Economics final quizlet

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The point of the broken window story is to prove that it is correct to say that destruction creates jobs and prosperity. A. True B. False

A nonexcludable public good is characterized by nonrivalry in a. production and nonexcludability. b. consumption and rivalry in production. c. consumption and excludability. d. consumption and nonexcludability. e. none of the above

A "price taker" is a firm that a. does not have the ability to control the price of the product it sells. b. does have the ability, although limited, to control the price of the product it sells. c. can raise the price of the product it sells and still sell some units of its product. d. sells a differentiated product. e. none of the above

A U.S. trade policy that restricts the sale of foreign goods in the U.S. market will a. reduce the demand for U.S. export goods since foreigners will be less able to buy our goods if they cannot sell to us. b. benefit producers in industries that export goods. c. increase the nation's income since it protects domestic jobs. d. enhance economic efficiency by allocating more resources to the areas of their greatest comparative advantage.

A decrease in the expected future price of a good will cause the current demand for the good to a. decrease, which is a shift to the left of the demand curve. b. decrease, which is a shift to the right of the demand curve. c. increase, which is a shift to the left of the demand curve. d. increase, which is a shift to the right of the demand curve.

A good is rivalrous in consumption if a. its consumption by one person reduces its consumption by others. b. it can be used to satisfy many needs (as compared to just one need). c. it can be used to satisfy many wants (as compared to just one want). d. its consumption by one person increases its consumption by others. e. a and c

A market is said to be in disequilibrium if a. it exhibits either a surplus or a shortage. b. the number of units that individuals are willing to buy exceeds the number of units they can afford. c. it is a market for an inferior good. d. none of the above

A negative externality is internalized when __________ until the socially optimum level of production is obtained. a. supply shifts to the left b. supply shifts to the right c. demand shifts to the right d. b and c e. none of the above

A person who does not ignore a sunk cost increases the probability that a. the past will influence the future. b. the future will influence the past. c. the future will be like the past. d. there will be no future. e. the future will be like the present.

A possible explanation that a nation might offer for the imposition of a protectionist policy such as a tariff is to: a. protect an infant industry from foreign competitors. b. encourage specialization in the good in which the nation has a comparative advantage. c. slow domestic production. d. increase the level of imports. e. give consumers more foreign-made options.

A tariff is a tax imposed on _____________ good. a. an imported b. a luxury c. an illegal d. the most popular e. a domestic

An externality is internalized if a. the person(s) or group that generated the externality incorporate into their own private cost-benefit calculations the external benefits (in the case of a positive externality) or the external costs (in the case of a negative externality) that third parties bear. b. people are made aware of it and realize that social benefits are less than private benefits (in the case of a positive externality) and that social costs are less than private costs (in the case of a negative externality). c. the person(s) or group that generated the externality do not incorporate into their own private cost-benefit calculations the external benefits (in the case of a positive externality) or the external costs (in the case of a negative externality) that third parties bear. d. b and c e. none of the above

An import quota: a. limits the amount of a good that can be imported, thus increasing prices. b. is the same as a ban on imports. c. increases the amount of a good imported, thus increasing prices. d. increases the amount of a good imported, thus decreasing prices. e. limits the amount of a good that can be imported, thus decreasing prices.

Compared to the no-trade situation, if the United States imports shoes, a. the price of shoes will decline in the domestic market. b. domestic shoemakers will be able to charge higher prices. c. domestic shoemakers will expand both output and employment. d. U.S. consumers will be harmed.

Dumping is a. the sale of a good by a foreign supplier in another country at a price below that charged by the supplier in its home market. b. an inappropriate method for getting rid of byproducts from a production process. c. a method to increase competitiveness in a market. d. all of the above. e. both a and c above.

Externalities can be internalized through voluntary agreements as long as a. transaction costs are low relative to expected benefits. b. transaction costs are high relative to expected benefits. c. the agreement is a short-run agreement. d. the agreement is a long-run agreement.

Figure 5-3 illustrates the market for a product that generates an external benefit. D1 is the private market demand curve, while D2 is the demand curve including the external benefit. Which of the following is true? a. Point a illustrates the competitive private market outcome, while point b illustrates the outcome consistent with economic efficiency. b. Point b illustrates the competitive private market outcome, while point a illustrates the outcome consistent with economic efficiency. c. The competitive private market outcome is consistent with the conditions for economic efficiency. d. The good will tend to be oversupplied relative to the conditions for economic efficiency.

For country A, an import is a good produced in: a. country B and purchased by residents of country A. b. country A and purchased by residents of country A. c. country A and purchased by residents of country B. d. country B and purchased by residents of country B. e. the domestic economy.

Generally, if a nation produces more consumer goods than capital goods A) less of all goods may be produced in the future. B) about the same amount of capital goods may be produced in the future as are being produced today. C) society will have to forego future consumption of capital goods. D) more of all goods may be produced in the future.

I argued in class that there's no such thing as a "rip off." A. True B. False

If a perfectly competitive firm and a single-price monopolist face the same demand and cost curves, then the competitive firm will produce a a. greater output and charge a lower price than the monopolist. b. greater output but charge the same price as the monopolist. c. greater output and charge a higher price than the monopolist. d. smaller output and charge a lower price than the monopolist. e. smaller output and charge a higher price than the monopolist.

If all resources were perfectly adaptable for alternative uses, the production possibilities curve would A) be a straight line. B) be bowed in. C) be bowed out. D) not exist.

If demand increases by a lesser amount than supply decreases, then equilibrium price __________ and equilibrium quantity __________. a. rises; falls b. falls; falls c. rises; rises d. falls; rises

If the government sets out to make home buying easier for more people by forcing lenders to accept ____________ down payments and ______________ interest rates, the result will likely be a(n) _______________ in housing prices. a. lower; lower; increase b. higher; higher; increase c. lower; higher; decrease d. higher; lower; decrease

If the purchase and sale of a currently illegal drug (for example, marijuana) were decriminalized, economists would expect a. an increase in demand and supply of this drug. b. an increase in demand and a decrease in supply of this drug. c. a decrease in demand and an increase in supply of this drug. d. a decrease in demand and supply of this drug.

In a competitive price-searcher market, the firms will a. be able to choose their price, and the entry barriers into the market will be low. b. be able to choose their price, and the entry barriers into the market will be high. c. have to accept the market price for their product, and the entry barriers into the market will be low. d. have to accept the market price for their product, and the entry barriers into the market will be high.

In a monopolistically competitive industry, a. each firm in the industry produces a slightly differentiated product. b. there are barriers to entry. c. there are barriers to exit. d. there are few sellers.

In competitive price-taker markets, firms a. can sell all of their output at the market price. b. produce differentiated products. c. can influence the market price by altering their output level. d. are large relative to the total market.

In economics A) resources are limited but wants are unlimited. B) resources are unlimited but wants are limited. C) both resources and wants are unlimited. D) both resources and wants are limited.

In essence, patents grant their owners a. a property right to new products and production processes that they have developed. b. the exclusive right to use a newly developed process or product forever. c. the right to use resources owned by their competitors. d. an exemption from laws that prohibit price discrimination.

In the above figure, how many bushels of corn are produced at point "a"? A) 2,500 B) 0 C) 10,000 D) 1,000

Logrolling consists of a. exchanging votes to gain support for legislation. b. spreading the costs of a piece of special-interest legislation over many millions of people. c. attempts directed at slowing down the growth of rational ignorance. d. increasing taxes on some people and lowering taxes on other people. e. none of the above

Market failure is a situation in which a. the market does not provide the ideal or optimal amount of a particular good. b. there are too many buyers but not enough sellers. c. prices are too high for "average" people to buy necessities. d. there is a question over the quality of a product for sale.

