Micro Exam 1

Which of the following provides the best evidence of the specialization of labor? a. a firm that produces a line of related products, such as eight kinds of breakfast cereal b. an architect who is willing to practice in only one geographic area c. a physician who practices cardiology and orthopedic surgery d. a family that eats at Wendy's every Thursday night e. a retailer who sells goods but does not provide services

a. a firm that produces a line of related products, such as eight kinds of breakfast cereal

If a good is inferior, an increase in income would shift the _____ a. demand curve leftward. b. supply curve leftward. c. supply curve rightward. d. supply and demand curves leftward. e. demand curve rightward.

a. demand curve leftward.

Someone who committed the association-is-causation fallacy might conclude that _____ a. event B, which followed event A, was caused by event A. b. event B, which followed event A, was not necessarily caused by event A. c. the simplest model is the best predictor of economic outcomes. d. what is true for the individual is also true for the group. e. what is true for the individual is not necessarily true for the group.

a. event B, which followed event A, was caused by event A.

Elijah, a basketball fan, reasons that because his favorite team has three superstars on it, the team must be a great team and will win the championship. Elijah is committing the _____ a. fallacy of composition. b. fallacy that association is causation. c. fallacy of segmentation. d. mistake of ignoring the secondary effects. e. mistake of ignoring the obvious.

a. fallacy of composition.

Natural resources _____ a. include bodies of water, trees, oil reserves, and minerals. b. are not scarce. c. are inexhaustible as long as they are managed properly. d. are the result of human effort. e. do not follow the law of demand and supply.

a. include bodies of water, trees, oil reserves, and minerals.

A cost that has already been incurred and cannot be recovered is known as a(n)_____ a. sunk cost. b. opportunity cost. c. direct cost. d. implicit cost. e. explicit cost.

a. sunk cost.

Sugar and honey are viewed as substitutes for each other in many recipes. If the price of sugar rises, we would expect _____ a. the demand for honey to increase. b. the demand for honey to decrease. c. the quantity demanded of honey to decrease. d. the price of honey to decrease. e. the quantity demanded of honey to increase.

a. the demand for honey to increase.

Refer to Exhibit 2.2, which shows the production possibilities frontier for Good A and Good B. Point g is efficient because _____ a. the only way to increase the production of Good A is to decrease the production of Good B. b. the economy can increase the production of both Good A and Good B. c. it is impossible to move to any other point along the production possibilities frontier. d. it is impossible to move to any other point inside the production possibilities frontier. e. no other production possibilities frontier exists.

a. the only way to increase the production of Good A is to decrease the production of Good B.

Don can produce 10 pens or 20 pencils in one hour, while Bob can produce 5 pencils or 15 pens in one hour. Which of the following statements is correct? a. Bob has an absolute advantage in the production of pencils. b. Bob has an absolute advantage in the production of pens. c. Bob has a comparative advantage in the production of pencils. d. Don has a comparative advantage in the production of pens. e. Don does not have a comparative advantage in the production of either good

b. Bob has an absolute advantage in the production of pens.

Refer to Table 2.3, which shows the production possibilities frontier between the production of capital goods and consumer goods in an economy. If this economy produced 4 units of capital goods, what can be stated of its production of consumer goods? a. It represents unemployment of resources. b. It represents zero production of consumer goods. c. It would not represent an efficient combination of goods. d. It cannot be reached using available technology. e. It is less desirable than a point inside the frontier.

b. It represents zero production of consumer goods.

Refer to the demand schedule in Table 4.1. There are three consumers in the market for playing cards: Don, Jon, and Ron. At a price of $2 per pack, the quantities demanded by each are 3 packs, 2 packs, and 1 pack, respectively. At a price of $1.50 per pack, the quantities demanded by each are 4 packs, 5 packs, and 3 packs, respectively. Which of the following is true? a. The market demand curve for playing cards does not follow the law of demand. b. The decrease in price causes the quantity demanded in this market to increase by 6 packs. c. The price decrease causes Don's demand curve to shift more than Jon's and Ron's. d. At a price of $1 per pack, the quantity demanded in this market must be 20 packs. e. Don's behavior does not follow the law of demand.

b. The decrease in price causes the quantity demanded in this market to increase by 6 packs

In the circular-flow model, households supply all of the following except _____ a. labor. b. goods and services. c. capital. d. entrepreneurial ability. e. natural resources.

b. goods and services.

Barter occurs when _____ a. two people share everything. b. one product is exchanged directly for another product. c. money is used to buy goods. d. money in different currencies is exchanged directly. e. goods are used to buy money.

b. one product is exchanged directly for another product.

The table given below shows the quantity supplied and the quantity demanded of a good at different prices. If the price of the good described in the table below is $1.60, then an economist would expect the _____ a. price to decrease to $1.40. b. price to decrease to $1.50. c. quantity supplied to decrease to 30 units. d. quantity demanded to increase to 90 units. e. quantity demanded to decrease to 50 units.

b. price to decrease to $1.50.

