Microeconomics Final Exam
"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:
$44
Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. The opportunity cost of producing 1 orange for Alpha and Beta, respectively, are:
0.5 apples; 0.25 apples.
Refer to Table 2-1. A student has only a few hours to prepare for two different exams tomorrow morning. The above table shows alternative possible exam outcomes with three alternative uses of the student's time. The opportunity cost of scoring an 84 on the history exam rather than 76 is:
7 points on the economics exam
Which is a characteristic of a price floor? Select all that apply.
A surplus may exist. Prices will not fall below a predetermined level.
Which are concepts that Adam Smith first introduced in his 1776 book The Wealth of Nations?
Adam Smith introduced the ideas of division and specialization of labor.
Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:
Andy's demand for beer to increase.
Why is there scarcity?
Because our unlimited wants exceed our limited resources
On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50. What will the likely effect of this policy be?
Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate.
Suppose that Canada can produce 100,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek, while Germany can produce 90,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek. From these numbers, we can conclude:
Canada has a comparative advantage in the production of hockey sticks.
Which statement best describes Becker's economic analysis of discrimination?
Competitive markets can allow some employers to practice discrimination, but can also provide profit-seeking firms with incentives not to discriminate.
Which statements describe the national interest argument?
Decisions about what constitutes a key strategic material are made by politicians, not nonpartisan analysts. The economic argument that a nation should not depend too heavily on other countries for supplies of certain key products, such as oil, or for special materials or technologies that might have national security applications has some validity when used sparingly such as a country making its own atom bombs.
Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 36 units of food per year or 18 units of clothing. Which of the following is true?
Georgeland has an absolute but not a comparative advantage in producing clothing.
If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:
Goods X and Y are complement goods.
Which is an example of a price floor?
Government-mandated minimum wage
Which are normative statements?
Health care should be available for everyone in the United States because it is the right thing to do. Although the benefits of the bus tunnel do not immediately exceed the costs, it can be used for a future subway when growth dictates it. (Normative statements describe the world as it should be, whereas positive statements acknowledge reality.)
Which would cause a shift in the supply curve to the right (increase)?
Improved technology
In India one person can produce 330 pounds of rice or 110 shirts in one year. In China one person can produce 400 pounds of rice or 200 shirts in one year. Which of the following statements is true?
India has a comparative advantage in the production of rice.
Which factor corresponds to the curving slope of a production possibilities frontier (PPF) graph?
Law of diminishing returns
For both the U.S. economy and global economy, what are the primary social mechanisms for answering the basic questions about what is produced, and for whom it is produced?
Markets—that is, demand and supply
Are markets always in equilibrium?
No, but if there is no outside interference, they tend to move toward equilibrium.
What do economists call a product whose demand rises when income rises, and falls when income falls?
Normal good
What type of price control is enacted in an attempt to keep prices low for those who demand the product?
Price ceiling
______________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.
Price floors
Which statement describes the impact of protectionism on jobs?
Protectionism reshuffles jobs from industries without import protections to industries that are protected from imports, but it does not create more jobs.
Which may result in a shift in the demand curve to the left (decrease) of the good or service mentioned?
Televisions, if there is an expectation that the price of a television will go down Vacation travel during a period of decreased worker income, such as an economic recession
Suppose that the USA can make 15,000,000 cars or 20,000,000 bottles of wine with one year's worth of labor. France can make 10,000,000 cars or 18,000,000 bottles of wine with one year's worth of labor. From these numbers, we can conclude:
The USA has an absolute advantage in the production of cars.
If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:
The USA specializes in potatoes because of its comparative advantage in producing potatoes.
Match the terms with their definitions.
The amount that individuals would have been willing to pay, minus the amount that they actually paid, is consumer surplus. The amount that a seller is paid for a good, minus the seller's actual cost, is called social surplus. The sum of consumer surplus and producer surplus is called social surplus. The loss in social surplus that occurs when the economy produces at an inefficient quantity is deadweight loss. The economy is getting as much benefit as possible from its scarce resources, and all the possible gains from trade have been achieved is efficiency in the demand and supply model.
Which factors can cause a shift in labor supply? Select all that apply.
The number of workers and the required education will cause a shift in labor supply.
Which statements describe potential economic benefits or gains of trade?
The potential for gains from trade may be especially high among the smaller and lower-income countries of the world. Low-income countries benefit more from trade than high-income countries do.
Which of the following would be expected if the tariff on foreign-produced automobiles were increased?
The supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise.
Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel?
There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.
Which statements describe benefits of trade between countries?
Trade allows each country to take advantage of lower opportunity costs in the other country. Gains from trade come from specializing in one's comparative advantage.
In addition to creating an inefficient outcome, the imposition of a price floor or a price ceiling will also produce which surplus transfers?
Transfer some producer surplus to consumers. Transfer some consumer surplus to producers.
Which scenario exemplifies the concept of the invisible hand?
When Carl purchases local products because they are cheaper, he is not thinking of the advantage it has on his area's manufacturing sector.
Which statements describe factors that can lower women's average wages as compared to men?
Women in their 30s and 40s are likely, on average, to have less job experience than men. In the United States, childless women with the same education and experience levels as men are typically paid comparably. However, women with families and children are typically paid about 7% to 14% less than other women of similar education and work experience.
