Econ test 1

Which of the following is not an example of a market?

In the United States, a sick person cannot legally purchase a lung

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation?

New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy

Assume Ren buys coffee beans in a competitive market. It follows that

Ren cannot influence the price of coffee beans even if he buys a large quantity of them

Which of the following events would cause a movement upward and to the left along the demand curve for olives?

The price of olives rises

If a person chooses self-sufficiency, then she can only consume what she produces. (True or False)

True

Interdependence among individuals and interdependence among nations are both based on the gains from trade (True or False)

True

It is possible for the U.S. to gain from trade with Germany even if it takes U.S. workers fewer hours to produce every good than it takes German workers. (True or False)

True

The opportunity cost of an item is

What you give up to get that item

The term market failure refers to

a situation in which the market on its own fails to allocate resources efficiently

Productivity is defined as

amount of goods and services produced from each unit of labor input

Currently you purchase ten frozen pizza per month. You will graduate from college in December, and you will start a new job in January. You have no plans to purchase frozen pizzas in January. For you, frozen pizzas are

an inferior good

which of the following statements about models is correct

because economic models omit many details, they all us to see what is truly important

If a seller in a competitive market chooses to charge more than the going price, then

buyers will make purchases from other sellers

Making rational decisions at the margin means that people

compare the marginal costs and marginal benefits of each decision

Equilibrium price must decrease when

demand does not change and supply increases

Total output in an economy increases when each person specializes because

each person spends more time producing that product in which he or she has a comparative advantage

The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that

equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources

To improve living standards, policymakers should

formulate policies designed to increase productivity

The basic principles of economics suggest that

government should become involved in markets when those markets fail to produce efficient or fair outcomes

A circular-flow diagram is a model that

helps to explain how the economy is organized

A popular celebrity that is paid highly for her time should probably not mow her own lawn because

her opportunity cost of mowing her lawn is higher than the cost of paying someone to mow it for her

microeconomics is the study of

how individual households and firms make decisions

Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that

in order to consume beyond its PPF, the United States should produce more pork than what it requires and export some of it to Mexico

Trade between countries tends to

increase both competition and specialization

The business cycle is

irregular fluctuations in economic activity

The production possibilities frontier provides an illustration of the principle that

people face trade-offs

As a student, Jordyn spends 40 hours per week writing term papers and completing homework assignments. On one axis of her production possibilities frontier is measured the number of term papers written per week. On the other axis is measured the number of homework assignments completed per week. Jordyn's production possibilities frontier is a straight line if

she can switch between writing term papers and completing homework assignments at a constant rate

Economists make assumptions to

simplify the complex world and make it easier to understand

The production possibilities frontier illustrates

the combinations of output that an economy can produce

When a country has a comparative advantage in producing a certain good,

then specializing in the production of that good and trading for other goods could allow that country to consume at a point beyond its production possibilities frontier

Economics is the study of how society mages its

unlimited wants and limited resources