Unit 1
A leftward shift of the supply curve for computers could be caused by which of the following in the short run? A) A decrease in the number of computer manufacturers B) A decease in taxes on computer manufacturers C) A decrease in the price of computers D) A decrease in the price of components used to assemble computers E) An increase in the price of mobile devices, a substitute good
A) A decrease in the number of computer manufacturers
The diagram above shows two demand curves for video games identified as D1 and D2. Which of the following changes will most likely cause a shift of the demand curve from D1 to D2 as shown in the diagram? A) An increase in consumers' income, assuming that video games are a normal good B) An increase in the price of game consoles, a complementary good C) A decrease in the price of mobile games, a substitute good D) A decrease in the number of buyers in the market E) A decrease in the price of video games
A) An increase in consumers' income, assuming that video games are a normal good
If there is a decrease in the price of the coffee beans used to make brewed coffee, how will this affect the equilibrium price and quantity of brewed coffee? A) Equilibrium price will decrease and equilibrium quantity will increase B) Equilibrium price will decrease and equilibrium quantity will not change C) Equilibrium price will decrease and equilibrium quantity will decrease D) Equilibrium price will increase and equilibrium quantity will decrease E) Equilibrium price will increase and equilibrium quantity will not change
A) Equilibrium price will decrease and equilibrium quantity will increase
The table shows that Home Nation can produce five autos or one hundred computers using all its available resources in a year. Foreign Nation can produce five autos or fifty computers using all its available resources in a year. Home Nation | Foreign Nation Annual Annual Production | Production Possibilities Autos | Computers | Autos | Computers | 5 100 5 50 Based on the information provided above, which of the following must be true? A) Home Nation has an absolute advantage in the production of computers. B) Foreign Nation has an absolute advantage in the production of autos. C) Home Nation has a comparative advantage in the production of autos. D) Foreign Nation has a comparative advantage in the production of computers. E) Neither nation has a comparative advantage.
A) Home Nation has an absolute advantage in the production of computers.
Country X is a major buyer of Country Y's grains. Assume Country X's government announced an increase in taxes on its imports of Country Y's grains effective next month. How will this news likely affect consumers' demand for grains in Country X? A) It will increase now because the tax on imported grains will increase the future price of grains. B) It will decrease now because the tax on imported grains will increase the future price of grains. C) It will not change now because the tax on imported grains will increase the future price of grains. D) It will increase now because the tax on imported grains will increase the current price of grains. E) It will decrease now because the tax on imported grains will increase the current price of grains.
A) It will increase now because the tax on imported grains will increase the future price of grains.
Which of the following describes the relationship between price and quantity supplied according to the law of supply? A) Positive relationship, illustrated by an upward-sloping supply curve B) Positive relationship, illustrated by a downward-sloping supply curve C) Positive relationship, illustrated by a horizontal supply curve D) Negative relationship, illustrated by an upward-sloping supply curve E) Negative relationship, illustrated by a downward-sloping supply curve
A) Positive relationship, illustrated by an upward-sloping supply curve
Which of the following illustrates the effect of a decrease in an economy's resources using a production possibilities curve (PPC)? A) The economy's PPC will shift inward and to the left. B) The economy's PPC will shift outward and to the right. C) The economy's PPC will become steeper. D) The economy's PPC will become flatter. E) The economy's PPC will remain the same.
A) The economy's PPC will shift inward and to the left.
