Mr. Salmon

In order for Jamie to paint one additional portrait, it will cost her $50.00. The good news is that, if she paints it, she can probably sell it for $250.00. Which of the following equals Jamie's marginal cost?

$50

*see 40 for graph* The trade off of producing hockey sticks at level X is

200 pucks

In order to make a rational economic decision, one must

Be able to assess marginal costs and benefits

Dalton is part of a household and works for an architecture firm. If the government raises income taxes, Dalton will be MORE LIKELY to:

Consume fewer goods in the market place.

Which of the following is an example of how the US government regulates and/or affects the economy?

Consumer protection policies

Country A exports 10% more goods than it imports. By contrast, country B imports 15% more goods than it exports. Which of the following statements is obviously true?

Country A has a favorable balance of trade, but country B has an unfavorable balance of trade.

Jane has worked at the same factory for over fifteen year. However, yesterday she was called into her supervisor's office and told that she is being laid off because there is a recession and the company cannot afford to employ her until the economy improves. Jane is experiencing

Cyclical unemployment

The Federal Reserve can be best described as

A bank for banks

An economic actor that exists primarily to produce a product for a profit is called:

A business or firm

Galen's company has a great year in which they make record profits. Galen decides to use a large percentage of the profits to purchase new, updated equipment. Galen has made what?

A capital investment

After getting a celeb athlete to endorse its product, Chocobliss Candy Bars finds that consumer taste favors their candy bars because of the star athlete's popularity. As a result of this popularity, what will happen to the supply and price of Chocobliss bars?

Both will rise.

*see 89 for graph* What does the graph above MOST LIKELY depict?

CPI

John has been told by his friends that he makes some awesome t-shirts. John decides that he might wan to sell some of them. If John uses the decision-making model and decides that after spending money to buy the shirts and the dye necessary, he can sell the shirts for $1 more than what it costs him to make them, then which of the following statements is true?

John has an incentive to sell the shirts because he stands to make a profit.

A good that is used in place of another good to meet the same need is called a

Substitute good

Dale has a four-year college degree and a master's degree. Olivia has a four-year college degree. Brendan has completed 2 years of college. Margaret has only a high school diploma. Which of the following statements is MOST LIKELY true?

Dale has greater earning potential than Olivia

Increasing the reserve requirements is likely to have which of the following effects?

Decreasing the money supply

Which of the following statements BEST differentiates between the terms debt and deficit?

Deficit means to have more money flowing out than coming in, and debt is the accumulated amount that is owed.

When trying to make a rational economic decision one would need to consider which of the following?

Potential opportunity cost

Which of the following is a typical role of government in a market economy?

Provider of public goods

Montie needs a loan for school. After shopping around, he finds 2 different institutions offering school loans at 4.5% interest. North Rock Bank will finance his education at 4.5% compounded annually for 5 years after graduation. Meanwhile, Scholar Tomorrow Funding will finance Montie's education at 4.5% simple interest for the same 5 year period. Finally, Montie gets a credit card application in the mail that would allow him to use a credit card to pay for college at a special rate of 4.3% compounded every 6 months. Which leader should Montie go with?

Scholar Tomorrow funding

Margaret has just received a $3000 bonus from work that she was not expecting. Being a very practical person, Margo does some research and notices that interest rates are currently very high. Because Margo wants to get as much return from her money as possible, she will be MOST LIKELY to do which of the following?

She will save her money in a bank or investment account.

The US charges a tax of thirty cents on every dollar's worth of foreign tennis shoes entering the country. Which type of trade barrier is this?

Tariff

The fact that the US tends to import more than it exports, while at the same time investing less money in foreign nations than foreign nations invest in the US evidence that

The US has a capital account surplus and a current account deficit.

*see 30 for graph* Based on the graph, which of the following would be a safe assumption?

The average earning potential of African Americans has increased in the last 3 decades

The following headline appears in a local paper: "New Product Aims to Attract Teen Girls". Which of the following economic questions does this headline answer?

For whom it should be produced?

Moses works as a full-time-guitarist in a rock and roll band called the "Flaming Whys", Due to a conflict with the lead singer, Moses leaves the band and begins looking for another band in need of a lead guitarist, Which of the following BEST describes the type of unemployment that Moses is experiencing?

Frictional

Fiscal policy is concerned with which of the following?

Government spending and taxation

Donald purchases $800 in stock in a company called Magnacorp. If Magnacorp goes into debt and experiences bankruptcy, how much will Donald be liable as a partial owner of the company?

