Econ Exam 1
Scarcity in economics means:
We do not have sufficient resources to produce all of the goods and services we want.
When markets fail:
government intervention may help
A simplified representation that is used to study a real situation is called a(n):
model
An economy that has the LOWEST opportunity cost of producing a particular good is said to have a(n): A) absolute advantage in production of that good. B) comparative advantage in production of that good. C) production possibility frontier. D) increasing opportunity cost in production of that good.
B - comparative advantage in production of that good
Gains from trade arise because of:
specialization in production
If a market is in disequilibrium:
there are opportunities for people to make themselves better off
Which statement is positive? Which statement is normative? I. The federal minimum wage in 2016 was $7.25 an hour. II. The minimum wage should be high enough that families will not livein poverty. A) I is positive; II is normative. B) I is positive; II is positive. C) I is normative; II is positive. D) I is normative; II is normative.
A - I is positive; II is normative
The circular-flow diagram illustrates how households _____ goods and services and _____ factors of production. A) buy; sell B) buy; buy C) own; buy D) own; sell
A - buy; sell
The market for soybeans is initially in equilibrium, with an upward-sloping supply curve and a downward-sloping demand curve. Because of mad cow disease, producers decide to replace bone meal with soybeans in cattle feed. The likely effect is that the: A) equilibrium price and quantity of soybeans will rise. B) equilibrium price and quantity of soybeans will fall. C) equilibrium quantity of soybeans will rise, but we can't determine what will happen to the equilibrium price. D) equilibrium price of soybeans will rise, but we can't determine what will happen to the equilibrium quantity.
A - equilibrium price and quantity of soybeans will rise
People who live in large cities decide to spend less in their day-to-day activities. This will MOST likely lead to: A) less income for other people B) more income for other people. C) no impact on other people. D) inflation.
A - less income for other people
Marla will make $10 by tutoring for an additional hour, but she will lose an hour of studying for her economics test. Marla decides to study, rather than tutor. Marla's choice indicates that she: A) values an additional hour of studying more than the $10 she would earn tutoring. B) values an hour of studying less than the $10 she would earn tutoring. C) does not understand that there is no benefit from studying. D) doesn't need the money.
A - values an additional hour of studying more than the $10 she would earn tutoring
Suppose small business owners decide to spend less. How will this affect an economy? A) It will have no impact since this group makes up a small portion of any economy. B) It will decrease the level of income of other people since one person's spending is someone else's income. C) It will cause prices for many goods to increase. D) It will increase the level of income in the economy since other groups will spend more.
B - It will decrease the level of income of other people since one person's spending is someone else's income.
If they spend all night writing computer programs, Laurence can write 10 programs, and Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 pairs, and Carrie Anne can make 4. Given this information and supposing Laurence and Carrie Anne have constant opportunity costs, we know that _____ has an absolute advantage in _____. A) Laurence; programs but not in sunglasses. B) Laurence; both programs and sunglasses. C) Carrie Anne; programs but not in sunglasses. D) Carrie Anne; both programs and sunglasses.
B - Laurence; both programs and sunglasses
Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette cheese overboiled new potatoes. If the price of Raclette cheese decreased, we would expect to see: A) an increase in demand for Raclette cheese. B) an increase in demand for new potatoes. C) no effect on the demand for either of the Raclette ingredients since this is a traditional dish and its consumption does not depend on the prices of the ingredients. D) an increase in demand for both Raclette cheese and new potatoes.
B - an increase in demand for new potatoes
A beneficial technological change is developed in the production of cranberries. At the same time, scientists discover that cranberries have significant health benefits. This will result in: A) an increase in both the equilibrium price and quantity in the cranberry market. B) an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of cranberries. C) a decrease in both the equilibrium price and quantity in the cranberry market. D) a decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of cranberries.
B - an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of cranberries
If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has a(n): A) zero slope. B) constant negative slope. C) increasing negative slope. D) decreasing negative slope.
B - constant negative slope
Which statement illustrates the law of demand? A) An increase in tuition encourages more students to enroll in college because the quality of education has risen. B) Consumers buy more personal computers because prices have fallen. C) Oil companies drill for new sources because prices are higher. D) Fewer people play golf because incomes are lower.
B - consumers buy more personal computers because prices have fallen
The _____ apples will decrease when apple prices rise. A) demand for B) quantity demanded of C) supply of D) equilibrium of
B - quantity demanded of
You can spend $100 on either a new economics textbook or a new tablet computer. If you choose to buy the new economics textbook, the opportunity cost is: A) $100. B) your enjoyment of the new tablet computer. C) both the $100 and your enjoyment of the new tablet computer. D) impossible to determine.