Use the table to answer the question below. Trucks Coffee (in tons) China 250 50 Malaysia 300 100 The table above shows the daily production possibilities for China and Malaysia in producing trucks and coffee using the same amount of resources. Based on the data provided, which of the following terms of trade are mutually beneficial for the two countries? A) 1 ton of coffee for 3 trucks B) 1 ton of coffee for 4 trucks C) 1 ton of coffee for 5 trucks D) 1 truck for 1 ton of coffee E) 1 truck for 5 tons of coffee
B) 1 ton of coffee for 4 trucks
The diagram above shows the production possibilities curve for the production of peaches and apples in Fruitland. Between points X and Y on the PPC, the opportunity cost of one unit of peaches is which of the following? A) 2 units of apples B) 1 unit of apples C) 2 units of peaches D) 1 unit of peaches E) 10 units of apples
B) 1 unit of apples
The diagram above shows two demand curves for video games identified as D1 and D2. Which of the following changes will most likely result in a movement from point X to point Y along the demand curve D1? A) A decrease in the number of buyers B) A decrease in the price of video games C) A decrease in the expected future price of video games D) An increase in the negative effects of video games on players E) An increase in the use of video games for educational purposes
B) A decrease in the price of video games
Assume an economy produces two goods, capital goods and consumer goods. If the production of capital goods increases in the current period, which of the following will occur for the current and future production possibilities curve (PPC) for consumer goods and capital goods? A) A movement along the current PPC and a leftward shift of the future PPC B) A movement along the current PPC and a rightward shift of the future PPC C) A rightward shift of the current PPC and a leftward shift of the future PPC D) A rightward shift of the current PPC and a rightward shift of the future PPC E) A movement along the current PPC with no shift of the future PPC
B) A movement along the current PPC and a rightward shift of the future PPC
Which of the following changes will increase the demand for bicycles? A) An increase in the price of bicycle helmets, a complementary good B) An increase in the price of scooters, a substitute good C) A decrease in the price of bicycles D) A decrease in consumers' income E) A decrease in the number of buyers
B) An increase in the price of scooters, a substitute good
All societies face a trade-off for every decision for which of the following reasons? A) A decision entails zero opportunity cost. B) Resources are scarce. C) Some resources are always unemployed. D) Resources have no alternative uses. E) Resources are not allocated efficiently.
B) Resources are scarce.
Allie is shopping when she finds a pair of running shoes priced at $90. When Allie uses her debit card to pay, it is declined because her balance is insufficient to cover the cost of the running shoes. Allie's situation best illustrates which economic concept? A) Opportunity cost B) Scarcity C) Unlimited resources D) Trade-offs E) Trade
B) Scarcity
If the wage rate of workers producing a good decreases, then which of the following will most likely occur? A) The demand curve will shift to the right. B) The supply of the good will increase. C) The quantity supplied of the good will decrease. D) Demand for the good will increase E) Quantity demanded for the good will decrease.
B) The supply of the good will increase.
Which of the following describes scarcity? A) Wants are limited. B) Wants exceed resources. C) Resources are unlimited. D) Resources are fully employed. E) Resources are allocated efficiently.
B) Wants exceed resources.
The table shows that Home Nation can produce five autos or one hundred computers using all its available resources in a year. Foreign Nation can produce five autos or fifty computers using all its available resources in a year. Home Nation | Foreign Nation Annual Annual Production | Production Possibilities Autos | Computers | Autos | Computers | 5 100 5 50 Based on the information provided above, which of the following are mutually beneficial terms of trade at which both Home and Foreign Nation will be willing to specialize and exchange? A) 1 auto for 1 computer B) 1 auto for 10 computers C) 1 auto for 17 computers D) 1 auto for 20 computers E) 1 auto for 25 computers
C) 1 auto for 17 computers
Use the given production possibilities curve (PPC) to answer the following question. A city government received a $1 million grant to build swimming pools and skating rinks for youth. Based on the data provided in the graph, what is the opportunity cost of building one swimming pool? A) 0.50 skating rink B) 0.50 swimming pool C) 2 skating rinks D) 2 swimming pools E) 5 skating rinks
C) 2 skating rinks
Which of the following will increase the market supply for new automobiles? A) An increase in the price of steel, an input in the production of automobiles B) An increase in taxes on automobile manufacturers C) An increase in subsidies to automobile manufacturers D) An increase in consumers' income E) An increase in the price of gasoline, a complementary good
C) An increase in subsidies to automobile manufacturers
If two nations specialize according to their individual comparative advantages and engage in trade, then which of the following must be true? A) Nations would be better off if they were self-sufficient. B) If one nation gains from trade with the other nation, then the other nation will lose. C) Both nations can consume beyond their individual production possibilities. D) Both nations can consume only what they produce. E) Both nations will lose from trade.