Michael and Angelo are both artists who can create sculptures or paint paintings each day. The following table describes their maximum outputs per day. Does either person have an absolute advantage? a. Yes, Michael has an absolute advantage in both sculptures and paintings. b. Yes, Angelo has an absolute advantage in both sculptures and paintings. c. Yes, Michael has an absolute advantage in paintings, and Angelo has an absolute advantage in sculptures. d. Yes, Michael has an absolute advantage in sculptures, and Angelo has an absolute advantage in paintings. e. No, neither has an absolute advantage.

Refer to Exhibit 16-1. This graph represents a negative externality situation. Given this, which of the two curves, X or Y, represents marginal social costs and why? a. Curve X, because if there is a negative externality, external costs are associated with it: social costs = external costs + private costs, therefore the marginal social cost curve must lie above the marginal private cost curve. b. Curve Y, because if there is a negative externality, negative external costs are associated with it: social costs = negative external costs + private costs, therefore the marginal social cost curve must lie below the marginal private cost curve. c. Curve X, because if there is a negative externality, external benefits are associated with it: social costs = external benefits + private costs, therefore the marginal social cost curve must lie above the marginal private cost curve. d. Curve Y, because if there is a negative externality, negative external benefits are associated with it: social costs = negative external benefits + private costs, therefore the marginal social cost curve must lie below the marginal private cost curve.

Refer to Exhibit 4-1. The number of units exchanged at the price ceiling is a. 75. b. 125. c. 175. d. 100.

Refer to Exhibit 5-2. If the tuition is set at $60 there will be a. a shortage at 10 a.m. and a surplus at 8 a.m. b. a surplus at 10 a.m. and a shortage at 8 a.m. c. equilibrium at both 10 a.m. and 8 a.m. because the price is half-way between their individual equilibria. d. none of the above

The Coase theorem a. shows that under certain conditions the market can internalize externalities. b. states that economic units should specialize in the production of those goods in which they have a comparative advantage. c. asserts that the firm should produce that output at which marginal cost is equal to marginal revenue. d. holds that the firm should produce that output at which marginal factor cost is equal to marginal revenue product.

The following table indicates the production possibilities of food and clothing per worker day in the United States and South Korea. Which of the following is true? a. Mutual gains could be realized if the United States specialized in producing food and South Korea in producing clothing. b. Mutual gains could be realized if the United States specialized in clothing production and South Korea in food production. c. South Korean workers are the high-cost producers of clothing. d. None of the above are true.

The opportunity cost of attending college might best be described as A) the highest-valued alternative use of the student's time. B) the money that must be paid in order to attend college. C) the lowest-valued alternative use of the student's time. D) the value that the student attaches to not working.

The production possibilities curve represents A) the maximum combination of goods and services that can be produced with fixed resources and technology, given efficient use of the resources. B) the maximum rate of growth of capital and labor in a country. C) the maximum amount of labor and capital available to society. D) the combinations of goods and services among which consumers are indifferent.

The theory of comparative advantage suggests that nations should produce a good if they a. have the lowest opportunity cost. b. have the lowest wages. c. have the most resources. d. can produce more of the good than any other nation.

The use of goods and services for personal satisfaction is known as A) consumption. B) specialization. C) comparative advantage. D) the law of increasing relative cost.

The usual answer to why some countries are rich and some countries are poor is differences in institutions. A. True B. False

Use the following scenario to answer the questions that follow: Esther and Albert produce hamburgers and hot dogs. Esther can produce six hamburgers per hour or four hot dogs per hour. Albert can produce three hamburgers per hour or one hot dog per hour. Based on the scenario, Albert's opportunity cost of one hamburger is: a. 1/3 hot dog. b. 1 hot dog. c. 6 hot dogs. d. 4 hot dogs. e. 8 hot dogs.

When analyzing public sector decision making, economic theory assumes voters, politicians, and government officials will a. respond to changes in personal benefits and costs when making public sector choices. b. always pursue the public interest even when it conflicts with their private interests. c. generally ignore the personal costs and benefits associated with their choices. d. make decisions that seek to maximize the amount of benefits created for society as a whole.

When economists talk about a barrier to entry, they are referring to a. a factor that makes it difficult for potential competitors to enter a market. b. the opportunity cost of equity capital that is incurred by a firm producing at minimum total cost. c. the downward-sloping portion of the long-run average total cost curve. d. the declining output experienced as additional units of a variable input are used with a given amount of a fixed input.

When negative externalities are connected with the production of a good, a. market output will be greater than the socially optimal output. b. private costs and social costs are equal. c. the government should subsidize the production of the good. d. there will be a shortage of the good.

When positive externalities are involved, the market is said to a. fail, because it underproduces the good connected with the positive externality. b. fail, because it overproduces the good connected with the positive externality. c. succeed, because it produces the socially optimal quantity of the good connected with the positive externality. d. be "in optimum," because the equilibrium fully adjusts for the positive externality.

Which of the following is NOT studied in microeconomics? A) the impact of an increase in the unemployment rate on economic production B) the impact of higher fuel prices on the cost of airline tickets C) the impact of firms' collective hiring choices on the aggregate unemployment rate D) the effect of an increase in gasoline taxes on the purchase of gasoline

Which of the following is a positive economic statement? A) If the price of eggs increases, the quantity demanded of bacon will fall. B) We should try to eliminate poverty in the United States. C) We should strive to achieve full employment in the United States. D) The President of the United States should promote stable prices in the United States.

Which of the following is an assumption of the theory of monopoly? a. There are extremely high barriers to entry. b. There are many sellers. c. The product has a number of close substitutes. d. The product is of extremely high quality.

Which of the following is an example of a normative economic statement? A) Income tax rates should be lower because that will increase government revenue. B) Lower income tax rates yield a larger federal government deficit. C) The federal budget deficit has increased every year for the last twenty years. D) Lower income tax rates will generate greater income tax revenue to the government.

Which of the following is one of the assumptions upon which the theory of monopolistic competition is built? a. There are many sellers. b. There are few buyers. c. It is difficult to enter the industry. d. Each firm in the industry produces a homogeneous product.

Which of the following is the best example of a monopoly? a. a local public utility b. a fast-food restaurant c. a department store d. a wheat farmer

Which of the following occurs when a shortage occurs in the market for a good? a. Quantity demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption. b. Quantity supplied exceeds quantity demanded and the price falls, which encourages more production and less consumption. c. Quantity demanded exceeds quantity supplied and the market mechanism pushes the price down, which encourages more production and less consumption. d. Quantity supplied exceeds quantity demanded and the price rises, which encourages more production and less consumption.

Which of the following represents an inefficient point? a. point A b. point B c. point C d. point D e. point E

Which of the following statements is false? a. Money must change hands before a cost can be incurred. b. No monetary payment takes place when an implicit cost is incurred. c. Costs may be either explicit costs or implicit costs. d. Cost implies that a sacrifice has been made.

Which of the following statements would a public choice theorist be least likely to agree with? a. The way to genuine reform in this country is to elect really good and moral people to government. b. The people who work for a large government bureaucracy are fundamentally similar to those who work for a private firm. c. A person's behavior is independent of the institutional setting he or she finds himself in. d. The people who work for private firms are inherently no better or worse than those who work for a large government bureaucracy.

Which of the following would be expected if the tariff on foreign-produced shoes were decreased? a. The domestic price of shoes would fall. b. The supply of foreign shoes to the domestic market would decline, causing shoe prices to rise. c. The number of unemployed workers in the domestic shoe industry would decline. d. The demand for foreign-produced shoes would decrease, causing the price of shoes to increase in other nations.

