ECON Test 1
If there is unemployment in an economy, then the
economy is producing at a point inside the production possibilities frontier.
If the price of corn increases by 20 percent and the quantity supplied of corn increases by 30 percent, then supply is
elastic and the elasticity of supply equals 1.5.
If a good has many close substitutes, then its demand is most likely
elastic.
If the price elasticity of demand for moose hunting lessons is 4.23, then the demand for moose hunting lessons is
elastic.
It is very difficult for Gourmet Chocolatier to find inexpensive and available inputs for the business. Because of this, we predict that Gourmet Chocolatier's supply to be
inelastic.
Which of the following explains why supply is more elastic as more time passes?
It is difficult or impossible to increase the quantity produced in a short period of time.
If a country has
an absolute advantage in producing a good, it might or might not have a comparative advantage in producing that good.
If the cross elasticity of demand between good A and good B is negative, then a decrease in the price of good A results in
an increase in the demand for good B
The graph that a nation's production possibilities frontier. The horizontal axis measures tacos in millions per year, from 0 to 6. The vertical axis measures pizzas in millions per year, from 0 to 5. The graph shows a downward-sloping, concave curve that intercepts the vertical axis at a quantity of pizza of 4 and the horizontal axis at a quantity of tacos of 5. Two points are marked on the graph, labeled A and B. Point A lies on the curve, and point B lies outside it. Points A and B correspond to a combination of tacos and pizzas of (0, 4), and (3, 4), respectively. The figure above shows a nation's production possibilities frontier. In the figure, point B shows
an unattainable point
The statement that "increases in the tax on gasoline increase the price of gasoline" is an example of a
positive statement.
"Lower ticket prices would lead to more people attending ballgames." This statement is a
positive statement.
A country has a comparative advantage in the production of a good if it can
produce the good at the lowest opportunity cost.
If an economy cannot produce more of one good without producing less of another good, this implies that which of the following has been achieved?
production efficiency
A production possibilities frontier shows
the various combinations of output a nation can produce a certain time, given its available resources and technology.
The primary focus of microeconomics is
to examine the behavior and operation of the individual units or sectors that make up the economy.
Which of the following statements best describes the study of economics? Economics studies how
we make choices in the face of scarcity.
Scott and Cindy both produce only pizza and tacos. In one hour, Scott can produce 20 pizzas or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Scott's opportunity cost of producing 1 taco is
1/2 of a pizza.
With no international trade, a country ________ consume at a point outside of its PPF; with international trade, a country ________ consume at a point outside of its PPF.
cannot; can
Economic growth depends upon which of the following? i. Improving the quality of labor ii. Technological advancement iii. Increasing the amount of capital
i, ii, and iii
The gains from trade include: i. lower prices from competition ii. greater output from specialization iii. greater variety of goods and services available
i, ii, and iii
The income elasticity of demand is ________ if the good is ________ good.
positive; a normal
The image is a table representing the demand schedule for skirts. There are two columns in the table, labeled Price (dollars per skirt) and Quantity demanded (skirts per year). The Price column has the values of 20 and 35. The quantity demanded column has the values of 30 and 25. Using the data in the table above, when the price of a skirt rises from $20 to $35, at the midpoint between these two prices, what is the price elasticity of demand?
0.33
If the price of a good decreases from $9 to $6 and the quantity supplied decreases from 1,500 to 1,300, at the midpoint between these two prices, the elasticity of supply equals
0.36.
Suppose the price of a ticket to a Lenny Kravitz concert is $41 and at that price, the quantity of tickets demanded is 17,000 per concert. Using the midpoint method of calculating percentage changes, if Mr. Kravitz raises the price to $48 and the quantity demanded decreases to 16,000, the price elasticity of demand for his concert tickets is
0.39.
On a production possibilities frontier, 500 pounds of apples and 1,200 pounds of bananas can be produced while at another point on the same frontier, 300 pounds of apples and 1,300 pounds of bananas can be produced. Between these points, what is the opportunity cost of producing a pound of apples?
0.5 a pound of bananas
Suppose an increase in demand causes the price to increase from $2 to $4 and the quantity to increase from 1,000 to 1,800. Then, at the midpoint between these two prices, the elasticity of supply equals
0.86.
