Microeconomics test 1
What are the institutions that help foster the appropriate incentives for economic growth?
a dependable legal system, property rights, and competitive and open markets
Which of the following would cause the demand for hot dog buns to increase?
a fall in the price of hot dogs
Adam smith coined the term "invisible hand" to mean
a metaphorical hand that leads individuals to promote social interest by pursuing self interest
Which of the following choices contains only factors that cause the supply curve to shift to the right?
a rise in technology, a fall in the costs of production, a fall in taxes on output
which of the following choices best illustrates the concept of Adam Smith's invisible hand?
a vietnamese farmer grows rice, an exporter ships it to the united states and a grocer in NY sells it to a customer
The ability of one producer to produce one good or service using fewer inputs than another producer is:
absolute advantage.
One benefit of trade is that it:
allows for increased specialization and mass-production techniques that lower per unit costs of production.
The quantity supplied is the:
amount of a good that firms are willing and able to sell at a particular price during a given period of time.
The Zimbabwean government printed money as fast as it could for years. As a result:
Zimbabwe experienced inflation at a rate of billions of percent per month.
Refer to the figure. If the price of potatoes is $8 a pound, what is the consumer surplus received? A graph of a demand curve. The graph plots quantity of potatoes in thousands of pounds on the horizontal axis and the price per pound of potato on the vertical axis. The demand curve has a negative slope and originates at the vertical axis corresponding to a price of 16 dollars and ends corresponding to 120 thousand pounds of potatoes on the horizontal axis.
$240,000
Firms are willing and able to sell 100 guitars per day at a price of $250 per guitar. What price will firms require to sell 100 guitars per day if there is a tax of $15 per guitar?
$265
Susan quits her administrative job, which pays $40,000 a year, to finish her 4-year college degree. Her annual college expenses are $8,000 for tuition; $900 for books; and $2,500 for food. The opportunity cost of attending college for the year is:
$48,900.
(Figure: PPF Nickel & Textiles) Refer to the figure. How many tons of textiles does Australia give up to produce one ton of nickel?
1/3
(Figure: PPF Mexico & United States) Use the figure in which both Mexico and the United States each have 24 units of labor. The opportunity costs of producing one shirt are:
1/6 of a computer for Mexico and one computer for United States.
The column headers of the table reads, Name; willingness to pay for 1 pound of bananas. The data are as follows: Jill is willing to pay 2 dollars for 1 pound of bananas; Joe is willing to pay 1.25 dollars for 1 pound of bananas; Jane is willing to pay 0.75 dollars for 1 pound of bananas; and James is willing to pay 0.25 dollars for 1 pound of bananas. The table shows four individuals' maximum willingness to pay for one pound of bananas. If the market price of bananas is $0.50/lb, what is the total consumer surplus in the market?
2.50
There are 100 consumers, each of whom values a concert ticket at a unique whole number dollar amount between $1 and $100. One customer is willing to pay $1, a second is willing to pay $2, a third is willing to pay $3, and so on. An unlimited number of concert tickets are on sale for $15 each. Create a simple demand curve to represent this scenario and using that curve calculate the total consumer surplus.
3,612.50
To produce 30 million barrels of oil per day, the minimum price per unit that producers in the diagram require is:
60
(Figure: PPF Nickel & Textiles) Refer to the figure. What is the maximum amount of textiles China can produce?
8 tons
8. (Figure: PPF Nickel & Textiles) Refer to the figure. What is the maximum amount of nickel China can produce? A graph plots a P P F for nickel and textiles for Australia and China. The graph plots Textiles in tons on the horizontal axis and Nickel in tons on the vertical axis. The P P F curve for Australia has a negative slope starting at 6 tons of Nickel and ending at 2 tons of Textiles. The curve for China also has a negative slope starting at 8 tons of Nickel and ending at 8 tons of Textiles.
8 tons
Refer to the table. What is the total amount of producer surplus (per barrel of oil) earned by all four producers if the market price per barrel of oil is $51?
87.75
A graph of a demand curve with quantity on the horizontal axis and price on the vertical axis. The demand curve has a negative slope. The demand curve contains two marked points that are denoted with dashed lines at each price and quantity demanded combination. The first point is at a price of 6 dollars and a quantity of 10 units. The second point is at a price of 3.75 dollars and a quantity of 15 units. Which statement is TRUE regarding the figure?
