Gunter Econ Final 2

B

1. By definition, economics is the study of a. how to make money in a market economy. b. the choices people make to attain their goals, given their scarce resources. c. supply and demand. d. how to make money in the stock market.

D

10. Refer to Figure 3-5. Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets. Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles? a. Panel (a) b. Panel (b) c. Panel (c) d. Panel (d)

C

11. Assume that both the demand curve and the supply curve for MP3 players shift to the right but the demand curve shifts more than the supply curve. As a result a. the equilibrium price of MP3 players will decrease; the equilibrium quantity may increase or decrease. b. the equilibrium price of MP3 players will increase; the equilibrium quantity may increase or decrease. c. both the equilibrium price and quantity of MP3 players will increase. d. the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will increase.

D

12. The total amount of producer surplus in a market is equal to a. the area between the demand curve and the supply curve below the market price. b. the difference between quantity supplied and quantity demanded. c. the area above the market supply curve. d. the area above the market supply curve and below the market price.

A

2. In the United States and in most European countries, aging populations and declining birthrates threaten public finances. As the population ages, there are fewer workers paying taxes relative to the number of retired people receiving government benefits. Which of the following government policies would NOT help reduce the pressure on public finances? a. reduce taxes paid by current workers so that they can save for their future b. reduce retiree benefit payments c. offer financial incentives to increase the birthrate d. raise the retirement age

E

3. Refer to Table 1-1. Using marginal analysis, determine how many hours should Eva extend her bakery's hours of operations? a. 5 hours b. 2 hours c. 6 hours d. 3 hours e. 4 hours

C

4. Which of the following is a problem inherent in centrally planned economies? a. There is too much production of low-cost, high-quality goods and services. b. Unemployment is too high. c. Production managers are more concerned with satisfying government's orders than with satisfying consumer wants. d. There are no problems and everyone, including consumers, is satisfied.

D

5. Refer to Table 2-2. Which of the following statements is true? a. George has a comparative advantage in both tasks. b. Jack has a comparative advantage in lawn mowing and George in garden cultivating c. Jack has a comparative advantage in both tasks. d. Jack has a comparative advantage in garden cultivating and George in lawn mowing.

C

6. Rayburn Reed is a highly talented photographer. He has chosen to specialize in photography because of all of the following except a. his photographs are highly esteemed by art lovers who are willing to pay very high prices. b. he obviously has a comparative advantage in photography. c. his opportunity cost of pursuing another career is very low. d. for him, this is the most lucrative way to purchase the products that he wants to consume.

A

7. Adam Smith's invisible hand refers to a. the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole. b. the laws of nature that influence economics decisions. c. property ownership laws and the rule of the court system. d. the government's unobtrusive role in ensuring that the economy functions efficiently.

B

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

D

9. Refer to Figure 3-2. If the current market price is $25, the market will achieve equilibrium by a. a price increase, increasing the supply and decreasing the demand. b. a price decrease, decreasing the supply and increasing the demand. c. a price increase, increasing the quantity supplied and decreasing the quantity demanded. d. a price decrease, decreasing the quantity supplied and increasing the quantity demanded.