ECON 401 Quiz 1

Every society faces​ trade-offs because we live in a world of scarcity. Suppose a​ student-athlete has the opportunity to earn $600 next year playing for a minor league baseball​ team, $100 next year playing for a European professional football​ team, or​ $0 returning to college for another year. What is the opportunity cost of the​ student-athlete returning to college next year? A: $600 B: $100 C: $700 D: $0

A: $600

The price of cereal rises. As a result, people have cereal for breakfast on fewer days and eat eggs instead. This behavior is an example of A: a decrease in the quantity demanded of cereal because of the substitution effect. B: an increase in the quantity demanded of eggs because of the income effect. C: a decrease in the quantity supplied of cereal because of the substitution effect. D: an increase in the quantity supplied of eggs because of the income effect.

A: a decrease in the quantity demanded of cereal because of the substitution effect.

Which of the following raises the equilibrium price and increases the equilibrium quantity of used cars? A: a fall in income if used cars are an inferior good B: an increase in the wage rate paid to used car salespeople C: Neither of the above because the question suggests a violation of the "law of demand". D: Neither of the above because the question suggests a violation of the "law of supply".

A: a fall in income if used cars are an inferior good

Scarcity is a situation in which A: people cannot satisfy all their wants. B: most people can get only bare necessities. C: people can satisfy all their wants. D: some people can get all they want and some cannot.

A: people cannot satisfy all their wants.

If the price of a video rental is below its equilibrium price, there will be a ________ of video rentals and the price will ________ . A: shortage; rise B: shortage; fall C: surplus; rise D: surplus; fall

A: shortage; rise

If a firm expects that the price of its product will be lower in the future than it is today A: the firm has an incentive to increase supply now and decrease supply in the future. B: the firm has an incentive to decrease supply now and increase supply in the future. C: the firm has an incentive to increase quantity supplied now and decrease quantity supplied in the future. D: the firm will not change supply until it knows for certain what will happen to its price.

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

2 A bakery can produce either cakes or cookies. If the price of cookies rises, then A: the supply curve of cake shifts leftward. B: the supply curve of cake shifts rightward. C: there is a movement downward along the supply curve of cakes. D: there is a movement upward along the supply curve of cakes

A: the supply curve of cake shifts leftward.

People buy more of good 1 when the price of good 2 rises. These goods are A: complements. B: substitutes. C: normal goods. D: inferior goods.

B: substitutes.

If a market is NOT in equilibrium, then which of the following is likely to occur? A: The demand curve will shift to bring the market to equilibrium. B: The supply curve will shift to bring the market to equilibrium. C: The price will adjust to bring the market to equilibrium. D: Both A and B are correct.

C: The price will adjust to bring the market to equilibrium.

The growing popularity of energy conservation has enticed large home improvement stores like Home Depot and Lowes to offer tankless water heaters. How does the fact that home improvement stores now offer these products affect the tankless water heater market? A: The demand curve for tankless water heaters shifts to the right. B: The demand curve for tankless water heaters shifts to the left. C: The supply curve for tankless water heaters shifts to the right. D: The supply curve for tankless water heaters shifts to the left.

C: The supply curve for tankless water heaters shifts to the right.

Which of the following is a positive statement? A: An unemployment rate of 9 percent is a national disgrace. B: Unemployment is a more important problem than inflation. C: When the national unemployment rate is 9 percent, the unemployment rate for inner-city youth is often close to 40 percent. D: Unemployment and inflation are equally important problems.

C: When the national unemployment rate is 9 percent, the unemployment rate for inner-city youth is often close to 40 percent.

Which of the following is a normative statement? A: The price of candy bars is $1.25 each. B: Candy bars are more expensive than newspapers. C: You should eat less candy. D: Popcorn and candy are sold in movie theaters.

C: You should eat less candy.

If Nike, an American corporation, produces sneakers in Thailand this would A: count as part of U.S. GDP since it is a U.S. corporation. B: count for both Thailand's GDP and U.S. GDP. C: add to Thailand's GDP but not to U.S. GDP. D: add to neither U.S. GDP nor Thailand's GDP.

C: add to Thailand's GDP but not to U.S. GDP.

Which of the following is a final good? A: the memory chips in your new smart phone B: a share of IBM stock C: flour purchased at the grocery store to bake cookies D: flour used by the bakery to bake cookies

C: flour purchased at the grocery store to bake cookies

The "law of demand" is illustrated by a A: rightward shift of the demand curve. B: leftward shift of the demand curve. C: movement along the demand curve. D: Both answers A and B are correct.

C: movement along the demand curve.

The "law of supply" refers to the fact that, all other things remaining the same, when the price of a good rises A: the supply curve shifts leftward. B: the supply curve shifts rightward. C: there is a movement up along the supply curve to a larger quantity supplied. D: there is a movement down along the supply curve to a smaller quantity supplied.

C: there is a movement up along the supply curve to a larger quantity supplied.

Which of the following is NOT a reason that GDP is a poor measure of a nation's economic welfare? A: GDP omits measures of political freedom. B: GDP does not take into account the value of people's leisure time. C: GDP does not include the underground economy. D: GDP overvalues household production

D: GDP overvalues household production

Economists point out that scarcity confronts A: neither the poor nor the rich. B: the poor but not the rich. C: the rich but not the poor. D: both the poor and the rich.

D: both the poor and the rich.

Ham and eggs are complements. If the price of ham rises, the demand for eggs will A: increase or decrease but the demand curve for ham will not change. B: decrease and the demand curve for ham will shift rightward. C: not change but there will be a movement along the demand curve for eggs. D: decrease and the demand curve for eggs will shift leftward.

D: decrease and the demand curve for eggs will shift leftward.

Gross domestic product (GDP) measures the A: number of final goods and services produced in the economy in a given time period. B: number of final goods and services sold in the economy in a given time period. C: market value of old and new final goods and services sold in the economy in a given time period. D: market value of final goods and services produced in the economy in a given time period.

D: market value of final goods and services produced in the economy in a given time period.

When the price of a good falls, the income effect for a normal good implies that people buy A: less of that good because the relative price of the good has fallen. B: more of that good because the relative price of the good has risen. C: less of that good because they cannot afford to buy all the things they previously bought. D: more of that good because they can afford to buy more of all the things they previously bought.

D: more of that good because they can afford to buy more of all the things they previously bought.

In 2013, Ozzie purchased a 2010 Ford Escort from his neighbor for his son, purchased a 2009 "one owner" Camry from Larchmont Toyota for his wife, bought a 2013 new Ford for himself, and sold his 2002 Dodge Caravan to his teenage nephew. Which, if any, of these transactions will be included in GDP in 2013? A: all four transactions B: all three purchases but not the sale C: the purchase of the Ford and the Caravan D: only the purchase of the Ford

D: only the purchase of the Ford

Which of the following is NOT included in GDP? A: production of services, such as the services of doctors B: production of goods that last more than one year, such as television sets C: production of goods that do not last more than one year, such as gasoline D: production in the home

D: production in the home