Econ Test 1

An increase in the demand for a product and a reduction in its costs of production would:

C. Increase the quantity supplied

Use the following graph of the demand for coffee: Refer to the above diagram of three demand curves for coffee. Which of the following would cause a shift in coffee demand from D1 to D2?

B. A scientific report stating that coffee improves memory and life expectancy

In a market system, as one industry expands output while another contracts, resources will flow:

B. Away from the declining industry and into the expanding industry

Lauren makes $150 a day as a bank clerk. She takes two days off work without pay, to fly to another city to attend the concert of her favorite band. The cost of transportation and lodging for the trip is $250. The cost of the concert ticket is $50. The full opportunity cost of Lauren's decision to attend the concert is:

A. $600

21. Which is of the following statements is correct?

A. If demand decreases, then the equilibrium price will decrease

Refer to the above supply and demand graph of Product X. What would happen if the government taxed the producers of this product because it has negative externalities in production?

A. Supply would decrease D. Price would increase

The law of supply states that when:

A. The price of a good goes down, the quantity supplied falls.

As a result of a decline in the price of gasoline, driving trips become more affordable, relative to the alternative of flying by airplane. This is an illustration of:

A. The substitution effect

Consumers "Dollar Votes" [or other currencies in countries other than the USA] are the primary determinant of answering which of the fundamental questions in a market economy?

A. What will be produced?

32. The equilibrium point in the market is where S and D curve intersect. Refer to the graph above. At equilibrium, producer surplus is equal to:

A. b

24. When an economist says people are "rational" or "self-interested", which of the following most closely represents the claim they are making?

A. decision makers in the economy are NOT acting randomly

29. A public good has which of the following traits?

A. it is non-excludable in consumption

27. A Public good has which of the following traits?

A. it is non-rival in consumption

Suppose that a nation can only make two products: defense goods and civilian goods. In a graph of the marginal benefit (MB) and marginal cost (MC) of defense goods, a leftward shift of the MB curve will cause the optimal quantity of:

C. Defense goods to decrease

40. Which of the following factors will decrease the current demand for a product?

B. A decrease in the current price of a substitute product

39. Refer to the above supply and demand graph. In the graph, line S is the current supply of this product, while line S1 is the optimal supply from the society's perspective. If government corrects this externality problem and shifts production to the socially optimal level, then the output produced will be equal to:

B. B

The production possibilities curve is concave with respect to the origin (bowed out away from the origin)

B. Because of resource specialization in terms of matching well with particular types of production

In a competitive market illustrated by the diagram above, for a price ceiling to be effective and alter the market outcome, it must be set:

B. Below the price of $15

31. The difference between the maximum price a consumer is willing to pay for a product and the actual price the consumer pays is called:

B. Consumer Surplus

30. In a market system, resources will flow away from an industry when:

B. Demand for the product made by the industry is decreasing

Deregulation can solve the problem of regulatory capture and increase economic efficiency:

B. If the deregulated industry becomes more competitive

19. For a good that is non-excludable, if left alone, market production of the good will fail to reach efficiency due to the

B. free rider problem

28. A Private good has which of the following traits?

B. it is rival in consumption

36. All of the following concepts relate to government failure, except:

B. taxing households to provide public goods

25. According to the McConnell textbook, which is one of the five fundamental questions that need to be answered by any economic system?

C. How will goods and services be produced?

Answer the question based on the following supply and demand schedules in units per week for a product. Refer to the above table. If the government introduced a guaranteed price floor of $40 and agreed to purchase surplus output, then the government's purchase of the surplus would be:

C. 100 units per week

34. Which of the following would best be classified as a complement for buying a new house?

C. A Mortgage loan

Which will be observed in a community where binding price ceilings are imposed on residential rents?

C. A shortage of available units to rent

33. Which of the following is consistent with the law of demand?

C. An increase in the price of hamburgers causes buyers to buy fewer hamburgers

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities: Refer to the above table. If the nation produces more and more tanks, the opportunity cost of each additional tank, in terms of the foregone auto production:

C. Increases

Which of the following is NOT one of the major categories of economic resources directly used to produce goods and services?

C. Money/currency

20. Consumer surplus occurs in a market because:

C. The market price is less than what some consumers are willing to pay for the product

Normal University wants to institute a crime-control program on its campus to deal with the high costs of theft and vandalism. The University is now considering several alternative levels of crime control. This table shows the expected annual costs and benefits of these alternatives.

C. the Level Four alternative

Where there are negative externalities (spillover costs) from producing a good, the private market left alone

C. will produce too much of the good

The table below shows the weekly demand for hamburger in a market where there are just three buyers. Refer to the above table. At a price of $5, the weekly market quantity demanded for hamburger is:

D. 24

26. Which of the following does not illustrate the idea of creative destruction?

D. A customer has to throw away a gallon of milk that is past the freshness date and is spoiled

35. Which of the following would be an example of government intervention to correct a market failure?

D. All of the above

In a market system, which of the following will eliminate high-cost producers, allowing only the low-cost producers to survive?

D. Competition

18. The term dollar votes in a market system means:

D. Consumers "vote" for certain products depending on how they spend their incomes

37. The distribution of income & wealth in a market economy is a primary factor that resolves which of the following fundamental economic questions?

D. Who will get the output?