Econ exam 1

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A decrease in supply will cause the largest increase in price when

both supply and demand are inelastic.

An example of an explicit cost would be the wages that a business owner pays her employees.

true

T/F inflation is the primary terminate of a country's living standards

faluse

Brady Industries has average variable costs of $1 and average total costs of $3 when it produces 500 units of output. The firm's total fixed costs equal

$1,000

Tom's Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $80 for 10,000 tents. At that level of output, the firm's average total costs equal

$110

Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is Kelly's annual opportunity cost of the financial capital that has been invested in the business?

$170

The Three Amigo's company produced and sold 500 dog beds. The average cost of production per dog bed was $50. Each dog bed can be sold for a price of $65. The Three Amigo's total costs are

$25,000.

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that the average total cost when 5 units of output are produced is $30, and the marginal cost of the sixth unit of output is $60. What is the average total cost when six units are produced?

$35

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that when four units of output are produced, the total cost is $175, and the average variable cost is $33.75. What would the average fixed cost be if ten units were produced?

$4

Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is

$500

Carol Anne makes candles. If she charges $20 for each candle, her total revenue will be

$500 if she sells 25 candles.

It costs a company $35,00 to produce 700 graphing calculators. The company cost will be $ 35,070 if ti produces an additional graphing calculation. The company is currently producing 700 graphing calculators. What is the minimum price the company will charge for the 701th calculator

$70.00

Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her home-organization services. One spring day, Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce.

-$80

The slope of a line that passes through the points (20,30) and (40,14( is

-4/5

Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's Sealcoating Service is

0.47

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

0.67, and an increase in price will result in an increase in total revenue for good A.

at which of the following prices would both Jamaica and Norway gain from trade with the other

1 radio for 4 coolers

If the production possibilities frontier shown for Arturo is for 100 hours of production then how long does ti take for Arturo to make on burrito

1/3 hour

Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 181 units of output per day when 16 workers are hired, holding other inputs fixed. The marginal product of the 16th worker is

16 units of output

IF the productions possibilities frontier shown is for two months of production then which of the following combinations of peanuts and cashews could Brazil produce in two months

3 pounds of peanuts and 150 pounds of cahsews

If Arturo and Dina each divides his/her time equally between the production of tacos and burritos, then total production is

400 tacos and 250 burritos

Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Murphy can paint five houses per week. What is the maximum total output possible if Eldin hires Murphy?

8 houses

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

A 13.33 percent increase in the price of the good

Which of the following changes would not shift the supply curve for a good or service?

A change in the price of the good or service

Which of the following changes would not shift the demand curve for a good or service?

A change in the price of the good or service.

Which of the following events would cause both the equilibrium price and equilibrium quantity of number two grade potatoes to increase if number two grade potatoes are an inferior good?

A decrease in consumer income

For which of the following individuals would the opportunity cost of going to college be highest

A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree

Which of the following costs of publishing a book is a fixed cost?

Composition, typesetting, and jacket design for the book

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?

Consumer and producer surplus

In a country A a worker who works 40 hours can produce 200 pounds of rice or 100 pounds of broccoli. In country B a worker who works 40 hours can produce 160 pounds of rice or 120 pounds of broccoli. Which country if either has an absolute advantage producing rice?

Country a has the absolute advantage because they can produce 200 pounds of rice while country b can only produce 160 pounds in the same amount of time

Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

which of the following claims is consistent with the views of mainstream economists?

If we increase the rate of inflation from 3 precent to 6 precent than the rate of unemployment will temporarily fall

Which of the following statements about agriculture in the United States is correct?

Increasing the supply of agricultural products typically benefits consumers but harms farmers as a group.

Which of the following demonstrates the law of demand?

Jayden buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal.

Jennifer takes 2 hours to make a loaf of bread and 1 hour to make a dozen cookies. Janet takes 3 hours to make a loaf of bread and 3/4 hours to make a dozen cookies. Who, if either, has an absolute advantage baking bread? Who, if either, has an absolute advantage making cookies?

