ECO exam 1

A ceiling price in a competitive market will result in persistent surpluses of a product. true false

False

Products and services are scarce because resources are scarce. true false

True

Which of the following is a labor resource? a. a computer programmer b. a computer c. silicon (sand) used to make computer chips d. a piece of software used by a firm

a computer programmer

If two goods are complements: a. they are consumed independently. b. an increase in the price of one will increase the demand for the other. c. a decrease in the price of one will increase the demand for the other. d. they are necessarily inferior goods.

a decrease in the price of one will increase the demand for the other.

Microeconomics is concerned with: a. the aggregate or total levels of income, employment, and output. b. a detailed examination of specific economic units that make up the economic system. c. positive economics, but not normative economics. d. the establishing of an overall view of the operation of the economic system.

a detailed examination of specific economic units that make up the economic system.

Assume that the demand schedule for product C is downsloping. If the price of C falls from $2.00 to $1.75: a. a smaller quantity of C will be demanded. b. a larger quantity of C will be demanded. c.the demand for C will increase. d. the demand for C will decrease.

a larger quantity of C will be demanded.

A surplus of a product will arise when price is: a. above equilibrium with the result that quantity demanded exceeds quantity supplied. b. above equilibrium with the result that quantity supplied exceeds quantity demanded. c. below equilibrium with the result that quantity demanded exceeds quantity supplied. d. below equilibrium with the result that quantity supplied exceeds quantity demanded.

above equilibrium with the result that quantity supplied exceeds quantity demanded.

Cameras and film are: a. substitute goods. b. complementary goods. c. independent goods. d. inferior goods.

complementary goods

The basic difference between consumer goods and capital goods is that a. consumer goods are produced in the private sector and capital goods are produced in the public sector. b. an economy that commits a relatively large proportion of its resources to capital goods must accept a lower growth rate. c. the production of capital goods is not subject to the law of increasing opportunity costs. d. consumer goods satisfy wants directly while capital goods satisfy wants indirectly.

consumer goods satisfy wants directly while capital goods satisfy wants indirectly.

The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is _____. a. direct, inverse b. inverse, direct c. inverse, inverse d. direct, direct

direct, inverse

Economic resources are also called: a. free gifts of nature. b. consumption goods. c. units of money capital. d. factors of production.

factors of production.

The term laissez faire suggests that: a. land and other natural resources should be privately owned, but capital should be publicly owned. b. land and other natural resources should be publicly owned, but capital equipment should be privately owned. c. government should not interfere with the operation of the economy. d. government action is necessary if the economy is to achieve full employment and full production.

government should not interfere with the operation of the economy.

A market is in equilibrium: a. provided there is no surplus of the product. b. at all prices above that shown by the intersection of the supply and demand curves. c. if the amount producers want to sell is equal to the amount consumers want to buy. d. whenever the demand curve is downsloping and the supply curve is upsloping.

if the amount producers want to sell is equal to the amount consumers want to buy.

An increase in consumer incomes will: a. increase the demand for an inferior good. b. increase the supply of an inferior good. c. increase the demand for a normal good. d. decrease the supply of a normal good.

increase the demand for a normal good.

The production possibilities curve: a. shows all of those levels of production that are consistent with a stable price level. b. indicates that any combination of goods lying outside the curve is economically inefficient. c. is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced. d. shows all of those combinations of two goods that are most preferred by society.

is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced.

If a product is in surplus supply, its price: a. is below the equilibrium level. b. is above the equilibrium level. c. will rise in the near future. d. is in equilibrium.

is above the equilibrium level.

A market: a. reflects upsloping demand and downsloping supply curves. b. entails the exchange of goods, but not services. c. is an institution that brings together buyers and sellers. d. always requires face-to-face contact between buyer and seller.

is an institution that brings together buyers and sellers.

The four factors of production are: a. land, labor, capital, and money b. land, labor, capital, and entrepreneurial ability c. labor, capital, technology, and entrepreneurial ability d. labor, capital, entrepreneurial ability, and money

land, labor, capital, and entrepreneurial ability

The economizing problem is one of deciding how to make the best use of: a. virtually unlimited resources to satisfy virtually unlimited wants. b. limited resources to satisfy virtually unlimited wants. c. unlimited resources to satisfy limited wants. d. limited resources to satisfy limited wants

limited resources to satisfy virtually unlimited wants.

