Economics Exam #1

The opportunity cost of attending university is likely to include all except which of the following? a) the cost of required textbooks b) the cost of haircuts received during the school term c) the income you forgo in order to attend classes d) tuition fees

b) the cost of haircuts received during the school term

Whenever there is a shortage at a particular price, the quantity sold at that price will equal: a) (quantity demanded plus quantity supplied)/2. b) the quantity supplied at that price. c)the quantity supplied minus the quantity demanded. d) the quantity demanded at that price.

b) the quantity supplied at that price.

What term is used to describe goods that can replace each other to some extent, so that a rise in the price of one good leads to a lower quantity consumed of another good, and vice versa? a) Surplus b) Inferior goods c) Substitutes d) Normal goods

c) Substitutes

"Natural resources" does NOT include a) trees b) bodies of water c) money d) oil reserves

c) money

When consumers and businesses have greater confidence that they will be able to repay in the future, _______________________. a) the quantity demanded of financial capital at any given interest rate will remain unchanged. b) the quantity demanded of financial capital at any given interest rate will achieve equilibrium. c) the quantity demanded of financial capital at any given interest rate will shift to the right. d) the quantity demanded of financial capital at any given interest rate will shift to the left.

c) the quantity demanded of financial capital at any given interest rate will shift to the right.

Refer to Figure 2-1. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from: a) B to E b) G to F c) A to B d) C to F

d) C to F

What name is given to goods where the quantity demanded rises as income rises? a) Superior goods b) Shift in demand c) Quantity demanded d) Normal goods

d) Normal goods

The basic difference between macroeconomics and microeconomics is: a) microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. b) microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment. c) microeconomics concentrates on the behaviour of individual consumers while macroeconomics focuses on the behaviour of firms. d) microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

d) microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

Many economists believe that the trend toward greater wage inequality across the U.S. economy was primarily caused by _____________. a) inflation b) the recession c) the rise of global markets d) new technologies

d) new technologies

In many cases, it is reasonable to refer to the ________________ as the price. a) consumption choice b) sunk cost c) budget constraint d) opportunity cost

d) opportunity cost

In contrast to goods and services markets, _____________ are rare in labor markets, because rules that prevent people from earning income are not politically popular. a) minimum wages b) living wage laws c) price floors d) price ceilings

d) price ceilings

Laws that impose an upper limit on the interest rate that lenders can charge are known as: a) price floors b) living wage laws c) financial investment laws d) usury laws

d) usury laws

What is meant by globalization? a) The trend in which buying and selling in markets have increasingly crossed national borders. b) An economy in which most economic decisions are made by buyers and sellers, who may be individuals or firms. c) A market in which firms are sellers of what they produce and households are buyers. d) The market in which households sell their labor as workers to businesses or other employers.

a) The trend in which buying and selling in markets have increasingly crossed national borders.

How do apple growers react to the news of medical research findings that suggest that eating apples leads to greater health benefits than were previously known? a) They increase the quantity of apples supplied. b) They decrease the quantity of apples supplied. c) They decrease the supply of apples. d) They increase the supply of apples.

a) They increase the quantity of apples supplied.

What is meant by surplus? a) When at the existing price, quantity supplied exceeds the quantity demanded. b) At the existing price, the quantity demanded exceeds the quantity supplied. c) When a change in some economic factor related to demand causes a different quantity to be demanded at every price. d) The total number of units of a good or service purchased at a certain price.

a) When at the existing price, quantity supplied exceeds the quantity demanded.

What is meant by specialization? a) When workers or firms focus on particular tasks in the overall production process for which they are well-suited. b) The payment in addition to the original investment from those who have received financial capital to those who provided it. c) An economy in which most economic decisions are made by buyers and sellers, who may be individuals or firms. d) The trend in which buying and selling in markets have increasingly crossed national borders.

a) When workers or firms focus on particular tasks in the overall production process for which they are well-suited.

The supply curve of textbooks (which are produced using paper made from trees) will shift to the left in response to: a) a sharp increase in the demand for and construction of wood-frame homes. b) an increase in the supply of lumberjacks. c) a decline in college tuition. d) an end to government regulations that limit timber harvesting in national forests.

a) a sharp increase in the demand for and construction of wood-frame homes.

