first econ test

What would be an example of capital good? A) Rhianna gets a haircut. B) Apple sells computers to Japan. C) Antonio, the manager of the local Taco Hut, purchases a new deep fryer. D) Jeanette buys a new dress. E) The local driverʹs license office purchases a new digital camera and printer.

Antonio, the manager of the local Taco Hut, purchases a new deep fryer

The total revenue test says i) Demand is elastic if a decrease in price results in an increase in total revenue. ii) Total revenue is maximized when demand is elastic. iii) Totalrevenueisminimizedwhendemandisunitelastic.

Demand is elastic if a decrease in price results in an increase in total revenue

Which of the following is a positive statement? A) If we reduce welfare payments given to the poor, they will find jobs. B) Taxes on gasoline should be lower so that gasoline is more affordable to the poor. C) Everyone should have some knowledge of economics. D) The rich should pay more in taxes. E) Social Security must be reformed.

If we reduce welfare payments given to the poor, they will find jobs

Assume that an association of young workers has lobbied Congress to require that all workers retire once they reach the age of fifty. What impact would this law have on the nationʹs production possibilities frontier?

The production possibilities frontier would shift inward

Which of the following increases the supply of gasoline? A) a decrease in the demand for gas‐guzzling, sport utility vehicles B) a situation where the quantity of gasoline demanded exceeds the quantity supplied C) an increase in income if gas‐guzzling, sport utility vehicles are a normal good D) an increase in the price of gasoline E) a decrease in the price of a resource used to produce gasoline, such as crude oil

a decrease in the price of a resource used to produce gasoline, such as crude oil

If the demand for digital cameras increases when consumersʹ incomes rise, then digital cameras

a normal good

Which of the following does NOT increase the supply of personal computers, that is, does NOT shift the supply curve of personal computers? A) an increase in the number of firms producing personal computer B) a fall in the cost of the components used to assemble personal computers C) an advance in the technology used to produce personal computers D) a rise the price of a personal computer E) a change in the expected future price of a personal computer

a rise the price of a personal computer

Which of the following increases the supply of a good and shifts its supply curve rightward? A) a smaller number of producers B) an increase in the cost of the resources used to produce the good C) an increase in the price of the good D) a higher wage paid to workers in the industry E) a technological advance in how the good is produced

a technological advance in how the good is produced

In a production possibilities frontier graph, the cost of producing more units of a good is measured by the

amount of the other good or service that must be forgone

Your economics professor offers 10 points extra credit if you attend a review session before your next exam. This extra credit is an example of

an incentive to attend the review session

Which of the following definitely results in a productʹs equilibrium price rising? A) an increase in both demand and supply B) a decrease in both demand and supply C) an increase in the supply combined with no change in the demand D) a decrease in demand combined with an increase in supply E) an increase in demand combined with a decrease in supply

an increase in demand combined with a decrease in supply

Consider the market for smart phones. Which of the following shifts the demand curve rightward? A) a decrease in the price of smart phones B) an increase in the supply of smart phones. C) an increase in the price of land‐line phone service, a substitute for smart phones D) an increase in the price of smart phones E) a decrease in the number of smart phone buyers

an increase in the price of land‐line phone service, a substitute for smart phones

An increase in the number of pineapple growers results in

an increase in the supply of pineapples and a rightward shift in the supply curve of pineapples

An incentive is

an inducement to take a particular action

economists measure opportunity cost as

as the best thing given up

The production possibilities frontier is the

boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced, given the available factors of production and the state of technology

The question of ʺWhat goods and services get produced?ʺ most closely relates to which of the following issues? A) the distribution of goods and services in the economy B) taxing high income workers to give payments to poor households C) producing goods and services in the least costly manner D) building a missile defense system, or putting a computer in every elementary school classroom E) obtaining specialized training to increase oneʹs income

building a missile defense system, or putting a computer in every elementary school classroom

