MICRO ECON EXAM 1Who developed the theory of comparative advantage?

Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes on beer should be increased because college students drink too much." We can conclude that:

Ben's statement is positive, but Holly's is normative

The demand for gasoline is rising. Which statement describes a possible cause?

Consumers expect prices to rise in the near future.

Who developed the theory of comparative advantage?

David Ricardo

Which event will NOT cause the supply curve for kayaks to shift to the left?

a decrease in the price of a kayak

A tsunami destroys many power plants on the coast of a country. What change can be expected in the supply of electricity in that country?

a shift to the left of the supply curve

What combinations of production are efficient in a production possibilities frontier (PPF)?

all points that are on the PPF

Paying a salesperson more for increased sales is an example of:

an incentive

Refer to Figure 3-2. A change from Point A to Point B represents a(n):

decrease in quantity demanded

(Table: Possible Output Combinations Using All Available Resources II) Use the table Possible Output Combinations Using All Available Resources II. If this economy is currently producing two lattes and 18 banana muffins, how many banana muffins must be given up to make two more lattes?

four banana muffins

A perfectly elastic supply curve is:

horizontal

Gasoline is produced from crude oil. Ceteris paribus, if the supply of crude oil falls, the equilibrium price of gasoline will _____ and the equilibrium quantity will _____.

increase; decrease

An increase in demand causes the equilibrium price to _____ and the equilibrium quantity to _____.

rise;rise

Tim woke up this morning with a stomachache and decided to skip class in order to get more rest. What is the opportunity cost of Tim's decision to sleep in?

the value of attending the class he decided to miss

If countries engage in international trade:

they can consume outside their production possibility frontiers.

If an economy is operating at a point that is inside of its production possibilities frontier, then it can be assumed that its resources are

underutilized.

The equilibrium price of crab claws is $19 per pound. What would be a price ceiling in the market for crab claws that would cause a shortage?

$18

(Use Figure: The Demand for Scented Candles) Use the figure The Demand for Scented Candles. What is the price elasticity of demand when price increases from $11 to $13?

1.22

When the price of sneakers decreases by 10 percent, Anaiah buys 40 percent more flowers. Anaiah's price elasticity of demand is equal to _____, and his demand is:

4; elastic

A unitary elastic demand means that if the percentage change in price is _____, then the percentage change in quantity demanded is _____.

5%; 5%

A change in preferences causes a movement along the demand curve.

False

An increase in the price of Lays potato chips causes the supply curve for this product to shift up and to the left.

False

If the price of Nike running shoes increases, Nike will supply fewer running shoes.

False

Which statement does NOT deal with microeconomics?

In 2009, the unemployment rate in the United States rose to nearly 10%.

Philosophers draw a distinction between positive statements, which describe the world as it is, and _________ which describe how the world should be.

Normative

When Otto's income increases, he buys fewer frozen vegetables. Based on this, we can conclude that:

Otto considers frozen vegetables to be inferior goods.

A legal maximum price that can be charged for a product or service is known as a(n):

Price ceiling

The cross-price elasticity of strawberries and blueberries is equal to 2. What can be concluded based on this information?

The goods are substitutes.

Graphically, a change in demand is represented by a shift of the demand curve.

True

Having a comparative advantage means a society can benefit from trade

True

Which statement is TRUE of an inferior good?

When income increases, demand decreases.

The price elasticity of demand is always:

negative because price and quantity demanded are inversely related.

A market demand curve:

is the horizontal summation of individual demands.

A price ceiling will have NO immediate effect if:

it is set above the equilibrium price.

Suppose there is unseasonably stormy weather in a summer resort town. We can expect demand for hotels to shift _____

left

Supply is defined as the _____ over a particular time period at various prices, holding all other relevant factors constant.

maximum amount of a product that sellers are willing and able to provide for sale

A simplified representation that is used to study a real situation is called a(n):

model

A production possibilities frontier will have a curved or "bowed out" shape if:

opportunity costs are increasing.

What does the phrase ceteris paribus mean?

other things being equal

Movement along the supply curve occurs due to a change in:

price

Suppose the Terrific Tube Company ran a very successful advertising campaign. Economic analysis would suggest that the campaign would cause the equilibrium price to _____ and the equilibrium quantity to _____.

rise:rise

A production possibilities curve shows:

the maximum amounts of two goods that can be produced assuming the full use of available resources.