Econ 110 Final

If the United States lifted the embargo on Cuban products, what would happen in the U.S. market for Cuban cigars?

The supply curve would shift to the right

Which of the following describes a characteristic of a perfectly competitive market?

There are many buyers and sellers.

Which of the following best describes an assumption economists make about human behavior?

They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time. -

If consumers believe the price of hybrid vehicles will decrease in the future, this will cause the demand for hybrid vehicles to decrease now.

True

In a free market there are virtually no restrictions, or at best few restrictions, on how a good or service can be produced or sold.

True

In a two-good, two country world, if one country has an absolute advantage in the production of both goods, it can still benefit by trading with the other country.

True

Which of the following is a macroeconomics question?

What determines the unemployment rate?

The study of economics arises due to

scarcity

Increasing opportunity cost along a bowed out production possibilities frontier occurs because

some factors of production are not equally suited to producing both goods or services.

The processes used to produce goods and services describes

technology

If a firm expects that the price of its product will be lower in the future than it is today

the firm has an incentive to increase supply now and decrease supply in the future.

Who, in a modern mixed economy, decides what goods and services will be produced with the scarce resources available in that economy?

the government, consumers and producers

The production possibilities frontier shows

the maximum attainable combinations of two products that may be produced in a particular time period with available resources.

A demand curve shows the relationship between

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

By drawing a demand curve with price on the vertical axis and quantity on the horizontal axis, economists assume that the most important determinant of the demand for a good is

the price of the good

One would speak of a movement along a supply curve for a good, rather than a change in supply, if

the price of the good changes

The circular flow model demonstrates

the roles played by households and firms in the market system.

If in the market for bananas the supply curve has shifted to the right, then

the supply of bananas increased

Which of the following is an example of an economic trade-off that a firm has to make?

whether it is cheaper to produce with more machines or with more workers

________ occurs when economic benefits are distributed fairly.

Equity

An decrease in supply is caused by a decrease in the price of the product.

False

As population declines, scarcity eventually disappears.

False

If a country is producing efficiently and is on the production possibilities frontier, the only way to produce more of one good is with an advance in technology.

False

In response to a shortage the market price of a good will rise; as the price rises, the demand will decrease and supply will increase until equilibrium is reached.

False

Optimal decisions are made at the point where marginal benefit is maximize

False

Policies based on normative economic ideas tend to increase economic efficiency and improve equity.

False

Suppose your expenses for this term are as follows: tuition: $5,000, room and board: $3,000, books and other educational supplies: $500. Further, during the term, you can only work part-time and earn $4,000 instead of your full-time salary of $10,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college?

$11,500

All of the following are examples of spending on goods and services in the circular flow model except

Chaitanya buys a new spa pedicure chair for her expanding nail salon business.

Zane's Vanes is a service that restores old weather vanes. Zane has just spent $125 purchasing a 1920s era weather vane which he expects to restore and sell for $500 once the work is completed. After having spent $125, Zane realizes that he will need to spend an additional $200 on materials to complete the restoration. Alternatively, he can sell the weather vane without restoring it for $200. What should he do?

He should finish the restoration and then sell the weather vane.

For each pound of salami that Hungary produces, it gives up the opportunity to make 10 bottles of beer. Slovakia can produce 1 pound of salami for every 8 bottles of beer it produces. Which of the following is true about the comparative advantage between the two countries?

Hungary has the comparative advantage in beer.

What is an economic model?

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

Which of the following statements about positive economic analysis is true ?

Positive analysis uses an economic model to estimate the costs and benefits of different course of actions.

Holding all other personal characteristics-such as age, gender, and income-constant, economists would expect that

people without health insurance will be less likely to be overweight than people with health insurance.

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

a decrease in the price of an input used to produce smartphones

An example of a factor of production is

a worker hired by an auto manufacturer

If society decides it wants more of one good and ________, then it has to give up some of another good and incur some opportunity costs.

all resources are fully utilized

Holding everything else constant, an increase in the price of raisins will result in

an decrease in the quantity of raisins demanded

An increase in the demand for peanuts due to changes in consumer tastes, accompanied by an increase in the supply of peanuts as a result of favorable growing conditions, will result in

an increase in the equilibrium quantity of peanuts; the equilibrium price may increase or decrease

A successful market economy requires well defined property rights and

an independent court system to adjudicate disputes based on the law.

If a decrease in income leads to an increase in the demand for macaroni, then macaroni is

an inferior good

At a product's equilibrium price

any buyer who is willing and able to pay the price will find a seller for the product

Ted quits his $60,000-a-year job to be a stay-at-home dad. What is the opportunity cost of his decision?

at least $60,000

Which of the following is part of an economic model?

data

Which of the following statements about an entrepreneur is true?

develops the vision for the firm and funds the producing unit

There is often a trade-off between

economic efficiency and economic equity.

Allocative efficiency is achieved when

firms produce the goods and services that consumers value most.

The ________ effect of a price change refers to the impact of a change in the price of a good on a consumer's purchasing power.

income

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

An office supply store sells a ream of printer paper at a fixed price of $4.50. Which of the following is a term used by economists to describe the money received from the sale of an additional ream of paper?

marginal revenue