Study Guide

Given the previous flows you defined, determine which event could be responsible for each of the following scenarios. Check all that apply. Both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen.__ The equilibrium price of cream cheese has risen but the equilibrium quantity of bagels has fallen.__

Fall in the Price of Flour, Rise in the Price of Milk

According to Hansen, being able to access a positive mental state is NOT essential for well being and coping.

False

According to Hansen, we should only see the good in life—good used in a pragmatic as opposed to moralistic sense.

False

According to Marx, under capitalism, the proletariat class exploited the capitalist class.

False

True or False: An increase in the demand for notebooks raises the quantity of notebooks demanded but not the quantity supplied.

False

True or False: Labor unions are the primary reason the standard of living in the United States has changed over time.

False

You are the chief financial officer for a firm that sells digital music players. Your firm has the following average-total-cost schedule: Your current level of production is 600 devices, all of which have been sold. Someone calls, desperate to buy one of your music players. The caller offers you $550 for it. True or False: You should accept the offer.

False

Suppose that in the United States, producing an aircraft takes 10,000 hours of labor and producing a shirt takes 2 hours of labor. In China, producing an aircraft takes 40,000 hours of labor, while producing a shirt takes 4 hours of labor. What will these nations trade?

China will export shirts, while the United States will export aircraft.

Which of the following is a positive, rather than a normative, statement?

Law X will reduce national income.

An economic model is

a simplified representation of some aspect of the economy.

Why did Smith magnify the negative effects of the division of labor?

Smith wanted to encourage universal public schooling, largely at government expense, so that even those in the lower ranks of society could acquire the essential skills of reading, writing, and arithmetic.

Adam Smith advocated for public education in order to address the social problems created by the increased division of labor.

True

For Marx, the transition to communism was a natural stage that will come when humans reach their potential.

True

Robert Frank is critical of the fact that few economists confront the reality of the rising income inequality in the US. Frank points out that Adam Smith—the father of economics—was a moral philosopher and considered moral questions, and hence economists today should as well.

True

The positive qualities of mind and heart—such as love, compassion, and gratitude—are mostly built from positive experiences—not just from witnessing life as it is.

True

To enrich an experience, we can pay attention to what ways an experience is new to you, such as previously overlooked nuances in gratitude.

True

True or False: The production possibilities frontier has this shape because each worker faces a constant trade-off between mowing lawns and washing cars.

True

Which of the following is included in the opportunity cost of spending $100 now?

The $105 you would have a year from now if you put it in the bank.

Which of the following are included in the true cost of going skiing? Check all that apply.

The rental of any ski equipment you need. / The cost of a lift ticket. / The wages you forego by going skiing.

Which of the following is a normative statement?

We should strive to push the PPF outward.

What role do the so-called talented people play in the Rawlsian argument?

They show how some inequality can be just.

Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant. What is the opportunity cost of something? Your aunt's opportunity cost of running a hardware store for a year is_____. Suppose your aunt thought she could sell $510,000 worth of merchandise in a year. True or False: Your aunt should open the store.

What must be given up to acquire it, $550,000, False

The supply of leather jackets would be expected to increase as a result of:

a decrease in the cost of producing leather jackets.

If all else is held constant, what would happen to the equilibrium price and quantity of iPhones if the price of an Android phone decreased?

They would both decrease.

For both parties to benefit from specialization and trade, the trading parties must agree on:

a price somewhere between their opportunity costs of production.

Goods that are produced now so that they can be used to produce other goods in the future are called:

capital goods

A shift in a production-possibility frontier can result from:

changes in production techniques

In July 2012, it cost $125 to purchase a ticket to visit the parks at Disneyland for one day. A five-day pass to the same parks cost only $290. Disneyland charges less for additional days because of:

diminishing marginal utility.

For a market to be competitive:

each buyer and seller is small, relative to the whole market; no single decision-maker has any influence over the market price.

A firm's economic profit is always less than its accounting profit because:

economic profit considers implicit costs, which accounting profit does not.

Think of the production possibilities frontier (PPF) model. When society is producing the largest possible output from its resources, it is operating:

efficiently

Over time, the price elasticity of supply for sunglasses will become more:

elastic

Suppose that at the current price consumers would like to purchase 10 million large-screen televisions and 15 million are available. When the market coordinates the demand and supply for large-screen televisions, the price of large-screen televisions will:

fall

Economics is best defined as the study of

how society manages its scarce resources.

Mexico has a comparative advantage in producing corn:

if its opportunity cost of producing corn is lower than the opportunity cost in other countries.

Good growing conditions for wheat would probably

induce a rightward shift in wheat's supply curve.

A local merchant raises the price of his good and finds that his total revenues increase. The demand for this good is:

inelastic

A linear, downward-sloping demand curve is

inelastic at some points, and elastic at others.

Nita is a devoted Coca-Cola consumer, whereas Becky can drink either Coca-Cola or Pepsi products. Nita's demand for Coca-Cola will be relatively more __________, while Becky's demand will be relatively more __________.

inelastic; elastic

Consider a production possibility frontier for Iraq. If in 2014 Iraq's resources are not being fully utilized, Iraq will be somewhere ________ of its production possibility frontier.

inside

When both supply and demand decrease, the equilibrium price:

is indeterminate and equilibrium quantity decreases.

