Econ 201 - Exam 1

Ben says, "an increase in tax on gasoline will raise its price." Holly argues "taxes should be increased because car emissions are harmful for the environment." We can conclude that:

Holly's statement is normative, but Ben's is positive

The price elasticity of demand for canned soup is estimated at -1.62. What happend to the sales revenue if the price of canned soup rises?

It falls

Which of the following best describes the comparative advantage of the two countries illustrated in Figure 17.1?

Japan has the comparative advantage in motorcycles; the United States in DVD players

Which of the following statements concerning the relationship between total product (TP) and marginal physical product (MPP) is NOT correct?

TP will fall if MPP is falling

In economics, which of the following is the best example of capital?

a computer used by a lawyer to prepared legal documents

Ceteris paribus, the quantity demanded of a good will decrease in response to

a higher price for the good

A price floor is

a lower limit on the price of a good

Ceteris paribus, which of the following events would most likely cause the production possibilities curve to shift inward?

a major earthquake destroys several industrial centers

Refer to figure 3.5. With rent control, the legal rental price is $1,000 per month. This will result in:

a shortage of 300 apartments

Comparative advantage refers to a country's

ability to produce a specific good at a lower opportunity cost than another country

Marginal utility refers to the

additional utility from consuming one more unit of a good

International trade

allows all countries to consume beyond their production possibilities

Ceteris paribus, which of the following will cause the demand for pizza to increase in a college town?

an increase in the number of students who eat pizza

In table 5.4, fixed costs:

are equal to $40

According to the Law of Demand

as the price of a good falls, the quantity demanded will increase in a given time period

Specialization and trade benefits:

both rich and poor countries

Suppose the price elasticity of demand for tacos is -0.80. If the price of tacos increases by 10%, then the demand for tacos should, given ceteris paribus:

decrease by 8%

When income decreases, the demand for most products

decreases and the demand curve shifts to the left

If a firm finds that it can sell 20,000 units at a price of $5 per unit and 25000 units at a price of $4 per unit in the price range is

elastic

Rising marginal costs result from:

falling marginal physical product

How are the fundamental economic questions answered in a mixed economy?

households, firms, and the gov't interact in markers to decide the answers

The study of economics focuses on

how best to allocate scarce resources

Which of the following is a positive economic statement?

if the price of iPhones fall, a larger quantity of iPhones will be purchased

With a greater amount of consumption, total utility:

increases as long as marginal utility is positive

Assuming the level of resources and technology are constant, if France decreases the size of its military then:

its production of consumer goods can increase

The factors of production include

land, labor, capital, and entrepreneurship

The demand for all carbonated beverages is likely to be... the demand for Dr. pepper

more inelastic than

If an increase in income leads to an increase in the demand for peanut butter, then peanut butter is a

normal good

Given that resources are scarce:

opportunity costs are experienced whenever choices are made

Ceteris paribus, in which of the following instances will total revenue decline?

price rises and demand is elastic

Ceteris paribus, according to the law of supply, if the price of lawn mowing decreases from $50 per lawn to $45 per lawn, then the:

quantity supplied of lawn mowing will decrease

Comparative advantage refers to the

relative opportunity costs of producing a particular good

All points on the production possibilities curve

represent the use of all available resources

Olive oil producers want to sell more olive oil at a higher price. Which of the following events would have this effect?

research finds that consumption of olive oil reduces the risk of heart disease

When there is a shortage in a market, prices are likely to:

rise because some buyers will offer to pay a higher price

When the price of potato chips rises, the demand for pretzels also rises. This indicates potato chips and pretzels are

substitutes

If the first, second, third and fourth worker employed by the firm add 15, 21, 12, and 8 units of total product respectively, we can conclude that:

that after the second worker marginal product declines

Using all available resources, the US can produce 30 burgers or 20 tacos and Mexico can produce 10 burgers or 18 tacos.

the US has an absolute advantage in producing both goods

If a country has an absolute advantage, it has

the ability to produce a specific good with fewer resources than its trading partners

An increase in the supply of frozen yogurt will take place when

the cost of producing frozen yogurt decreases

Assume a toy company hiresan additional worker to assemble toys, and the size of the factory and amount of equipment remain constant. As a result, the level of output increases but by a smaller amount than when the previous additional worker was hired. This is an example of:

the law of diminishing returns

As more labor is hired in the short run, diminishing returns are observed because:

the new workers have less capital and land to work with

When economists talk about a trade-off between "guns and butter", they mean

the production of more military goods may require fewer consumer goods

Which of the following is an example of labor as a factor of production?

the skills and abilities of workers

With which unit of labor does diminishing marginal returns first appear in table 5.1?

third

Economists make a distinction between changes in quantity demanded and changes in demand

to distinguish a movement along a demand curve from a shift of the demand curve

Which of the following will always increase as output increases?

total cost

The difference between total utility and marginal utility is that

total utility is the complete satisfaction from consuming a good while marginal utility is the satisfaction from consuming one additional unit of a good

If marginal utility is negative, then

total utility will decrease with additional consumption

If a consumer receives 20 total units of utility from consuming two candy bars, and 25 total units of utility from consuming three candy bars, the marginal utility of the second candy bar is

unknown as more information is needed to determine the answer

If a firm increases output, total costs will rise because of a change in:

variable costs

In table 5.5, the total cost of 2 units is

$22

In table 5.6, the marginal cost of the third unit of output is

$3

What is the marginal cost of the 15th pair of jeans in table 5.2?

$4.00

Based on the information in table 17.1, the opportunity cost of producing 1 bushel of corn in country B is:

4.5 bushels of wheat

In table 1.1, what is the opportunity cost of increasing the production of missiles from 2 to 3 in terms of houses?

7,000 houses

Society might be able to produce this combination if new resources were discovered but cannot produce it with current resources. Select the appropriate point.

A

Refer to figure 3.1. Consider th e market for laptop computers. There is a decrease in the price of computers microchips.

B

Refer to figure 3.1. Consider the market for desktop computers. Consumers decide they like laptop computers better than desktops.

C

Refer to figure 3.1. Consider the market for new cars. People begin saving for retirement at a much higher rate.

C

Society is employing some of the available technology but not all of it. Select the appropriate point.

C

What is the marginal physical product of the second unit of labor in table 5.1?

16

Based on the information in Table 17.1, the opportunity cost of producing 1 tank in the United States is:

2 automobiles

Refer to figure 4.4. Using the percent change formula for elasticity, calculate the value of the price elasticity of demand going from point f to point e.

-2.5

Based on the information in table 1.1, the opportunity cost of producing 1 automobile in the Russia's

1/4 of a tank

Refer to figure 3.1. An increase in price of pickles would be represented by a movement from

B to A