ECO-251 exam study guide

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Which of the following is an example of a durable good?

Binoculars

The figure given below shows the production possibilities frontier for mufflers and socks. The opportunity cost of moving from point b to d is:

100 socks

In what ways is consumer demand different from consumer wants?

Demand takes into account the ability to pay

Which of the following is a defining characteristic of a public good?

It is freely available to everyone once it is produced

Jennifer expects the price of chewing gum to go up by 10 percent next week. Which of the following is the most likely result of such an expectation?

Jennifer's demand for chewing gum will increase during this week

Refer to Exhibit 4.4, which shows the supply curve of a good. Which outcome will result when price increases from P to P'?

Quantity supplied will increase

A cottage industry is one that:

carries out production in workers' homes

Externalities are defined as:

costs or benefits that fall on third parties

If the price of potato chips increases, other things constant, the demand for potato chip dips will _____

decrease, because the goods are complements

An increase in the price of a good normally increase the

demand for its substitutes

The law of demand is illustrated by a demand curve that is

downward sloping

The figure below shows the production possibilities frontier for Good A and Good B. In the figure below, given the quantity of resources and level of technology, which of the following points is unattainable?

e

The figure below shows the production possibilities frontier for Good A and Good B. In the figure below, if all the economy's resources are used efficiently to produce only good B, then the economy will be at point:

g

The figure below shows the production possibilities frontier for Good A and Good B. In the figure below, if resources are used fully and efficiently, then the economy can produce at point(s):

g,h, or i

If people believe that prices are going to be higher in the future than they are today, they will

increase their demand now

If Good A and Good B are complements, then a decrease in the price of Good B _____

increases the demand for Good A.

Adam Smith's term "the invisible hand" refers to:

market forces

The law of demand states that _____

other things constant, quantity demanded varies inversely with price.

Households:

own and sell resources

A good economic theory:

predicts well

The labor market is an example of:

resource market

Households act as suppliers when they provide:

resources to firms and governments

The term "utility" refers to:

satisfaction

The table given below shows the quantity supplied and the quantity demanded of a good at different prices. If the price of the good is $1.40, there is a _____.

shortage of 30 units

The table given above shows the quantity supplied and the quantity demanded of a good at different prices. If the price of the good described in the table given below is $1.60, then there is a _____

surplus of 30 units

Which of the following best defines supply?

the amount of a good that producers are willing and able to sell at each possible price, other things constant

Which of the following is an example of a positive economic statement?

​An increase in the price of gasoline will cause a reduction in the amount of gasoline purchased.

Which of the following is an example of a normative economic statement?

​Women should earn the same income as men

A production possibilities frontier can shift outward for all of the following reasons except:

​a decrease in the size of the labor force

A country has an absolute advantage in the production of a good if that country:

​can produce the good using fewer resources than another country would require

The law of comparative advantage says that a person should produce a good if he or she:

​has the lowest opportunity cost of producing that good

A resource is something that:

​is used to produce goods and services

The figure given below shows the production possibilities frontier for mufflers and socks. If society moves from point c to point d, then society:

​loses 30 mufflers

Scarcity:

​occurs when a resource is not freely available

An outward shift of the production possibilities frontier:

​reflects economic growth

Adam Smith believed that people's pursuit of their own self-interests:

​tended to promote general welfare

Macroeconomics is the study of:

​the behavior of the economy as a whole

Microeconomics is the study of:

​the economic behavior of individual decision makers

The law of comparative advantage says that:

​the individual with the lowest opportunity cost of producing a particular good should produce it.

Goods and services are scarce because:

​they are produced using scarce resources

To say that people make decisions at the margin means that:

​they weigh the additional costs and the additional benefits of various activities before they make a decision.

Which of the following is not a reason why some production continues in households?

Some household production requires many specialized resources.

Which of the following is true of import tariffs and quotas?

They benefit domestic producers.

A PPF will not shift because of an increase in

Unemployment

Refer to Exhibit 4.3, which shows the supply curves of baby formula. The development of a more efficient production technology for producing baby formula is likely to cause _____

a rightward shift of the supply curve from S1 to S2

A tariff is:

a tax on imports

The difference between normal and inferior goods is that

an increase in income will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward

Gross domestic product is the market value of:

all final goods produced during the course of a year

A movement along the demand curve for a good can be attributed to a change in _____

the quantity demanded of the good

An improvement in technology would shift

the supply curve rightward

Which of the following is the fundamental resource that is the basis of labor?

time


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