ECON TEST 1

For which of the following individuals would the opportunity cost of going to college be highest?

a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree

For which of the following problems can well-designed public policy enhance economic efficiency?

both externalities and market power

Refer to Figure 4-9. If price in this market is currently $14, then there would be a(n)

excess supply of 40 units and the law of supply and demand predicts that the price will fall from $14 to a lower price.

Laws that penalize pollution in public places (like the side of the highway) are examples of government intervention that is intended to reduce

externalities.

In a particular country in 2000, the average worker needed to work 40 hours to produce 55 units of output. In that same country in 2008, the average worker needed to work 30 hours to produce 45 units of output. In that country, the productivity of the average worker

increased by about 9 percent between 2000 and 2008

When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good

increases as more of the good is produced.

An economy's production of two goods is efficient if

it is impossible to produce more of one good without producing less of the other

A tradeoff exists between a clean environment and a higher level of income in that

laws that reduce pollution raise costs of production and reduce incomes.

Economics deals primarily with the concept of

scarcity

Efficiency means that

society is getting the maximum benefits from its scarce resources.

Which of the following statements about the circular-flow diagram is correct?

The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms.

The slow growth of U.S. incomes during the 1970s and 1980s can best be explained by

a decline in the rate of increase in U.S. productivity.

Which of these terms are used interchangeably?

"inputs" and "factors of production"

Refer to Figure 4-9. In this market, equilibrium price and quantity, respectively, are

$10 and 50.

Refer to Figure 2-8, Panel (a). The opportunity cost of moving from point K to point L is

0 cups of coffee

If the production possibilities frontier is bowed outward, then "?" could be

310

Refer to Figure 2-8, Panel (a). The opportunity cost of one cup of coffee is highest when the economy produces

6 cups of coffee

In the simple circular-flow diagram,

All of the above

The country of Econoland produces two goods, textbooks and widgets. Last year, it produced 200 textbooks and 500 widgets. This year, it produced 250 textbooks and 600 widgets. Given no other information, which of the following events could not explain this change?

Any of these events could, in fact, explain the change

In the figure above, which movement reflects a decrease in quantity demanded but NOT a decrease in demand?

From point a to point e

Tom is restoring a car and has already spent $3500 on the restoration. He expects to be able to sell the car for $5000. Tom discovers that he needs to do an additional $2000 of work to make the table worth $5000 to potential buyers. He could also sell the car now, without completing the additional work, for $2800. What should he do?

He should complete the additional work and sell the car for $5000.

Which of the following statements is correct about the roles of economists?

In trying to explain the world, economists are scientists; in trying to improve the world, they are policy advisers.

When government policies are enacted,

None of the above are correct.

Refer to Figure 4-4. The graphs show the demand for cigarettes. In Panel (b), the arrows are consistent with which of the following events?

The prohibition of cigarette advertisements on television

Which of the following transactions does not take place in the markets for factors of production in the circular-flow diagram?

a woman buys corn for dinner

The circular-flow diagram

an economic model

Refer to Figure 2-8, Panel (a) and Panel (b). A shift of the economy's production possibilities frontier from Panel (a) to Panel (b) could be caused by

an improvement in donut production technology.

In competitive markets, buyers

and sellers are price takers.

Any point on a country's production possibilities frontier represents a combination of two goods that an economy

can produce using all available resources and technology

Communist countries worked under the premise that

central planners were in the best position to determine the allocation of scarce resources in the economy.

Economists speaking like policy advisers make

claims about how the world should be.

Rational people make decisions at the margin by

comparing marginal costs and marginal benefits

For a very long time Tropicland has had inflation of 12%. Suddenly its inflation rate drops to 4%. The drop in the inflation rate

could be due to slower money supply growth. We would expect unemployment to be higher

Economists use the word equality to describe a situation in which

each member of society has the same income

Refer to Figure 2-11. The shift of the production possibilities frontier from A to B can best be described as

economic growth

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between

efficiency and equality.

Refer to Figure 2-2. Enid regularly buys fruits and vegetables at a grocery store. Santo regularly pays a lawn-care company to mow his lawn. If the flow of fruits and vegetables from the grocery store to Enid is represented by an arrow from Box C to Box B of this circular-flow diagram, then the money paid by Santo to the lawn-care company is represented by an arrow

from Box B to Box C.

Refer to Figure 4-12. All else equal, buyers expecting turkey to be more expensive in the future would cause a current move

from DB to DA

An example of an externality is the impact of

pollution from a factory on the health of people in the vicinity of the factory

Refer to Figure 2-8, Panel (a). Production is

possible at points J, K, L, and M, but efficient only at points J, L, and M.

Refer to Figure 2-8, Panel (a) and Panel (b). Which of the following is not a result of the shift of the economy's production possibilities frontier from Panel (a) to Panel (b)?

production of 1 donut and 4 cups of coffee becomes efficient

The overriding reason as to why households and societies face many decisions is that

resources are scarce.

The primary determinant of a country's standard of living is

the country's ability to produce goods and services.

Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is

the enjoyment and exercise he would have received had he played tennis.

A certain production possibilities frontier shows production possibilities for two goods: wheat and shirts. Which of the following concepts cannot be illustrated by this model?

the flow of dollars between sellers of wheat and shirts and buyers of wheat and shirts

When computing the opportunity cost of attending a Broadway show you should include

the price you pay for the ticket and the value of your time

Market economies are distinguished from other types of economies largely on the basis of

the ways in which scarce resources are allocated

Which of the following is not a reason people choose to depend on others for goods and services?

to allow people to produce outside their production possibilities frontiers

Refer to Figure 2-8, Panel (a). The movement from point M to point K could be caused by

unemployment.

A positive economic statement such as "Pollution taxes decrease the quantity of pollution generated by firms"

would require data but not values in order to be evaluated.