When the price of a taco decreases from $5 to $3, the quantity demanded increases from 600,000 to 1,000,000 tacos each month. At the midpoint between these two prices, the price elasticity of demand equals
1
The price of one bedroom apartments in Cheyenne increased from $55,000 to $65,000 and the quantity of apartment for sale increased from 25 to 30. At the midpoint between these two prices, the price elasticity of supply for apartments in Cheyenne is equal to
1.09
Suppose an increase in supply lowers the price from $10 to $8 and increases the quantity demanded from 100 units to 130 units. Using the midpoint method, the elasticity of demand equals
1.17.
In the table above, Jack's opportunity cost for 1 pound of food is ________ and his opportunity cost for 1 pound of clothing is ________.
1/2 of a pound of clothing; 2 pounds of food
The figure above shows the production possibilities frontiers for the United Kingdom and France. What is the opportunity cost of one bushel of wheat in France?
1/4 of a pound of fish
The data in the table above give two points on the demand curve for pizza. Using the midpoint method, when the price of a pizza falls from $10 to $9, what is the percentage change in price?
10.5 percent
Robinson Crusoe divides his time between catching fish and gathering fruit. Part of his production possibilities frontier is given in the above table. If Mr. Crusoe is on his PPF and he increases the amount of fruit he gathers from 56 to 90 pounds, the opportunity cost is
17 pounds of fish.
In the above table, for Mary the opportunity cost of producing a dress is ________ and the opportunity cost for Mark of producing a dress is ________.
1 1/2 jackets; 2/3 of a jacket
Tacos and pizza are substitutes. If a 2 percent change in the price of a taco leads to a 4 percent change in the demand for pizza, the cross elasticity of demand equals
2.
Which of the following is a macroeconomic issue?
The number of jobs and production in Zimbabwe increase.
The image is a table representing the demand schedule for pizza. The table has two columns, labeled Price (dollars per pizza) and Quantity demanded (pizzas per day). The Price column has the values of 10 and 9. The Quantity demanded column has the values of 100 and 125. The data in the table above give two points on the demand curve for pizza. Using the midpoint method, when the price of a pizza falls from $10 to $9, what is the percentage change in the quantity demanded?
22.2 percent
The figure shows the production possibility frontier for a country. What is the opportunity cost per ton of rice to move from point B to point D?
500 bottles of wine
Which of the following is an example of a normative statement?
Car prices should be affordable.
Which of the following is a normative statement?
Flood victims should pay for their own rebuilding
The figure shows the PPF for a country that produces computers and computer factories. Which of the following would most likely shift the PPF from PPF0 in one year to PPF1 in the next?
Decrease the production of computers from 12 million (at point B) to 9 million (at point C) and build 6 new computer factories.
Which economic question depends on the incomes that people earn and the prices they pay for goods and services?
For whom?
Going skiing will cost Adam $80 a day. He also loses $40 per day in wages because he has to take time off from work. Adam still decides to go skiing.
His decision is rational if Adam's marginal benefit of spending a day skiing is greater than his marginal cost.
Hank requires 1 hour to cut the grass and 3 hours to clean the house. His sister Holly requires 1 hour to cut the grass and 4 hours to clean the house. Which of the following statements is true?
Holly has a comparative advantage in cutting the grass.
What is the reason that all economic issues and problems occur?
Human wants exceed the resources available to satisfy them.
What typically happens to benefits as the amount of an activity is increased?
Marginal benefit decreases.
If John can produce 10 chairs or 20 lamps during a week while Mary can produce 12 chairs or 22 lamps in the same time, who has the absolute advantage in producing each good?
Mary in producing both goods
In one hour John can produce 20 loaves of bread or 8 cakes. In one hour Phyllis can produce 30 loaves of bread or 15 cakes. Which of the following statements is true?
Phyllis has an absolute advantage in both goods.
Of the following, which good has the most elastic demand?
Post Raisin Brand purchased at a Safeway grocery store
Rika's opportunity cost of producing 100 t−shirts is 50 jackets. Jeff's opportunity cost of producing 75 t−shirts is 25 jackets. Who should specialize in jackets?
Rika
The question of "How are goods and services produced?" most closely addresses which of the following issues?
Should Ford use expensive industrial robots or inexpensive Mexican autoworkers to produce SUV's?
