micro econ 1 2 4 test

Which of the following events would increase the supply of tomatoes? the introduction of mechanized tomato pickers, which raises the cost of production an increase in wages for the tomato pickers a decrease in the cost of fertilizer for the tomato plants unseasonably hot, dry weather in the tomato-growing regions of the nation a decrease in the price of pasta products

a decrease in the cost of fertilizer for the tomato plants

If the government imposes a ceiling price on apartment rents, we would expect to observe all of the following except one. Which is the exception? an increase in the number of new apartment complexes being built long waiting lists for apartment seekers lower maintenance of existing apartments conversion of some apartment complexes to condos a shortage

an increase in the number of new apartment complexes being built

A shortage of textbooks will cause a decrease in the supply of textbooks a decrease in the demand for textbooks both an increase in the supply of textbooks and a decrease in the demand for textbooks an increase in the price of textbooks, caused by a shift of either the supply curve or the demand curve an increase in the price of textbooks

an increase in the price of textbooks

An entrepreneur is a(n) individual who has much education organizer who seeks profitable opportunities and is willing to accept risks business organization that uses inputs to produce output administrator who runs an enterprise without accepting any risk of financial loss depot or storehouse for commercial products

organizer who seeks profitable opportunities and is willing to accept risks

Which of the following is true about entrepreneurs? They have the talent required to dream up a new product or find a better way to produce an existing one. They are rewarded by profits. They sometimes suffer losses. They benefit from what's left over after paying other resource suppliers. All of the answers are correct.

All of the answers are correct.

Which of the following is an example of a positive statement? Workers with families should be paid at least the minimum wage. If crime rates were reduced, the world would be a better place in which to live. Marginal tax rates should be reduced for individuals in the highest tax brackets. An increase in the price of gasoline will cause a reduction in the amount purchased. Corrupt politicians ought to be voted out of office.

An increase in the price of gasoline will cause a reduction in the amount purchased.

A decrease in the price of peanuts will cause a leftward shift of the supply curve of peanut butter. True False

False

An improvement in technology shifts the supply curve rightward. True False

False

Rent controls mean that tenants end up with the best possible housing choices over the long run. True False

False

The economic question of "what to produce" is often referred to as the distribution question. True False

False

The production possibilities frontier represents all desirable combinations of two goods True False

False

t or f An economic model will produce poor predictions if it includes unrealistic assumptions. True False

False

t or f It is always rational to acquire more information before making a decision. True False

False

t or f Profit is the payment received by resource owners for the use of their capital. True False

False

t or f The association-causation fallacy is the error of assuming that what is true for one member of a group must be true for the group. True False

False

John takes 10 minutes to iron a shirt and 20 minutes to type a paper. Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct? Harry has a comparative advantage in ironing. Harry has a comparative advantage in typing. Harry has an absolute advantage in typing. Harry has an absolute advantage in ironing. Neither can gain from specialization and exchange.

Harry has a comparative advantage in ironing.

Which of the following is true of an increase in quantity supplied of a given good? It is represented by a rightward shift in the supply curve. It could result from a technological improvement. The price of a key resource used to produce the good may have decreased. It is caused by an increase in the price of the good. The price of an alternative good has increased.

It is caused by an increase in the price of the good.

Which of the following statements about demand is true? Since most college students want a Mercedes sports coupe, their demand for it is high. If price increases, the demand curve shifts to the right. The demand curve for bacon will not shift when the price of bacon changes. If a supply curve shifts, thereby changing the price, the demand curve will shift as well. If a demand curve shifts, the supply curve will shift as well, whether or not the price changes.

The demand curve for bacon will not shift when the price of bacon changes.

Studies show that the supply curve for oranges has shifted. Which of the following could not explain the shift of the supply curve? Weather conditions have changed. The price of fertilizer has changed. The wage paid to orange pickers has changed. The price of oranges has changed. The demand for grapefruit has changed.

The price of oranges has changed.

As the use of DVDs becomes more widespread, we would expect all of the following except one. Which is the exception? The prices of CDs will decrease. The demand curve for CD players will shift leftward. The supply curve of CD players will shift rightward. The demand curve for CDs will shift leftward. Firms will move their resources away from CD production to DVD production.

The supply curve of CD players will shift rightward.