The consumer optimum:

is the combination of goods and services that maximizes utility for a given income.

Honey and jam are substitute products. If the price of honey increases, the demand for:

jam will increase, causing the price of jam to increase as well.

If a profit-maximizing, competitive firm is producing a quantity at which marginal cost is between average variable cost and average total cost, it will

keep producing in the short run but exit the market in the long run.

In the short run, the cost of __________ is variable, whereas the cost of __________ is fixed.

labor; capital

A competitive firm maximizes profit by choosing the quantity at which

marginal cost equals the price.

Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes. If Steve sells 1,250 bikes this year (50 more than last year) and his average total cost increases to $1.28 million, we know that the:

marginal cost of those 50 bikes is $80,000.

When a firm hires another employee and, as a result, total output increases, this change in total output is also known as:

marginal product.

A competitive firm's short-run supply curve is its ________ cost curve above its ________ cost curve.

marginal, average variable

In economics, we assume that firms make decisions in order to:

maximize profit.

Senator Bright, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright should argue that trade can be beneficial

because it allows specialization, which increases total output.

For Rawls and Nozick:

both believe that government must play an essential role in society

In the goods market:

business produces goods and services and sells them to households and government.

Suppose the marginal cost of dating Perry is $30 while the marginal benefit is worth $50 to you. Following economic reasoning you should:

date Perry

When consumer tastes are negatively influenced, this causes market demand to:

decrease, resulting in a surplus which will be eliminated as price falls.

When the price of ground beef increases and all else is held constant, we would expect the supply of hamburgers to __________, causing the price to __________.

decrease; increase

Businesses do all of the following except:

demand goods and services from households in the goods market.

Households do all of the following except:

demand labor services from businesses in the factor market.

Businesses are on the:

demand side of factor markets and the supply side of goods markets.

The movie Saving Private Ryan is about a military mission to find and recover a particular soldier- Private Ryan. The movie is predominately about how much was given up in an effort to save this one particular soldier. The main economic theme of the movie is:

opportunity cost

According to the law of demand, an increase in the price of baseball trading cards causes:

people to buy fewer trading cards.

Diminishing marginal product explains why, as a firm's output increases,

the production function gets flatter, while the total cost curve gets steeper.

Price elasticity of demand measures the change in:

quantity demanded due to the change in price.

To reach the consumer optimum for two goods, the:

ratio of marginal utility to price for both good must be equal.

Utility theory seeks to measure:

satisfaction

According to Smith, the cooperation that is necessary to raise living standards best driven by

self-interest

When a hurricane rips through Florida, the price of oranges rises because the:

supply curve shifts to the left.

Households are on the:

supply side of factor markets and the demand side of goods markets.

In theory socialism is an economic system:

that tries to organize society in the same ways as most families organize, striving to see that individuals get what they need.

The difference between capitalism and mercantilism is that under capitalism:

the "invisible hand" is more important than the government.

In The Wealth of Nations, decisions as to how much of a commodity to be produced are ultimately made by:

the "invisible hand" of the market

An increase in the supply of a good will decrease the total revenue producers receive if

the demand curve is inelastic

When the price of an hour of tutoring increases,

the quantity demanded for tutoring decreases.

A shortage occurs whenever:

the quantity supplied is less than the quantity demanded.

When two individuals produce efficiently and then make a mutually beneficial trade based on comparative advantage,

they both obtain consumption outside their production possibilities frontier.

Which goods will a nation typically import?

those goods in which other nations have a comparative advantage

Classify the following as microeconomics or macroeconomics: 1) study of individual choice, and 2) inflation and unemployment

the first is microeconomics, while the second is macroeconomics.

The values in a payoff matrix show:

the gains and losses of decisions for each player given the decisions of other players.

All of the following topics fall within the study of microeconomics EXCEPT

the influence of the government budget deficit on economic growth.

In 11th century Europe, the central economic decisions were made by:

tradition and the lord of the manor.

Implicit costs are:

the opportunity cost of the means of production.

The prisoner's dilemma is a well-known game in which:

independent action is not necessarily the best joint action, but is the best independent action.

The additional satisfaction derived from consuming one more unit of a good or service is called:

marginal utility

An economy produces hot dogs and hamburgers. If a discovery of the remarkable health benefits of hot dogs were to change consumers' preferences, it would

move the economy along the production possibilities frontier.

Complete the following table with the marginal product of each hour spent fishing. The production becomes_____ as the number of hours spent fishing increases. True or False: The total-cost curve is increasing and convex because there are diminishing returns to fishing time.

10, 8, 6, 4, 2, flatter, true

Suppose that the band playing at the rock concert at your school next weekend is playing this weekend at another school. As at your school, the concert sold out quickly, leaving many loyal fans who would still like to buy tickets. There are also some ticket holders who might be willing to sell. Some of these potential sellers can no longer go to the concert. Other ticket holders are only moderately interested in the band and would sell their tickets if the price were high enough. If tickets are free (that is, the price is $0), there will be:

A shortage of 50 tickets

The difference between capitalism and mercantilism is that under capitalism:

A. the "invisible hand" is more important than the government.

Your cousin Vinnie owns a painting company with fixed costs of $200 and the following schedule for variable costs: The efficient scale is___ houses.