Which of the following would be the most likely long-run effect if the United States increased its tariff rates and adopted stricter import quotas? a. a decrease in both U.S. imports and exports b. an increase in both U.S. imports and exports c. a decrease in U.S. imports and an increase in U.S. exports d. an increase in U.S. imports and a decrease in U.S. exports

Which of the following would most likely increase the demand for peanut butter? a. a decrease in the price of jelly, a good that is often used with peanut butter b. the discovery that excessive consumption of peanut butter is harmful to one's health c. crop failures that raise the price of peanuts d. the invention of a new product that consumers think is a good substitute for peanut butter

A profit-maximizing price searcher will expand output to the point where a. total revenue equals total cost. b. marginal revenue equals marginal cost. c. price equals average total cost. d. price equals marginal cost.

A factory can be thought of as A) a type of entrepreneurship. B) physical capital. C) a trade-off with land. D) a land and labor combination

A farmer has 100 acres of land on which he can grow soybeans or corn. An acre of land yields 200 bushels of soybeans or 100 bushels of corn. The above figure refers to the farmer's A) substitution options curve. B) production possibilities curve. C) demand curve. D) opportunity cost curve.

A firm that is a "pure monopoly" is a. a seller of a highly advertised and differentiated product in a market with low barriers to entry in the long run. b. the only seller of a good for which there are no good substitutes in a market with high barriers to entry. c. the only buyer of a unique raw material. d. the producer of a product subsidized by the government.

A friend says, "I really, really need a new car." As an economist, you're thinking 22) ______ A) If this friend says she needs a new car, then we must all agree that a new car is a need and not just a want. B) This is an example of how objectively undefinable needs are. Many would argue that this friend could get along just fine with a reliable used car. C) that a new car can only be considered a need if at least 51% of the public agrees. D) Right! Everyone needs a new car.

A man-made resource such as a building or a machine is an example of which resource? A) entrepreneurial ability B) physical capital C) human capital D) labor

A political candidate running in a two-person race is likely to occupy a. an extreme end of the political spectrum and hope that his or her opponent will gravitate toward the middle so that he or she can then claim that his or her opponent has flip-flopped. b. the middle of the political spectrum and label his or her opponent as an extremist (either liberal or conservative). c. a position somewhere between the middle of the political spectrum and an extreme end so that he or she can move either way shortly before the election. d. one extreme end of the political spectrum early in the race and the other extreme end near the end of the race.

A price ceiling is a government-mandated a. minimum price below which legal trades cannot be made. b. maximum price above which legal trades cannot be made. c. minimum price above which legal trades cannot be made. d. maximum price below which legal trades cannot be made.

A scientist who is studying earthquakes includes the impact of wind when performing some tests of damages to structures. This is an example of A) irrational behavior in noneconomic situations. B) accounting for every possible phenomena that may effect the problem under examination. C) failing to understand how to do scientific methodology. D) failing to hold all other things constant.

A simplified representation of the real world that is used to explain economic phenomena is a(n) A) assumption. B) model. C) implication. D) viewpoint.

Assume that supply decreases greatly and demand increases slightly. Which of the following will happen? a. Equilibrium price will fall and equilibrium quantity will rise. b. Equilibrium price will rise and equilibrium quantity will fall. c. Equilibrium price will rise and equilibrium quantity will rise. d. Equilibrium price will fall and equilibrium quantity will fall. e. Neither equilibrium price nor equilibrium quantity will change.

Bonnie volunteers to help make floral arrangements at a flower shop. She is an example of A) human capital. B) labor. C) entrepreneurial ability. D) physical capital.

Consider Figure 7-17. Between the prices of $5 and $6, which supply curve is most elastic and which is least elastic? a. S1 is most elastic; S2 is least elastic. b. S1 is most elastic; S3 is least elastic. c. S3 is most elastic; S1 is least elastic. d. S3 is most elastic; S2 is least elastic. e. S2 is most elastic; S3 is least elastic.

Consider the following information about a business Diane opened last year: price = $5, quantity sold = 12,000; implicit cost = $17,000; explicit cost = $40,000. What was Diane's economic profit? a. $20,000 b. $3,000 c. $6,000 d. $43,000 e. There is not enough information provided to answer this question.

Economics is most precisely defined as A) the same as the study of finance and management. B) the study of how people make choices. C) a study of what people need to survive. D) a study of how culture evolves in different geographic areas.

Exhibit 4-2 represents the orange juice market. The horizontal line at $2 shows a price ceiling imposed by the government. Which of the following statements is true at this price? a. At the price ceiling the surplus equals 400 units. b. At the price ceiling the shortage equals 400 units. c. At the price ceiling the surplus equals 300 units. d. At the price ceiling the shortage equals 200 units. e. none of the above

Good Y is an inferior good. If the average income of those who buy good Y rises, the _____________ curve for good Y will shift ____________ resulting in a(n) _____________ in the equilibrium price of Y and a(n) ____________ in the equilibrium quantity of Y. a. supply; rightward; decrease; increase. b. demand; leftward; decrease; decrease c. demand; rightward; increase; increase d. supply; leftward; increase; decrease e. supply; leftward; increase; increase

Hazlitt stated that bad economists look at: A. Long term, not the short term; one group, not all groups B. Short term, not long term; one group not, not all groups C. Short term, not long term; all groups, not one group D. Long term, not short term; all groups,, not one group

If a positive externality exists, __________ for the socially optimal output to be reached. a. supply needs to decrease b. demand needs to increase c. demand needs to decrease d. a and c e. none of the above

If private property rights were established in the air, there would probably be a. more air pollution. b. less air pollution. c. the same amount of air pollution that exists without private property rights in the air. d. better weather.

If tariffs are decreased, the long-run effect is most likely to be a. a decrease in both U.S. imports and exports. b. an increase in both U.S. imports and exports. c. a decrease in U.S. imports and an increase in U.S. exports. d. an increase in U.S. imports and a decrease in U.S. exports.

If the income elasticity of a good is positive, we can conclude that the good is a. an inferior good. b. a normal good. c. a luxury good. d. a necessity.

If the production possibilities curve is a downward sloping straight line, then A) resources are highly specialized, making it difficult to use them for alternative uses. B) all resources must be perfectly adaptable for alternative uses. C) production is efficient only when producing at the mid-point. D) technological change has increased.

In economics, actions by individuals and interest groups designed to influence public policy in a manner that will either directly or indirectly redistribute more income to themselves are known as a. logrolling. b. rent seeking. c. influence peddling. d. redistribution searching.

In economics, the demand for a good refers to the amount of the good people a. would like to have if the good were free. b. are willing to buy at various prices. c. need to achieve a minimum standard of living. d. will buy at alternative income levels.

In the early West, many of the open lands were overgrazed. This was largely because a. landowners charged ranchers a fee to graze their cattle. b. the lands were unowned. c. a government policy in effect at the time subsidized cattle production. d. none of the above

Many people argue that certain industries, such as weapons, energy, and transportation, should be protected by trade barriers in the interest of: a. national infrastructure. b. national security. c. the unemployment rate in those industries. d. technological advancement. e. economic independence.

Opening trade between a nation that has "cheap labor" and one that has "expensive labor" will a. lower the standard of living in both countries. b. raise the standard of living in both countries. c. raise the standard of living in the "expensive labor" country and lower the standard of living in the "cheap labor" country. d. raise the standard of living in the "cheap labor" country and lower the standard of living in the "expensive labor" country.

