Micro Economics Chapters 1-3

Chapter 3

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Questions 10-13 Look at the chart

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Questions 17-19 refer to exhibit

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Refer to Table for questions 8-15

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In making which of the following statements is an economist acting more like a scientist? A) A reduction in unemployment benefits will reduce the unemployment rate B) The unemployment rate should be reduced because unemployment robs individuals of their dignity C) The rate of inflation should be reduced because unemployment robs individuals of their dignity D) The state should increase subsidies to universities because the future of our country depends on education

A) A reduction in unemployment benefits will reduce the unemployment rate

Foreign Trade: A) Allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home B) Allows a country to avoid trade-off C) Makes the member of a country more equal D) Increases the scarcity of resources E) None of the above

A) Allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home

Points on the production possibilities frontier are: A) Efficient B) Inefficient C) Unattainable D) Normative E) None of the above

A) Efficient

If a nation has a comparative advantage in the production of a good: A) It can produce that good at a lower opportunity cost than its trading partner B) It can produce that good using fewer resources than its trading partner C) It can benefit by restricting imports of that good D) It will specialize in the production of that good and export it

A) It can produce that good at a lower opportunity cost than its trading partner

Which of the following activities is most likely to produce an externality? A) A student sits at home and watches television B) A student has a party in her dorm room C) A student reads a novel for pleasure D) A student eats a hamburger in the student union

B) A student has a party....( Turns up)

Which of the following statements is true about a market economy? A) Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being. B) Taxes help prices communicate costs and benefits to produces and consumers C) With a large enough computer, central planners could guide production more efficiently than markets D) The strength of a market system is that it tends to distribute resources evenly across consumers.

A) Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being.

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. if there is no trade: A) Opportunity cost of 1 watch is 3 rings B) 1 watch is 1/3 rings C) 1 watch is 4 rings D) 1 watch is 1/4 rings E) 1 watch is 12 rings

A) Opportunity cost of 1 watch is 3 rings

Because people respond to incentives, we would expect that if the average salary of accountants increases by 50 percent while the average salary of teachers increases by 20 percent: A) Students will shift majors from education to accounting B) Students will shift majors from accounting to education C) Few students will attend college D) None of the above are true

A) Students will shift majors from educating to accounting

Which of the following statements regarding the circular-flow diagram is true? A) The factors of production are owned by households B) If Susan works for IBM and receives a paycheck, the transaction takes place in the market for goods and services. C) If IBM sells a computer, the transaction takes place in the market for factors of production D) The factor of production are owned by firms E) None of the above

A) The factors of production are owned by households

Which of the following statements about microeconomics and macroeconomics is not true? A) the study of very large industries is a topic within macroeconomics B) Macroeconomics is concerned with economy-wide phenomena C) Microeconomics is a building block for macroeconomics D) Microeconomics and macroeconomics cannot be entirely separated

A) the study of very large industries is a topic within macroeconomics

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. if there is no trade: A) Domestic price of 1 ring is 3 watches B) 1 ring is 1/3 watches C) 1 ring is 4 watches D) 1 ring is 1/4 watches E) 1 ring is 12 watches

B) 1 ring is 1/3 watches

In the short run: A) An increase in inflation temporarily increase unemployment B) A decrease in inflation temporarily increases unemployment C) Inflation and unemployment are unrelated D) None of the above are true

B) A decrease in inflation temporarily increases unemployment

Economic growth is depicted by: A) A movement along a production possibility frontier toward capital goods B) A shift in the production possibility frontier outward C) A shift in the production possibility frontier inward D) A movement from inside the cure toward the curve

B) A shift in the production possibility frontier outward

Economic models are: A) Created to duplicate reality B) Built with assumptions C) Usually made of wood and plastic D) Useless if they are simple

B) Built with assumptions

Suppose two economists are arguing about policies that deal with unemployment. one economist says, "the government should fight unemployment because it is the greatest social evil." the other economist responds, "Hogwash. inflation is the greatest social evil" these economists disagree because they have: A) Disagree because they have different scientific judgments B) Disagree because they have different values C) Really don't disagree at all. It just looks that way. D) None of the above