Jennifer has the absolute advantage when it comes to make bread since she can make a loaf in 2/3 the time that Janet can. While Janet has the absolute advantage in terms of making cookies since she can make a dozen in 3/4 the times that Jennifer can

if Korea is capable of producing either rshoes or soccer balls or some combination of the two then

Koreas opportunity cost of shoes is the inverse of its opportunity cost of soccer balls

In the circular-flow diagram, which of the following is not a factor of production

Money

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation?

New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy.

Pete owns a shoe-shine business. His accountant most likely includes which of the following costs on his financial statements?

Shoe polish and rent on the shoe stand

Describe the difference between the short run and the long run.

Short runs would be something that has a fixed input but only for a period of time. While a long run is the idea that there is a equilibrium and therefor all different types of markets get adjust to the equilibrium.

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost?

The cost of the steel that is used in producing automobiles

What will happen in the market for shotgun-shell ammunition now if buyers expect higher shotgun-shell prices in the near future?

The demand for shotgun-shell ammunition will increase.

What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that reduced the amount of labor necessary to produce them?

The equilibrium price would decrease, and the equilibrium quantity would increase.

What would happen to the equilibrium price and quantity of lattés if the cost of producing steamed milk, which is used to make lattés, rises?

The equilibrium price would increase, and the equilibrium quantity would decrease.

The current price of blue jeans is $30 per pair, but the equilibrium price of blue jeans is $25 per pair. As a result, which of the following statements is not true?

There is a shortage of blue jeans at the $30 price.

After much consideration you have chosen Ireland over Spain for your study abroad program next year. however the deadline for your final decision is still months away and you may reverse this decision which of the following events could prompt you to reverse this decision?

The marginal benefit of going to Spain increase

Which of the following events could cause an increase in the supply of ceiling fans?

The number of sellers of ceiling fans increases.

Which of the following is an example of an implicit cost?

The owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm

Which of the following events would cause the price of oranges to fall?

The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges.

Which of the following events would cause a movement upward and to the left along the demand curve for olives?

The price of olives rises.

Which of the following is not a determinant of the demand for a particular good?

The prices of the inputs used to produce the good

Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve.

Which of the following is not a determinant of the price elasticity of demand for a good?

The steepness or flatness of the supply curve for the good

Elian's aunt gave her $100 for her birthday with the conditions that Elena buys herself something in deciding how to spend the money Elena narrows her options down to four choices option a option b option c and option d. each option cost $100 finally she decides on option B The opportunity cost of this decision is

The value to Elena of the option she would have chosen had option b not been available

Suppose the cost flying a 100- seat plane for an airline is $50,000 and there are 10 empty seats on the flight the marginal cost of flying a passenger is

This cannot be determined from the information given

Which of the following is an example of a normative, as opposed to a positive, statement?

Universal healthcare would be good for US citizens

if the United States decide to trade with Yemen we know that

Yemen and the United States can both benefit

Thousands of people develop Lund cancer from second hand exposure to cigarette smoke. This is an example of

a market failure caused by an externally

What does it mean when production on one item increase and another decrease

a movement along the demand curve

You lose your job and, as a result, you buy fewer iTunes music downloads. This shows that you consider iTunes music downloads to be

a normal good

the gains from trade are

a result of more efficient resource allocation than would be observed in the absence of trade

the gains from trade are

a result of more efficient resources allocation than would be observed in the Adsense of trade

If a surplus exists in a market, then we know that the actual price is

above the equilibrium price, and quantity supplied is greater than quantity demanded.

Suppose that for a particular business there are no implicit costs. Then

accounting profit will be the same as economic profit.

when the government prevents prices from adjusting naturally to supply and demand it

adversely affects the allocation of resources

The average fixed cost curve

always declines with increased levels of output.

What would shift production of one item to producing more but not changing any other products

an improvement in the production technology of on good

if the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price then we would expect relative to the market outcome

an increase in the number of visits people would want to make an a decrease in the numbers of visits health care providers want to provide

Average total cost is very high when a small amount of output is produced because

average fixed cost is high.