Public choice theorists assert that persons who change jobs from, say, a government position to a business position, sometimes alter their work behavior and attitudes because a. they want to fit in and be liked by their fellow workers. b. they are acting rationally by weighing the costs and benefits of certain behavior in different work settings. c. they feel that if they change jobs, they should also change their behavior. d. their new boss tells them it is in their best interest.

Public choice theory suggests that politicians will be most likely to favor redistribution of income from a. the rich to the poor. b. disorganized individuals to well-organized special interest groups. c. middle-income taxpayers to both the rich and the poor. d. well-organized business and labor groups to consumers.

Public franchises, patents, and government licenses are examples of __________ barriers to entry. a. social b. legal c. cultural d. geographic

Refer to Figure 5-4. The figure illustrates an industry that generates a. external benefits. b. external costs. c. no externalities. d. economies of scale.

Scarcity refers to A) the inability of an individual to purchase a good or service due to her limited income. B) the inability of society to satisfy all human wants because of limited resources. C) a shortage in a good or service. D) the ability of society to consume all that it produces.

Stephanie has decided to eat lunch between classes. She has ranked her choices, from highest to lowest as, (1) turkey sandwich, (2) tuna sandwich, (3) slice of cheese pizza, (4) cheeseburger. The opportunity cost of the eating turkey sandwich is A) the combined value of the tuna sandwich, slice of cheese pizza and cheeseburger. B) the value of tuna sandwich, the next best choice. C) zero since she has satisfied a want. D) the value of the cheeseburger.

The ability of one producer to create more of a good than another producer using the same quantity of resources is called: a. comparative advantage. b. absolute advantage. c. a positive-sum game. d. gains from trade. e. the law of increasing relative cost.

The following table indicates the production possibilities of cars and clothing per worker day in the United States and Japan. Which of the following is true? a. No gains from trade are possible. b. Joint output would be maximized if the United States specialized in producing cars and Japan in producing clothing. c. Mutual gains from trade could be realized if the United States specialized in clothing production and Japan in car production. d. The Japanese are the high-cost producers of both cars and clothing.

The shorter the period of time consumers have to adjust to price changes, the __________ the __________ elasticity of demand. a. lower; income b. lower; price c. higher; income d. higher; price

The theory of monopoly assumes that the monopoly firm a. faces a downward-sloping supply curve that is the same as its marginal revenue curve. b. faces a downward-sloping demand curve. c. produces more than the perfectly competitive firm under identical demand and cost conditions. d. produces a product for which there are many close substitutes. e. none of the above

Think of the production possibilities frontier (PPF) model. When society is producing the largest possible output from its resources, it is operating: a. inefficiently. b. efficiently. c. with no opportunity cost. d. inside (within) the PPF. e. beyond its opportunity cost.

Use the following scenario to answer the questions that follow: Amy can produce either 5,000 pounds of cheese or 20 houses per year. Jim can produce either 5,000 pounds of cheese or 10 houses per year. Amy has a comparative advantage in the production of ___________, and Jim has a comparative advantage in the production of _____________. a. houses; houses b. houses; cheese c. cheese; houses d. both goods; houses e. both goods; cheese

Use the following scenario to answer the questions that follow: Karl and Pete produce cars and trucks. Karl can produce 10 cars per hour or 5 trucks per hour. Pete can produce 12 cars per hour or 4 trucks per hour. Based on the scenario, which of the following is true? a. Karl has a comparative advantage in producing cars but not trucks. b. Karl has a comparative advantage in producing trucks but not cars. c. Karl has a comparative advantage in producing both goods. d. Karl has a comparative advantage in producing neither good. e. Karl does not have any absolute advantage.

Use the following scenario to answer the questions that follow: Karl and Pete produce cars and trucks. Karl can produce 10 cars per hour or 5 trucks per hour. Pete can produce 12 cars per hour or 4 trucks per hour. Based on the scenario, which of the following is true? a. Karl has an absolute advantage in producing cars but not trucks. b. Karl has an absolute advantage in producing trucks but not cars. c. Karl has an absolute advantage in producing both goods. d. Karl has an absolute advantage in producing neither good. e. Karl does not have any comparative advantage.

Use the following scenario to answer the questions that follow: Rosa and Dirk produce basketballs and footballs. Rosa can produce six basketballs per hour or two footballs per hour. Dirk can produce three basketballs per hour or four footballs per hour. Based on the scenario, which of the following is true? a. Dirk has an absolute advantage in producing basketballs but not footballs. b. Dirk has an absolute advantage in producing footballs but not basketballs. c. Dirk has an absolute advantage in producing both goods. d. Dirk has an absolute advantage in producing neither good. e. Rosa has a comparative advantage in producing both goods.

When we say that a firm is a price taker, we are indicating that the a. firm takes the price established in the market then tries to increase that price through advertising. b. firm can change output levels without having any significant effect on price. c. demand curve faced by the firm is perfectly inelastic. d. firm will have to take a lower price if it wants to increase the number of units that it sells.

Which of the following indicates the major difference between monopolists and competitive price searchers? a. Monopolists will always be able to make economic profit; competitive price searchers will not. b. Barriers to entry are high under monopoly but low in competitive price-searcher markets. c. Monopolists will face a downward-sloping demand curve; competitive price searchers will not. d. Unregulated monopolists will charge prices that exceed marginal cost; competitive price searchers will not.

Which of the following is a primary difference between price searchers and price takers? a. Price searchers maximize profits, but price takers do not. b. Price searchers have to cut their price to sell additional output, but price takers do not. c. The market demand for goods produced by price searchers is downward sloping, while the market demand for goods produced by price takers is horizontal. d. Profit-maximizing price searchers will expand output to the quantity where marginal revenue equals marginal cost, but price takers will not.

Which of the following will most likely occur under a system of clearly defined and enforced private property rights? a. Resource owners will tend to abuse resources and use them selfishly. b. Resource owners will conserve vital resources for the future, particularly if they expect the resource to increase in value. c. Resource owners will ignore the wishes of others, including those who would like to use the resource that is privately owned. d. Resource owners ignore the wishes of others since there is little incentive to employ privately owned resources in ways that are beneficial to others.

Which of the following would be expected if the tariff on foreign-produced automobiles were increased? a. The domestic price of automobiles would fall. b. The supply of foreign automobiles to the domestic market would decline, causing auto prices to rise. c. The number of unemployed workers in the domestic automobile industry would rise. d. The demand for foreign-produced automobiles would increase, causing the price of automobiles to increase in other nations.

Why do politicians sometimes resist free trade and "globalization"? a. Free trade does not benefit the economy as a whole. b. Special interest groups may not benefit from free trade. c. Free trade does not benefit the global economy. d. Free trade usually hurts the consumers. e. Only the rich benefit from free trade.

You like to sleep until 11:00 am during the semester. What is the opportunity cost of attending an 8:00 am class? A) the money you spend on coffee to stay awake B) sleep C) obtaining the notes from the 8:00 am class D) nothing, since you can go back to bed later

A monopolist will maximize profits by a. setting the price at the level that will maximize per-unit profit. b. producing the output where marginal revenue equals total cost and charging a price along the demand curve. c. selling at the price on the demand curve at the output rate where marginal revenue equals marginal cost. d. producing at the output rate where price equals marginal cost.

A perfectly competitive firm will increase its production as long as a. total revenue is less than total cost. b. the total revenue curve is rising. c. marginal revenue is greater than marginal cost. d. the marginal revenue curve is rising.

A point on a production possibilities curve indicates A) an output combination that can be attained only if society gets more resources or there is technological change. B) resources are not being used efficiently. C) resources are being used efficiently. D) opportunity costs are constant.