Which of the following is a land resource? a. a farmer b. an oil drilling rig c. a machine for detecting earthquakes. d. natural gas

natural gas

The term ceteris paribus means: a. that if event A precedes event B, A has caused B. b. that economics deals with facts, not values. c. other things equal. d.prosperity inevitably follows recession.

other things equal.

The scarcity problem: a. persists only because countries have failed to achieve continuous full employment. b. persists because economic wants exceed available productive resources. c. has been solved in all industrialized nations. d. has been eliminated in affluent societies such as the United States and Canada.

persists because economic wants exceed available productive resources.

The demand curve shows the relationship between: a. money income and quantity demanded. b. price and production costs. c. price and quantity demanded. d. consumer tastes and the quantity demanded.

price and quantity demanded

The law of demand states that: a. price and quantity demanded are inversely related. b. the larger the number of buyers in a market, the lower will be product price. c. price and quantity demanded are directly related. d. consumers will buy more of a product at high prices than at low prices.

price and quantity demanded are inversely related

The law of supply indicates that: a. producers will offer more of a product at high prices than they will at low prices. b. the product supply curve is downsloping. c. consumers will purchase less of a good at high prices than they will at low prices. d. producers will offer more of a product at low prices than they will at high prices.

producers will offer more of a product at high prices than they will at low prices.

The two basic markets shown by the simple circular flow model are: a. capital goods and consumer goods. b. free and controlled. c. product and resource. d. household and business.

product and resource.

Which of the following is a fundamental characteristic of the market system? a. property rights b. central planning by government c. unselfish behavior d. government-set wages and prices

property rights

An increase in product price will cause: a. quantity demanded to decrease. b. quantity supplied to decrease. c. quantity demanded to increase. d. the supply curve to shift to the right.

quantity demanded to decrease.

The term quantity demanded: a. refers to the entire series of prices and quantities that comprise the demand schedule. b. refers to a situation in which the income and substitution effects do not apply. c. refers to the amount of a product that will be purchased at some specific price. d. means the same thing as demand.

refers to the amount of a product that will be purchased at some specific price.

A nation's production possibilities curve is bowed out from the origin because: a. resources are not equally efficient in producing every good. b. the originator of the idea drew it this way and modern economists follow this convention. c. resources are scarce. d. wants are virtually unlimited.

resources are not equally efficient in producing every good.

The law of increasing opportunity costs exists because: a. resources are not equally efficient in producing various goods. b. the value of the dollar has diminished historically because of persistent inflation. c. wage rates invariably rise as the economy approaches full employment. d. consumers tend to value any good more highly when they have little of it.

resources are not equally efficient in producing various goods.

An effective ceiling price will: a.induce new firms to enter the industry. b. result in a product surplus. c. result in a product shortage. d. clear the market.

result in a product shortage.

An effective price floor will: a. force some firms in this industry to go out of business. b. result in a product surplus. c. result in a product shortage. d. clear the market.

result in a product surplus.

An improvement in production technology will: a. increase equilibrium price. b. shift the supply curve to the left. c. shift the supply curve to the right. d. shift the demand curve to the left.

shift the supply curve to the right

The concept of opportunity cost: a. is irrelevant in socialistic economies because of central planning. b. suggests that the use of resources in any particular line of production means that alternative outputs must be forgone. c. is irrelevant if the production possibilities curve is shifting to the right. d. suggests that insatiable wants can be fulfilled.

suggests that the use of resources in any particular line of production means that alternative outputs must be forgone.

Macroeconomics approaches the study of economics from the viewpoint of: a. the entire economy. b. governmental units. c.the operation of specific product and resource markets. d. individual firms

the entire economy.

Which of the following most closely relates to the idea of opportunity costs? a. tradeoffs b. economic growth c. technological change d. capitalism

tradeoffs

(Last Word) The fallacy of composition states that: a. because economic systems are composed of so many diverse economic units, economic laws are necessarily inexact. b. the anticipation of a particular event can affect the composition of that event when it occurs. c. what is true for the individual must necessarily be true for the group. d. because event A precedes event B, A is necessarily the cause of B.

what is true for the individual must necessarily be true for the group.