Econ E201 first test

What are sources of economic growth?

Changes in Resources (quality or quantity) and changes in technology

What happens to the demand curve If less buyers enter the market?

demand will shift to the left (implying it decreases).

What happens to the demand curve If consumers taste for a good increases?

demand will shift to the right (implying it increases).

What happens to the demand curve If more buyers enter the market?

demand will shift to the right (implying it increases).

What happens to supply curve if there is a rise in the price of a complement in production?

increases the supply of the good being considered.

What happens when marginal cost equals marginal benefit?

it is impossible to make people better off by reallocating resources and producing a different combination of goods.

What are the factors of production?

land, labor, capital, entrepreneurship

What happens to supply curve If there is a decrease in the prices of inputs?

the supply curve will increase (shift to the right)

What happens to supply curve If there is an increase in technology

the supply curve will increase (shift to the right)

What happens to supply curve If the price of a good is expected to raise in the future?

the supply of the good today decreases.

What does labor earn?

Wages

Suppose consumers revise their expectations and now believe that fishing boat prices are going to increase next month instead of staying at current prices. What would be expected on the current market price and market quantity of fishing boats? A) Both the market price and market quantity would increase B) The market price would increase and the market quantity would decrease C) The market price would decrease and the market quantity would increase D) Both the market price and market quantity would decrease E) No prediction can be made without knowing the price elasticity of demand

A) Both the market price and market quantity would increase

Suppose that while consumer's incomes are decreasing it is observed that the price and quantity of soybean crackers increases. Which of the following is most likely the explanation for the price and quantity changes in the soybean cracker market? A) Soybean crackers are inferior goods B) Soybean crackers are normal goods C) Soybean cracker meals are necessity goods D) Soybean cracker meals are luxury items E) Soybean crackers are compliments to some other goods

A) Soybean crackers are inferior goods

If the U.S. Surgeon General announces in a well believed report that increased wheat consumption could cause heightened anxiety levels among children and adults, what happens to the equilibrium price and quantity of shredded wheat? A) The equilibrium price falls and the equilibrium quantity decreases. B) Both the equilibrium price and quantity remain the same. C) The equilibrium price falls and the equilibrium quantity increases. D) The equilibrium price rises and the equilibrium quantity decreases. E) The equilibrium price rises and the equilibrium quantity increases.

A) The equilibrium price falls and the equilibrium quantity decreases.

The price of coffee beans, a normal good, increased by 10% from last year and the quantity of coffee beans purchased decreased by 2%. Which of the following best explains these changes in price and quantity purchased? A) There was a bad harvest of coffee beans B) Consumers' income increased C) The price of cocoa increased and cocoa is a substitute for coffee D) A recent scientific study that identified a connection between coffee consumption and throat cancer was highlighted in the news E)Many new coffee producers entered the market

A) There was a bad harvest of coffee beans

Suppose that soup is an inferior good. If consumer income declines at the same time that the number of soup suppliers increases, then the equilibrium price will _____ and the equilibrium quantity will _____. A) be indeterminate; increase B) be indeterminate; decrease C) decrease; decrease D) increase; be indeterminate E) decrease; be indeterminate

A) be indeterminate; increase

In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eight-hour day, Adam can produce either 8 loaves of bread or 8 pounds of butter. We know that Andy has a comparative advantage in the production of A) bread, while Adam has a comparative advantage in the production of butter. B) butter, while Adam has a comparative advantage in the production of bread. C) both bread and butter. D) bread and neither has a comparative advantage in the production of butter

A) bread, while Adam has a comparative advantage in the production of butter.

The opportunity cost of economic growth is A) present consumption that a nation gives up to accumulate capital B) investment that a nation gives up to increase its economic growth. C) future consumption that a nation gets if it gives up some present consumption. D) future consumption that a nation gives up to consume more today

A) present consumption that a nation gives up to accumulate capital

Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following is correct? A) Only Homer would be better off if Homer specialized in picking fruit and Teddy specialized in catching fish. B) Both Homer and Teddy would be better off if Homer specialized in catching fish and Teddy specialized in picking fruit. C) Both Homer and Teddy would be better off if Homer specialized in picking fruit and Teddy specialized in catching fish. D) Only Homer would be better off if Homer specialized in catching fish and Teddy specialized in picking fruit.

B) Both Homer and Teddy would be better off if Homer specialized in catching fish and Teddy specialized in picking fruit.