A tariff: a. is a strict enforcement of health laws. b. is a voluntary agreement between two countries to limit exports. c. is a tax on imports. d. is a limit on the quantity of a good that can be imported into a country. e. subsidizes the production of goods leaving the country.

Assume that supply decreases slightly and demand increases greatly. Which of the following will happen? a. Equilibrium price will fall and equilibrium quantity will rise. b. Equilibrium price will rise and equilibrium quantity will fall. c. Equilibrium price will rise and equilibrium quantity will rise. d. Equilibrium price will fall and equilibrium quantity will fall. e. Neither equilibrium price nor equilibrium quantity will change.

Assume, for Canada, that the domestic price of steel without international trade is higher than the world price of steel. This suggests that with trade, a. Canada has a comparative advantage in the production of steel over other countries and Canada will import steel. b. Canada has a comparative advantage in the production of steel over other countries and Canada will export steel. c. other countries have a comparative advantage over Canada in the production of steel and Canada will import steel. d. other countries have a comparative advantage over Canada in the production of steel and Canada will export steel.

Cross elasticity of demand is the percentage change in the quantity __________ of a good divided by the percentage change in __________. a. demanded; the price of the good b. supplied; the price of the good c. demanded; the price of another good d. supplied; the price of another good e. demanded; income

Figure 5-3 illustrates the market for a product that generates an external benefit. D1 is the private market demand curve, while D2 is the demand curve including the external benefit. Which of the following is true? a. Relative to economic efficiency, output of the good will be too large and the price too low. b. Relative to economic efficiency, output of the good will be too large and the price too high. c. Relative to economic efficiency, output of the good will be too small and the price too low. d. Relative to economic efficiency, output of the good will be too small and the price too high.

Five months ago Wilson opened up a health club. Which of the following is an implicit cost related to the health club? a. Wilson paid $120 for an outside laundry service to clean the towels used at the club. b. Wilson paid $100 for the pest control exterminator to spray the health club. c. Wilson previously worked as an accountant, earning $3,000 a month. d. Wilson usually eats four hamburgers a day, priced at $3 each.

Government bureaus and bureaucrats are not as likely to try to please their "customers" as are private firms. Why? a. Government bureaus usually employ more employees than private firms. b. There are fewer government bureaus than private firms. c. Government bureaus do not face competition, private firms do. d. Government bureaus provide more nearly essential services than private firms. e. none of the above

If a teacher tells a student that those who attend the study session typically score higher on the final exam, A) the student has no greater incentive to attend because there is no guarantee she will get a higher grade on the exam. B) a "C" student will be making an irrational decision if she decides to skip the study session since she has plenty of time to go. C) the student has a positive incentive to attend the study session because she may get a higher grade. D) the student has a negative incentive to attend the study session because she will be punished if she does not go.

If the United States unilaterally removed all of its trade restrictions and moved toward a policy of free trade, international trade theory indicates that a. U.S. residents would gain, but people in other countries would be worse off. b. people in other countries would gain, but U.S. residents would be worse off. c. both U.S. residents and people in other countries would be able to achieve higher income levels. d. the average income level would be lower in both the United States and other countries.

If the cross elasticity of demand for good A with respect to good B is +2.7, then good A is a. an inferior good. b. a normal good. c. a substitute for good B. d. a complement to good B.

If total revenue rises as a result of a decrease in price, it follows that demand is a. inelastic. b. perfectly inelastic. c. elastic. d. unit elastic. e. none of the above

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, economist Adam Smith argued that individuals A) are generally not concerned with economic questions. B) always tend to act in an altruistic manner. C) are motivated by self-interest. D) always consider the impact of their actions on the welfare of others

In order for an economy to increase its production possibilities, the economy must A) reduce output. B) increase its wants. C) increase inputs. D) be very efficient.

In the theory of perfect competition, a. sellers of the product are not influenced by other sellers and therefore have virtually complete control over the production and pricing of their product. b. buyers of the product may have a preference as to whom they purchase from based on brand loyalty. c. buyers and sellers of the product know everything that there is to know about the product. d. it can be quite expensive for a firm to enter this type of market, but once the firm is established, it will be a profitable venture.

Marginal social benefits are equal to a. marginal private benefits + marginal internal benefits. b. marginal private benefits - marginal internal benefits. c. marginal private benefits + marginal external benefits. d. marginal private benefits - marginal external benefits.

Most economists believe that the market __________ produce nonexcludable public goods because of __________. a. will; the monetary incentive they have to produce them b. will not; externality problem c. will not; free rider problem d. will; the market shortage that often accompanies the production of public goods. e. none of the above

Most economists do not believe an increase in the minimum wage would significantly reduce the poverty rate. Which of the following best explains why? a. An increase in the minimum wage might encourage high school students to drop out of school. b. Most minimum-wage employees would simply work fewer hours if their wages were increased. c. Most minimum-wage workers are teenagers or spouses in households with incomes already above the poverty level. d. Most studies indicate the demand for unskilled labor is highly inelastic.

Naturally occurring diamonds are an example of A) physical capital. B) human capital. C) land. D) labor.

On a supply-and-demand diagram, equilibrium is found a. where the supply curve intercepts the vertical axis. b. where the demand curve intercepts the horizontal axis. c. where the demand and supply curves intersect. d. at every point on either curve

Opportunity costs arise from A) regrets. B) taxes. C) choices. D) mistakes.

Price elasticity of demand is the ratio of the a. absolute change in quantity demanded to the absolute change in price. b. absolute change in price to the absolute change in quantity demanded. c. percentage change in quantity demanded to the percentage change in price. d. percentage change in price to the percentage change in quantity demanded.

Public choice refers to a. the decisions and decision-making processes that individuals go through to solve public problems. b. political decisions made in the interest of the public at large. c. the application of economic principles and tools to public-sector decision making. d. the process that individuals undergo to decide what goods and services they will purchase and consume. e. the process that individuals undergo to decide whether or not they will pursue a career government service.

Rational (political) ignorance refers to a. some voters choosing not to vote in elections. b. the fact that some voters are not smart enough to be informed on political issues. c. the state of not acquiring information about politics and government because the costs of acquiring the information are greater than the benefits. d. political candidates deliberately saying "dumb" things during their campaign. e. none of the above

Refer to Exhibit 3-5. In the market shown, a rightward shift in demand from D1 to D2 could have been caused by a. an increase in the number of sellers in the market. b. an improvement in technology in the production of this good. c. a decrease in buyers' income (assuming the good is an inferior good). d. a decrease in buyers' income (assuming the good is a normal good). e. a and b

Refer to Figure 5-4. The inefficient equilibrium price and quantity are a. $1.90 and 38 units, respectively. b. $1.80 and 35 units, respectively. c. $1.60 and 42 units, respectively. d. $1.35 and 58 units, respectively.

Refer to the above figure. Which one of the following statements is TRUE with regard to the economy depicted in the graph? A) The best production point is 500 loaves of bread and 50 bales of wool. B) The total amount of resources it takes to produce 20 bales of wool and 500 loaves of bread is more than the amount of resources needed to produce 50 bales of wool and 250 loaves of bread. C) The total amount of resources it takes to produce 20 bales of wool and 500 loaves of bread is the same as the amount of resources needed to produce 50 bales of wool and 250 loaves of bread. D) Point C cannot be produced.

Refer to the graph below. This society could reach point F when there is a(n): a. increase in the monetary price of apple pie. b. credible new study that shows blueberries reduce the risk of heart attack. c. increase in technology that makes pie bakers more efficient. d. new regulation that makes pie baking more costly. e. increase in the monetary price of blueberry pie.