Which of the following is NOT a characteristic of capitalism? a) central planning b) a reliance on prices to direct resources to their best uses c) laissez-faire policies d) private property rights

a) central planning

Marginal thinking is best demonstrated by: a) choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. b) acquiring the information relevant to a choice before making that choice c) measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake d) deciding to never purchase a coat made with animal skins or furs

a) choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

The labor ____________ curve(s) will shift _______________ if there is an increase in productivity or an increase in the demand for the final product. a) demand; right b) supply; left c) supply; right d) demand; left

a) demand; right

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made. a) government b) market c) firm d) business sector

a) government

A price floor that makes it illegal for an employer to pay employees less than a certain hourly rate is known as: a) minimum wage b) wage floor c) living wage d) price floor

a) minimum wage

A more efficient means of processing algae to produce an anticancer drug is discovered. As a result, the supply curve for the drug will: a) shift to the right, decreasing the price of the drug b) shift to the left, increasing the price of the drug. c) shift to the left, decreasing the price of the drug. d) shift to the right, increasing the price of the drug.

a) shift to the right, decreasing the price of the drug

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good. a) the production possibilities frontier b) allocative efficiency c) utility d) scarcity

a) the production possibilities frontier

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is: a) $44 b) $4 c) $40 d) $0

a) $44

What is meant by command economy? a) An economy in which the government either makes or strongly influences most economic decisions. b) When the average cost of producing each individual unit declines as total output increases. c) An economy where goods and services are produced abroad and sold domestically. d) An economy where goods and services are produced domestically and sold in another country.

a) An economy in which the government either makes or strongly influences most economic decisions.

Which of the following best characterizes the circular flow of income? a) Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. b) Households buy factors of production from businesses, and businesses buy goods and services from households. c) The government purchases resources from businesses and households and then sells goods and services to businesses and households. d) Businesses buy resources from the government, and households buy goods and services from businesses.

a) Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

What is meant by fiscal policy? a) Economic policies that involve government spending and taxation. b) The payment in addition to the original investment from those who have received financial capital to those who provided it. c) The trend in which buying and selling in markets have increasingly crossed national borders. d) The study of the production, distribution, and consumption of goods and services.

a) Economic policies that involve government spending and taxation.

What name is given to as a person receives more of a good, the marginal utility from each additional unit of the good is smaller than from the previous unit? a) Law of diminishing marginal utility b) Law of diminishing returns c) Efficiency d) Productive efficiency

a) Law of diminishing marginal utility

What is meant by producer surplus? a) The benefit producers receive from selling a good or service, measured by the price the producer actually received minus the price the producer would have been willing to accept. b) The benefit consumers receive from buying a good or service, measured by what the individuals would have been willing to pay minus the amount that they actually paid. c) A table that shows a range of prices for a certain good or service and the quantity demanded at each price. d) The total number of units of a good or service sold at a certain price.

a) The benefit producers receive from selling a good or service, measured by the price the producer actually received minus the price the producer would have been willing to accept.

What is meant by microeconomics? a) The branch of economics that focuses on actions of particular actors within the economy, like households, workers, and business firms. b) The social arrangements that determine what is produced, how it is produced, and for whom it is produced. c) The trend in which buying and selling in markets have increasingly crossed national borders. d) A market in which firms are sellers of what they produce and households are buyers.

a) The branch of economics that focuses on actions of particular actors within the economy, like households, workers, and business firms.

What is meant by law of supply? a) The common relationship that a higher price is associated with a greater quantity supplied. b) Government laws to regulate prices. c) A table that shows a range of prices for a certain good or service and the quantity demanded at each price. d) The benefit consumers receive from buying a good or service, measured by what the individuals would have been willing to pay minus the amount that they actually paid.

a) The common relationship that a higher price is associated with a greater quantity supplied.

Which of the following refers to an economy in which most economic decisions are made by buyers and sellers, who may be individuals or firms? a) Command economy b) Market-oriented economy c) Economies of scale d) Financial capital market

b) Market-oriented economy

What term is used to describe the total number of units of a good or service purchased at a certain price? a) Normal goods b) Quantity demanded c) Market d) Excess demand

b) Quantity demanded

Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel? a) The increase in wage costs will shift the demand curve for steel to the left, increasing the cost of steel. b) There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel. c) There is an increase in the cost of producing steel, which shifts the supply curve of steel to the right, thereby increasing the price of steel. d) There is a decrease in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.

b) There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.

Which of the following characteristics relate to allocative efficiency? a) A diagram that shows the combinations of output that are possible for an economy to produce. b) When the mix of goods being produced represents the allocation that society most desires. c) When it is impossible to produce more of one good without decreasing the quantity produced of another good. d) When it is impossible to get more of something without experiencing a tradeoff of less of something else.

b) When the mix of goods being produced represents the allocation that society most desires.

The term "ceteris paribus" means that: a) what is true for the individual is not necessarily true for the whole. b) all variables except those specified are constant. c) no one knows which variables will change and which will remain constant. d) everything is variable.

b) all variables except those specified are constant.