Which of the following is NOT a factor of production? A) The effort of farmers raising cattle. B) The wages paid to workers. C) Cattle D) The management skill of a small business owner. E) The water used to cool a nuclear power plant.

B) The wages paid to workers.

Suppose that the government of New York state promises to decrease taxes to a firm if it decides to stay in New York instead of moving to another state. This policy on the part of the state constitutes ________, to make the ________ of the firm remaining in New York. A) a command; marginal benefit exceed the marginal cost B) an incentive; marginal benefit exceed the marginal cost C) a command; marginal cost exceed the marginal benefit D) an incentive; marginal cost exceed the marginal benefit

B) an incentive; marginal benefit exceed the marginal cost

Suppose that you observe the price of tomatoes decreases after the supply for tomatoes increased. You then observe that people buy more lettuce at any price. These observations suggest that lettuce and tomatoes are ________. A) normal goods B) complements consumption C) complements in production D) substitutes in consumption E) inferior goods

B) complements consumption

A system of property rights _________________________________________________ A) reduces the efficiency of government, which reduces the growth rate of the economy over time. B) encourages economic growth by creating incentives to invest in capital and to be innovative. C) discourages economic growth by discouraging the development of new ideas and ways of doing things. D) encourages investment but discourages entrepreneurial activity, so the effect on economic growth is uncertain.

B) encourages economic growth by creating incentives to invest in capital and to be innovative.

When the production possibilities frontier is bowed outwards, the opportunity cost of producing more of one good A) cannot be determined. B) increases in terms of the amount foregone of the other good. C) produces a convex shaped curve. D) remains constant. E) decreases in terms of the amount foregone of the other good.

B) increases in terms of the amount foregone of the other good.

Your friend Jane makes the statement, "The cost of books has increased 100 percent over the past year," she is A) testing an economic model. B) making a positive statement. C) facing a tradeoff of book cost last year and this year. D) making a normative statement. E) making a post hoc fallacy.

B) making a positive statement.

. "Every time I wear my school's colors on Saturday, our team wins its football game." This statement is an example of ________________________________________ A) an opportunity cost for wining football games. B) post hoc fallacy. C) fallacy of composition. D) a normative economic statement. E) ceteris paribus fallacy.

B) post hoc fallacy.

After you graduate, you have decided to accept a position working at the Bureau of Labor Statistics for $45,000.00 a year. The two other offers you received were working for Wal-Mart for $38,000 and working for Ernst and Young consulting for $42,000. Of these two offers, you would have preferred the job at Ernst and Young. What is the opportunity cost of accepting the position at the Bureau of Labor Statistics? A) the $45,000 you are paid for working at the Bureau of Labor Statistics B) the $42,000 you would have been paid working for Ernst and Young C) the $42,000 you would have been paid working for Ernst and Young and the $38,000 you would have been paid working for Wal-Mart D) the $38,000 you would have been paid working for Wal-Mart E) None of the above are correct.

B) the $42,000 you would have been paid working for Ernst and Young

Suppose you are given a free ticket to take a night cruise on the Jordan River, which is nontransferable and has no resale value. The same night there is a concert by your favorite band the Marginalists, which is your next best alternative. Tickets to see the Marginalists cost $100. On any given day, you would be willing to pay up to $105 to the Marginalists. Assume there are no other costs for going on the cruise or seeing the concert. Based on this information, what is the opportunity cost of going on the cruise? A) $105 B) $0 C) $5 D) $205 E) $100

C) $5

Jed had an exam score of 50 percentage points. There is an extra credit assignment that Jed can complete that will raise his exam score by 20 percentage points. Jed has determined that the extra credit assignment will take 10 hours of his time. Jed will complete the assignment he values the A) additional 20 percentage points more than the first 50 percentage points. B) wants a higher score. C) 20 percentage points more than the 10 hours of his time. D) 10 hours of his time more than the 20 percentage points. E) 70 percentage points more than the 10 hours of his time.

C) 20 percentage points more than the 10 hours of his time.