Samia has decided that with the two hours in between classes she can do one of 3 things. She has ranked her choices, from highest to lowest as, (1) chat with her friends, (2) study economics or (3) take a nap. The opportunity cost of chatting with her friends is A) the value of chatting with her friends. B) the combined value of studying economics and taking a nap. C) the value of studying economics, the next best use of time. D) zero since she does not pay her friends to talk to her.

Suppose the government imposes a price ceiling above the equilibrium price of a given good. Which of the following is the most likely result? a. Some other rationing device will emerge to allocate the good among buyers. b. Some buyers and sellers will be willing to risk breaking the law in order to exchange the goods. c. No change will occur in the market. d. There may be buyers who are willing to pay quite high prices so they can consume more than what they are consuming now. e. a, b, and d

Suppose the plow is invented and agricultural productivity greatly increases. Which of the following graphs best depicts how this would affect the PPF? a. Graph A b. Graph B c. Graph C d. Graph D e. Graph E

Tariffs and quotas are often imposed when a government is more responsive to __________ interests, and the benefits of those trade restrictions are often __________. a. consumer; concentrated b. consumer; widely dispersed c. producer; concentrated d. producer; widely dispersed

The current demand for automobiles would decrease if a. the price of gasoline fell. b. consumer income rose. c. consumers suddenly believed the price of automobiles would be sharply lower in the near future. d. consumers suddenly believed the price of automobiles would be sharply higher in the near future.

The demand curve for a perfectly competitive firm a. is downward sloping. b. is upward sloping. c. is perfectly horizontal. d. is perfectly vertical. e. may be downward or upward sloping, depending upon the type of product offered for sale.

The fewer substitutes for a good, a. the lower its income elasticity of demand. b. the higher its income elasticity of demand. c. the lower its price elasticity of demand. d. the higher its price elasticity of demand.

The point of the North/South Korea satellite image was that: A. Resources matter B. Geography matters C. Institutions matter D. Culture matters

The political popularity of a tariff on imported goods that compete with products of a well-established domestic industry is a. surprising since one would expect the political power of consumers to override the interests of even a well-established domestic industry. b. surprising since one would expect the economic harm resulting from tariffs to be well understood by voters. c. not surprising since such a tariff would generally benefit an easily recognized interest group at the expense of uninformed, uninterested consumers. d. not surprising since the tariff enables domestic producers and consumers to gain at the expense of foreigners.

The theory of perfect competition generally assumes that a. sellers act independently of other sellers, but buyers do not act independently of other buyers. b. buyers act independently of other buyers, but sellers do not act independently of other sellers. c. buyers and sellers act independently of other buyers and sellers. d. neither buyers nor sellers act independently of other buyers and sellers.

The trade-off between current consumption and the production of capital goods is also a trade-off between A) satisfying the needs of the poor and the wants of the wealthy. B) having fewer needs and more wants in the future. C) current consumption and future consumption. D) the future cost for capital goods and future cost of consumption goods.

Trade restrictions like tariffs and quotas will a. protect American jobs and increase employment. b. ensure that more dollars stay in the United States. c. reduce the value of goods and services that we will be able to produce and consume. d. make all Americans better off.

Under a system of private property, could a 60-year-old owner of a tree farm benefit by planting and caring for a crop of Douglas firs, most of which will not be ready to cut for 50 years? a. No, the farmer will be dead before the crop will be ready for harvest. b. No, the value of the farmer's land will decline since he is taking it out of production for the next 50 years. c. Yes, the farmer will benefit because this action will increase the value of the land if and when the farmer decides to sell. d. Yes, but only if the project is subsidized by the government or private conservation groups.

When a conflict arises in a major oil-exporting area of the world, such as the Middle East, the price of gasoline already in the storage tanks at local gas stations usually increases. Which of the following best explains this occurrence? a. Gas station owners anticipate consumers will buy more gasoline as gasoline prices increase. b. Gas station owners are attempting to repeal the laws of supply and demand. c. Gas station owners anticipate higher replacement costs for their supply of gasoline and, therefore, raise their prices in response to this higher expected cost. d. A decline in consumer demand generally causes gas station owners to raise their prices.

When a foreign supplier tries to "dump" goods into another country in order to gain a foothold in a foreign market, this is often a result of ____________ within the foreign country. a. tariffs b. restrictions c. subsidies d. unemployment e. changed preferences

When experts first predicted major weather-related coffee crop failures in Central and South America in 1986, the price of coffee already on grocery shelves in the United States increased sharply. When coffee became temporarily more scarce, the usefulness to society of "coffee conservation" increased. The immediate sharp price increase (which soon leveled off) gave consumers an incentive to a. buy all the coffee they could at the higher prices and hoard it, since there was obviously a shortage. b. drink as much coffee as possible at the higher price. c. start conserving coffee immediately and switch to other beverages if it was easy to do so. d. ignore the price of coffee and drink it as they normally would.

When price is greater than marginal cost for a firm in a competitive market, a. marginal cost must be falling. b. the firm must be minimizing its losses. c. there are opportunities to increase profit by increasing production. d. the firm should decrease output to maximize profit.

Which of the following is a major disadvantage of setting the price of a good below equilibrium and using waiting in line rather than price to ration the good? a. Compared to price rationing, waiting in line is unfair since it is easier for those with higher incomes to wait in line. b. Waiting in line imposes a cost on the consumer; paying higher prices does not. c. Both waiting in line and higher prices are costly to consumers, but unlike the payment of a higher price, waiting in line does not provide suppliers with an incentive to expand future output. d. Waiting in line benefits consumers at the expense of producers.

Which of the following is not an argument for adopting trade restrictions on imported goods? a. antidumping argument b. national-defense argument c. consumer-protection argument d. infant-industry argument

Which of the following is the best example of a public good? a. a government-run health care system b. the Walt Disney World amusement park c. national defense d. long-distance telephone service

Which of the following is true? a. Economists calculate only economic profit, and accountants calculate only accounting profit. b. Economic profit is always greater than accounting profit. c. Accounting profit is the difference between total revenue and explicit costs. d. Economic profit is the difference between total revenue and implicit costs.

Which of the following statements about a movement along the production possibilities curve in the above figure is FALSE? A) Society cannot have more of both goods at the same time. B) The trade-off between computers and televisions is not constant. C) There are no opportunity costs involved in choosing one point on the curve over all other points. D) An additional computer can be produced only if fewer televisions are produced.

A bowed outward production possibilities curve occurs when A) resources are not scarce. B) there are shortages in the goods being produced. C) opportunity costs are constant. D) additional units of output of one good necessitate greater reductions in the other good.

A tariff is a tax placed on a. an exported good and it lowers the domestic price of the good below the world price. b. an exported good and it ensures that the domestic price of the good stays the same as the world price. c. an imported good and it lowers the domestic price of the good below the world price. d. an imported good and it raises the domestic price of the good above the world price.

After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water? a. Price will increase, and quantity will decrease. b. Price will decrease, and quantity will decrease. c. Price will decrease, and quantity will increase. d. Price will increase, and quantity will increase.

An effective minimum wage a. imposes a price ceiling on the wages of various categories of low-skill workers. b. increases the demand for low-skill workers. c. makes it easier for low skill workers to find jobs. d. increases the earnings of some low-skill workers while reducing the employment and training opportunities available to others.

Arguments made against free trade include all of the following except a. national defense considerations justify producing certain goods domestically whether the country has a comparative advantage in their production or not. b. infant industries should be protected from free trade so that they may have time to develop and compete on an even basis with older, more established foreign industries. c. dumping is an unfair trade practice that puts domestic producers of substitute goods at a disadvantage that they should be protected against. d. free trade is inflationary and should be restricted in the domestic interest. e. if foreign governments subsidize their exports, foreign firms that export are given an unfair advantage that domestic producers should be protected against.