The price elasticity of demand is a measure of

buyers' responsiveness to changes in the price of a product

The extent to which the demand for a good changes when the price of a substitute or complement changes, other things remaining the same, is measured as the

cross elasticity of demand

The sustained expansion of production possibilities is called

economic growth

If the price elasticity of demand for moose hunting lessons is 4.23, then the demand for moose hunting lessons is

elastic

The circular flow model shows the flow of

expenditure and income throughout the economy

Millions of people from Mexico have migrated to the United States. This has reduced the supply of labor in Mexico and increased the supply of labor in the United States. Assume that the demand for labor in Mexico and the United States is unchanged. Then wages in the United States ________ and wages in Mexico ________.

fall; rise

If a product is narrowly defined, it is likely to

have many substitutes and therefore its demand is elastic

Jan is attending college and studying to be an investment broker. To improve her chances of employment following college, she has interned at a top brokerage firm during the last two summers. Janʹs internship has increased her

human capital

scarcity exists because

human wants exceed the resources available to satisfy them

Which of the following is true regarding demand? i. Demand is the relationship between quantity demanded and the price of a good when all other influences on buying plans remain the same. ii. Demand refers to one quantity at one time. iii. ʺDemandʺ and ʺ quantity demandedʺ are the same thing.

i. Demand is the relationship between quantity demanded and the price of a good when all other influences on buying plans remain the same.

Economic growth depends upon which of the following? i. Improving the quality of labor ii. Technological advancement iii. Increasing the amount of capital

i. Improving the quality of labor ii. Technological advancement iii. Increasing the amount of capital

The law of supply states that, other things remaining the same,

if the price of a good increases, the quantity supplied increases

Which of the following is an assumption used when drawing a production possibilities frontier? i. Human wants and desires are limited to what is available. ii. Only two goods are considered. iii. The level of technology is fixed and unchanging.

ii. only two goods are considered iii. the level of technology is fixed and unchanging

Which of the following statements is correct? The A) income elasticity of demand for inferior goods is positive. B) cross elasticity of demand for substitutes is negative. C) income elasticity of demand for normal goods is positive. D) income elasticity of demand for inferior goods is zero. E) cross elasticity of demand for complements is positive.

income elasticity of demand for normal goods is positive

Suppose a medical study reveals new benefits to consuming beef and at the same time a bumper corn crop reduces the cost of feeding steers. The equilibrium quantity of beef will

increase

A professor changes the penalty for cheating on exams from getting a 0 on the exam to getting an F in the course. The professor has A) increased the marginal cost of cheating. B) recognized that students donʹt respond to incentives. C) recognized that students donʹt make rational choices. D) decreased the marginal benefit of cheating. E) made all the students act in the social interest.

increased the marginal cost of cheating

During 2008 the supply of gasoline decreased while at the same time the demand for gasoline increased. If the magnitude of the increase in demand was greater than the magnitude of the decrease in supply, then the equilibrium price of gasoline ________ and the equilibrium quantity ________.

increased; increased

As more time passes, the price elasticity of gasoline

increases

Moving from one point to another on a production possibilities frontier implies

increasing the production of one good and decreasing the production of another

When the percentage change in the quantity demanded is less than the percentage change in price, then demand is

inelastic

A product that has a negative income elasticity of demand is ________ good.

infererior

Moving from a point inside the production possibilities frontier to a point on the production possibilities frontier, the opportunity cost of producing more of the good on the horizontal axis

is 0

A demand schedule

is a list of the quantities demanded at each different price when all other influences on buying plans remain the same

Dan missed class the day the professor covered the circular flow model. Dan asked his friend Joan to explain markets to him. Joan correctly stated that a market

is any arrangement that brings buyers and sellers together

Huey has eaten two hamburgers and is considering a third. The marginal benefit in his decision is the pleasure from consuming

just the third hamburger

As a factor of production, oil reserves are counted as

land

scarcity requires that we

make choices about what goods and services to produce

The production possibilities frontier illustrates the

maximum combinations of goods and services that can be produced

The greater the amount of time that passes after a price change, the

more elastic supply becomes

If the price of a good rises, then moving along a demand curve the percentage change in the quantity demanded will be

negative

The cross elasticity between computers and software is

negative because they are complements

The value of the best thing that a person must give up when making a decision is known as the ________ cost.