Leather used in making shoes comes from cattle, which are also raised for beef production. Holding all other factors constant, suppose that the world demand for beef decreases. What is the expected affect in the market for leather shoes? A) The equilibrium price and equilibrium quantity will both increase B) The equilibrium price and equilibrium quantity will both decrease C) The equilibrium price will increase, but the equilibrium quantity will decrease D) The equilibrium price will decrease, but the equilibrium quantity will increase E) The equilibrium price will increase, but the equilibrium quantity is undetermined

C) The equilibrium price will increase, but the equilibrium quantity will decrease

Suppose a drought destroys much of the U.S. orange crop. Also during this time, the number of buyers of oranges in the United States increases. Additionally, the drought effect is anticipated to be much less in size than the buyer effect. Accordingly, the equilibrium price of oranges will _____ and the equilibrium quantity will _____. A) increase; decrease B) be indeterminate; decrease C) increase; increase D) increase; be indeterminate E) decrease; increase

C) increase; increase

Crude oil is an input used in the production of gasoline. It is also an input used in producing plastic that is used in producing automobile parts. Suppose there is a large increase in the price of crude oil due to changes in the oil market's supply. What are the anticipated effects of the equilibrium quantity and price for automobiles that use gasoline? A) The market price will decrease and the market quantity could increase, decrease, or remain the same B) The market quantity will increase and the market price could increase, decrease, or remain the same C) The market quantity will decrease and the market price will increase D) The market quantity will decrease and the market price could increase, decrease, or remain the same E) The market quantity will decrease and the market price will increase

D) The market quantity will decrease and the market price could increase, decrease, or remain the same

DVDs and CDs are substitutes in production and not related in consumption. If there is an increase in the demand for DVDs that increases the market price of a DVDs, we would expect to see ________________________ A) a decrease in the supply of CDs. B) a decrease in the quantity supplied of CDs but not in the supply. C) an increase in the supply of CDs. D) an increase in the quantity supplied of CDs but not in the supply.

D) an increase in the quantity supplied of CDs but not in the supply.

Assume that beef and pork are substitutes for consumers. There is a drought in the cattle gazing areas that leads to cattle being underfed. What is the expected effect of this change in the beef market on the pork market? In the market for pork, ________________. A) the supply and the demand curve will shift leftward B) the supply curve would shift rightward C) the supply curve would shift leftward D) the demand curve would shift rightward E) the demand curve would shift leftward

D) the demand curve would shift rightward

The ultimate cost of any choice is A) the dollars expended on the good. B) what someone else would be willing to pay. C) the value of the good assessed by an independent auditor. D) the highest-valued alternative forgone. E) the after-tax cost to the individual.

D) the highest-valued alternative forgone.

Considering only candy bars and fast food meals, if the price of a candy bar is $1 and the price of a fast food meal is $5, we can say that ___________________________________________ A) the relative price of a candy bar is 5 fast food meals. B) the money price of a candy bar is 1/5 of a fast food meal. C) the money price of a fast food meal is 1/5 of a candy bar. D) the relative price of a fast food meal is 5 candy bars

D) the relative price of a fast food meal is 5 candy bars

Consumers come to expect that the price of a gallon of gasoline will decrease next week. As a result, you would expect A) next week's supply of gasoline decreases. B) today's supply of gasoline increases. C) today's demand for gasoline increases. D) today's demand for gasoline decreases. E) the price of a gallon of gasoline increase today

D) today's demand for gasoline decreases.

Beef and leather belts are complements in production. If people's concern about health shifts the demand curve for beef leftward, you would predict that in the market for leather belts there will be _____________________________________ A) a lower equilibrium price for a leather belt that results from an increase in the supply of leather belts. B) no change in the equilibrium price. C) a higher equilibrium price for a leather belt that results from an increase in the supply of leather belts. D) a lower equilibrium price for a leather belt that results from a decrease in the supply of leather belts. E) a higher equilibrium price for a leather belt that results from a decrease in the supply of leather belts.

E) a higher equilibrium price for a leather belt that results from a decrease in the supply of leather belts.

What does capital earn?

Interest

What does entrepreneurship earn?

Profit

What does land earn?

Rent

What happens to supply curve if there is a fall in the price of a substitute in production?

This increases the supply of the good

Factors of production, goods and services flow in one direction whereas money flows in the opposite direction. True or False?

True

What do changes in demand and/or supply lead to?

changes in the price of the good or service and in the quantity produced and consumed.

What happens to supply curve If more sellers enter the market?

supply will shift to the right (implying it increases or shifts to the right).

What happens if the price of a good is expected to raise in the future?

the demand for the good today increases.

What happens when expected future income increases?

the demand today increases