AFC(200,100,66.67,50,40,33.33,28.57), AVC(10,10,13.33,20,32,53.33,91.43), ATC(210,110,80,70,72,86.67,120),4

Over the past 30 years, technological advances have reduced the cost of computer chips. This has led to_____ in the supply of computers, causing the price of computers to _____. Because computers and computer software are _____ , this change in price causes the demand for computer software to_____. However, computers and typewriters are_____ , so the change in the price of computers_____ the demand for typewriters.

An increase, fall, complements, increase substitutes, decreases

During the Revolutionary War, the American colonies could not raise enough tax revenue to fully fund the war effort; to make up the difference, the colonies decided to print more money. Printing money to cover expenditures is sometimes referred to as an inflation tax. Who is being taxed when more money is printed?

Anyone who is holding money.

The government imposes a $1,000 per year license fee on all pizza restaurants. Which cost curves shift as a result?

Average total cost and average fixed cost.

At the new equilibrium price, what is the net amount of money that each seller receives after paying the fee to the exchange?

$35

What is the new equilibrium price that buyers pay sellers for tickets, remembering that buyers must also pay $15 to student government?

$35

Assume that strawberries cost $1 and apples cost $2. If a consumer has $16, the bundle of goods that would maximize his utility per dollar and remain within his budget would be:

6 strawberries and 5 apples.

Governments may intervene in a market economy in order to

All of the above.

Which statement(s) best summarize(s) Adam Smith's views?

All the answers above are correct.

Refer to the pay-off matrix in the instructions. What is the Nash equilibrium?

Both Confess

Refer to figure D. The effect of a decrease in price is best shown by which arrow?

C

Consider the market for DVDs, TV screens, and tickets at movie theaters. DVDs and TV screens___ DVDs and movie tickets___ TV screens and movie tickets___

Complements, Substitutes, Substitutes

The demand curve for a good will shift to the right if, holding all else constant,

Consumers expect future prices to increase.

How can you compare the benefits to the costs?

Determine the benefits of what you give up by going on the vacation, and compare them to the benefits of going on vacation.

Which of the following statements is true about utility?

Everyone receives different levels of satisfaction from the same good or service.

Regulating cable TV prices__ Providing some poor people with vouchers that can be used to buy food__ Prohibiting smoking in public places__ Breaking up Standard Oil (which once owned 90% of all oil refineries) into several smaller companies__ Imposing higher personal income tax rates on people with higher incomes__ Instituting laws against driving while intoxicated__

Efficiency, EQUALITY, Efficiency, Efficiency, EQUALITY, Efficiency

Spam is considered an inferior good. What would happen to the equilibrium price and quantity of Spam if income decreased and more firms started producing Spam?

Equilibrium price will be indeterminate and equilibrium quantity will go up.

According to Marx, under communism, who would control the economic system?

Everyone

Which of the following will move the SUPPLY CURVE for housing in Florida, a popular retirement state, to the left?

Higher construction costs.

Which of the following describe some of the trade-offs faced by a recent college graduate deciding whether to go to graduate school? Check all that apply.

If she goes to graduate school, she won't be able to spend as much time with her family. / Graduate school means fewer years of on-the-job experience. / Taking out more student loans means she may not able to purchase the new car she needs.

According to Smith, social harmony comes from economic exchanges in which people act...

In their own self-interest

Which of the following would cause a normal good's demand curve to shift to the left?

Income decreases.

If Jim can sell paper at a lower opportunity cost than Dwight can, then:

Jim has a comparative advantage in paper sales.

Which of the following situations illustrates a positive incentive?

Lee gives his children candy if they clean their rooms.

According to Smith, the division of labor in agriculture tends to be __________ than the division of labor in manufacturing. (Smith, of course, is referring to his own time here.)

Less

Classify the following topics as relating to microeconomics or macroeconomics. A family's decision about how much income to save___ The effect of government regulations on auto emissions___ The impact of higher national saving on economic growth___ A firm's decision about how many workers to hire___ The relationship between the inflation rate and changes in the quantity of money___

Micro, Micro, MACRO, Micro, MACRO

A 1996 bill reforming the federal government's antipoverty programs limited many welfare recipients to only 2 years of benefits. This change gives people the incentive to find a job _____ quickly than if welfare benefits lasted forever. The loss of benefits after 2 years will result in the distribution of income becoming _____ equal. In addition, the economy will bemore Correct efficient because of the change in working incentives.

More, Less

Refer to Figure F. In the graph above, what change would increase production efficiency?

Moving from D to A.

If the economy goes into a recession and incomes fall, what happens in the markets for inferior goods?

Prices and quantities both rise.

Will there be a shortage or surplus of tickets with this upper limit on ticket prices?

Shortage

Who strictly managed the economy under the Mercantilism of the 1500s-1600s?