B) Disagree because they have different values

Suppose the world consists of two countries - the United States and Mexico. Furthermore, suppose there are only two goods - food and clothing. Which of the following statements is true? A) If the US has an absolute advantage in the production of food, then Mexico must have an absolute advantage in the production of clothing B) If the US has a comparative advantage in the production of food, then Mexico must have a comparative advantage in the production of clothing. C) If the US has a comparative advantage in the production of food, it also must have a comparative advantage in the production of clothing D) If the US has a comparative advantage in the production of food, Mexico might also have a comparative advantage in the production of food E) None of the above

B) If the US has a comparative advantage in the production of food, then Mexico must have a comparative advantage in the production of clothing.

If a nation has an absolute advantage in the production of a good: A) It can produce the good at a lower opportunity cost than its trading partner B) It can produce that good using fewer resources than its trading partner C) It can benefit by restricting imports of that good D) It will specialize in the production of that good and export it E) None of the above

B) It can produce that good using fewer resources than its trading partner

The scientific method requires that: A) Scientists use test tubes and have clean labs B) Scientists be objective C) Scientists use precision equipment D) Only incorrect theories are tested E) Only correct theories are tested

B) Scientists be objective

Economics is the study of how: A) To fully satisfy our unlimited wants B) Society managers its scarce resources C) To reduce our wants until we are satisfied D) Society manages its unlimited resources

B) Society manages its scarce resources

Which of the following is not part of the opportunity cost of going on vacation? A)The money you could have made if you had stayed home and worked. B) The money you spent on food C) The money you spent on airline tickets D) The money you spent on a Broadway show

B) The money you spent on food

Suppose you find $20. if you choose to use the $20 to go the football game, your opportunity cost of going to the game is: A) Nothing. Because you found the money B) $20 (because you could have used the $20 to buy other things) C) $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game D) $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game, plus the cost of the dinner you purchased at the game E) None of the above

C) $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game

Which of the following will not shift a country's production possibilities frontier outward? A) an increase in the capital stock B) an advance in technology C) a reduction in unemployment D) an increase in the labor force

C) A reduction in unemployment

Which of the following statements is true? A) Self-sufficiency is the road to prosperity for most countries B) A self-sufficient country consumes outside its production possibility frontier C) A self-sufficient country at best can consume on its production possibility frontier D) Only countries with an absolute advantage in the production of every good should strive to be self-sufficient

C) A self-sufficient country at best can consume on its production possibility frontier

Which of the following is most likely to produce scientific evidence about a theory? A) An economist employed by the AFL/CIO doing research on the impact of trade restriction on workers' wages B) A radio talk show host collecting data on how capital market respond to taxation C) A tenured economist employed at a leading university analyzing the impact of bank regulation on rural lending. D) A lawyer employed by General Motors addressing the impact of air bags on passenger safety

C) A tenured economist employed at a leading university analyzing the impact of bank regulation on rural lending.

High and persistent inflation is caused by: A) Unions increasing wages too much B) OPEC raising the price of oil too much C) Governments increasing the quantity of money too much. D) Regulations raising the cost of production too much

C) Governments increasing the quantity of money too much.

Productivity can be increased by: A) Raising minimum wages B) Raising union wages C) Improving the education of workers D) Restricting trade with foreign countries

C) Improving the education of workers

An increase in the price of beef provides: A) Information that tells consumers to buy more beef B) Info that tells consumers to buy less beef C) Info that tells producers to produce more beef D) No info because prices in a market system are managed

C) Info that tells producers to produce more beef

Joe is a tax accountant. He receives $100 per hour doing tax returns. He can type 10,000 characters per hour into spreadsheets. He can hire an assistant who types 2,500 characters per hour into spreadsheets. Which of the following statements is true? A) Joe should not hire an assistant because the assistant can not type as fast as he can. B) Joe should hire the assistant as long as he pays the assistant less than $100 per hour C) Joe should hire the assistant as long as he pays the assistant less than $25 per hour D) None of the above