Assuming that bus travel is an inferior good, an increase in consumer income, other things being equal, will cause a. an upward movement along the demand curve for bus travel. b. a downward movement along the demand curve for bus travel. c. a rightward shift in the demand curve for bus travel. d. a leftward shift in the demand curve for bus travel.

At a price for which quantity demanded exceeds quantity supplied, a __________ is experienced, which pushes the price __________ toward its equilibrium value. a. surplus; downward b. surplus; upward c. shortage; downward d. shortage; upward

Because illegal drug markets operate outside the legal system, a. the quality of these drugs has increased. b. the sellers of illegal drugs earn less money. c. there is less violence in these markets than if they were legal. d. none of the above.

Consider two goods--one that generates external benefits and another that generates external costs. A competitive market economy would tend to produce a. too much of both goods. b. too little of both goods. c. too much of the good that generates external benefits and too little of the good that generates external costs. d. too little of the good that generates external benefits and too much of the good that generates external costs.

Economic profit is the difference between total revenue and a. explicit costs. b. implicit costs. c. sunk costs. d. the sum of explicit and implicit costs.

Economics A) is a social science. B) is concerned with unlimited wants. C) is concerned with limited resources. D) All of the above are correct.

Figure 4-3 indicates the demand (D) and supply (S) for the rental housing market in a large city. If the government imposed a price ceiling of a, which of the following would be true? a. The quantity of rental housing demanded would be t. b. The quantity of rental housing supplied would be r. c. There would be a shortage of rental housing. d. All of the above are true.

Figure 7-2 depicts a demand curve with a price elasticity that is a. perfectly elastic, implying that as much as can be supplied will be purchased at the market price. b. relatively inelastic, implying that a percent increase in price results in a smaller percent reduction in sales. c. unitary, implying that a percent change in price leads to an equal percent change in quantity demanded. d. perfectly inelastic, implying that the same amount will be purchased regardless of the price of the good.

Given your knowledge of the incentives created by private ownership, which of the following would you expect to be false? a. People will take better care of their own personal automobile than they will a rental car. b. People will take better care of a home they own than they will of a home they rent. c. Property owned privately will tend to be better conserved and kept than public property or property owned in common. d. People will be more likely to throw trash out onto their own lawn than they will be to throw it out onto the side of an interstate highway.

If Country A has an absolute advantage over Country B in the production of every commodity, a. mutual gains from trade between Country A and Country B would be impossible. b. Country B would be able to gain from trade but not country A. c. the joint output of the two countries could not be increased through specialization and exchange. d. mutual gains from trade would still be possible.

If the cross elasticity of demand for good A with respect to good B is -0.87, then good A is a. an inferior good. b. a normal good. c. a substitute for good B. d. a complement to good B.

In a market system, ________ provide signals about whether resources are relatively scarce or abundant. A) scientists and engineers B) economists C) government officials D) prices

International trade is advantageous because trade makes it possible for people in each country to a. import more than they export. b. export more than they import. c. employ more of their domestic resources producing things that are costly for them to produce domestically. d. acquire goods from foreigners more economically than they could be produced domestically. e. do all of the above.

It is argued that certain industries should be protected from foreign competition because they are needed to secure the United States from foreign aggression. This argument is called the __________ argument. a. saving domestic-jobs b. low foreign wages c. foreign export subsidies d. national defense

Microeconomics is defined as that part of economic analysis that A) concerns aggregate production and consumption. B) includes the problems of inflation and unemployment. C) studies the behavior of the economy as a whole. D) studies individual decision making by households and firms.

Modern economists are increasingly using microeconomic analysis in macroeconomics because A) microeconomic theory is more scientific. B) macroeconomic subjects such as inflation affect all individuals. C) macroeconomics is older and more outdated. D) aggregate outcomes stem from decisions made by individuals, business firms and government.

Normative economic statements A) are easily testable. B) violate the law of ceteris paribus. C) are usually irrational. D) contain value judgments.

One of the reasons given for the imposition of a protectionist policy such as a tariff is to: a. aid other nations in developing their own industries. b. increase the welfare of foreign consumers. c. increase the welfare of domestic consumers. d. protect domestic workers from foreign competition. e. slow domestic production.

Real-world markets that approximate the four assumptions of the theory of perfect competition include a. some agricultural markets. b. the soft drink market. c. the stock market. d. a and c e. a, b, and c

Refer to Exhibit 16-2. This graph represents a positive externality situation. Given this, which of the two curves, X or Y, represents marginal social benefits and why? a. Curve X, because if there is a positive externality, negative external benefits are associated with it: social costs external benefits - private benefits, therefore the marginal social benefit curve must lie below the marginal private benefit curve. b. Curve X, because if there is a positive externality, external benefits are associated with it: social benefits = external benefits + private benefits, therefore the marginal social benefit curve must lie below the marginal private benefit curve. c. Curve Y, because if there is a positive externality, external costs are associated with it: social benefits = external costs + private benefits, therefore the marginal social benefit curve must lie above the marginal private benefit cost curve. d. Curve Y, because if there is a positive externality, external benefits are associated with it: social benefits = external benefits + private benefits, therefore the marginal social benefit curve must lie above the marginal private benefit curve.

Refer to Exhibit 3-10. $20 is the a. equilibrium price. b. market-clearing price. c. price at which there is neither a surplus nor a shortage. d. all of the above

Refer to Exhibit 3-5. In the market shown, a rightward shift in supply from S1 to S2 could have been caused by a. a decline in the number of buyers in the market. b. a decline in the price of a substitute good. c. a decrease in income (assuming the good is a normal good). d. the granting of a subsidy to the producer. e. none of the above

Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. At P = $0, there is a ________ of freeway space at 8 a.m. and ________ at 11 p.m. a. shortage; a surplus b. surplus; a shortage c. surplus; equilibrium d. shortage; equilibrium

Refer to the above figure. Which of the following would allow society to move to point d? A) producing efficiently B) concentrating production in wheat C) using the best land to produce wheat and the lower quality land to produce beans D) increasing the quantity of labor

Rent controls generally fix the price of rental housing below market equilibrium. Economic analysis suggests these controls a. are effective in helping the poor find housing. b. improve the quality of housing available to consumers. c. create a surplus of rental housing. d. reduce the future supply of rental housing.

Resource X is necessary to the production of good Y. If the price of resource X rises, the _____________ curve for good Y will shift ____________ resulting in a(n) _____________ in the equilibrium price of Y and a(n) ____________ in the equilibrium quantity of Y. a. supply; rightward; decrease; increase. b. demand; leftward; decrease; decrease c. demand; rightward; increase; increase d. supply; leftward; increase; decrease e. supply; leftward; increase; increase

Suppose a great plague wipes out half of the society's population. Which of the following graphs best depicts how this would affect the PPF? a. Graph A b. Graph B c. Graph C d. Graph D e. Graph E

Suppose that the minimum wage was increased to $10 per hour. Which of the following would be most likely to result from the minimum wage increase? a. an increase in the employment of low-skill workers previously employed at wage rates of less than $10 per hour b. an increase in the number of jobs providing low-skill workers with on-the-job training c. a reduction in the number of teenagers unemployed d. an increase in the demand for high-skill workers providing services that are a good substitute for those whose wages were pushed up by the higher minimum wage

Suppose the United States reduced the tariff on television sets, allowing foreign-produced televisions to more freely enter the U.S. market. Which of the following would most likely occur? a. The price of televisions to U.S. consumers would increase, and the demand for U.S. export products would rise. b. The price of televisions to U.S. consumers would fall, and the demand for U.S. export products would fall. c. The price of televisions to U.S. consumers would increase, and the demand for U.S. export products would fall. d. The price of televisions to U.S. consumers would fall, and the demand for U.S. export products would rise.