The government

When testing a model rocket on your campus quad, which of the following would be an endogenous factor?

The size of the rocket engine

On January 30, 2012, Starbucks India announced plans to open 50 cafes. What would you expect to happen to the market for coffee in India, assuming all other factors are held constant?

The supply for coffee will increase in India.

According to Rawles, what follows if the so-called talented people don't endorse the difference principle?

Their society is unjust.

Mark can cook dinner in 30 minutes and wash the laundry in 20 minutes. His roommate takes half as long to do each task. How should the roommates allocate the work?

There are no gains from trade in this situation.

he price of coffee rose sharply last month, while the quantity sold remained the same. Each of five people suggests an explanation:

Tom, Harry, and Mary

Diminishing marginal utility:

occurs when the additional utility for each good declines as consumption increases.

Old Navy stocks more Bermuda shorts during the summer months than in the winter months. The resulting shift in supply explains:

price expectations.

Adam Smith's "invisible hand" refers to

the ability of free markets to reach desirable outcomes, despite the self-interest of market participants.

Your opportunity cost of going to a movie is

the total cash expenditure needed to go to the movie plus the value of your time.

What quantity of tickets will change hands when there is a $15 tax on sellers?

25

What is the equilibrium price in the resale market for concert tickets?

$40

Use the information from the previous graph to calculate the new equilibrium price that buyers pay for tickets when student government collects the fee from sellers. The buyers pay:

$50

Raj has an accounting profit of _____ and an economic profit of ____.

$50, $10

Lauren is the owner of a bakery that earns 0 (zero) economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total explicit costs were:

$92,000

Two friends, Rachel and Joey, enjoy baking bread and making apple pies. Rachel takes two hours to bake 1 loaf of bread and one hour to make 1 pie. Joey takes four hours to bake 1 loaf of bread and four hours to bake 1 pie. What is Joey's opportunity cost of baking 1 loaf of bread?

1 pie

Which of the following describe some of the trade-offs faced by a family deciding whether to buy a new car? Check all that apply.

A larger vehicle means saving time by not having to make multiple trips somewhere, but a smaller vehicle is cheaper / An increase in the family's car payment means the family will be unable to afford a vacation. / Fuel efficient cars are more expensive, but regular cars require spending more on gas.

_____ is an idea brought up by Smith that Marx found dehumanizing.

Division of labor

Indicate whether each of the following allocations is efficient or inefficient. Allocation A,B,C,D

Efficient, Efficient, Inefficient, Efficient

This chapter discusses many types of costs: opportunity cost, total cost, fixed cost, variable cost, average total cost, and marginal cost. Fill in the type of cost that best completes each sentence. What you give up for taking some action is called the_____. _____ is falling when marginal cost is below it and rising when marginal cost is above it. A cost that does not depend on the quantity produced is a(n)_____. In the ice-cream industry in the short run,_____ includes the cost of cream and sugar but not the cost of the factory. Profits equal total revenue minus_____ . The cost of producing an extra unit of output is the _____.

Opportunity cost, Average total cost, fixed cost, variable cost, total cost, marginal cost

Which of the following factors did NOT lead to the development of the Feudalist society?

Rapid technical innovations

Once again, in an hour, David can wash 2 cars or mow 1 lawn, while Ron can wash 3 cars or mow 1 lawn. Who has the comparative advantage in car washing, and who has the comparative advantage in lawn mowing?

Ron in washing, David in mowing.

In an hour, David can wash 2 cars or mow 1 lawn, while Ron can wash 3 cars or mow 1 lawn. Who has the absolute advantage in car washing, and who has the absolute advantage in lawn mowing?

Ron in washing, neither in mowing.

Which of the following describe some of the trade-offs faced by a company president deciding whether to open a new factory? Check all that apply.

The firm can either open a new factory or upgrade existing equipment. / The firm can either pay out more of its profit to shareholders or earn additional profit next year by increasing production.

Under feudalism...

Traditions decide what, how, and for whom to produce.

A Nash equilibrium occurs when a decision maker has nothing to gain by changing its own strategy without collusion.

True

Billy Preston's song "Will It Go Round in Circles" captures the essence of the circular flow diagram or model.

True

Game theory:

complements the standard supply/demand model.

When would oil producers see the largest percentage decline in the quantity demanded for oil due to an increase in the price of oil today?

in 15 years

Oil is a main component in the manufacture of plastic bags. If the price of oil were to increase, the price of plastic bags would:

increase and the quantity would decrease.

Taxes cause the equilibrium price of a good to:

increase.

Consider the following cost information for a pizzeria: The pizzeria's fixed cost is___ Complete the third column of the following table by calculating the marginal cost per dozen pizzas using the information on total cost. Then complete the final column by calculating the marginal cost per dozen pizzas using the information on variable cost. True or False: It doesn't matter whether you compute marginal cost using total cost or variable cost.

$300, MC (50,40,30,30,40,50), MC using Variable Cost(50,40,30,30,40,50), True

Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes. Steve's average fixed cost was __________ per bike.