Comparative advantage is based on opportunity costs. True False

True

Each point on a production possibilities frontier requires full employment of resources. True False

True

If a decrease in the price of good A causes an increase in the demand for good B, then A and B must be complements. True False

True

It is possible for one person to have an absolute advantage in two tasks and a comparative advantage in only one. True False

True

t or f Normative economic statements refer to what should be. True False

True

t or f The bowed-out shape of the production possibilities frontier indicates increasing opportunity costs. True False

True

Which of the following would not shift the production possibilities frontier? an increase in worker training a war that destroyed many buildings a technological improvement that improved fuel efficiency in cars a decrease in the size of the labor force a change to a more inefficient production process

a change to a more inefficient production process

Which of the following will cause the demand curve for gasoline to shift leftward? a decrease in the price of gasoline an increase in the price of gasoline a leftward shift of the supply of gasoline a rightward shift of the supply of cars a decrease in the price of bicycles

a decrease in the price of bicycles

The difference between a good and a service is that a good helps satisfy unlimited wants; a service does not a service helps satisfy unlimited wants; a good does not a services is available in unlimited quantities; a good is not a good is available in unlimited quantities; a service is not a good is tangible; a service is not

a good is tangible; a service is not

The "invisible hand" described by Adam Smith refers to the allocative role of markets and market forces importance of government intervention and central planning actions of successful entrepreneurs in directing the economy role of monopolized industries in leading the nation value of religious belief in creating an ideal economy

allocative role of markets and market forces

Which of the following could shift the demand for a good to the right? a decrease in income, if the good is a normal good an increase in the price of a complementary good a decrease in the good's price, if the good is normal an increase in the good's price, if the good is inferior an expectation of a future price increase

an expectation of a future price increase

The difference between normal and inferior goods is that normal goods are of better quality than inferior goods an increase in price will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward if the price of a normal good increases, individuals who buy it are poorer; for inferior goods, the opposite is true an inferior good is something that will not be demanded until quantities of the normal good have been exhausted an increase in income will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward

an increase in income will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward

Choices made by economic decision makers are government decisions only are the primary focus of economics are not important in economic analysis occur infrequently do not involve ordinary citizens

are the primary focus of economics

When faced with a choice, a person assesses alternatives as long as the expected marginal __________ of gathering more information about the person's opinions __________ the expected marginal __________. benefit, is less than, cost cost, exceeds, benefit benefit, exceeds, cost benefit, is greater than, benefit cost, is greater than, benefit

benefit, exceeds, cost

The demand for a product is the amount that buyers purchase in the market buyers are willing to purchase at a given price sellers are willing to sell at a particular price buyers are willing and able to purchase at alternative prices buyers are able to purchase at a specific price

buyers are willing and able to purchase at alternative prices

The law of demand says that as the price of a good rises, buyers recognize that price may be even higher in the future, and so they buy now buyers purchase less in hopes that the price will fall in the future buyers purchase less, in part because their real income has fallen buyers purchase more, in part because the price of a substitute has risen buyers purchase more, in part because it has higher status at a higher price

buyers purchase less, in part because their real income has fallen

A change in the composition of the population will generally change demand only if there is a change in the size of the population change demand only if there is no change in the size of the population change demand even if there is no change in the size of the population have absolutely no effect on demand result in a movement along the demand curve

change demand even if there is no change in the size of the population

The law of demand assumes that as the price of a good increases, people recognize that its price may be even higher in the future, so they buy now rather than later consumers tend to shift their purchases to relatively cheaper substitutes people will buy less of it in the hope that the good will be cheaper in the future the consumer's money income increases, and he or she is less able to buy all goods, including the good whose price has increased

consumers tend to shift their purchases to relatively cheaper substitutes

Assume that corn and soybeans are alternatives that could be grown by most farmers. An increase in the price of corn will increase the supply of corn increase the supply of soybeans decrease the supply of soybeans decrease the supply of corn have no effect on the supplies of corn and soybeans

decrease the supply of soybeans

If good B is a complement to good A, then a decrease in the price of B increases the quantity demanded of A decreases the demand for A increases the demand for A decreases the quantity demanded of A will cause the demand for B to increase

decreases the demand for A

The law of demand is illustrated by a demand curve that is horizontal vertical upward sloping constant downward sloping

downward sloping

The opportunity cost of going to college includes the costs of tuition, books, fees, and nothing else housing housing and food earnings forgone by not working full-time housing, food, and earnings forgone by not working full-time

earnings forgone by not working full-time

The study of how nations deal with the problem of scarcity is the domain of economics political science sociology political economy anthropology

economics

The equilibrium point represents the only price-quantity combination in a market that causes both buyers and sellers to agree to a price increase causes both buyers and sellers to agree to a price decrease exactly matches the independent plans of buyers and sellers allows buyers to purchase what they want allows sellers to earn a profit

exactly matches the independent plans of buyers and sellers

You tell your friend that the stock market does well when we have Republican presidents so you are going to vote republican in the next presidential election. Because she is such a good friend she gently points out to you that you are correct only when the economy is in a recession have mistakenly inferred causation from observed correlation have ignored secondary effects have committed the fallacy of composition are correct only when the United States enjoys economic growth

have mistakenly inferred causation from observed correlation

Suppliers recognize there is a shortage in the market for their product when they notice that the quantity supplied exceeds the quantity demanded the quantity demanded is falling inventories are falling production exceeds new orders for the product government economists announce a shortage exists

inventories are falling

Society's production possibilities frontier helps explain the immense complexity of the real economy demonstrates that, although resources are scarce for individuals, there is no problem of scarcity for society as a whole is based on unrealistic assumptions and therefore has no value as an economic tool is based on simplifying assumptions, but is still useful for illustrating scarcity, opportunity cost, and economic growth is based on the assumption that technology is constantly changing

is based on simplifying assumptions, but is still useful for illustrating scarcity, opportunity cost, and economic growth