The division of labor means _____ a. discrimination in labor markets. b. separating a job into smaller tasks to be completed by different people. c. dividing one worker's time among different jobs and duties. d. assigning the same task to different groups of people. e. the fact that two 20-year-olds are more productive than one 40-year-old.

b. separating a job into smaller tasks to be

When economists refer to human capital, they refer to _____ a. income earned by capitalists. b. skills used in production. c. dividends earned by investors. d. bonds held by the public. e. bank loans given to the public.

b. skills used in production.

If all resources are used efficiently to produce goods and services, a nation will find itself producing _____ a. inside its production possibilities frontier. b. somewhere on its production possibilities frontier. c. outside its production possibilities frontier. d. only one type of commodity. e. more of one product with no decrease in the production of any other product.

b. somewhere on its production possibilities frontier.

39. Recently, it has been discovered that lobsters grown on lobster farms can feed on algae, which is a cheaper lobster food. As a result of this discovery, _____. a. the supply curve of lobsters will shift to the left b. the supply curve of lobsters will shift to the right c. there will be an increase in the quantity of lobsters supplied d. there will be a decrease in the quantity of lobsters supplied e. both supply and demand curves will shift to the right

b. the supply curve of lobsters will shift to the right

The law of demand indicates that _____ a. when prices rise, the quantity demanded rises. b. when prices rise, the quantity demanded falls. c. when prices fall, the quantity supplied rises. d. when prices fall, the quantity supplied falls. e. when prices rise, the quantity demanded stays the same.

b. when prices rise, the quantity demanded falls.

Which of the following is the best definition of economics? a. An investigation of the evolutionary process of mankind b. A study of society as a system of interconnected parts c. A study of how people deal with the problem of scarcity d. An examination of the structure and the role of the government in an economy e. A study of how to conduct free and fair elections in a country

c. A study of how people deal with the problem of scarcity

Which of the following is a positive statement? a. An unemployment rate of 7 percent or higher is a national disgrace. b. Unemployment is a less important problem than inflation. c. When the unemployment rate in an economy is 7 percent, the unemployment rate of the urban population is often close to 40 percent. d. Unemployment and inflation are equally important problems. e. An inflation rate of 7 percent is too high.

c. When the unemployment rate in an economy is 7 percent, the unemployment rate of the urban population is often close to 40 percent.

If corn and soybeans are alternative crops grown by most farmers, an increase in the price of corn, other things constant, is likely to _____ a. increase the supply of corn. b. increase the supply of soybeans. c. decrease the supply of soybeans. d. decrease the supply of corn. e. decrease the demand for soybeans.

c. decrease the supply of soybeans.

Refer to Exhibit 4.2 of the demand curves for a good. A shift from the demand curve D' to the demand curve D would be caused by a(n) _____ a. increase in the price of the good under consideration. b. significant decrease in the population because of emigration. c. increase in the price of a substitute good. d. decrease in the number of producers of the product. e. decrease in the price of an important resource.

c. increase in the price of a substitute good.

In economics, marginal analysis _____ a. has no practical applications or real-world uses. b. eliminates incorrect decisions and bad choices. c. involves comparing the additional costs and additional benefits of an activity. d. involves examining only the total costs and total benefits of an activity. e. guarantees an incorrect decision.

c. involves comparing the additional costs and additional benefits of an activity.

Comparative advantage refers to _____ a. the ability of an individual to produce a greater amount of a good than another individual. b. the ability of an individual to produce a lesser amount of a good than another individual. c. the ability of an individual to produce a good at a lower opportunity cost than another individual. d. the ability of an individual to produce a good at a lower dollar cost than another individual. e. the ability of an individual to produce a good using fewer labor hours than other individuals.

c. the ability of an individual to produce a good at a lower opportunity cost than another individual.

A movement along the demand curve for a good can be attributed to a change in _____ a. the demand for the good. b. the opportunity cost of producing the good. c. the quantity demanded of the good. d. the substitution effect of consuming the good. e. the income and preference of a consumer.

c. the quantity demanded of the good.

_____ is the ability to make something using fewer resources than other producers use. a. Specialization. b. Exchange. c. Arbitrage. d. Absolute advantage. e. Comparative advantage.

d. Absolute advantage.

Refer to the market schedules for pizza in Table 4.4. If the price rises to $10, what will happen? a. There will be a shortage of 20 million pizzas and the price will fall. b. There will be a shortage of 20 million pizzas and the price will rise. c. There will be a surplus of 20 million pizzas and the price will rise. d. There will be a surplus of 20 million pizzas and the price will fall. e. There will be equilibrium and the price will remain the same.

d. There will be a surplus of 20 million pizzas and the price will fall.