$375

Steve owns a bike store. His total costs are $1.2 million per year, and his fixed costs are $450,000 per year. This means that his variable costs are:

$750,000

Zumba classes sell all 20 participant spots at a price of $4.50 each. When the instructor raised the prices to $5.50, 10 people attended the class. From the midpoint method, the price elasticity of demand for Zumba is:

-3.33

Refer to figure E Laura's production possibility curve for math and economics problems in one night is shown in the graph. Her opportunity cost of finishing 6 math problems instead of 4 math problems is:

1 economics problem.

Without trade, the price of white socks (in terms of red socks) in Boston is_____ of red socks and in Chicago is_____ of red socks. _____ has an absolute advantage in the production of red socks, and_____ has an absolute advantage in the production of white socks. _____ has a comparative advantage in the production of red socks, andB_____ has a comparative advantage in the production of white socks. If the cities trade with each other, Chicago will export _____ socks, and Boston will export _____ socks. The price of a white sock can be expressed in terms of red socks. The highest price at which white socks can be traded that would make both cities better off is_____ per white sock, and the lowest price that makes both cities better off is_____ per white sock.

1 pair, 2 pairs, Boston, Boston, Chicago, Boston, red, white, 2 red socks, 1 red sock

The initial price of picture frames is $6 and suppliers offer 20 frames. When the price falls to $4, suppliers offer only 10. The price elasticity of supply is:

1.67

The price of a good rises from $8 to $12, and the quantity demanded falls from 110 to 90 units. Calculated with the midpoint method, the elasticity is

1/2

Two friends, Rachel and Joey, enjoy baking bread and making apple pies. Rachel takes two hours to bake 1 loaf of bread and one hour to make 1 pie. Joey takes four hours to bake 1 loaf of bread and four hours to bake 1 pie. What is Rachel's opportunity cost of baking 1 pie?

1/2 loaf of bread

Pat's opportunity cost of making a pizza is_____gallons of root beer, and Kris's opportunity cost of making a pizza is_____ gallons of root beer. _____ has an absolute advantage in making pizza, and _____ has a comparative advantage in making pizza. If Pat and Kris trade foods with each other, _____ will trade away pizza in exchange for root beer. The price of pizza can be expressed in terms of gallons of root beer. The highest price at which pizza can be traded that would make both roommates better off is_____ gallons of root beer, and the lowest price that makes both roommates better off is_____ gallons of root beer per pizza.

1/2, 2/3, Pat, Pat, Pat, 2/3, 1/2

Suppose that there are 10 million workers in Canada and that each of these workers can produce either 2 cars or 30 bushels of wheat in a year. The opportunity cost of producing a car in Canada is_____ bushels of wheat, and the opportunity cost of producing a bushel of wheat in Canada is_____ cars. Canada_____ accept the deal the United States proposes.

15, 1/15, Should

A German worker takes 400 hours to produce a car and 2 hours to produce a case of wine. A French worker takes 600 hours to produce a car and X hours to produce a case of wine. For what values of X will gains from trade be possible? Check all that apply. For what values of X will Germany export cars and import wine? Check all that apply.

2, 300, 1, 2

What is the amount of the shortage or surplus?

30 tickets

What is the equilibrium quantity in the resale market for concert tickets?

30 tickets

Refer to Figure B. Evan can grow both roses and carnations in his garden. His production possibility table is given below. If he is currently producing 110 roses, his opportunity cost of producing 40 more roses is:

31 carnations.

Maria's opportunity cost of reading 100 pages of sociology is_____pages of economics.

40

An economy consists of three workers: Larry, Moe, and Curly. Each works 10 hours a day and can produce two services: mowing lawns and washing cars. In an hour, Larry can either mow 1 lawn or wash 1 car; Moe can either mow 1 lawn or wash 2 cars; and Curly can either mow 2 lawns or wash 1 car. All three spend all their time mowing lawns. (A)___,___ All three spend all their time washing cars. (B)___,___ All three spend half their time on each activity. (C)___,___ Larry spends half his time on each activity, while Moe only washes cars and Curly only mows lawns. (D)___,___

40,0,0,40,20,20,25,25

Which of the following would be expected to cause the QUANTITY DEMANDED of wool to increase?

A decrease in the price of wool.

Suppose that the band playing at the rock concert at your school next weekend is playing this weekend at another school. As at your school, the concert sold out quickly, leaving many loyal fans who would still like to buy tickets. There are also some ticket holders who might be willing to sell. Some of these potential sellers can no longer go to the concert. Other ticket holders are only moderately interested in the band and would sell their tickets if the price were high enough. If the price of a ticket is $50, there will be:

A surplus of 15 tickets

A firm is producing 20 units with an average total cost of $25 and marginal cost of $15. If the firm were to increase production to 21 units, which of the following must occur?

Average total cost would decrease.

If these countries were open to trade,_____ would export shirts and_____ would benefit from trade. The price of a computer can be expressed in terms of shirts. The highest price for which a computer can be traded that would make both countries better off is_____ shirts per computer, and the lowest price that makes both countries better off is_____ shirts per computer. Suppose that China catches up with American productivity so that a Chinese worker can produce 100 shirts or 20 computers... True or False: There are no longer gains from trade.