One alternative reaction occurs when buyers and seller decide to break the government rules on prices or sales, which is referred to as _______________. a) targeted subsidies b) black market c) side payments d) taxes

b) black market

Which of the following is generally accepted as a valid criticism of the production of useful goods and services? a) economic freedom b) environmental pollution c) government involvement d) the black market

b) environmental pollution

A lender demands an interest rate in part to compensate for any expected _________, so that the money that is repaid in the future will have at least as much buying power as the money that was originally loaned. a) opportunity costs b) inflation c) risk premium d) compound interest

b) inflation

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________, which describe how the world should be. a) opportunity costs b) normative statements c) budget constraints d) trade-offs

b) normative statements

Attending college is a case where the ________________ exceeds the monetary cost. a) marginal analysis b) opportunity cost c) marginal utility d) budget constraint

b) opportunity cost

In the case of rent control, a landlord may keep the rent low but put off needed maintenance or installing new appliances. This is known as ____________________. a) black markets b) quality adjustment c) side payments d) input prices

b) quality adjustment

A straightforward example of a _______________, often used for simplicity, is the interest rate. a) financial investment b) rate of return c) price floor d) price ceiling

b) rate of return

Which of the following characteristics relate to price ceiling? a) The benefit producers receive from selling a good or service, measured by the price the producer actually received minus the price the producer would have been willing to accept. b) A relationship between price and the quantity supplied of a certain good or service. c) A law that prevents a price from rising above a certain level. d) Goods that are often used together, so that a rise in the price of one good tends to decrease the quantity consumed of the other good, and vice versa.

c) A law that prevents a price from rising above a certain level.

Which of the following characteristics relate to inferior goods? a) Goods where the quantity demanded rises as income rises. b) The benefit consumers receive from buying a good or service, measured by what the individuals would have been willing to pay minus the amount that they actually paid. c) Goods where the quantity demanded falls as income rises. d) The common relationship that a higher price is associated with a greater quantity supplied.

c) Goods where the quantity demanded falls as income rises.

Which of the following refers to comparing the benefits and costs of choosing a little more or a little less of a good? a) Production possibilities frontier b) Law of diminishing marginal utility c) Marginal analysis d) Risk premium

c) Marginal analysis

What name is given to rise in the overall level of prices? a) Opportunity cost b) Law of diminishing returns c) Price inflation d) Risk premium

c) Price inflation

What term is used to describe the total number of units of a good or service sold at a certain price? a) Complements b) Equilibrium c) Quantity supplied d) Law of supply

c) Quantity supplied

Which of the following characteristics relate to equilibrium? a) When a change in some economic factor related to demand causes a different quantity to be demanded at every price. b) The sum of consumer surplus and producer surplus. c) The combination of price and quantity where there is no economic pressure from surpluses or shortages that would cause price or quantity to shift. d) At the existing price, the quantity demanded exceeds the quantity supplied.

c) The combination of price and quantity where there is no economic pressure from surpluses or shortages that would cause price or quantity to shift.

What is meant by law of demand? a) The quantity at which quantity demanded and quantity supplied are equal at a certain price. b) A line that shows the relationship between price and quantity supplied on a graph, with quantity supplied on the horizontal axis and price on the vertical axis. c) The common relationship that a higher price leads to a lower quantity demanded of a certain good or service. d) A law that prevents a price from falling below a certain level.

c) The common relationship that a higher price leads to a lower quantity demanded of a certain good or service.

Which of the following refers to the cost of having to wait for repayment? a) Law of diminishing returns b) Marginal analysis c) Time value of money d) Compound interest

c) Time value of money

What is meant by productive efficiency? a) Another name for the budget constraint. b) When the mix of goods being produced represents the allocation that society most desires. c) When it is impossible to produce more of one good without decreasing the quantity produced of another good. d) Costs that were incurred in the past and cannot be recovered, and thus should not affect current decisions.

c) When it is impossible to produce more of one good without decreasing the quantity produced of another good.

Which of the following best denotes the reason for the existence of substantial black markets? a) government laws and rules b) a market-oriented economy c) a command economy d) the microeconomy

c) a command economy

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is: a) a shift of the demand curve for beef to the right. b) no change; only the supply curve for beef is likely to be affected. c) a shift of the demand curve for beef to the left. d) a movement down along the demand curve for beef to the right.

c) a shift of the demand curve for beef to the left.

Improvements in the productivity of labor will tend to: a) increase the supply of labor. b) decrease the supply of labor. c) increase wages. d) decrease wages.

c) increase wages.