Which of the following best denotes the reason for the existence of substantial black markets?
a command economy
Which of the following would most likely shift the production possibilities curve inward?
a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time
After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is:
a shift of the demand curve for beef to the left.
The imposition of a price ceiling on a market often results in:
a shortage
Union members earn ______________ than non-union members, even after adjusting for factors such as _____________________________ .
about 20% more; years of work experience and education level.
Jethro has a(n) __________________ in all aspects of camping: he is faster at carrying a backpack, gathering firewood, paddling a canoe, setting up tents, making a meal, and washing up.
absolute advantage
When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________________ in producing that product.
absolute advantage
Colombia produces coffee with less labor and land than any other country; it therefore necessarily has:
an absolute advantage in coffee production
Which of the following results in a rightward shift of the market demand curve for labor?
an increase in demand for the firm's product
Which of the following will not result in a rightward shift of the market supply curve for labor?
an increase in labor productivity
Which of the following will not result in a leftward shift of the market demand curve for labor?
an increase in the wage rate
Members of labor unions are able to use their ________________ to achieve better economic outcomes.
bargaining power
In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of:
buyers and sellers
The nature of demand indicates that as the price of a good increases:
buyers desire to purchase less of it.
Specialization:
can lead to an increase in overall production.
Marginal thinking is best demonstrated by:
choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.
What is most likely to encourage underground economies?
command economies
When nations increase production in their area of _________________ and trade with each other, both sides can benefit.
comparative advantage
When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right.
costs of production fall
In recent years, the U.S. labor market has experienced a __________ in the earnings gap between men and women. One of the main factors behind this is ____________________ .
decline; women's' career focus and rewards gained with top-level job expertise
If immigration consists of mainly high-skilled workers, then a(n) ________ in immigration will ________ the wages of high-skilled workers.
decrease, increase
The labor ____________ curve(s) will shift _______________ if there is an increase in productivity or an increase in the demand for the final product.
demand; right
In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.
division of labor
As depicted in ______________, it is necessary to give up some of one good to gain more of the other good.
the production possibilities frontier
If new manufacturers enter the computer industry, then (ceteris paribus):
the supply curve shifts to the right.
The reasons that nations trade includes the fact that:
no one country produces all of what citizens within the country want.
The theory of comparative advantage shows that the gains from international trade do not just result from the absolute advantage of producing at lower cost, but also from pursuing comparative advantage and producing at a lower ________________.
opportunity cost
The underlying reason why trade benefits both sides of a trading arrangement is rooted in the concept of __________________.
opportunity cost
Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be.
positive statements
The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied.
price
The downward slope of the demand curve again illustrates the pattern that as _____________ rises, _________________ decreases.
price, quantity demanded
_________________ refers to the total number of units that are purchased at that price.
quantity demanded
Which factor drives the study of economics?
scarcity
The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options.
sunk costs
A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the __________________ .
supply curve to the right
A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:
the supply curve.
The opportunity cost of producing a pair of pants in the USA is 5 bushels of wheat, while in China, it is 2 bushels of wheat. As a result:
there can be mutual gains from trade to the two countries if the USA exports wheat to China in exchange for pants.
According to the law of supply:
there is a direct relationship between price and the quantity supplied.
Scarcity exists because of:
unlimited wants and limited resources.
But nearly all supply curves share a basic similarity: they slope _______________.
up from left to right
In deciding how many hours to work, Beulah will make a choice that maximizes her _______; that is, she will choose according to her preferences for leisure time and income.
utility
If U.S. immigration consists of mainly low-skilled workers, then an increase in immigration __________ the wages of low-skilled workers.
will reduce
Discrimination in labor markets arises if _________________________, as measured by education, receive different pay because of their _______________________ .
workers with the same skill levels; race or gender
As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.
technology
As the _____________ complement for high-skill labor becomes cheaper, the demand curve for high-skill labor will shift to the right.
technology
The opportunity cost of attending university is likely to include all except which of the following?
the cost of haircuts received during the school term
The basic difference between macroeconomics and microeconomics is that:
microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).
Other things being equal, a __________ supply of workers tends to __________ real wages.
larger; decrease
Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________.
law of demand
If a firm faces ________________________, while the prices for the output the firm produces remain unchanged, a firm's profits will increase.
lower costs of production
Trade allows each country to take advantage of _________________ in the other country.
lower opportunity costs
Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.
marginal analysis
In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.
market-oriented economy
The ___________ is the only price where quantity demanded is equal to quantity supplied.
equilibrium price
If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ___________________
excess demand
In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made.
government
Alternate Outputs from One Day's Labor Input:USA: 12 bushels of wheat or 3 yards of textiles.India: 3 bushels of wheat or 12 yards of textiles.From the data, the USA:
has an absolute advantage over India in the production of wheat.
The best way to describe economics is that it is the study of __________
how decisions are made.
According to international trade theory, a country should:
import goods in which it has a comparative disadvantage.
Improvements in the productivity of labor will tend to:
increase wages.
If the demand for software engineers __________ slower than does supply, then wages of software engineers will __________.
increases; fall
Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?
international trade
The opportunity cost of an action:
is a subjective valuation that can be determined only by the individual who chooses the action.
Scarcity implies that:
it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.
