflects the reality that most goods are better suited for specific sorts of production?

A concave production possibilities frontier

(Figure) What would be a reason why an economy is operating at point D?

A reduction in business investment causes unemployment to increase.

China produces many products at the lowest cost possible, even though Chinese consumers do not desire many of these products (e.g., football helmets). China is achieving:

A. production efficiency only

_____ advantage exists when one country can produce more of a good than another country.

Absolute

Which of these would be least likely to increase economic growth?

An increase in tariffs to protect domestic industries from foreign competition.

Suppose that Costa Rica is able to produce 50,000 pounds of coffee or 10,000 medical devices per day; Vietnam is able to produce 40,000 pounds of coffee or 5,000 medical devices per day. Which statement is TRUE?

Costa Rica has a comparative advantage in the production of medical devices, while Vietnam has a comparative advantage in coffee production.

Which headline would be LEAST likely to be studied in macroeconomics?

GM Expands Car Sales in China

_____ combine land, labor, and capital to produce goods and services and assume the risks associated with running businesses.

Entrepreneurs

Which statement about entrepreneurs is NOT correct?

Entrepreneurs do not take on any business risks.

(Figure: Pork and Corn PPF) Economists can unequivocally tell which point of production is ideal.

False

(Figure: Pork and Corn PPF) It is possible to produce 15 units of corn and 4 units of pork at the same time.

False

As it relates to the production possibilities frontier, an increase in technology for one good while holding all else constant will cause a complete outward shift of the production possibilities frontier.

False

The choice to attend a free college lecture involves no opportunity cost.

False

Which statement defines absolute advantage?

One country that can produce more of a good than another country if both work with identical resources.

Which of the following is not possible for two countries who trade computers and automobiles with one another?

One of the countries has a comparative advantage in the production of both products.

Governments continue to impose price controls. Which statement is NOT a valid reason for this?

Price controls are always effective.

Which situation deals more with equity than efficiency?

The Red Sox signs a star player for $35 million a year, which is over 10 times the average salary of the rest of the team.

What does the term "laissez-faire" mean in economics?

The role of government should be as minimal as possible.

Economic models predict that a binding minimum wage will generally cause increased unemployment for low-skilled workers.

True

The production possibilities frontier is bowed outward as a result of increasing costs.

True

To dispose of the unwanted surplus resulting from agricultural price floors, the European Union pays exporters to sell products at a loss overseas.

True

Which of these questions would NOT be considered one of the basic economic questions?

When will the new high-speed train in California be completed?

Which of these would NOT be considered a factor of production?

a bank loan used to start a new business

The primary difference between a change in supply and a change in the quantity supplied is that:

a change in quantity supplied is a movement along the supply curve, while a change in supply is a shift in the supply curve.

In the market for tacos, the factor that does NOT shift the supply curve to the left is:

a decrease in the price of tacos.

A price control is:

a legal restriction on how high or low a price in a market may go.

For a country to have a comparative advantage in a good, it must have:

a lower opportunity cost of producing that good

A student organization forms on your college campus to protest the high rent for apartments near campus. This organization is planning a meeting with the dean and the president of the college. Which choice BEST describes one policy the student organization might fight for?

a price ceiling

If a producer does NOT face increasing opportunity cost, then the production possibilities frontier is:

a straight downward-sloping curve.

If one country has a(n) _____ advantage in the production of one item, it can always produce more of the same item than another nation, given the same resources

absolute

When an economy is producing the mix of goods and services MOST desired by society, that economy is considered to have:

allocative efficiency.

When the mix of goods and services produced is just what society desires, then __________ exists.

allocative efficiency.

In the market for tacos, a normal good, you observe that the equilibrium price and quantity have increased. This can be caused only by:

an increase in the incomes of people who eat tacos.

The most likely reason that the government implements a price _____ is because it feels the price is too high for _____.

ceiling; consumers

The main reason why a production possibilities frontier would have a concave shape is:

because as a country specializes in one product, it must give up more of the other.

Why is entrepreneurial ability considered a factor of production?

because entrepreneurs assume the risk of producing output, an important part of the production process

If an economy faces increasing opportunity costs with respect to the production of two goods, then the production possibilities frontier between the two goods will be:

bowed outward.

Suppose the Jamaican government sets coffee prices at $1 per pound when the market price is $10 per pound. The government's actions will:

cause coffee shortages, even in a coffee-rich country.

A farmer finds that when he produces more corn, he also has more cornstalks that he can sell as decorations. To the farmer, corn and cornstalks are:

complements in production.