If a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would

be horizontal

A likely example of complementary goods for most people would be

chips and salsa

positive statements are

claims about how the world is

the gains from specializations and trade are based on _________ advantage

comparative

the most obvious benefit of specialization and trade is that they allow us to

consume more goods than we otherwise would be able to consumer

Justin builds fences for a living. Justin's out-of-pocket expenses (for wood, paint, etc.) plus the value that he places on his own time amount to his

cost of building feces

your professor love her work, teaching economics. she has been offered other positions in the corporate world that would increase her income by 25 precent, but she has decided to continue working as a professor. her decision would not change unless the marginal

cost of teaching increased

The line that relates the price of a good and the quantity supplied of that good is called the supply

curve, and it usually slopes upward.

t/f opportunity cost refers to how many inputs a producer requires to produce a good

false

t/f production possibilities frontiers cannot be used to illustrate trade offs

false

t/f the gains from specialization and trade are based on absolute advantage

false

The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10 percent. Refer to Scenario 5-2. The equilibrium price will

decrease in both the aged cheddar cheese and bread markets.

The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10 percent. Refer to Scenario 5-2. Total consumer spending on aged cheddar cheese will

decrease, and total consumer spending on bread will decrease.

Equilibrium quantity must decrease when demand

decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.

Equilibrium price must decrease when demand

decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously.

If the number of buyers in a market decreases, then

demand will decrease.

For which of the following goods is the income elasticity of demand likely highest?

diamonds

If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost. Refer to Scenario 13-4. Farmer Brown's production function exhibits

diminishing marginal product.

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

economies of scale.

Economist sometimes give conflicting advice becasue

economists have different values and scientific judgments

large or persistent inflation is almost always caused by

excessive growth in the equity of money

A firm's total profit equals its marginal revenue minus its marginal cost.

false

A movement upward and to the left along a given demand curve is called a decrease in demand.

false

If a company making frozen orange juice expects the price of its product to be higher next month, it will supply more to the market this month.

false

If the government imposes a binding price floor in a market, then the consumer surplus in that market will increase.

false

If there is an improvement in the technology used to produce a good, then the supply curve for that good will shift to the left.

false

It is not possible for demand and supply to shift at the same time.

false

Monopolists are price takers.

false

Price will rise to eliminate a surplus.

false

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

false

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

false

There is general agreement among economists that the long-run time period exceeds one year.

false

t/f Whenever a country has an absolute advantage in the production of a good, that implies that the country should specialize in the production of that good.

false

t/f if on producer is able to produce a good at a lower opportunity cost than some other producer then the producer with the lower opportunity cost is said to have an absolute advantage In the production of that good

false

t/f when there are two people and each is capable of producing two goods it is possible for one person to have a comparative advantage over the other in both goods

faluse

Economists include both explicit and implicit costs while accountants include only implicit costs.

fase

in the simply circular flow diagram which of the follow is not ture

firms own the factors of production

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the

flatter the demand curve will be.

Soup is an inferior good if the demand

for soup falls when income rises

Yvette buys and sells real estate. Two weeks ago, she paid $300,000 for a house on Pine Street, intending to spend $50,000 on repairs and then sell the house for $400,000. Last week, the city government announced a plan to build a new landfill on Pine Street just down the street from the house Yvette purchased. As a result of the city's announced plan, Yvette is weighing two alternatives: She can go ahead with the $50,000 in repairs and then sell the house for $290,000, or she can forgo the repairs and sell the house as it is for $250,000. She should

forgo the repairs and sell the house as it is for $250,000

Devin works as an attorney for a corporation and is paid a salary in exchange for the legal services he performs. Juan owns office buildings and rents his buildings to companies in exchange for rent payments. If Devin'g income is represented by a flow of dollars from Box D to Box B of this circular- flow diagram, then Juan's income is represented by a flow of dollars (c on the top, d on the bottom, a on the left, and b on the right)

from box c to box a

In the circular flow diagram in the markets for

goods and services households are buyers and firms are sellers

in the circular flow diagram in the markets for

goods and services households are buyers and firms are sellers

Central planning refers to

government guiding economic activity. Today many countries that had this system have abandoned it.