At a price of $6 per unit, consumers are willing and able to buy 10 units.
Two countries that specialize where they have a comparative advantage and then trade with each other will experience increases in: I. wages in both countries. II. total output in both countries. III. living standards in both countries.
I, II, and III
David sells his car, which he considers worthless, to Cameron for $200. Which of the following statements is TRUE?
David and Cameron must have different preferences for the car.
Suppose France can produce four phones or three computers with one unit of labor, and Sweden can produce one phone or two computers with one unit of labor. If France can trade only with Sweden, then the theory of comparative advantage suggests that:
France should specialize in producing phones and import computers from Sweden.
Which of the following statements is TRUE?
Specialization and trade raise wages in both countries that are party to the trade.
(Table: iPhone and iPod Production) According to the table on iPhone and iPod production, which of the following is TRUE?
The United States has an absolute advantage in producing both iPhones and iPods.
Which of the following explains why economic booms and busts cannot be avoided?
The economy is always being struck by unavoidable shocks.
Suppose a famous baseball player, Alex Rodriguez, hires a high school student to paint his house. Which of the following is most likely TRUE?
The opportunity cost of painting a house is higher for Alex Rodriguez than for the high school student.
Imagine that millions of refugees move out of country A and into country X. This would cause the demand for housing in country A to _____ and the demand for housing in country X to _____.
decrease; increase
Specialization and trade can _____ the per unit cost of production because _____ .
decrease; it creates economies of scale associated with large-scale production
As the price of lead falls (a key input in the production of automobile batteries), the costs of producing batteries decreases, shifting the supply curve of batteries:
down and to the right.
Booms and busts refer to the
fluctuations in economic activity over time.
A grocery store is running a "buy-one-get-another-at-one-half-off" promotion on a dozen doughnuts. So the first dozen is $6, and the second would be $3. A person would buy the second dozen if their marginal benefit from the second dozen doughnuts is
greater than $3
If the central bank creates too much money, _____ is the result. If the central bank doesn't create enough money, an economic _____ is the result.
inflation; slowdown
Quantity demanded:
is the amount that buyers are willing and able to buy at a particular price.
According to the theory of comparative advantage, the reason wages are lower in China than in the United States is:
lower productivity in China.
What is thinking on the margin?
making choices by comparing the additional benefits and additional costs from doing a little bit more of some activity
The quantity of DVDs that people plan to buy this month will increase when:
movie theater ticket prices increase.
A policymaker wants to reduce inflation. In order to make an intelligent decision about how to do so, the policymaker:
needs to know the causes of inflation, for example, the government's printing of too much money.
Division of knowledge refers to:
people learning different tasks in which they specialize.
The difference between the market price and the minimum price at which a seller is willing to sell a certain quantity of a good is:
producer surplus.
The main incentive for business activity is:
profit
(Figure: PPF Mexico & United States) Use the above figure in which both Mexico and the United States each have 24 units of labor. Mexico has a comparative advantage in ______, and the United States has a comparative advantage in ______.
shirts; computers
The demand curve:
shows how much buyers are willing and able to buy at different prices.
(Figure: PPF Mexico & United States) Use the figure in which both Mexico and the United States each have 24 units of labor. The opportunity costs of producing one computer are:
six shirts for Mexico and one shirt for the United States.
Globalization is:
the advance of human cooperation across national boundaries.
The production possibilities frontier shows:
the combinations of outputs a country can produce given its resources and productivity.
The better Martha Stewart is at running her business:
the higher her opportunity cost of ironing her own shirts
The historical rise in living standards of American workers is primarily a result of
the rise in American productivity.
In the 2 hours between classes a student can do one of three things, ranking them from most to least desirable as: (1) chat with friends, (2) study economics, or (3) eat lunch. This student's opportunity cost of chatting with friends is:
the value of studying economics.
The decisions made by the Federal Reserve Bank sometimes result in negative effects on the economy because:
too much money or too little money might induce inflation or unemployment due to bad timing of decisions.