Which factor is NOT a determinant of supply?

consumer tastes

A new wonder diet that results in a dramatic weight loss sweeps through the United States. The key to the diet is to eat large amounts of red meat (beef) but no poultry or carbohydrate-rich foods. As millions of Americans switch to the new diet, we can expect a(n) _____ in the _____ poultry, leading to a shift to the _____ in the _____ curve for poultry and _____ poultry prices.

decrease; demand for; left; demand; lower

The limits on international trade include all of these EXCEPT:

decreasing opportunity costs and increasing returns.

The market price of airline flights increased recently. Some economists suggest that the price increased because of an increase in the number of business travelers. They believe that, in the market for flights:

demand increased.

Over the past several years, consumers have had an increasing interest in getting tattoos. This means that the _____ for tattoos has _____.

demand; increased

In the market for canned pinto beans, _____ will increase if income increases and if pinto beans are a(n) _____ good.

demand; normal

Capital includes all of these EXCEPT:

dollar bills in a bank vault.

Land:

earns rent.

"The economic wealth of this country was built primarily by some individuals profiting from a transaction, whereas others were harmed by that transaction." This statement indicates that its author:

fails to understand that all voluntary trades benefit both parties involved.

(Figure) The area between which two points on the PPF could represent an improvement in allocative efficiency?

from B to C

(Figure) The area between which two points on the production possibilities frontier could represent an improvement in productive efficiency?

from D to B

Which of these is one of China's top five exports to the United States?

furniture

By definition, in a black market, goods or services are bought and sold:

illegally.

If government decides to control the amount of a good allowed to be transacted in a market, this will:

increase incentives for market participants to engage in black market activities.

The law of demand states that, other things equal, as the price:

increases, the quantity demanded will decrease.

Which of the following is NOT an example of an improvement to human capital?

increasing the number of machines available to workers

In economics, the payment to capital is called:

interest.

Capital:

is any manufactured product that is used to produce other products.

West African cotton farmers are very upset about the subsidies the U.S. government pays to American cotton farmers. One reason for this could be that subsidized cotton from the United States:

leads to cotton surpluses in the United States and lower prices for West African farmers on world markets.

In economics, the term "capital" refers to:

manufactured buildings and equipment used to produce other goods and services.

The market for corn in Kansas is considered to be competitive. This means there are _____ buyers and _____ sellers of corn in Kansas.

many; many

The horizontal summation of individual demand curves for a particular product, holding the price constant and completed for all possible prices, gives you:

market demand.

Increasing opportunity costs occur along the production possibilities frontier because:

not all resources are equally well suited to produce all goods.

If the market for buffalo meat is in equilibrium, the price of buffalo meat will probably _____ in the near future.

not change

When an economy uses the most efficient means of farming to grow as much corn as possible, this economy has achieved:

production efficiency but not necessarily allocative efficiency.

The practical constraints on trade include all of these EXCEPT:

production possibilities frontiers for nations are linear.

For consumers, pizza and hamburgers are substitutes. A rise in the price of a pizza causes a _____ in the equilibrium price of a hamburger and a(n) _____ in the equilibrium quantity of hamburgers.

rise; increase

The MOST common way in which economists model a problem is by:

simplifying the model down to its basic relevant elements.

An effective minimum wage ultimately means that:

some unskilled workers have a difficult time finding a job.

Which of these is among the top five U.S. exports to China?

soybeans

In the local market for coffee, if Joyce's Java and Everyday Joe's coffee shops go out of business, the _____ curve shifts to the _____.

supply; left

An effective price floor would result in a(n):

surplus of the good.

A point on a nation's production possibilities frontier indicates:

that resources are fully utilized in producing the given combination of goods and services.

A persistent shortage may occur if:

the government imposes a price ceiling below the equilibrium price.

In which market is government most likely to intervene to prevent a market failure?

the market for college education

A shift of the demand curve for thin-crust pizza would NOT be caused by a change in:

the price of thin-crust pizza.

Milk is an important ingredient in the production of ice cream. If the price of milk increases, then one would expect, holding all other things constant:

the supply curve for ice cream to shift left.

Tim woke up this morning with a stomachache and decided to skip class in order to get more rest. What is the opportunity cost of Tim's decision to sleep in?

the value of attending the class he decided to miss

The market for apples is in equilibrium at a price of $0.50 per pound. If the government imposes a price ceiling in the market at $0.40 per pound:

there will be a shortage of the good.

If the minimum wage is a binding price floor:

those who want to work will outnumber the jobs available.

Economists refer to the payment to labor as:

wages.

All of these are considered human capital, EXCEPT:

working in a factory.