B - your enjoyment of the new tablet computer
Jim is being paid $7.25 an hour to work at a restaurant. In the circular flow, this is an example of a: A) business selling goods and services in the product market. B) household buying goods and services in the product market. C) business buying a resource in the factor market. D) household buying a resource in the factor market.
C - business buying a resource in the factor market
If Brazil gives up three automobiles for each ton of coffee it produces, while Peru gives up seven automobiles for each ton of coffee it produces, then Brazil has a comparative advantage in _____ production and should specialize in _____. A) automobile; coffee B) coffee; automobiles C) coffee; coffee D) automobile; automobiles
C - coffee; coffee
Which decision is the BEST example of making a choice at the margin? A) buying a new car B) quitting your job C) drinking another cup of coffee D) attending college
C - drinking another cup of coffee
Resources are being used efficiently when: A) scarcity is no longer an issue. B) they are also used equitably. C) every opportunity to make people better off without making others worse off has been seized. D) gains from trade are still available.
C - every opportunity to make people better off without making others worse off has been seized
A high-school graduate who gets a college degree is adding to the economy's stock of: A) labor. B) capital. C) human capital. D) financial capital.
C - human capital
The market for corn in Kansas is considered to be competitive. This means there are _____ buyers and _____ sellers of corn in Kansas. A) many; few B) few; many C) many; many D) few; few
C - many; many
The demand curve for monthly subscriptions to HBO has shifted to the right. What could have caused it? A) a fall in the price of HBO subscriptions B) an increase in the price of HBO subscriptions C) an increase in the supply of HBO subscriptions D) an increase in the incomes of buyers
D - an increase in the incomes of buyers
In the market for tacos, a normal good, you observe that the equilibrium price and quantity have increased. This can be caused only by: A) an increase in the price of beef. B) an increase in the wages of taco shop workers. C) fewer taco shops. D) an increase in the incomes of people who eat tacos.
D - an increase in the incomes of people who eat tacos.
In the circular-flow diagram, the factor market is where: A) households buy factors of production. B) households buy goods and services. C) businesses buy goods and services. D) businesses buy factors of production.
D - businesses buy factors of production
Economists generally believe that a country should specialize in the production of a good or service if the: A) production possibility frontier is further from the origin than that of any other country. B) production possibility frontier is closer to the origin than that of any other country. C) country can produce the product using more resources than any other country. D) country can produce the product while forgoing fewer alternative products than any other country.
D - country can produce the product while forgoing fewer alternative products than any other country
A dozen friends got together to celebrate a birthday. If the birthday cake is cut into 12 pieces of the same size and each of the 12 partygoers gets a slice, this cake distribution is: A) efficient but not equitable. B) equitable but not efficient. C) efficient and equitable. D) equitable.
D - equitable
In the circular-flow diagram, an organization that produces goods or services for sale is a: A) market. B) household. C) factor. D) firm.
D - firm
After graduation from college, you might have an increase in your income from a new job. If as a result you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger is a(n) _____ good. A) normal B) substitute C) complementary D) inferior
D - inferior
You are planning to study eight hours this week for your economics final and are considering studying a ninth hour. You should: A) compare the benefits of one more hour of study with the cost of one less hour of sleep. B) compare the benefits of one more hour of study with the cost of one less hour of studying calculus. C) compare the benefits of one more hour of study with the cost of one less hour of work at your part-time job. D) make your decision based on the cost of the next best alternative use of your time compared to the benefit of one more hour of study.
D - make your decision based on the cost of the next best alternative use your time compared to the benefit of one more hour of study
which factor is NOT an example of a resource? A. land B. labor C. capital D. production
D - production
The basis of the circular-flow diagram is that: A) the best models avoid making assumptions .B) goods and services flow in a circle in the factor market. C) resources are sold along with goods and services in the resource market. D) the flow of money into each market or sector is equal to the flow of money coming out of that market or sector.
D - the flow of money into each market or sector is equal to the flow of money coming out of that market or sector
Free trade between countries: A) should be based on absolute advantage. B) always involves wealthy countries exploitingless developed nations. C) will shift the domestic production possibility frontier to the right. D) will allow for greater levels of consumption than without trade.
D - will allow for greater levels of consumption than without trade
A choice made _____ is a choice whether to do a little more or a little less of an activity.
at the margin
a resource is anything that:
can be used in production
a central and fundamental theme in economics is that:
people have unlimited wants but limited means to satisfy them.
We have to make choices because:
resources are scarce
the opportunity cost of something:
what is given up to acquire it