C) Both nations can consume beyond their individual production possibilities.
Matcha green tea is primarily cultivated by Japanese farmers. Suppose that Matcha green tea grows in popularity as its health benefits, namely its lower caffeine content, become known, and at the same time the government reduces taxes imposed on Japanese tea farmers. What is the likely effect on the equilibrium price and quantity in the Japanese Matcha tea market? A) Price increases, and quantity increases. B) Price decreases, and quantity decreases. C) Price is indeterminate, and quantity increases. D) Price is indeterminate, and quantity decreases. E) Price decreases, and quantity is indeterminate.
C) Price is indeterminate, and quantity increases.
The supply (S) and demand (D) for a good are shown in the diagram above. At a price of P2 in the diagram above which of the following will happen in the market? A) There will be a surplus of 30 units and 90 units will be exchanged. B) There will be a surplus of 90 units and 30 units will be exchanged. C) There will be a surplus of 60 units and 30 units will be exchanged. D) There will be a shortage of 90 units and 30 units will be exchanged. E) There will be a shortage of 30 units and 90 units will be exchanged.
C) There will be a surplus of 60 units and 30 units will be exchanged.
Which of the following will cause a movement along the demand curve for chicken, a normal good, resulting in an increase in the quantity demanded? A) An increase in consumers' income B) An increase in the price of fish, a substitute good C) An increase in the price of barbecue sauce, a complementary good D) A decrease in the price of chicken E) A decrease in the number of consumers of chicken
D) A decrease in the price of chicken
Which of the following is an example of a factor of production? A) A want B) A bank C) A bond D) Capital E) Stock
D) Capital
The diagram above shows the production possibilities curve for the production of peaches and apples in Fruitland. The production possibilities curve illustrates which of the following relationships? A) The production of peaches decreases as apple production decreases. B) The production of peaches increases as apple production increases. C) The opportunity cost of peach production decreases as apple production decreases. D) Fruitland cannot produce a combination of 5 units of peaches and 10 units of apples. E) Fruitland can produce only the combinations of peaches and apples illustrated by points X and Y.
D) Fruitland cannot produce a combination of 5 units of peaches and 10 units of apples.
The shape of a PPC illustrates the type of opportunity costs involved in production. What type of costs do PPC1 and PPC2 illustrate? A) PPC1 illustrates constant opportunity costs and PPC2 illustrates increasing opportunity costs. B) PPC1 illustrates constant opportunity costs and PPC2 illustrates decreasing opportunity costs. C) PPC1 illustrates increasing opportunity costs and PPC2 illustrates decreasing opportunity costs. D) PPC1 illustrates increasing opportunity costs and PPC2 illustrates constant opportunity costs. E) PPC1 illustrates decreasing opportunity costs and PPC2 illustrates constant opportunity costs.
D) PPC1 illustrates increasing opportunity costs and PPC2 illustrates constant opportunity costs.
The table below shows the landscaping productivity of Simone and Irina during an eight hour workday. Simone can mow twelve lawns or trim twenty four trees in eight hours. Irina can mow nine lawns or trim twelve trees in eight hours. Mow Lawns Trim Trees Simone 12 24 Irina 9 12 Based on the information in the table, which of the following is true? A) Irina has an absolute advantage in mowing lawns. B) Irina has an absolute advantage in trimming trees. C) Irina has a comparative advantage in trimming trees. D) Simone has an absolute advantage in trimming trees and mowing lawns. E) Simone has a comparative advantage in trimming trees and mowing lawns.
D) Simone has an absolute advantage in trimming trees and mowing lawns.
