Econ Test 1

Which of the following statements about consumer goods in false?

They are a source of an economy's growth potential

Which of the following would not result in an outward shift of a nation's PPC?

a reduction in the unemployment rate

Refer to Figure 1.1. Which current production alternative would best induce increases in the economy's future production capabilities in the long run?

alternative A

Refer to Figure 1.1. Which of the following could allow the economy to move from point B to point F over time?

an advance in tech

All of the following are supply shifters except

consumer tastes

A decrease in demand for gasoline will

decrease equilibrium quantity and decreased equilibrium price

A decrease in the supply of blankets, with the demand for blankets being unchanged, will

decrease the equilibrium quantity and increase the equilibrium price

Refer to Table 1.1. If the economy produces 4 capital goods and 10 consumer goods, the economy

faces excess productive capacity

Which of the following is not an assumption that underlies an economy's PPC?

fixed income

Jogging becomes more fashionable. What happens to the equilibrium price and quantity of jogging shoes?

increase in equilibrium price and increase in equilibrium quantity

Assume that the supply of computers increased, while at the same time the demand for computers increased. The net effect of these two changes would be a(n)

indeterminate effect on the equilibrium price and an increase in the equilibrium quantity

The branch of economics that focuses on the choices made by households and firms, and the effects that those choices have on particular markets, is

microeconomics

If the government decides to raise the tax on gasoline, what will happen in the gasoline market?

price will rise and quantity will fall

Assume that apples and oranges are substitute goods. A frost that destroys 50% of orange production in Florida would likely increase the price of oranges, therefore decreasing the

quantity demanded of oranges and increasing the demand curve for apples

In a competitive market, the price of pears serves to

ration pears among competing consumers

The law of increasing opportunity costs is best explained by

resources not being completely adaptable to alternative uses

Suppose that one hour of additional studying would raise a student's score on an exam by an additional 5 points. What can we conclude from this?

the slope of the study time-grade line is 5

Refer to Figure 1.1. If the economy moves from point A to point B, it will produce

more consumer goods, but fewer capital goods

Refer to Figure 1.1. If the economy is located at point E,

there must be unemployment in the economy

____ is a schedule that shows various amounts of a good or service a buyer is willing and able to purchase at each possible price during a particular period

Demand

A question that positive economics would consider is

Does free trade result in job losses for workers in import-competing industries?

A ____ is a mechanism through which buyers and sellers communicate to trade goods and services

Market

All points along a PPC depict the

Maximum output that society can produce with given resources and tech

Assuming that rational people are motivated by incentives, what would occur if the average salary of finance majors rises by 30% and the average salary of philosophy majors remains constant?

Students will shift majors from philosophy to finance

If the demand for a good is negatively related to the price of another good, the two goods are

complementary goods

A decrease in the price of a movie ticket creates an increase in consumers' purchasing power so that they can afford to buy more movie tickets. This is called the

income effect

Refer to Figure 1.1. The shape of the PPC suggests that the US produces under conditions of

increasing opportunity costs

The bowed-out shape of a PPC illustrates

increasing opportunity costs

According to the law of demand, price and quantity demanded are

inversely related

The economic way of thinking includes all of the following principles except

limited human wants and unlimited resources cause scarcity of goods

Refer to Table 1.1. As we move from point A to point F, the

opportunity cost of consumer goods in terms of capital goods increases

Suppose we know there is a direct relationship between two variables: the amount of candy given to a group of children and the number of times the children smile. Another way to say this is that there is a(n) ____ relationship between candy and smiles

positive

Refer to Figure 2.1. Initially, the market is in equilibrium at a price of $25 and a quantity of 15 calculators. If productivity decreases for workers who produce calculators, which of the following would best represent the new equilibrium price and quantity?

price = $50, quantity = 10 calculators

Refer to Figure 2.1. Initially, the market is in equilibrium at a price of $25 and a quantity of 15 calculators. If union negotiations result in higher wages but not higher worker productivity, which of the following would best represent the new equilibrium price and quantity?

price = $50, quantity = 10 calculators

Refer to Figure 2.2. When the price is $3, there is a(n)

shortage of 800 bushels

If advances in tech make it possible for farmers to grow 25% more wheat per acre than they did in the past, the result would be an increase in the

supply of wheat because of declining costs of production

All of the following would cause the demand curve for Coke to increase except

the price of Coke decreases because of a price war among grocery stores

When we draw a demand curve for automobiles, which of the following is allowed to vary along the demand curve?

the price of automobiles

When we draw a supply curve of pencils, which of the following is allowed to vary along the supply curve?

the price of pencils

A rational person does not act unless the action

yields marginal benefits that are greater than marginal costs