Which of the following best describes a monetary policy tool? a) government spending b) household savings c) interest rates d) taxes

c) interest rates

Saving money is a(n) ____________________, because it involves less consumption in the present, but the ability to consume more in the future. a) opportunity cost b) risk premium c) intertemporal choice d) budget constraint

c) intertemporal choice

A change in the quantity of the product that the labor produces can: a) shift the supply curve for labor b) shift the demand curve for financial capital c) shift the demand curve for labor d) shift the supply of financial capital

c) shift the demand curve for labor

As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left. a) high-skill labor b) market c) technology d) lower wage

c) technology

If new manufacturers enter the computer industry, then (ceteris paribus): a) some established manufacturers must exit the industry. b) the demand curve shifts to the left. c) the supply curve shifts to the right. d) the supply curve shifts to the left.

c) the supply curve shifts to the right.

Which of the following characteristics relate to sunk cost? a) When the mix of goods being produced represents the allocation that society most desires. b) Rise in the overall level of prices. c) As a person receives more of a good, the marginal utility from each additional unit of the good is smaller than from the previous unit. d) Costs that were incurred in the past and cannot be recovered, and thus should not affect current decisions.

d) Costs that were incurred in the past and cannot be recovered, and thus should not affect current decisions.

What term is used to describe the loss in social surplus that occurs when a market produces an inefficient quantity? a) Surplus b) Inefficient market c) Inferior good d) Deadweight loss

d) Deadweight loss

Which of the following refers to goods and services that are produced domestically and sold in another country? a) Imports b) Specialization c) Command economy d) Exports

d) Exports

What term is used to describe goods and services produced abroad and sold domestically? a) Export specialization b) Domestic-oriented economy c) Exports d) Imports

d) Imports

What term is used to describe another name for the budget constraint? a) Utility b) Marginal analysis c) Production possibilities frontier d) Opportunity set

d) Opportunity set

What term is used to describe a law that prevents a price from falling below a certain level? a) Price ceiling b) Equilibrium price c) Producer surplus d) Price floor

d) Price floor

Which of the following refers to a payment to make up for the risk of not being repaid in full? a) Productive efficiency b) Intertemporal choice c) Opportunity set d) Risk premium

d) Risk premium

The U.S. economy is best described as a) socialism b) capitalism c) a command economy d) a mixed economy

d) a mixed economy

Any given demand or supply curve is based on the ceteris paribus assumption that ___________________. a) no one knows which variables will change and which will remain constant. b) everything is variable. c) what is true for the individual is not necessarily true for the whole. d) all else is held equal

d) all else is held equal

Which of the following results in a rightward shift of the market demand curve for labor? a) a decrease in the firm's product price b) a decrease in labor productivity c) an increase in the wage rate d) an increase in demand for the firm's product

d) an increase in demand for the firm's product

Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories. a) financial capital market b) financial investment market c)Specialization Model d) circular flow diagram

d) circular flow diagram

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers. a) interconnected economy b) task economy c) modern economy d) division of labor

d) division of labor

If the demand for software engineers ____ slower than does supply, wages of software engineers will ____. a) decreases; fall b) increases, rise c) increases; remain constant d) increases; fall

d) increases; fall

The _________________ budget constraint shows the tradeoff between present and future consumption. a) inflation b) utility-maximizing c) time-value of money d) intertemporal choice

d) intertemporal choice

In the ____________, households work and receive payment from firms. a) savings market b) financial capital market c) financial investment market d) labor market

d) labor market

Other things being equal, a _______ supply of workers tends to ____ real wages. a) larger; increase b) smaller; not change c) smaller; decrease d) larger; decrease

d) larger; decrease

If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages ____. a) will decrease b) will stay the same c) may increase, decrease or stay the same depending on the relative slopes. d) will increase

d) will increase

On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50.? What will the likely effect of this policy be? a) Low income workers will be better able to survive the recession at the new, higher wage rate. b) Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate. c) More people will be hired at the higher wage rate offsetting the effects of the recession. d) The higher wage will increase the supply of labor offsetting the effects of the recession.

b) Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate.

Which of the following characteristics relate to complements? a) When at the existing price, quantity supplied exceeds the quantity demanded; also called "excess supply." b) Goods that are often used together, so that a rise in the price of one good tends to decrease the quantity consumed of the other good, and vice versa. c) The common relationship that a higher price is associated with a greater quantity supplied. d) The common relationship that a higher price leads to a lower quantity demanded of a certain good or service.

b) Goods that are often used together, so that a rise in the price of one good tends to decrease the quantity consumed of the other good, and vice versa.