The supply (S) and demand (D) for a good are shown in the diagram above. At a price of P0 in the diagram above, which of the following is true? A) The existing surplus in the market will cause upward pressure on prices until equilibrium is reached at 75 units. B) The existing surplus in the market will cause downward pressure on prices until equilibrium is reached at 60 units. C) The existing shortage in the market will cause upward pressure on prices until equilibrium is reached at 30 units. D) The existing shortage in the market will cause upward pressure on prices until equilibrium is reached at 60 units. E) The existing shortage in the market will cause downward pressure on prices until equilibrium is reached at 45 units.
D) The existing shortage in the market will cause upward pressure on prices until equilibrium is reached at 60 units.
Use the table to answer the question below. Price of Quantity Quantity Candy Bar Demanded Supplied $1.00 1000 0 $2.00 775 100 $4.00 525 250 $5.00 375 525 $6.00 200 700 $7.00 50 1200 When the price of a candy bar is $6.00, which of the following is true? A) The market does not clear because the price is lower than the equilibrium price and there will be a surplus in the market. B) The market does not clear because the price is lower than the equilibrium price and there will be a shortage in the market. C) The market clears because buyers and sellers are in agreement on the price. D) The market does not clear because the price is higher than the equilibrium price and there will be a surplus in the market. E) The market does not clear because the price is higher than the equilibrium price and there will be a shortage in the market.
D) The market does not clear because the price is higher than the equilibrium price and there will be a surplus in the market.
Two nations sign a trade agreement expecting to enjoy mutual gains from the trade of a certain good. How will this event likely affect the supply of the good in the two nations? A) This event will likely cause a decrease in the quantity supplied of the good in both nations. B) This event will likely cause an increase in the quantity supplied of the good in both nations. C) This event will likely cause a decrease in the supply of the good in both nations. D) This event will likely cause an increase in the supply of the good in both nations. E) This event will likely have no effect on the good in either nation.
D) This event will likely cause an increase in the supply of the good in both nations.
Which of the following describes the law of supply? A) An increase in the price of a good will decrease the quantity demanded. B) The price of a good will increase if production input costs increase. C) An increase in taxes will decrease the supply of a good. D) An increase in the number of sellers will increase the supply of a good. E) An increase in the price of a good will increase the quantity supplied.
E) An increase in the price of a good will increase the quantity supplied.
Michael and Martha run a mechanic shop. In one hour Michael can perform eight oil changes or change ten tires. In one hour Martha can perform seven oil changes or change fourteen tires. Given this information which of the following is true? A) Martha has a comparative advantage in changing oil. B) Martha has an absolute advantage in changing oil. C) Michael has a comparative advantage in changing tires. D) Michael has an absolute advantage in changing tires. E) Michael has an absolute and a comparative advantage in changing oil.
E) Michael has an absolute and a comparative advantage in changing oil.
Which of the following describes the relationship between price and quantity demanded according to the law of demand? A) Positive relationship, illustrated by an upward-sloping demand curve B) Positive relationship, illustrated by a downward-sloping demand curve C) Negative relationship, illustrated by a horizontal demand curve D) Negative relationship, illustrated by an upward-sloping demand curve E) Negative relationship, illustrated by a downward-sloping demand curve
E) Negative relationship, illustrated by a downward-sloping demand curve
Which of the following contributes to the economic problem of scarcity? A) Human wants are insufficient. B) Resources are unlimited. C) Resources are efficient. D) Resources are expensive. E) Resources have alternative uses.
E) Resources have alternative uses.
Which of the following is not a scarce resource? A) Land B) Labor C) Capital D) Entrepreneurship E) Stocks
E) Stocks
Assume household income has fallen dramatically in Country X and the cost of construction materials for building new houses has increased. How will these changes affect the equilibrium price and equilibrium quantity for new houses? A) The equilibrium price will increase, and the equilibrium quantity will decrease. B) The equilibrium price will decrease, and the equilibrium quantity will decrease. C) The equilibrium price will decrease, and the equilibrium quantity will increase. D) The equilibrium price will decrease, and the equilibrium quantity will be indeterminate. E) The equilibrium price will be indeterminate, and the equilibrium quantity will decrease.
E) The equilibrium price will be indeterminate, and the equilibrium quantity will decrease.