He has limited liability and will only lose the $800 he invested in the company.

Jake is trying to decide whether to take a summer job as a camp counselor or as a farm laborer. The farm pays much better, but the work is also much more demanding and he would have less time off. Which of the following could be considered an opportunity cost of taking the job as a farm laborer?

The free time that comes with being a counselor.

Jack is about to graduate from high school. His parents His parents have saved 45,000 dollars for him. They plan on giving it to him after graduation. Jack has to decide what to do with the money and is torn between buying a new car or paying for college. Which option reflects Jack engaging in a rational decision making process?

He thinks about the two alternative options, decides what is most important to him, evaluates the alternatives, and makes the rational decision to pay to pay for college with the money.

Thomas owns an auto dealership that specializes in selling luxury cars. He reads the morning paper and discovers that the Federal reserve has just implemented an "easy money" policy. How does Thomas feel about this?

He's glad because people who can afford it will be more likely to buy cars.

**See table #8** For the years of 1995-2004, the US experienced-

Inflation

Which of the following is an investment which allows someone to transfer financial risk?

Insurance

Which of the following statements BEST distinguishes labor from entrepreneurship?

Laborers earn wage for their labor and entrepreneurs earn profits for starting a business

In the school cafeteria, there are servers, grill cooks, dishwashers, and cash register attendants. Each of these does his/her own specific task. This is a good example of what?

Division of labor

Buying stocks, purchasing bonds, using profits to buy better machinery, and using part of one's income to take a training course are all forms of

Investments

When the Federal Reserve sells securities on the open market, it has which of the following effects?

Money supply decreases

*see 84 for graph* Which point on the graph above depicts economic expansion?

V

Which of the following is a monetary policy that would be useful in stopping deflation?

decreasing the reserve requirement

Which of the following is a positive occurrence in the US economy?

expansion

The costs of producing each additional unit ("just one more") of a particular product is called what?

marginal costs

Which of the following is an example of investment in capital?

reinvesting company profits in updated technology

Which of the following MOST resembles a traditional economic system?

Nathan is an excellent cobbler. Because his family hsd practiced this profession for generations, it is all he ever hoped or was expected to be. The shop he works out of is on land owned by a wealthy landlord, and although he takes great pride in his work, Nathan will likely never advance beyond where he currently is in life.

Nigeria and South Africa both produce oil and diamonds. In one day, Nigeria produces 100 units of crude oil and one unit of diamonds. On the other hand. South Africa produces one-half a unit of crude oil and fifty units of diamonds in the same time frame. Which of the following can be accurately said about these two countries?

Nigeria has an absolute advantage in oil, and South Africa has an absolute advantage in diamonds.

Which of the following statements BEST distinguishes between the terms recession and depression?

A depression is longer and more severe than a than a normal recession

The act of giving up one thing to obtain another is called

A trade-off

Darren owns his own plumbing business. He spends some of his company's profits on new pipes and tools. Jennifer then hires Darren and his assistant to install a new septic tank in her back yard. Which of the following statements is true?

The pipes and tools are capital

Teachers and professors buy a lot of books. If changes in the demand for education led to rapidly increasing wages for teachers and professors, how would this affect the price and quantity sold of books?

The price and quantity would rise as teachers' incomes shifted demand to the right.

Why are interest rates lower for people with collateral?

These loans have less risk because the borrower has assets that can be taken in place of payment

*see 14 for graph*Russia and Ukraine are neighboring countries. The table below gives the amount of crude oil and steel that each produces in a day. Which of the statements below is accurate?

Ukraine has a comparative advantage in steel, despite Russia's absolute advantage in both products.

The fundamental economic questions that all economies must answer are

What will be produced, how it will be produced, and for whom will it be produced?

*see 78 for graph* Which of the following points represents a level of production not possible for snow boards?

Z

Bill's business chooses to produce fluorescent toothbrushes that allow people to brush their teeth in the dark because he believes there is a demand for them. He decided to embark on this business adventure on his own, despite some skepticism from those who know him. Since the government does not force consumers to buy what they don't desire , Bill will have to convince people to purchase his toothbrushes of their own free will. This scenario is MOSTLY an example of what?

a free enterprise system based on voluntary exchange

Which of the following products is MOST LIKELY to have the lowest level of price elasticity?

a successful new cancer medication

In a perfectly competitive market, a firm will hire new employees as long as the cost of the added worker is less than the

amount of revenue generated by the employee

The nation of Tupalow is outraged that the Republic of Za has repeatedly violated international human rights laws. As a result, Tupalow decides not to export products to the Republic of Za until that nation shows evidence that it is complying with such laws. Such action is called what?