China, both countries, 10, 5, True

When the price of scooters drops by 5%, the quantity demanded changes by 20%. You know that the price elasticity of demand for scooters is:

Elastic

England and Scotland both produce scones and sweaters. Suppose that an English worker can produce 50 scones per hour or 1 sweater per hour. Suppose that a Scottish worker can produce 40 scones per hour or 2 sweaters per hour. _____ workers have an absolute advantage in producing scones, and_____workers have an absolute advantage in producing sweaters. _____ workers have a comparative advantage in producing scones, and_____ workers have a comparative advantage in producing sweaters. If England and Scotland decide to trade, Scotland will trades_____ to England. If a Scottish worker could produce only 1 sweater per hour, Scotland_____ gain from trade, and England_____ gain from trade.

English, Scottish, English, Scottish, sweaters, would still, would still

Complete the following table by indicating the chain of events caused by a change in the price of flour, an input to making bagels.

Fall (Increase, Increase, Decrease Increase Increase, Increase) Rise (Decrease, Decrease, Increase, Decrease Decrease, Decrease)

Complete the following table by indicating the chain of events caused by a change in the price of milk, an input to making cream cheese.

Fall (Increase, Increase, Decrease Increase Increase, Increase) Rise (Decrease, Decrease, Increase, Decrease Decrease, Decrease)

Ketchup is a complement (as well as a condiment) for hot dogs. If the price of hot dogs rises, the quantity of hot dogs demanded_____ , which_____ the demand for ketchup. Because of the change in the equilibrium quantity of ketchup, the demand for tomatoes by ketchup producers_____ , causing the equilibrium price of tomatoes to_____ . This means producers of tomato juice face_____ input prices, and the supply curve for tomato juice_____ . The resulting_____ in the price of tomato juice causes people to substitute_____, so the demand for orange juice_____ .

Falls, lowers, falls, decrease, lower, increases, fall, away from orange juice and toward tomato juice, falls

Consider the following events: Scientists reveal that eating oranges decreases the risk of diabetes, and at the same time, farmers use a new fertilizer that makes orange trees produce more oranges. True or False: When the demand curve and the supply curve shift in the direction previously indicated, the effect on the equilibrium price is clear even without knowing the magnitude of the shifts.

False

The division of labor tends to be greatest in less economically developed countries.

False

Under capitalism, the state operates in the interests of all its citizens, according to Marx.

False

Selena pays a storekeeper $1 for a quart of milk.__,__ Stuart earns $4.50 per hour working at a fast-food restaurant.__,__ Shanna spends $30 to get a haircut.__,__ Salma earns $10,000 from her 10% ownership of Acme Industrial.__,__

Firm to household, Household to firm/ Household to firm, Firm to household/ Firm to household, Household to firm/ Household to firm, Firm to household/

The market for pizza has the following demand and supply schedules: If the actual price in this market were above the equilibrium price, quantity supplied would be_____ than quantity demanded, so there would be_____ pressure on prices. True or False: If the actual price in this market were below the equilibrium price, suppliers could raise the price without losing sales.

Greater, downward, true

Refer to Figure A for this question. Which of the shifts explains what would happen to the production possibility curve if political unrest and strikes disrupt only the industrial goods sector of the economy?

II

Refer to Figure C. Which of the shifts explains what would happen to the production possibility curve if a cyclone destroys five major car factories in the Philippines?

III

Which of the following statements support the reality that your standard of living is different from that of your parents or grandparents when they were your age? Check all that apply.

In the United States, the average person's life expectancy was roughly 78 years old in 2010, but only 70 years old in 1960. / A cutting-edge television comes with HD, 3D, and SmartTV technology, while your grandparents likely enjoyed a black-and-white television in the early years. / Many families have at least two cars per household, whereas having a vehicle was a luxury in the early 20th century.

If the number of buyers in a market increases from 50 to 100, you would expect the equilibrium price to __________ and the equilibrium quantity to __________, holding all else constant.

Increase; increase

The production possibilities frontier has a bowed-out shape because the quantity of guns the economy must give up in order to produce more butter _____ the more butter is produced. In other words, the opportunity cost of butter _____ with increased production. Impossible for the economy to achieve_____ Feasible but inefficient_____

Increases, Rises, D, A

Given what you know about Rawls' view of justice or fairness, how do you think he would define injustice?

Inequalities that aren't to the benefit of the least well off

If they spend all night writing computer programs, Laurence can write 10 programs while Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 while Carrie Anne can make 4. Given this information and supposing Laurence and Carrie Anne have constant opportunity costs, we know that:

Laurence has an absolute advantage in both programs and sunglasses.

The Social Security system provides income for people over age 65. If a recipient of Social Security decides to work and earn some income, the amount he receives in Social Security benefits is typically reduced. The provision of Social Security gives people the incentive to save _____ while working. Moreover, the reduction in benefits associated with higher earnings gives people the incentive to _____ past age 65.

Less, Not work

Nimbus, Inc., makes brooms and then sells them door-to-door. Here is the relationship between the number of workers and Nimbus's output in a given day: In the following table, complete the marginal product column. Which of the following statements are true about the patterns found in this table? Check all that apply.