C) Joe should hire the assistant as long as he pays the assistant less than $25 per hour

Which of the following situations describes the greatest market power? A) A farmer's impact on the price of corn B) Volvo's impact on the price of autos C) Microsoft's impact on the price of desktop operating systems D) A student's impact on college tuition

C) Microsoft's impact on the price of desktop operating systems

Trade-offs are required because wants are unlimited and resources are: A) Efficient B) Economical C) Scarce D) Unlimited E) Marginal

C) Scarce

Which of the following statements is normative? A) printing too much money causes inflation B) people work harder if the wage is higher C) the unemployment rate should be lower D) large government deficits cause an economy to grow more slowly

C) the unemployment rate should be lower

Referring to question 17, your decision rule should be to complete the hot-dog stand as long as the cost to complete the stand is less than: A) $100 B) $300 C) $500 D) $800 E) None of the above

D) $800

According to the principle of comparative advantage: A) Countries with a comparative advantage in the production of every good need not specialize B) Countries should specialize in the production of goods that they enjoy consuming C) Countries should specialize in the production of goods for which they use fewer resources in production than their trading partners D) Countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners.

D) Countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners.

Raising taxes and increasing welfare payments: A) Proves that there is such a thing as free lunch B) Reduces market power C) Improves efficiency at the expense of equality D) Improves equality at all the expense of efficiency E) Does none of the above

D) Improves equality at all the expense of efficiency

Which of the following is not a factor of production? A) land B) labor C) capital D) money E) All of these answers are factors of production

D) Money

Positive statements are: A) Microeconomics B) Macroeconomics C) Statements of prescriptions that involve value judgements D) Statements of descriptive that can be tested

D) Statements of descriptive that can be tested

A rational person does not act unless: A) The action makes money for the person B) The action is ethical C) The action produces marginal costs that exceed marginal benefits D) The action produces marginal benefits that exceed marginal cost E) None of the above

D) The action produces marginal benefits that exceed marginal cost

In which of the following cases is the assumption most reasonable? A) To estimate the speed at which a beach ball falls, a physicist assumes that it falls in a vacuum. B) To address for impact of money growth on inflation, an economist assumes that money is strictly coins C) To address the impact of taxes on income distribution, an economist assumes that everyone earns the same income D) To address the benefits of trade, an economists assumes that there are two people and two goods.

D) To address the benefits of trade, an economists assumes that there are two people and two goods.

Which of the following statements about trade is true? A) Unrestricted international trade benefits every person in a country equally B) People that are skilled at all activities cannot benefit from trade C) Trade can benefit everyone in society because it allows people to specialize in activities in which they have an absolute advantage D) Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage.

D) Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage.

Workers in the US enjoy a high standard of living because: A) Unions in the US keep the wage high B) We have protected our industry from foreign competition C) The United States has high minimum wage D) Workers in the United States are highly productive E) None of the above are true

D) Workers in the United States are highly productive

Which of the following issues is related to microeconomics? A) the impact of money on inflation B) the impact of technology on economic growth C) the impact of the deficit on saving D) the impact on oil prices on auto production

D) the impact on oil prices on auto production

Which of the following involve a trade-off? A) Going to college B) Taking a nap C) Buying a car D) Watching a football game on saturday afternoon E) All of these

E) All of the above involve trade-offs

Which of the following products would be least capable of producing an externality? A) Cigarettes B) Stereo equipment C) Inoculations against disease D) Education E) Food

E) Food

T/F: If japan has an absolute advantage in the production of an item, it must also have a comparative advantage in the production of that item

False

T/F: If trade benefits one country, its trading partner must be worse off due to trade

False

T/F: In the short run, a reduction in inflation tends to cause a reduction in unemployment

False

T/F: Points outside the production possibilities frontier are attainable but inefficient

False

T/F: Self-sufficiency is the best way to increase one's material welfare

False

T/F: When a country removes a specific import restriction, it always benefits every worker in that country

False

T/F: A tax on a liquor raises the price of a liquor and provides an incentive for consumers to drink more

False

T/F: Adam smiths "invisible hand" concept describes how corporate business reaches into the pockets of consumers like an "invisible hand"

False

T/F: An auto manufacturer should continue to produce additional autos as long as the firm is profitable, even if the cost of the additional units exceeds the price received

False

T/F: An individual farmer is likely to have market power in the market for wheat.