an embargo

The government would like to increase the money supply. Which of the following might be done to accomplish this task?

buy bonds

Factory machinery is considered to be part of which of the following factors of production?

capital

In 2007, the United States experienced record numbers of home foreclosures. In other words, because of many people had signed home loans that they ultimately could not afford to pay back, record numbers lost their homes to lenders. Lenders were able to take these homes because homes were

collateral

An economy in which the government owns the means of production and a planning commission determines what gets produced and for whom would BEST be described as a

command economy

Fred receives a loan for $10,000 that must be repaid in 3 years. The rate of interest is 5%. If the amount of interest that must be repaid is greater than $1,500, what type of interest is Fred paying?

compound

When economists monitor the state of the economy by keeping track of changes in the prices of goods and services typically purchased by consumers, they are using what economic indicator?

consumer price index

The US experienced a recession from March 2001 to November 2001. During this time, companies laid off many employees Later, many of the employees were rehired when the economy recovered. Which of the following types of unemployment BEST describes this situation?

cyclical

*see70 for graph* If the demand curve for coats moves left, then supply will

decrease

The study of how individuals, firms, and nations can best allocate their limited resources is called what?

economics

David wants to buy a piece of pizza and go to the movies. However, he only has enough money to do one or the other. In order to decide what to spend his limited money on, David will

engage in a rational decision making process

The item mentioned in question #82 will likely be which of the following?

expensive

US exchange rates are determined entirely by supply and demand. The US, therefore, has a

floating exchange rate

The government is said to have a balanced budget if

government spending exactly equals the amount of government revenue

Which of the following would be MOST LIKELY to prevent Marcus from taking his family on a vacation to Disney World?

high taxes

Buyers help determine price in a market economy by

how much they demand a product and are willing to spend

Emma is a US tourist visiting Niagara Falls. She visits both the US and Canadian sides. Emma wants to buy twenty T-shirts and some other souvenirs. Before traveling, she investigates and finds that, at the current exchange rate of 1 US dollar to 1.25 Canadian dollars, the souvenirs will cost her the same amount on either side of the border. If the exchange rate suddenly shifts to 1 US dollar to 1.5 Canadian dollars, on which side of the border should Emma buy her shirts, and why?

in Canada because the US dollar has appreciated

The federal government is concerned that economic growth is too high, that it is unsustainable, and that inflation is resulting. Which of the following fiscal policies might be enacted to reduce inflation?

increasing taxation

Assuming demand remains the same, if the supply of hot dogs is reduced, what will happen to the price of hot dogs?

it will increase

If the price of cameras goes down, what will happen to the demand for camera lenses?

it will increase

The island of Mogo is ruled by a king and a council of 5 elders. The king and this council determine what the islanders need and what can be produced. They also determine at what price things will be sold. Although they allow some people to own private property, they are strict about how such property can be used. It sounds like Mogo has what kind of market?

mixed market that is predominantly command

Purchasing power parity means that-

money supply decreases

The value of the BEST alternative that is given up wen one makes an economic decision is called the-

opportunity cost

In market economies, such as that of the US, the fundamental question "how will it be produced?" is answered by

private firms seeking the lowest cost production method

The flow of goods and services from businesses to households occurs primarily in the

product market

What role do profits play in a market economy

profits motivate businesses to produce

Good communications skills, the ability to show proper respect, and knowledge of computers are all

qualities that increase one's value in the labor market

Since the 1980s, the US has

run current account deficits and capital account surplus

If a desired item is in such short supply that there is not enough to meet demand, then that item is said to be what?

scarce

Amy opens a web site consulting firm. She faces unlimited liability, but maintains all the decision making authority. What type of business does Amy open?

sole-proprietorship

With the advancement of computer technologies, computers were developed that could efficiently operate telephone switching stations. Which of the following would BEST describe the unemployment experienced by people who had previously held jobs as telephone operators?

structural

As part of the Central American Free Trade Agreement, the US decides to eliminate all tariffs and quotas on cane sugar. Which of the following actors would be MOST LIKELY to oppose this action?

sugar growers in Louisiana and Texas

Which of the following provides the BEST definition of a trade-off?

the act of giving up one thing to obtain another

Which of the following statements BEST defines consumer credit?

to receive goods in the present on agreement that one will pay for them in the future

Which of the following is considered a negative side-effect of minimum wage?

unemployment