MP (20, 30, 40, 30, 20, 10, 5), TC ($200, 300, 400, 500, 600, 700, 800, 900), MC ($5.00, 3.33, 2.50, 3.33, 5.00, 10.00, 20.00), ATC (15.00, 8.00, 5.56, 5.00, 5.00, 5.33, 5.81), When marginal cost is less than average total cost, average total cost is falling., Marginal product rises at first, then declines.

Kati-Lyn has to choose between eating Chinese food and Indian food. Both Chinese and Indian food cost the same. Which of the following equations, where MU is marginal utility and U is total utility, will lead to the optimal level of consumption?

MU Chinese = MU Indian

A firm is producing 1,000 units at a total cost of $5,000. If it were to increase production to 1,001 units, its total cost would rise to $5,008. What does this information tell you about the firm?

Marginal cost is $8, and average total cost is $5.

Which of the following describe some of the trade-offs faced by a member of Congress deciding how much to spend on national parks? Check all that apply.

Money spent on national parks benefits park visitors, but alternatively the money could be spent on highways to benefit drivers. / Congress can spend either a small amount on a lot of parks or a large amount on a single national park.

Suppose that in Slovakia, one unit of labor can produce either 16 tons of wheat or 32 tons of soy while in Poland, one unit of labor can produce either 4 tons of wheat or 2 tons of soy. Given this information, which of the following statements is true?

Poland has a comparative advantage in producing wheat but not soy.

Classify each of the following statements as positive or normative. Society faces a short-run tradeoff between inflation and unemployment.___ A reduction in the rate of money growth will reduce the rate of inflation.___ The Federal Reserve should reduce the rate of money growth.___ Society ought to require welfare recipients to look for jobs.___ Lower tax rates encourage more work and more saving.___

Positive, Positive, NORMATIVE, NORMATIVE, Positive

The company that you manage has invested $5 million in developing a new product, but the development is not quite finished. At a recent meeting, your salespeople report that the introduction of competing products has reduced the expected sales of your new product to $3 million. If it would cost $1 million to finish development and make the product, you _____ go ahead and do so. The most you should pay to complete development is_____.

Should, $3

Consider the market for minivans. For each of the following events, identify which of the determinants of demand are affected. If demand is unaffected by this event because it creates a supply change, select the "None" option. People decide to have more children.___ A strike by steelworkers raises steel prices.___ Engineers develop new automated machinery for the production of minivans.___ The price of sports utility vehicles rises.___ A stock-market crash lowers people's wealth.___ People decide to have more children.___ A strike by steelworkers raises steel prices.___ Engineers develop new automated machinery for the production of minivans.___ The price of sports utility vehicles rises.___ A stock-market crash lowers people's wealth.___

Tastes, None, None, None, Price of substitute or compliment, Income, None, Input Prices, Technology, None, None

Which of the following describe some of the trade-offs faced by a professor deciding how much time to spend preparing for class? Check all that apply.

The better the lecture, the better his chances of tenure, but time spent preparing the lecture decreases the time he available to work on research. / The more he prepares, the better his lectures, but the less he prepares, the more free time he can enjoy doing something else.

Based on your understanding of Smith's arguments, explain why the common man of the interior of North America today is far richer in material standards than the common man located in the interior of Africa today.

The common man of interior North America lives in a region that is more populous and better connected to neighboring markets—hence a higher level of division of labor present than in interior Africa.

Movie tickets and DVDs are substitutes. If the price of DVDs increases, what happens in the market for movie tickets?

The demand curve shifts to the right.

Which one of the following is a role for government that Smith saw as essential:

The government needed to maintain a standing army

In a market economy...

The government, by distributing rights to undertake economic activities, decides what, how, and for whom to produce

Under mercantilism...

The government, by distributing rights to undertake economic activities, decides what, how, and for whom to produce

What is the cost of going skiing in this case? Check all that apply.

The value of your time spent studying. / The rental of any ski equipment you need. / The cost of a lift ticket.

The National Hockey League locked out the hockey players in an effort to negotiate a salary cap with the players' union. A cap would limit the payroll of each team. League officials acknowledged that the teams have brought the problem on themselves by overspending and overpaying some players in an effort to compete for the best players. Why would the teams have caused this problem for themselves?

They were caught in the logic of the prisoner's dilemma in which each player maximizing his own self-interest leads to an outcome that is worse off for everyone.

A dominant strategy exists when a particular strategy produces the best outcome for that player regardless of the strategies deployed by the other.

True

A key part of what makes a "prisoners' dilemma" a dilemma is the fact that the prisoners cannot cooperate.

True

According to Rawls, the social policies and institutions we agree upon should improve the circumstances of the least advantaged members of society.

True

According to Robert Frank, in recent years, all significant income growth has been concentrated at the top of the scale.

True

According to Smith, the extent to which the division of labor could increase depended upon the extent of the market.

True

According to Smith, the need for national defense grew more urgent as economic growth occurred.