The Coase theorem states that a. positive externalities are directly related to the weather-the better the weather, the more positive externalities. b. in the case of trivial or zero transaction costs, negative externalities are more likely to appear. c. when transaction costs are high, positive externalities will be minimized. d. in the case of trivial or zero transaction costs, the property rights assignment does not matter to the resource-allocative outcome.

The Coase theorem states that a. transaction costs consist of marginal private costs and marginal social costs and are higher when exchange is subject to increasing marginal costs. b. transaction costs are the difference between marginal social costs and marginal private costs and are higher when exchange is subject to decreasing marginal costs. c. when transaction costs are significant, the resource-allocative outcome will be the same regardless of who is assigned the property rights. d. when transaction costs are insignificant, the resource-allocative outcome will be the same regardless of who is assigned the property rights. e. b and c

The price elasticity of demand would most likely be highest for which of the following goods? a. food (in general) b. cars (in general) c. clothing (in general) d. Ford cars e. a, b, or c

The above table shows the daily production possibilities for a bakery. Currently the bakery bakes 60 pizzas and 180 loaves of bread, that is at alternative C. Using the above table but now the bakery bakes 30 pizzas and 240 loaves of bread (alternative B), moving from alternative B to alternative D, what is the opportunity cost of one pizza pie? A) 150 loaves of bread B) 2.5 loaves of bread C) 0.5 loaf of bread D) 2 loaves of bread

The assumption that people do not intentionally make decisions that would leave them worse off is known as A) the normative assumption. B) the ceteris paribus assumption. C) the microeconomic assumption. D) the rationality assumption.

The discovery of new natural resources will cause A) an upward movement along the curve. B) the curve to shift back and to the left. C) the economy to move closer to the production possibilities curve. D) the production possibilities curve to shift up and to the right.

The impact of an increase in the gasoline tax on SUV sales is A) a macroeconomics topic because it deals with taxes. B) insignificant. C) not an economic issue, but rather a political issue. D) a microeconomics topic because it deals with one industry.

The law of increasing additional costs is due to A) the fact that it is more difficult to use resources efficiently the more society produces. B) taxes. C) scarcity. D) the fact that resources are not perfectly adaptable for alternative uses.

The perfectly competitive firm maximizes profit at the output where a. price equals marginal cost. b. marginal revenue equals marginal cost. c. average variable cost equals average fixed cost. d. a and b e. all of the above

The sale of goods abroad at a price below their cost and below the price charged in the domestic market is called a. priming. b. coping. c. invading. d. dumping.

To have more consumer goods in the future, we must 40) ______ A) lower current income. B) get government involved in the production process. C) stop producing all goods today. D) produce more capital goods today.

When production of a good generates external costs, the a. demand curve for the good will overstate the true social benefits from consumption of the good. b. demand curve for the good will understate the true social benefits from consumption of the good. c. supply curve for the good will overstate the true social cost of producing the good. d. supply curve for the good will understate the true social cost of producing the good.

Which of the following explains why managers of government agencies have little incentive to achieve operational efficiency? a. Public-sector managers need not fear bankruptcy when operational efficiency is not achieved. b. Public-sector managers seldom receive personal benefits if they find ways to improve the efficiency of their operations. c. Public-sector agencies typically do not face competition. d. All of the above explain why government agencies have little incentive to be efficient.

Which of the following is true regarding the market for steak shown in Figure 3-1? a. If the price of steak were $2 per pound, producers would want to supply less steak than consumers would want to buy. b. If the price of steak were $4 per pound, producers would want to supply more steak than consumers would want to buy. c. If the price of steak were $3 per pound, producers would want to supply the same amount of steak that consumers would want to buy. d. All of the above are true regarding the market for steak shown in the figure.

Which of the following statements is true? a. Costs are always explicit, never implicit. b. Costs are always implicit, never explicit. c. George runs a stationery shop; he paid Frank $5,000 for the carpet he installed in the shop. The $5,000 for carpet is an implicit cost. d. An implicit cost is a cost that represents the value of resources used in production for which no actual monetary payment is made. e. none of the above

Which statement best describes absolute advantage? a. DiNozzo has an absolute advantage in the production of wooden boats. b. DiNozzo has an absolute advantage in both. c. Gibbs has an absolute advantage in solving crimes, whereas DiNozzo has an absolute advantage in making wooden boats. d. Gibbs has an absolute advantage in both. e. Gibbs has an absolute advantage in making wooden boats, whereas DiNozzo has an absolute advantage in solving crimes.

Which statement best describes the absolute advantage as shown in the graphs? a. Pam has an absolute advantage in the production of both. b. Jim has an absolute advantage in the production of both. c. Jim has an absolute advantage in the production of pizzas, and Pam has an absolute advantage in the production of stromboli. d. Pam has an absolute advantage in the production of pizzas, and Jim has an absolute advantage in the production of stromboli. e. They both have an absolute advantage in the production of stromboli.

You have a comparative advantage in producing a good whenever: a. you enjoy producing that good. b. you can produce more of the good than someone else can using the same resources. c. your opportunity cost is constant. d. your opportunity cost of producing that good is lower than that of other producers. e. you have specific training in the production of that good.

Evidence indicates that tariffs and quotas are a. beneficial for producers in a protected industry, but not beneficial for the workers in the industry. b. beneficial for producers in a protected industry, but not beneficial for consumers. c. beneficial for workers in a protected industry, but not beneficial for consumers. d. not beneficial for the workers in a protected industry or for consumers. e. b and c

If a supply curve shifts rightward, this means a. suppliers are willing and able to offer less of the good for sale at every price. b. suppliers are willing and able to offer more of the good for sale at every price. c. quantity supplied is greater at every price. d. suppliers are willing and able to offer more of the good for sale only at a particular price. e. b and c

If the supply curve and the demand curve for lettuce both shift to the left by an equal amount, what can we say about the resulting changes in price and quantity? a. The price will increase, but the quantity may increase or decrease. b. The price will increase, and the quantity will increase. c. The price will decrease, and the quantity will increase. d. The price will stay the same, but the quantity will increase. e. The price will stay the same, but the quantity will decrease.

In the theory of perfect competition, a. the market demand curve is horizontal. b. the single firm's demand curve is horizontal. c. the single firm's demand curve is downward sloping. d. the market demand curve is downward sloping. e. b and d

Perfectly competitive industries are a. difficult to enter because there are already so many producers in the industry. b. not particularly appealing or attractive to enter because there tend to be so many buyers that it is difficult to deal with them. c. relatively easy to enter but not so easy to exit from. d. a and b e. none of the above

When a good is nonexcludable, then individuals a. will purchase the good for less than it cost to produce. b. can obtain the benefits of the good without paying for it. c. have an incentive to become free riders. d. will purchase more than the optimum amount. e. b and c

Which of the following illustrates the law of demand? a. Jorge buys fewer pencils at $2 per pencil than at $1 per pencil, ceteris paribus. b. Chen buys more ice cream at $4 per half-gallon than at $3 per half gallon, ceteris paribus. c. Karissa buys fewer sweaters at $50 each than at $35 each, ceteris paribus. d. a, b, and c e. a and c

Which of the following is not an assumption of the theory of monopolistic competition? a. There are high barriers to entry. b. There are many sellers and few buyers. c. Each firm in the industry produces and sells a homogeneous product. d. a and b e. all of the above

Which of the following represents a point that is unattainable with current resources and technology? a. point A b. point B c. point C d. point D e. point E

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