opportunity

The statement that ʺincreases in the tax on gasoline increase the price of gasolineʺ is an example of a

positive statement

The price elasticity of supply is a measure of the extent to which the quantity supplied of a good changes when the

price changes

Suppose the equilibrium quantity of movie tickets is 1000. If the demand curve shifts ________, the equilibrium quantity of movie tickets will ________.

rightward; increase

The phrase ʺa change in demandʺ most directly implies a

shift of the demand curve

If two goods have a cross elasticity of demand of ‐2, then when the price of one good increases, the demand curve of the other good

shifts leftward

The supply schedule

shows the relationship between the quantity supplied and the price of a good when all other influences on selling plans remain the same

If the demand for used cars decreases after the price of a new car falls, used cars and new cars are

substitute goods

If the price of a Brita water filtration system increases and the quantity demanded of bottled water increases, then these two goods are

substitutes

Market demand curves are obtained by

summing the quantities every consumer is willing to buy at each different price

Consider the market for bread. If the price of wheat rises, then the

supply curve of bread shifts leftward

Suppose the equilibrium price of oranges is $2.00 per pound. If the actual price is above the equilibrium price a

surplus exists and the price falls to restore equilibrium

What is the ʺquantity demandedʺ?

the amount of a good people are able and willing to buy during a specific time period and at a given price

The quantity supplied of a good, service, or resource is ________ during a specified period and at a specified price.

the amount that people are able and willing to sell

why is a production possibilities frontier bowed out (concave)?

the bowed shape reflects opportunity cost

Suppose that the equilibrium price and quantity of new houses both increase. Which of the following could be a cause of this change? A) The supply of new houses increased and the demand for new houses did not change. B) Both the supply and demand for new houses decreased. C) The demand for new houses increased and the supply did not change. D) Both the supply and the demand for new houses increased and the supply increased by more than the demand. E) The supply of new houses decreased and the demand for new houses did not change.

the demand for new houses increases and the supply did not change

In stores, it is common to find seasonal products marked down when the season ends. What explains this behavior?

the law of demand is being used to increase the quantity demanded

Market equilibrium occurs when

the quantity demanded equals the quantity supplied

If a higher price for wheat decreases the quantity of corn being produced, which of the following describes what has occurred? A) The quantity of wheat supplied increased and quantity of corn supplied decreased. B) The supply of wheat increased and the supply of corn decreased. C) The supply of wheat decreased and the supply of corn decreased. D) The quantity of wheat supplied increased and the supply of corn decreased. E) The supply of wheat increased and the quantity of corn supplied decreased

the quantity of wheat supplied increased and the supply of corn decreased

Plywood is used in the construction of houses. If the price of plywood rises, what happens to the supply of houses?

the supply decreases so that the supply curve shifts leftward

Correlation means

the values of two variables move in a predictable and related way

Consider the market for peanut butter. If there is an increase in the price of peanuts,

there is a decrease in the supply of peanut butter

The ʺlaw of demandʺ refers to the fact that, other things remaining the same, when the price of a good rises,

there is a movement up along the demand curve to a smaller quantity demanded

The price of salsa rises. How does the increase in the price of salsa affect the supply of salsa?

there is no change to the supply of salsa, but the quantity of salsa supplied increases

To economists, scarcity means that

unlimited wants cannot be satisfied by the limited resources

Which of the following statements best describes the study of economics? Economics studies how A) we make choices in the face of scarcity. B) businesses reach decisions. C) to create incentives so that scarcity does not exist. D) to organize production so that scarcity does not occur. E) firms make profits.

we make choices in the face of scarcity

In economics, cost is measured as ________, and benefit is measured as ________. A) what you must give up to get something; what you are willing to give up to get it B) what you are willing to pay on the margin; what the government pays you when you are unemployed or retired C) what you are willing to give up to get it; what you must give up to get something D) the amount of money that you pay on the margin; the amount of money that you receive on the margin E) the amount of money that you pay for something; the amount of money that someone else is willing to pay you

what you must give up to get something; what you are willing to give up to get it