EC215 Prin of Microeconomics

"The distribution of income should be determined by the government" is an example of a positive economic statement.

False

For a person to have a comparative advantage in producing a product, he must be able to produce that product at a higher opportunity cost than his competitors.

False

For most goods and services, the burden of a tax is on the sellers.

False

The payment received by suppliers of entrepreneurial skills is called rent.

False

Which of the following is a microeconomics question?

How will Apple decide on a selling price for the iPad?

Which of the following is not a consequence of minimum wage laws?

Producers have an incentive to offer workers non-wage benefits such as health care benefits and convenient working hours rather than a higher wage.

If the price of toothpaste is represented by equation P = 40 - .5QD, then the corresponding quantity of toothpaste demanded is represented by the equation

QD = 80 - 2P.

Which of the following is a positive economic statement?

Raising the tax on gasoline raises the selling price of gasoline.

If the price of gasoline was $3.25 a gallon and it is now $3.75 a gallon, what is the percentage change in price?

15.4 percent

Let D = demand, S = supply, P = equilibrium price, and Q = equilibrium quantity. What happens in the market for electric vehicles if the government offers incentives to manufacturers to produce more electric vehicles?

S increases, D no change, P decreases, Q increases

For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries?

Switzerland has the comparative advantage in watches.

If additional units of a good are produced at an increasing opportunity cost, the production possibilities frontier would be bowed outward (concave).

True

Which of the following would shift the supply curve for MP3 players to the right?

a decrease in the price of an input used to produce MP3 players

A decrease in the price of pork will result in

a smaller quantity of pork supplied.

An example of a factor of production is

a worker hired by an auto manufacturer.

Which of the following is a factor of production?

an acre of forested land

Holding everything else constant, a decrease in the price of bicycles will result in

an increase in the quantity of bicycles demanded.

If a decrease in income leads to an increase in the demand for sardines, then sardines are

an inferior good.

The production possibilities frontier assumes all of the following except

any level of the two products that the economy produces is currently possible.

A production possibilities frontier with a ________ shape indicates increasing opportunity costs as more and more of one good is produced.

bowed outward

A(n) ________ is represented by a leftward shift of the demand curve while a(n) ________ is represented by a movement along a given demand curve.

decrease in demand; increase in quantity demanded

If the government implements a price ceiling on insulin, this will

decrease the quantity of insulin the manufacturers will be willing to supply.

Opportunity cost is defined as

he highest valued alternative that must be given up to engage in an activity.

In economics, the accumulated skills and training that workers have is known as

human capital.

Adam Smith's ________ refers to the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole.

invisible hand

A supply curve

is a curve that shows the relationship between the price of a product and the quantity of the product supplied.

Economic surplus

is equal to the sum of consumer surplus and producer surplus.

Because minimum wage is a price floor

it will create a deadweight loss.

The branch of economics which studies the behavior of entire economies is called

macroeconomics

In economics, the term ________ means "additional" or "extra."

marginal

In a competitive market equilibrium the ________ equals the ________ of the last unit sold.

marginal benefit; marginal cost

A grocery store sells a bag of potatoes at a fixed price of $2.30. Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes?

marginal revenue

The branch of economics which studies how households and firms interact in markets is called

microeconomics.

An economic ________ is a simplified version of some aspect of economic life used to analyze an economic issue.

model

In economics, all of the following is counted as "capital" except

money.

If a straight line passes through the point x = 12 and y = 4 and also through the point x = 4 and y = 8, the slope of this line is

negative one half.

Economic models do all of the following except

portray reality in all its minute details.

Rent control is an example of

price ceiling

The minimum wage is an example of

price floor

Every society faces economic trade-offs. This means

producing more of one good means less of another good can be produced.

Households

purchase final goods and services in the product market.

In New York City, about 1 million apartments are subject to rent control by the local government. Rent control

puts a legal limit on the rent that landlords can charge for an apartment.

At market equilibrium

quantity demanded equals quantity supplied.

Economists assume that rational people

respond to economic incentives.

Comparative advantage means

the ability to produce a good or service at a lower opportunity cost than any other producer.

According to the production possibilities model, if more resources are allocated to the production of physical and human capital, then all of the following are likely to happen except

the country's total production will fall.

A consumer is willing to purchase a product up to the point where

the marginal benefit is equal to the price of the product.

Consumer surplus in a market for a product would be equal to the area under the demand curve if

the market price was zero.

Increasing marginal opportunity cost implies that

the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.

A demand curve shows the relationship between

the price of a product and the quantity of the product demanded.

A change in all of the following variables will change the market demand for a product except

the price of the product.

Deadweight loss refers to

the reduction in economic surplus resulting from not being in competitive equilibrium.

If in the market for peaches the supply curve has shifted to the left

the supply of peaches has decreased.

Suppose when the price of laptops fall, college students buy more laptops. This implies that

there is a negative relationship between laptop prices and quantities purchased by college students.

A student comments to his roommate that the only way he will be able to pass his final exams is to not sleep for the next three days. This statement suggests that

there is a trade-off between studying and sleep.

Marginal analysis involves undertaking an activity

until its marginal benefits equal marginal costs.

Arthur buys a new cell phone for $150. He receives consumer surplus of $150 from the purchase. What value does Arthur place on his cell phone?

$300

Suppose a price floor on sparkling wine is proposed by the Health Minister of the country of Vinyardia. What will be the likely effect on the market for sparkling wine in Vinyardia?

Deadweight loss will increase.

The following equations represent the demand and supply for silver pendants.QD = 50 - 2PQS = -10 + 2PWhat is the equilibrium price (P) and quantity (Q - in thousands) of pendants?

P = $15; Q = 20 thousand

By definition, economics is the study of

The choices people make to attain their goals, given their scarce resources.

A decrease in input costs in the production of LCD televisions caused the price of LCD televisions to decrease. Holding everything else constant, how would this affect the market for video game consoles (a complement to LCD televisions)?

The demand for video game consoles would increase and the equilibrium price of video game consoles would increase.

How are the fundamental economic decisions determined in North Korea?

The government decides because North Korea is a centrally planned economy.

"Because apples and oranges are substitutes, an increase in the price of oranges will cause the demand for apples to increase. This initial shift in demand for apples results in a higher price for apples; this higher price will cause the demand curve for apples to shift to the right." Which of the following correctly comments on this statement?

The statement is false because a change in the price of apples would not change the demand for apples.

"Because chips and salsa are complements, an increase in the price of chips will cause the demand for salsa to decrease. This initial shift in demand for chips results in a higher price for chips; this higher price will cause the demand curve for chips to shift to the right." Which of the following correctly comments on this statement?

The statement is false because a change in the price of chips would not change the demand for chips.

Suppose an excise tax of $1 is imposed on every case of beer sold and sellers are responsible for paying this tax. How would the imposition of the tax be illustrated in a graph?

The supply curve for cases of beer would shift to the left by $1.

If a country produces only two goods, it is possible to have an absolute advantage in the production of both goods.

True