Why is a production possibilities frontier bowed out (concave)?
The bowed shape reflects increasing opportunity cost.
Which of the following is correct?
The cross elasticity of demand for substitute goods is positive.
Which of the following is the best definition of economic growth?
The sustained expansion of production possibilities.
You have chosen to take a trip during spring break. If you had not gone, you would either have worked at a temporary job or studied for exams. The opportunity cost of your trip is
We cannot determine what the opportunity cost is without knowing which alternative, working or studying, you would have preferred.
The opportunity cost of producing more of one good on a production possibilities frontier is
a ratio of quantities.
Which of the following is most likely to have an income elasticity of demand that exceeds 1?
airline travel
The graph shows the production possibilities frontier for a country. The horizontal axis measures fast food meals in millions per year and the vertical axis measures video tape in millions per year. The graph shows a downward-sloping, concave curve that intercepts both the horizontal and the vertical axis. Four points are marked on the graph, labeled A, B, C, and D. Point A lies on the curve. Point B lies on the curve and the horizontal axis. Point C lies inside the curve and point D lies outside the curve, to the right of point A. Point D in the above PPF figure is
an unattainable production combination.
Sergio's downloads of movies increase by 10 percent when his income increases by 30 percent. Based on this information, we know that for Sergio downloaded movies
are normal goods.
The idea of increasing opportunity cost is reflected in the
bowed out shape of the production possibilities frontier.
Consider the United States' production of soy beans and running shoes. If the United States has an absolute advantage in the production of both goods compared to China,
both countries can gain from trade.
Microeconomics includes the study of the
choices made by individuals and businesses.
Scarcity forces people to
choose among available alternatives.
The image is a table that shows the relationship between the price of cake and the quantity demanded of ice cream. The table has two columns, labeled price (dollars per cake and quantity demanded (gallons of ice cream per week). The price column has the values of 2 and 4. The quantity demanded column has the values of 10 and 6. Based on the data in the table above, ice cream and cake are ________ goods.
complementary
If the price of a one good increases and the quantity demanded of a different good decreases, then these two goods are
complements.
By specializing and trading, a country is able to
consume but not to produce combinations of goods that lie beyond its production possibilities frontier
The measure used to determine whether two products are complements or substitutes is called the
cross elasticity of demand
The benefit of a one−unit increase in an activity
decreases as you do more of it.
If a lower price for a Pepsi decreases the demand for a Coke, the cross elasticity value for Pepsi and Coke is
definitely positive.
Suppose a good can be produced using commonly available resources. The elasticity of supply is
greater than 1.
A product's price elasticity of demand is likely to be greater
if the product is a luxury good rather than a necessity.
Moving from one point to another on a production possibilities frontier implies
increasing the production of one good and decreasing the production of another.
The image is a table representing the demand schedule for skirts. There are two columns in the table, labeled Price (dollars per skirt) and Quantity demanded (skirts per year). The Price column has the values of 20 and 35. The quantity demanded column has the values of 30 and 25. Using the data in the table above, the demand for skirts is
inelastic.
Scarcity
is the inability to satisfy all our wants.
While moving along a production possibilities frontier, the amount of labor ________, the amount of capital ________, and the level of technology ________.
is fixed; is fixed; is fixed
As an economy grows,
its PPF shifts outward.
Huey has eaten two hamburgers and is considering a third. The marginal benefit in his decision is the pleasure from consuming
just the third hamburger.
Scarcity means we must
make choices.
When Gabriel made a rational choice to spend his entire allowance on candy bars, he did so by comparing the
marginal benefits of the candy bars to the marginal costs of the candy bars.
Macroeconomics is the study of
national or global economies.
The cross elasticity between computers and software is
negative because they are complements.
If a product is an inferior good, then its income elasticity of demand is
negative.
Goods are ________ when the income elasticity of demand is positive.
normal
Comparative advantage is directly related to which of the following concepts?
opportunity cost
You are more sensitive to a change in price if you
spend a lot of your income on the good.
One reason why the demand for gasoline is inelastic is because
substitutes for gas are hard to find.
An opportunity cost is
the benefits of the highest−valued alternative forgone.
The opportunity cost of economic growth is
the decrease in the current production of consumption goods.