Other things constant, which of the following is likely to change the quantity of wheat supplied? a. a government subsidy for farmers who do not grow wheat b. an increase in the price of soybeans c. a decrease in the price of the fertilizer used in wheat production d. a fall in the price of wheat e. an expectation of a future increase in wheat prices

d. a fall in the price of wheat

If at a given price, the amount by which quantity supplied exceeds quantity demanded, there is _____ a. supply. b. demand. c. equilibrium. d. a surplus. e. a shortage.

d. a surplus.

Refer to Exhibit 2.5, which shows the production possibilities frontier (PPF) for capital goods and consumer goods. Which of the graphs best illustrates the impact on the production possibilities frontier of a decrease in unemployment? a. a b. b c. c d. d e. b and d

d. d

An economy's production possibilities frontier _____ a. helps explain the immense complexity of the real economy. b. demonstrates that there is no problem of scarcity for society as a whole. c. is based on unrealistic assumptions and has no value as an economic tool. d. is based on simplifying assumptions, but is still useful for illustrating scarcity, opportunity cost, and economic growth. e. is based on the assumption that technology is constantly changing.

d. is based on simplifying assumptions, but is still useful for illustrating scarcity, opportunity cost, and economic growth.

The most important characteristic of the equilibrium price is that it _____ a. guarantees that producers earn profit. b. clears the market, leaving neither a surplus nor a shortage. c. maximizes the quantity demanded of a good. d. minimizes the quantity demanded of a good. e. guarantees that buyers maximize their utility.

d. minimizes the quantity demanded of a good.

Microeconomics is the study of _____ a. the effect of an increase in money supply on interest rates. b. the effect of an increase in interest rates on the level of investment in an economy. c. the government's role as a distributor in an economy. d. the economic behavior of individual decision makers. e. the government's role as a producer in an economy.

d. the economic behavior of individual decision makers.

The law of supply indicates that _____ a. when prices rise, the quantity demanded rises. b. when prices rise, the quantity demanded falls. c. when prices fall, the quantity supplied rises. d. when prices fall, the quantity supplied falls. e. when prices rise, the quantity demanded stays the same.

d. when prices fall, the quantity supplied falls.

Refer to Table 2.1. You can spend $40 on going to the movies or eating at a restaurant, or both. If you decide to spend all your money at the movies, how much can you spend at the restaurant? a. $40 b. $30 c. $20 d. $10 e. $0

e. $0

Studies show that the demand curve for peas has shifted over time. Which of the following explanations would you reject first? a. The price of string beans has changed. b. The demand for corn has changed. c. The demand for string beans has changed. d. The income of consumers has changed. e. The price of peas has changed.

e. The price of peas has changed.

Which of the following is most likely to cause the demand for ice cream, a normal good, to decrease? a. a decrease in the price of ice cream b. a decrease in the price of milk c. warmer weather d. an increase in the number of consumers e. a decrease in consumer income

e. a decrease in consumer income

The term opportunity cost suggests that _____ a. one person must lose when someone else gains in an exchange situation. b. not all individuals make the most of life's opportunities. c. executives do not always recognize opportunities for profit as quickly as they should. d. the only factor that is important in decision making is cost. e. a good must be given up to get some other good in return as resources are scarce.

e. a good must be given up to get some other good in return as resources are scarce.

Which of the following would most likely increase the supply of college textbooks? a. the exit of five major publishers from the industry b. an increase in the cost of paper used in the books c. an increase in the wage rate of workers associated with printing d. an expectation of a price rise in the future e. an improvement in the technology used in book production

e. an improvement in the technology used in book production

Refer to the market supply schedule for pizza in Table 4.2. When the price falls from $15 to $6, what is the change in quantity supplied in the pizza market? a. stays the same at 28 million pizzas b. increases to 28 million pizzas c. decreases by 28 million pizzas d. increases by 12 million pizzas e. decreases by 12 million pizzas

e. decreases by 12 million pizzas

Refer to Exhibit 2.2, which shows the production possibilities frontier for Good A and Good B. If resources are used fully and efficiently, then the economy can produce at point(s) _____ a. f b. a or b c. c d. d or e e. g, h, or i

e. g, h, or i

You can either read a book, get something to eat, or take a nap. The opportunity cost of getting something to eat is _____ a. the cost of what you eat. b. the difference between the costs of the book and the food. c. the difference between the opportunity costs of reading and sleeping. d. the net benefit of sleeping. e. impossible to determine because the most preferred alternative is not known.

e. impossible to determine because the most preferred alternative is not known.

On a given production possibilities frontier, which of the following is not assumed to be fixed? a. the amount of labor available b. the amount of capital available c. the level of technology d. the amount of land and natural resources available e. the amount of goods produced

e. the amount of goods produced

You will buy another pair of jeans only if _____ a. the marginal benefit from the change exceeds the average benefit from the change. b. there are no costs involved. c. the change increases social welfare. d. there is no uncertainty about the results of the change. e. the expected marginal benefit exceeds the expected marginal cost.

e. the expected marginal benefit exceeds the expected marginal cost.