which of the following statements does not supply a market economy

government policies are the primary forces that guide the decisions of firms and households

the rate of trade- off between producing chairs and producing couches depends on how many chairs and couches are being produced in

graph a only

The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10 percent. Refer to Scenario 5-2. The change in equilibrium quantity will be

greater in the bread market than in the aged cheddar cheese market.

economist at the department of justice

help enforce the nations antitrust lawas

The x-coordinate of an order pair specified the

horizontal location of a point

An example of positive analysis is studying

how market forces produce equilibrium

The "invisible hand" refers to

how the decisions of households and firms lead to desirable market outcomes

A difference between explicit and implicit costs is that

implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.

suppose the United States has a comparative advantage over Mexico in producing pork the principle of comparative advantage asserts that

in order to consume beyond its ppt the United States should produce more pork than what it requires and export some of it to Mexico

which of the following is the most correct statement about the relationship between in flotation and unemployment

in the short run falling inflations is associated with rising unemployment

If the cost of producing sofas decreases causing the price of sofas to decrease, consumer surplus in the sofa market will

increase

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is

inelastic.

an increase in the overall level of of prices in an economy is referred to as

inflation

Another term for factors of production is

inputs

In the long run,

inputs that were fixed in the short run become variable.

production

is on the curve

For a self-sufficient producer, the production possibilities frontier

is the same as the consumption possibilities froniter

Suppose an increase in the price of rubber coincides with an advance in the technology of tire production. As a result of these two events, the demand for tire

is unaffected, and the supply of tires could increase, decrease, or stay the same.

Define absolute advantage

is when "comparing the production of one person firm or nations to that of another"

When a factory is operating in the short run,

it cannot adjust the quantity of fixed inputs.

in the circular flow diagram,

labor flows from households to firms

A worker in Vietnam can earn $6 per day making cotton cloth on a land loom. A worker is the United States can earn $85 per day making cotton cloth with a mechanical loom. What is the likely explanation from different wages

labor is more productive making cotton cloth with a mechanical loom than with a hand loom.

Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considerslabor to be variable and capital to be fixed.

labor to be variable and capital to be fixed.

Economies of scale occur when

long-run average total costs fall as output increases.

What is Catherines opportunity cost of producing cake she can make 5 ice creams and 2 cakes

making cake 5/2

If marginal cost is rising,

marginal product must be falling.

Suppose there are six bait and tackle shops that sell worms in a lakeside resort town in Minnesota. If we add the respective quantities that each shop would produce and sell at each of the six bait and tackle shops when the price of worms is $2 per bucket, $2.50 per bucket, and $3 per bucket, and so forth, we have found the

market supply curve

Consider two individuals — Marquis and Serena — each of whom would like to wear sweaters and eat tasty food. The gains from trade between Marquis and Serena are most obvious in which of the following cases?

marquis skills such that he can produce only sweaters and Serena skills are such that she can produce only tasty food

Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market

may increase, decrease, or remain unchanged.

Suppose televisions are a normal good and buyers of televisions experience a decrease in income. As a result, consumer surplus in the television market

may increase, decrease, or remain unchanged.

Goods with many close substitutes tend to have

more elastic demands.

Scatterplot

multiple point on a graph

A competitive market is a market in which

no individual buyer or seller has any significant impact on the market price.

the point where both x and y are zero is know as the

origin

Refer to Figure 4-10. Which of the following movements would illustrate the effect in the market for bullet-proof vests of an increase in the price of Kevlar, the material used to make the vests?

point c to point d

A supply schedule is a table that shows the relationship between

price and quantity supplied.

Total revenue equals

price × quantity.

Economists at the department of treasury

provide advice on tax policy to the president

the phenomenon of scarcity stems from the fact that

resources are limited

the overriding reason why households and societies face many decisions is that

resources are scarce

The law of supply states that, other things equal, when the price of a good

rises, the quantity supplied of the good rises.

