Econ Exam 2 Part 1

Which of the following is true of the production possibilities curve? a. All of the above are correct. b. It assumes a fixed level of technology. c. It assumes resources are fixed. d. It assumes resources are fully employed.

a. All of the above are correct.

Which of the following is most likely to be true of economic and accounting profits? a. Economic profits are less than accounting profits. b. Accounting profits minus economic profits equal zero. c. Accounting profits are less than economic profits. d. Economic profits plus accounting profits equal zero.

a. Economic profits are less than accounting profits.

Which of the following is an example of an organization using marginal analysis? a. ​A government official considering what effect an increase in military goods production will have on the production of consumer goods. b. ​A hotel manager calculating the average cost per guest for the past year. c. ​A farmer hoping for rain. d. ​A business calculating economic profits.

a. ​A government official considering what effect an increase in military goods production will have on the production of consumer goods.

Because of scarcity, a. ​it is impossible to satisfy every desire and choices must be made. b. ​the available supply of time, goods, and resources is greater than human wants. c. ​every desire is fulfilled. d. ​there are no limits on the economy's ability to satisfy unlimited wants.

a. ​it is impossible to satisfy every desire and choices must be made.

If a price ceiling is imposed, then: a. the market supply curve will shift to the right. b. a shortage of product will result. c. the market equilibrium price is below the level the government wishes to achieve. d. the market demand will shift to the left. e. the government would be required to buy-up the surplus product.

b. a shortage of product will result.

An economic model is: a. applicable to consumer behavior but not to producer behavior. b. an abstraction from reality. c. a plastic scaled version of the economy. d. not an accepted tool of the economics profession. e. a complete depiction of reality.

b. an abstraction from reality.

Perfect competition is a market structure in which there is: a. rivalry in product design. b. none of the above. c. competition in product quality. d. a contest among firms to provide good service after the sale.

b. none of the above.

The various combinations of goods and services that can be produced, when an economy uses its available resources and technology efficiently, is called: a. unlimited production. b. production possibilities. c. opportunity cost. d. scarcity. e. capital accumulation.

b. production possibilities.

A free rider is a person who: a. pays less than the full value for a product. b. receives benefits from someone else's action but does not pay for them. c. won the state lottery. d. is harmed by another's actions. e. is subject to a negative externality.

b. receives benefits from someone else's action but does not pay for them.

A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20,000 a year, and take over a store building that he owns and currently rents to his brother for $6,000 a year. His expenses at the sushi bar would be $50,000 for food and $2,000 for gas and electricity. What are his explicit costs? a. $66,000. b. $78,000. c. $26,000. d. $72,000. e. $52,000.

c. $26,000.

Market structure describes which of the following characteristics? a. The number of firms in each industry. b. The similarity of the product sold. c. All of the above are true. d. The ease of entry into and exit from the market.

c. All of the above are true.

Which of the following would most likely cause the demand for veggie burgers to increase? a. A technological innovation that lowers the cost of producing veggie burgers. b. An increase in the price of burger buns. c. An increase in the price of tofu burgers, perceived as a substitute by veggie burger consumers. d. A decline in the price of veggie burger.

c. An increase in the price of tofu burgers, perceived as a substitute by veggie burger consumers.

How would a decrease in the price of the feed grains used to feed cattle affect the market for beef? a. The supply of beef would increase, decreasing beef prices. b. The demand for beef would decrease, decreasing beef prices. c. The supply of beef would decrease, increasing beef prices. d. The demand for beef would increase, increasing beef prices.

c. The supply of beef would decrease, increasing beef prices.

Which of the following is true for the law of demand? a. Sellers increase the quantity of a good available as the price of the good increases. b. An increase in price results from false needs. c. There is an inverse relationship between the price of a good and the quantity of the good demanded. d. Prices increase as more units of a product are demanded.

c. There is an inverse relationship between the price of a good and the quantity of the good demanded.

A car leasing company that expands its size by buying its competitors may run the risk of increasing production cost per unit due to: a. economies of scale. b. greater use of large-volume purchases. c. diseconomies of scale. d. diminishing returns.

c. diseconomies of scale.

Assuming that shoe repair services are an inferior good, an increase in consumer income, other things being equal, will cause a(n): a. rightward shift in the demand curve. b. upward movement along the demand curve. c. leftward shift in the demand curve. d. downward movement along the demand curve.

c. leftward shift in the demand curve.

Two goods that are substitutes are: a. coffee and cream. b. tennis racket and tennis balls. c. movie theater tickets and video rentals. d. bacon and eggs. e. camera and film.

c. movie theater tickets and video rentals.

If a decrease in the price of football tickets increases the total revenue of the athletic department, this is evidence that demand is: a. perfectly inelastic. b. unit elastic with respect to price. c. price elastic. d. price inelastic.

c. price elastic.

In general, supply curves slope upward because: a. consumers buy a greater quantity. b. technology improves the ability of firms to produce more at each possible price. c. rising prices provide producers with a greater profit incentive. d. increases in the price of a good result in lower opportunity costs.

c. rising prices provide producers with a greater profit incentive.

Which of the following are implicit costs for a typical firm? a. Electricity costs. b. Cost of labor hired by the firm. c. Insurance costs. d. Opportunity costs of capital owned and used by the firm. e. The cost of raw materials.

d. Opportunity costs of capital owned and used by the firm.

Which of the following is a normative economic statement? a. An increase in the price of a good will reduce the amount purchased. b. Higher profits in an industry will attract more entrepreneurs into the industry. c. The unemployment rate for the United States is currently 5.4 percent. d. The inflation rate in the United States is too high.

d. The inflation rate in the United States is too high.

A perfectly competitive firm in the short-run can earn: a. zero economic profits. b. positive economic profits. c. negative economic profits. d. all of the above are possible

d. all of the above are possible

If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is: a. perfectly elastic. b. perfectly inelastic. c. inelastic. d. elastic.

d. elastic.

In the long run, price elasticities of demand are usually ____. a. less than they are in the short run because people can adjust b. greater than they are in the short run because prices rise over time c. the same as they are in the short run because tastes don't change d. greater than they are in the short run because consumers have time to adjust e. less than they are in the short run because real prices fall over time

d. greater than they are in the short run because consumers have time to adjust

"The government should provide health care for all citizens." This statement is an illustration of: a. positive economic analysis. b. correlation analysis. c. fallacy of association analysis. d. normative economic analysis.

d. normative economic analysis.

f a competitive firm is losing money then it should: a. raise its price. b. shut down if its total fixed costs are greater than losses. c. always shut down. d. shut down if its losses are greater than total fixed costs.

d. shut down if its losses are greater than total fixed costs.

Suppose an oil company wants to make its total revenue as large as possible. It should charge a price at which the demand for oil is: a. inelastic. b. elastic. c. perfectly inelastic. d. unitary elastic.

d. unitary elastic.

Which of the following best describes the three fundamental economic questions? a. ​What time to produce, what place to produce, and how to produce. b. ​What to produce, when to produce, and for whom to produce. c. ​What to produce, when to produce, and where to produce. d. ​What to produce, how to produce, and for whom to produce.

d. ​What to produce, how to produce, and for whom to produce.

Diseconomies of scale exist for all of the following reasons except: a. management problems. b. failures in information flows. c. organizational problems. d. bureaucratic inefficiencies. e. firm size is too small.

e. firm size is too small.

A decrease in quantity demanded is given by a(n): a. downward movement to the right along the demand curve. b. downward shift of the demand curve. c. upward shift of the demand curve. d. downward shift of both demand and supply curves. e. upward movement to the left along the demand curve.

e. upward movement to the left along the demand curve.