ECON101- Exam 1 (Ch. 1-2)

What is the opportunity cost of one dozen roses?

.40 (80/200)

If the economy is currently producing at point A, what is the opportunity cost of moving to point B?

12 thousand forks

What is the opportunity cost of one dozen orchids?

2.5 dozen roses (200/80)

If the economy is currently producing at point C, what is the opportunity cost of moving to point B?

20 thousand spoons

IF the economy is currently producing at point X, what is the opportunity cost of moving to point W?

3 millions tons of steel

If the economy is currently producing at point Y, what is the gain in production if the economy moves to point X?

5 millions tons of steel

If Vidalia chooses to produce 60 dozen orchids, how many roses can it produce to maximize production?

50 dozen roses

If Vidalia chooses to produce 50 dozen roses, how many orchids can it produce to maximize production?

60 dozen orchids

Which of the following is a positive economic statement?

Due to a decrease in state funding, university tuition has risen

Fiona shares an office with her ex-husband. Her share of the rent and utilities is $625 per month. She is considered moving to a home office which she will not have to share with anyone. The home office will not cost her anything as far as extra rent or utilities. Recently, you ran Fiona at the gym and she tells you that she she has moved into her home office. Fiona is as rational as any other person. As an economics major, you rightly conclude that

Fiona figures that the additional benefit of having her own office (as opposed to sharing) is at least $625

Which of the following statements is true?

George has an absolute advantage in both tasks

Which of the following is a microeconomic question?

How will Apple decide on a selling price for the iPad?

Your roommate, Serafina, a psychology major, said, "The problem with economics is that it assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with her comment?

I disagree with her. Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave rationally, meaning they make the best decisions given their knowledge of the costs and benefits.

What is an economic model?

It is a simplified version of some aspect of economic life used to analyze an economic issue

In 2017, President Trump considered imposing a tariff on automobiles assess embed by U.S. manufacturers in Mexico that were to be sold in the United States. If this tariff was imposed and as a result, some of these manufacturers moved their automobile assembly from Mexico back to the United States, these firms would be reacting to which of the three key economic ideas?

People respond to economic incentives

One reason some manufacturing companies began moving production to China in the early 2000s was due to lower wages that could be paid to Chinese workers. Moving manufacturing to China to take advantage of lower wages so goods could be produced at a lower cost than if produced in the United States exemplifies which key economic idea?

People respond to economic incentives

Which of the following statements is true about revenue?

Revenue is the total amount received for selling a god or service.

In the first six months of 2003, branches of Commerce Bank in New York City were robbed 14 times. The New York City Police recommended steps the bank could take to deter robberies, including the installation of plastic barriers called "bandit barriers." The police were surprised the bank did not take their advice. According to a deputy commissioner of police, "Commerce does very little of what we recommend. They've told our detectives they have no interest in ever putting in the barriers." It would seem that Commerce Bank would have a strong incentive to install "bandit barriers" to deter robberies. Why wouldn't they do it?

The banks must have weighed the cost of installing bandit barriers against the benefits and decided that they have "no interest in ever putting in the barriers."

How are the fundamental economic decisions determined in Cuba?

The government decides because Cuba is a centrally planned economy.

Which of the following best describes an assumption economists make about human behavior?

They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.

Which of the following is a normative economic statement?

Tobacco products should be banned in all public spaces

Which of the following is a macroeconomic question?

What determines the unemployment rate?

Trade-offs force society to make choices when answering what three fundamental questions?

What goods and services to produce; how will these goods and services be produced; and who receives them?

Fast food restaurants produce a range of menu items such as hamburgers, chicken sandwiches, salads, and French fries. What fundamental economic question are they addressing by offering this range of items?

What to produce?

The term "market" in economics refers to

a group of buyers and sellers of a product and the arrangement by which they come together to trade.

Consider the following statements: a. Soda drinkers purchase more soda from a grocery store that sells soda at a lower price than other rival grocery stores in the area b. Homeowners do not take steps to increase security even though they believe it is more costly to allow burglaries than to install security monitoring equipment c. Manufactures produce less of a particular cell phone when its selling price rises. Which of the above statements demonstrates that economic agents respond to incentives?

a only

The recession of 2007-2009 would most likely be represented in a production possibilities frontier graph by

a point inside the frontier

An example of a factor of production is

a worker hired by an auto manufacturer

When every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it, ________ occurs.

allocative efficiency

What does the term "marginal" mean in economics?

an additional or extra

Ted quits his $60,000-a-year job to be a stay-at-home dad. What is the opportunity cost of his decision?

at least $60,000

The _______ production points on a production possibilities frontier are the points along and inside the production possibilities frontier.

attainable

A production possibilities frontier with a __________ shape indicates increasing opportunity costs as much as more and more of one good is produced.

bowed outward

Economics is the study of _____________ people make to attain their goals, given their ______________ resources.

choices; scarcity

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?

consume a combination of goods that lies outside its own production possibilities frontier

The primary purpose of patents and copyrights is to

encourage the expenditure of funds on research and development to create new products

To compete in the automobile market, Tesla must make many strategic decisions such as whether to introduce a new car model, how to sell and service its car, and where to advertise. At Tesla's Fremont, California plant, managers must decide on the monthly production quantities of their S and X models. In making this decision, the managers

face a trade-off, because producing more of one model means producing less of the other

The basic economic problem of scarcity

has always existed and will continue to exist

In a market economy, ________ interact in markets to decide the answers to the fundamental economic questions.

households and firms

Who receives the goods and services produced in the United States depends largely on

how income is distributed

In economics, the practical application of an invention is known as

innovation

Adam Smith's ________ refers to the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole.

invisible hand

The branch of economics which studies the behavior of entire economics and policies that affect the economy as a whole is called

macroeconomics

The branch of economics which studies how households and firms make choices, interact in markets, how government attempts to influence their choices is called

microeconomics

The ability to exercise control over one's own resources within the confines of the law refers to

one's property rights

What is George's opportunity cost of mowing a lawn?

one-half of a garden cultivated

Economists assume that

optimal decisions are made at the margin

When goods and services are produced at the lowest possible cost, _______ occurs.

productive efficiency

In a production possibilities frontier, a point inside the frontier is

productively inefficient

Economists assume that rational people

respond to economic incentives

In economics, the total amount received for selling a good or service is referred to as

revenue

The study of economics arises due to

scarcity

In economics, activities done for others, such as providing house cleaning or dental work, are referred to as

services

Economic growth is represented on a production possibilities frontier model by the production possibilities frontier

shifting outward

Increasing opportunity cost along a bowed-out production possibilities frontier occurs because

some factors of production are not equally suited to producing both goods and services

Which of the following is an example of an activity undertaken by an entrepreneur?

starting a snow cone business

The processes used to produce goods and services describes

technology

Comparative advantage means

the ability to produce a good or service at a lower opportunity cost than any other producer.

Human capital refers to

the accumulated skills and training that workers have

Opportunity cost is defined as

the highest valued alternative that must be given up to engage in an activity.

Which of the following is a factor of production?

the janitor at a local elementary school

Which of the following is counted as "capital" in economics?

the machines that workers have to work with

The production possibilities frontier shows

the maximum attainable combinations of two products that may be produced in a particular time period with available resources

The unattainable points in a production possibilities frontier are

the points outside the production possibilities frontier

The linear production possibilities frontier in the figure indicates that

the tradeoff between roses and orchids is constant

Scarcity refers to the situation in which

unlimited wants exceed limited resources

Which of the following is an example of an economic trade-off that a firm has to make?

whether it is cheaper to produce with more machines or with more workers