EXAM 1 ECON FE

1. The ceteris paribus condition is the requirement that when analyzing the relationship between two variables, such as price and quantity demanded, other variables must be held constant. a) TRUE b) FALSE

A

A change in all of the following variables will change the market demand for a product except a) the price of the product. b) population and demographics. c) income. d) tastes.

A

Consider a country that produces only two goods: pineapples and tractors. Suppose it is possible for this country to increase its production of pineapples without producing fewer tractors. In this case, its current output combination is inefficient. A) TRUE B) FALSE

A

If an increase in income leads to a decrease in the demand for greasy pizza, then greasy pizza is a) an inferior good. b) a neutral good. c) a necessity. d) a normal good.

A

The demand by all the consumers of a given good or service is the ________ for the good or service. A) market demand B) quantity demanded C) law of demand D) scheduled demand

A

The law of demand implies, holding everything else constant, that as the price of bagels increases A) the quantity of bagels demanded will decrease. B) the demand for bagels will decrease. C) the quantity of bagels demanded will increase. D) the demand for bagels will increase.

A

Thomas increased his consumption of potato chips when the price of pistachios increased. For Thomas, potato chips and pistachios are A) substitutes in consumption. B) both inferior goods. C) complements in consumption. D) both luxury goods.

A

Which of the following is a macroeconomics question? a) What determines the growth rate of the economy? b) How is the production quantity of snowboards determined? c) What factors determine the price of electronic cigarettes? d) What determines the salaries of Wall Street executives?

A

_______ a nation's production possibilities frontier represents economic growth. a) An outward shift of b) An inward shift of c) Moving up along d) Moving down along

A

A successful market economy requires well defined property rights and A) balanced supplies of all factors of production. B) an independent court system to adjudicate disputes based on the law. C) detailed government regulations. D) a safety net to ensure that those who cannot participate in the market economy can earn an income

B

A(n) ________ is represented by a leftward shift of the demand curve while a(n) ________ is represented by a movement along a given demand curve. A) decrease in demand; increase in demand B) decrease in demand; increase in quantity demanded C) increase in demand; decrease in quantity demanded D) decrease in quantity demanded; decrease in demand

B

A(n) ________ is represented by a leftward shift of the demand curve while a(n) ________ is represented by a movement along a given demand curve. a) decrease in demand; increase in demand b) decrease in demand; increase in quantity demanded c) increase in demand; decrease in quantity demanded d) decrease in quantity demanded; decrease in demand

B

All of the following are examples of spending on goods and services in the circular flow model except A) Giovani buys a new cell phone to replace the one he flushed down the toilet. B) Amir buys a new humidor for his cigar shop. C) Isabella buys the sushi plate for lunch at the Turning Japanese Sushi Bar. D) Vijay buys a new minivan for his family's cross-country vacation.

B

Comparative advantage means A) the ability to produce more of a product with the same amount of resources than any other producer. B) the ability to produce a good or service at a lower opportunity cost than any other producer. C) the ability to produce a good or service at a higher opportunity cost than any other producer. D) compared to others you are better at producing a product.

B

Comparative advantage means a) the ability to produce more of a product with the same amount of resources than any other producer. b) the ability to produce a good or service at a lower opportunity cost than any other producer. c) the ability to produce a good or service at a higher opportunity cost than any other producer. d) compared to others you are better at producing a product.

B

Economic models a) make no assumptions in order to remain as accurate as possible. b) are simplified versions of reality. c) cannot be used to analyze real-world issues. d) magnify the complexity of economic issues in order to provide useful data.

B

Economics is the study of the ________ people make to attain their goals, given their ________ resources. A) purchases; unlimited B) choices; scarce C) income; available D) decisions; household

B

If an increase in income leads to in an increase in the demand for peanut butter, then peanut butter is A) a neutral good. B) a normal good. C) a necessity. D) a complement.

B

In economics, choices must be made because we live in a world of a) unemployment. b) scarcity. c) greed. d) unlimited resources.

B

Marginal cost is the ________ associated with a particular increase in an activity. a) total cost b) additional cost c) forgone cost

B

Now if Australia and New Zealand decide to trade with each other, A) Australia should specialize in both surfboards and boomerangs B) New Zealand should specialize in surfboards C) Australia should specialize in surfboards D) Neither country should specialize in surfboards

B

On a two-dimensional graph, ________ allows for the effects of additional variables. A) moving along a curve B) shifting curves C) eliminating a curve D) adding an additional curve

B

The ability to exercise control over one's own resources within the confines of the law refers to A) the free market. B) one's property rights. C) entrepreneurship. D) having an absolute advantage.

B

The extra cost associated with undertaking an activity is called A) net loss. B) marginal cost. C) opportunity cost. D) foregone cost.

B

The three fundamental questions that any economy must address are: A) What will be the prices of goods and services; how will these goods and services be produced; and who will receive them? B) What goods and services to produce; how will these goods and services be produced; and who receives them? C) Who gets jobs; what wages do workers earn; and who owns what property? D) How much will be saved; what will be produced; and how can these goods and services be fairly distributed?

B

Which of the following is a factor of production? a) a diamond ring at Tiffany's b) an economist hired by Amazon. c) a pedicure at a spa. d) coffee at Water Street

B

Which of the following is an example of spending on goods and services in the circular flow model? a) Micah purchases a new wrench for his auto repair business. b) Chester buys a first-class ticket from Atlanta to London for his long-awaited vacation. c) Toby buys a new lawn mower to use in his lawn care business. d) Lily purchases a new massage table for use in her therapy center.