False

T/F: Economic models must mirror reality or they are of no value

False

T/F: If a country's workers can produce 5 hamburgers per hour or 10 bags of French fries per hour, absent trade, the price of 1 bag of fries is 2 hamburgers

False

T/F: If an advanced country has an absolute advantage in the production of everything, it will benefit if it eliminates trade with less-developed countries and becomes completely self-sufficient

False

T/F: It is reasonable to assume that the world is composed of only one person when modeling international trade

False

T/F: Macroeconomics is concerned with the stuy of how households and firms make decisions and how they interact in specific markets

False

T/F: Normative statements can be refuted with evidence

False

T/F: Talented people that are the best at everything have a comparative advantage in the production of everything

False

T/F: The production possibilities frontier is bowed outward because the trade-off between the production of any two goods is constant

False

T/F: The statement "an increase in inflation tends to cause unemployment to fall in the short run" is normative

False

T/F: The united states will benefit economically if we eliminate trade with Asian countries because we will be forced to produce more of our own cars and clothes

False

T/F: Workers in the United States have a relatively high standard of living because the United states has a relatively high minimum wage

False

True or False: When the government redistributes income with taxes and welfare, the economy becomes more efficient.

False

T/F: Absolute advantage is a comparison among producers based on productivity

True

T/F: If an economy is operating on its production possibilities frontier, it must produce less of one good if it produces more of another

True

T/F: If producers have different opportunity costs of production, trade will allow them to consume outside their production possibilities fronteirs

True

T/F: When a jet flies overhead, the noise it generates is an externality

True

T/F: When people act as scientists, they must try to be objective

True

T/F: An advance in production technology would cause the production possibilities curve to shift outward

True

T/F: An unintended consequence of public support of higher education is that low tuition provides an incentive for many people to attend state universities even if they have no desire to learn anything

True

T/F: Assumptions make the world easier to understand because they simplify reality and focus our attention

True

T/F: Comparative advantage is a comparison among producers based on opportunity cost

True

T/F: Comparative advantage, not absolute advantage, determines the decision to specialize in production

True

T/F: High and persistent inflation is cause by excessive growth in the quantity of money in the economy

True

T/F: If a producer is self-sufficient, the production possibilities frontier is also the consumption possibilities frontier

True

T/F: If an economy is operating on its production possibilities frontier, it must be using its resources efficiently

True

T/F: If an economy were experiencing substantial unemployment, the economy is producing inside the production possibilities frontier

True

T/F: If gains from trade are based solely on comparative advantage, and if all countries have the same opportunity costs of production, then there are no gains from trade

True

T/F: If germany's productivity doubles for everything it produces, this will not alter its prior pattern of specialization because it has not altered its comparative advantage

True

T/F: Most economists believe that tariffs and import quotas usually reduce general economic welfare

True

T/F: Rational people act only when the marginal benefit of the action exceeds the marginal cost

True

T/F: Sue is better at cleaning and bob is better at cooking. it will take fewer hours to eat and clean if bob specializes in cooking and sue specializes in cleaning than if they share the household duties evenly

True

T/F: The gains from trade can be measured by the increase in total production that comes from specialization

True

T/F: To a student, the opportunity cost of going to a basketball game would include the price of the ticket and the value of the time that could have been spent studying

True

T/F: When economists make positive statements, they are more likely to be acting as scientists

True

T/F: When economists say, "There ain't no such thing as a free lunch," they mean that all economic decisions involve trade offs.

True

You have spent $1000 building a hot-dog stand based on estimates of sales of $2000. the hot dog stand is nearly completed, but now you estimate total sales to be only $800. you can complete the hot dog stand for another $300. should you complete the hot dog stand? A) Yes B) No C) There is not enough information to answer this question

Yes