Which of the following statements is correct? shoes than socks 800,0 600,400 400,700 200,900 0,1000

the opportunity cost of an additional 200 shoes increase as more shoes are produced

Suppose the cost of flying a 200 seat plain for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300 the airline should

sell the tickets because the marginal benefit exceeds the marginal cost

A supply curve can be used to measure producer surplus because it reflects

sellers costs

Cost is a measure of the

sellers willingness to sell

Efficiency means that

society is getting the most it can from its scarce resources

Ashley bakes bread that she sells at the local farmer's market. If she purchases a new convection oven that reduces the costs of baking bread, the

supply of Ashley's bread will increase.

Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the

supply of bicycles will shift to the left.

prior to the collapse of Communism, communist countries worked on the premise that economic well being would be best attained by

the actions of government central planners

The primary determinant of a country's standard of living is

the country's ability to produce goods and services

Which of the following would likely be studied by a macroeconomist rather than a macroeconomist?

the effect of a sales tax on the cigarette industry

If boxes A and B (a on the left and b on the right) represent households and firms, than boxes C and D (C on the top and D on the bottom) of this circular-flow diagram represent

the markets for goods and services and the markets for factors of production

what does a production possibilities frontier represent

the production possibilities frontier represents what part of production can increase by decreasing another and between two goods what can you be most efficient if you only produce one

Demand is said to be inelastic if

the quantity demanded changes only slightly when the price of the good changes.

Cross-price elasticity of demand measures how

the quantity demanded of one good changes in response to a change in the price of another good.

The price elasticity of supply measures how much

the quantity supplied responds to changes in the price of the good.

consider the production possibilities frontier for an economy that produces only sofas and cars. the opportunity cost of each car is

the slope of the production possibilities frontier or 3/2 sofas

If something happens to alter the quantity supplied at any given price, thenthe supply curve shifts.

the supply curve shifts.

Producer surplus directly measures

the well-being of sellers.

When a country has a comparative advantage in producing a certain good

then specializing in the production of that good and trading for other goods could allow that county to consume at a point beyond its production possibilities prontier

Suppose this economy is producing at Point d. (point is bellow the producing curve) which of the following statements would best explain this situation

there is widespread unemployment in the economy

When Two variables have a positive correlation,

they tend to move in the same direction

When two variables have a positive correlation,

they tend to move in the same direction

suppose the cost of flying a 100- seat plane for an airline of $50,000 and there are 10 empty seats on a flight. the marginal cost of flying a passenger is

this cannot be determined from the information given

We can say that the allocation of resources is efficient if

total surplus is maximized

A decrease in demand shifts the demand curve to the left.

true

An increase in the price of blue pens will increase both the equilibrium price and quantity in the market for black pens.

true

Because of the greater flexibility that firms have in the long run, all short-run cost curves lie on or above the long-run curve.

true

Cocoa and marshmallows are complements, so a decrease in the price of cocoa will cause an increase in the demand for marshmallows.

true

If a determinant of demand other than price changes, the demand curve shifts.

true

In a market economy, prices are the signals that guide the allocation of scarce resources.

true

Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is P = 15 + (1/3) QS . If 90 units of the good are produced and sold, then producer surplus amounts to $1,350.

true

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

true

The law of demand is true for most goods in the economy.

true

The opportunity cost of capital is an implicit cost almost every business incurs.

true

Unless markets are perfectly competitive, they may fail to maximize the total benefits to buyers and sellers.

true

Variable costs usually change as the firm alters the quantity of output produced.

true

t/f aThe production possibilities frontier shows the trade-offs that the producer faces but does not identify the choice the producer will make.

true

t/f Ellie and breads both produce apple pies and vanilla ice cream if fillies opportunity cost of one apple pie is 1/2 gallon of ice cream and Brendan's opportunity cost of one apple pie is 1/4 galloon ice cream Ellie has a comparative advantage in production of ice cream

ture

Jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of apps. Jerome's demand for apps is

unit elastic

A seller's opportunity cost measures the

value of everything she must give up to produce a good.

If a firm produces nothing, which of the following costs will be zero?

variable cost


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