True

According to microeconomics, individuals tend to act in their own self interest. However, Mankiw offers no recommendations in the opening chapters of his text for how humans can re-sculpt their brains so that their expression of self interest is more in line with cultivated positive qualities, such as compassion and gratitude.

True

Marx predicted that under capitalism as the time for economic and social revolution draws closer, the conditions for the workers would become much worse than the capitalists.

True

Nash says: In madness, I thought I was the most important world; madness offered an escape.

True

Nash won a Nobel Prize in economics for his work.

True

Nozick judges fairness by the procedures by which goods get distributed: As long as we acquire goods in fair ways, he argues, the outcome will be fair.

True

Once behind "a veil of ignorance", Rawls says that free and rational people will choose whatever procedures produce the fairest end-result.

True

One important step of learning is that you need to access or activate a useful mental state or experience, and install this activated mental state as lasting neural structure as a positive neural trait.

True

One important step of learning is that you need to access or activate a useful mental state or experience, and install this activated mental state as lasting neural structure as a positive neural trait. According to Hansen, very little attention has been given to the second by researchers compared to the attention received by the first.

True

Rawls advocates for perfect equality in society.

True

Smith claims that the workers themselves can invent labor-saving machinery.

True

The brain is inefficient at turning positive experiences though into lasting neural structural changes that engender these positive qualities. Hanson's work is about making the brain more efficient.

True

The brain—according to scientific research based on MRI—actually changes for the better if people do cultivation practices like the ones suggested by Hansen about 6 times a day for 30 seconds each.

True

The division of labor was a crucial component in the source of the wealth of nations for Adam Smith.

True

The economics profession failed to recognize the significance of Nash equilibrium until years after Nash conceived the idea.

True

The principle of transfer of holdings says that to be fair, an exchange must be voluntary.

True

Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods.___ Certain very talented people have a comparative advantage in everything they do.___ If a certain trade is good for one person, it can't be good for the other one.___ If a certain trade is good for one person, it is always good for the other one.___ If trade is good for a country, it must be good for everyone in the country.___

True, False, False, False, False

Complete the following table with the number of workers needed to make one car or 1 ton of grain in the United States and Japan. Complete the following table by determining the opportunity cost of a car and of grain for both the United States and Japan. Given this information, _____has an absolute advantage in producing cars, and _____ has an absolute advantage in producing grain. Also, _____ has a comparative advantage in producing cars, and _____ has a comparative advantage in producing grain. Complete the following table with the quantities of cars produced and consumed in each country if there is no trade. True or False: Both countries would be better off if they produce the good in which they have a comparative advantage and then trade 200 million tons of grain for 100 million cars.

US (1/4,1/10), Japan (1/4, 1/5), 2 1/2, 2/5, 1 1/4, 4/5, neither country, the United States, Japan, the United States, 200, 500, 200, 250,True

A life-saving medicine without any close substitutes will tend to have

a small elasticity of demand.

The most likely impact of an effective price floor is:

a surplus will develop.

When the price is ________ the equilibrium price, we would expect there to be a __________, causing the market to put __________ pressure on the price until it went back to the equilibrium price.

above; surplus; downward

Which of the following might lead to an increase in the equilibrium price of jelly and a decrease in the equilibrium quantity of jelly sold?

an increase in the price of grapes, an input to jelly

Two goods that are used together are called:

complements.

When both supply and demand shift to the right:

equilibrium quantity always rises.

Which of the following is both a shift in supply and a shift in demand?

expectations of future prices

A point inside the production possibilities frontier is

feasible, nut not efficient.

Greater investment in capital goods today leads to:

greater growth in the production possibilities frontier (PPF) in the future.

The more the current price exceeds the equilibrium price, the:

greater the resulting surplus will be.

The circular-flow diagram illustrates that, in markets for the factors of production,

households are sellers, and firms are buyers.

In the factor market:

households supply factors of production to business and are paid by business for doing so.

If the number of buyers in a market increases from 50 to 100, you would expect the equilibrium price to __________ and the equilibrium quantity to __________, holding all else constant.

increase; increase

When marginal utility is positive, total utility:

increases

A marginal change is one that

incrementally alters an existing plan.

Total revenue minus total cost is equal to:

profit

The discovery of a large new reserve of crude oil will shift the ________ curve for gasoline, leading to a ________ equilibrium price.

supply, lower

An increase in ________ will cause a movement along a given demand curve, which is called a change in ________.

supply, quantity demanded

A technological advancement for Good A will shift the __________ curve of Good A to the __________, making the equilibrium price __________.

supply; right; decrease.

A perfectly competitive firm

takes its price as given by market conditions.

If a nation has high and persistent inflation, the most likely explanation is

the central bank creating excessive amounts of money.

A change in which of the following will NOT shift the demand curve for hamburgers?

the price of hamburgers

The law of supply states that, all other things being equal,

the quantity supplied falls when the price falls, and the quantity supplied rises when the price rises.

The production possibilities frontier between two normal goods and services is typically bowed outward because:

the resources used to produce goods and services are not equally suited to the production of both goods.

The ability of firms to enter and exit a market over time means that, in the long run,

the supply curve is more elastic