B

_______ is a situation in which a good or service is produced at the lowest possible cost. A) Allocative efficiency B) Productive efficiency C) Equity D) Optimal marginalism

B

A production possibilities frontier with a bowed-outward shape indicates A) the possibility of inefficient production. B) constant opportunity costs as more and more of one good is produced. C) increasing opportunity costs as more and more of one good is produced. D) decreasing opportunity costs as more and more of one good is produced.

C

Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira, peanut butter and bananas are a) substitutes in consumption. b) both inferior goods. c) complements in consumption. d) both luxury goods.

C

Firms A) have no influence on the circular flow in a market economy. B) purchase resources in the product market. C) sell goods in the product market. D) sell resources in the factor market.

C

For each surfboard that Australia produces, it gives up the opportunity to make 25 boomerangs. For each surfboard New Zealand produces, it gives up the opportunity to make 15 boomerangs. Which of the following is true about the comparative advantage between the two countries? A) Australia has the comparative advantage in producing surfboards. B) Australia has the absolute advantage in producing boomerangs and surfboards. C) New Zealand has the comparative advantage in producing surfboards D) New Zealand has the comparative advantage in producing boomerangs.

C

If the price of grapefruit rises, the substitution effect due to the price change will cause A) a decrease in the demand for grapefruit. B) a decrease in the demand for oranges, a substitute for grapefruit. C) a decrease in the quantity of grapefruit demanded. D) a decrease in the quantity of grapefruit supplied.

C

If you were to look for an internship over the summer, you would be doing so in which market? a) product market b) output market c) factor market d) government market

C

The highest valued alternative that must be given up to engage in an activity is the definition of A) economic equity. B) marginal benefit. C) opportunity cost. D) marginal cost.

C

The idea that because of scarcity, producing more of one good or service means producing less of another good or service refers to the economic concept of A) optimization. B) efficiency. C) trade-off. D) equity.

C

The law of demand implies, holding everything else constant, that as the price of gelato a) increases, the demand for gelato will increase. b) increases, the quantity of gelato demanded will increase. c) decreases, the quantity of gelato demanded will increase. d) decreases, the demand for gelato will increase.

C

The slope of the above production possibilities frontier a) has no economic relevance or meaning. b) is always constant. c) measures the opportunity cost of producing one more unit of a good.

C

Which of the following is a microeconomics question? A) How much will be saved and how much will be produced in the entire economy? B) What will the level of economic growth be in the entire economy? C) What factors determine the price of carrots? D) What determines the average price level and inflation?

C

Which of the following is an example of spending on factors of production in the circular flow model? a) Carolina buys breakfast for kindergarten class. b) Melissa purchases a new mixer-grinder as a housewarming gift for her friend. c) Alisha owns a café and purchases a new coffee grinder for her café.

C

Which of the following statements is true about a simple circular flow model? A) Firms are neither buyers nor sellers in the product market. B) Households are neither buyers nor sellers in the input market. C) Firms are buyers in the factors market. D) Households are sellers in the product market.

C

Which of the following statements is true about a simple circular flow model? a) Producers are neither buyers nor sellers in the product market. b) Households are neither buyers nor sellers in the input market. c) Producers are buyers in the factors market. d) Households are sellers in the product market.

C

A worker is hired in a A) goods and services market. B) product market. C) government market. D) factor market.

D

Economists assume that individuals A) behave in unpredictable ways. B) will never take actions to help others. C) prefer to live in a society that values fairness above all else. D) are rational and respond to incentives.

D

The attainable production points on a production possibilities curve are A) the horizontal and vertical intercepts. B) the points along the production possibilities frontier. C) the points outside the area enclosed by the production possibilities frontier. D) the points along and inside the production possibility frontier.

D

The income effect of a price change refers to the impact of a change in A) income on the price of a good. B) demand when income changes. C) the quantity demanded when income changes. D) the price of a good on a consumer's purchasing power.

D

The opportunity cost of taking a semester-long economics class is A) the cost of tuition and fees only. B) the value of the time spent in the classroom. C) zero because there is no admission charged if you are enrolled in the course. D) equal to the highest value of an alternative use of the time and money spent on the class. E) the knowledge and enjoyment you receive from attending the class.

D

The production possibilities frontier model shows that A) if consumers decide to buy more of a product, its price will increase. B) a market economy is more efficient in producing goods and services than is a centrally planned economy. C) economic growth can only be achieved by free market economies. D) if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good

D

What is an economic model? A) It is a description of an economic issue that includes all possible related information. B) It is a description of an economic issue based on official government information. C) It is a detailed version of some aspect of economic life used to analyze an economic issue. D) It is a simplified version of some aspect of economic life used to analyze an economic issue.

D

Which of the following is a microeconomics question? a) Why do economies experience periods of high inflation? b) Will Federal Reserve intervention lower the inflation rate? c) Why has growth in the economy increased since the end of the recession? d) Will the merger of American Airlines and US Airways increase or decrease airfares?

D

Which of the following is an example of spending on factors of production in the circular flow model? A) Carolina has her nails done before her 20th high school class reunion. B) Giorgio buys snow cones for his youth soccer team after each game. C) Stevie trades in his old cell phone for a newer model. D) Alisha purchases a cotton candy machine for her concession stand at the state fair.

D