A surplus of wheat is impossible if people are hungry is impossible if the price of wheat is below equilibrium will result in an increase the price of wheat is unlikely to result in any change in the price of wheat indicates that the problem of scarcity of wheat has been solved

is impossible if the price of wheat is below equilibrium

Economists believe that people respond in a predictable way to changes in costs and benefits. The term that best describes this phenomenon is opportunity cost scarcity innovation marginal analysis other things equal (or ceteris paribus)

marginal analysis

Adam Smith's term, "the invisible hand," refers to the hidden role of government in setting regulations that govern trading in markets the most capable entrepreneurs in the economy market forces the unseen work of the financial markets that facilitates trade the role of technological change and random events in the economy

market forces

Which of the following would be most likely to increase the demand for downtown parking in a large city? improved bus service to the downtown area lower downtown parking fees more downtown parking lots more freeways leading to the downtown area a major employer moves to the suburbs

more freeways leading to the downtown area

If the price of a haircut (a normal good) increases, other things constant, the demand for haircuts increases demand for haircuts decreases quantity demanded of haircuts decreases quantity demanded of haircuts increases demand for haircuts, or quantity demanded of haircuts decreases; they are the same thing

quantity demanded of haircuts decreases

Which of the following is correct when a price floor is set above the equilibrium price? quantity supplied is less than quantity demanded at the set price quantity supplied is equal to quantity demanded at the set price at the set price there will be a shortage The market price is greater than the price floor quantity supplied exceeds quantity demanded at the set price

quantity supplied exceeds quantity demanded at the set price

The respective payments for the resources of natural resources, labor, capital, and entrepreneurial ability are interest, wages, profit, and rent profit, rent, interest, and wages rent, wages, profit, and interest interest, profit, wages, and rent rent, wages, interest, and profit

rent, wages, interest, and profit

The labor market is an example of a government market classified market communication market resource market product market

resource market

The law of increasing opportunity cost reflects the fact that the production possibilities frontier is bowed inward resources are not perfectly substitutable resources cannot always be used efficiently an economy will operate at a point inside the production possibilities frontier an economy will operate at a point along the production possibilities frontier

resources are not perfectly substitutable

Opportunity cost exists because technology is fixed at any point in time the law of comparative advantage is working resources are scarce but wants are unlimited the value of lost opportunities varies from person to person efficiency is measured by the monetary cost of an activity

resources are scarce but wants are unlimited

Economics is best described as the study of choice when scarcity exists study of the production of goods and services theory of consumer behavior science of money art of spending money wisely

study of choice when scarcity exists

Which of the following best defines supply? the amount of a good that producers want to sell at a particular price the amount of a good that consumers will buy the amount of a good that producers are willing and able to sell at each possible price, other things constant the amount of a good that producers are willing to sell at each possible price, other things constant the amount of a good that producers are willing and able to buy at each possible price, other things constant

the amount of a good that producers are willing and able to sell at each possible price, other things constant

A decrease in demand for a good could mean that consumers are willing to pay a higher price for each quantity of the good consumers are willing to buy larger quantities of the good at each price the demand curve has undergone a parallel shift to the right the demand curve has undergone a nonparallel shift to the right the demand curve has shifted to the left

the demand curve has shifted to the left

Microeconomics is the study of marginal or inferior products the economic behavior of individual decision makers the behavior of the economy as a whole how to use the fewest natural resources to produce goods and services government's role as a producer in the economy

the economic behavior of individual decision makers

At various points along the production possibilities frontier, the greatest achievable output levels are illustrated resources are not fully employed more of one good can be obtained without giving up more of the other more efficient output levels are possible society is equally well off

the greatest achievable output levels are illustrated

Because resources are not perfectly adaptable to the production of both good A and good B, the opportunity cost of A increases as production of A increases the opportunity cost of A decreases as production of A increases it is impossible for the economy to produce both A and B the opportunity cost of A is constant the opportunity cost of B is constant

the opportunity cost of A increases as production of A increases

In macroeconomics, we analyze all of the following the overall performance of the economy as a whole arrangements through which specific products are exchanged influences on the decision making of particular households the factors that affect the decisions of individual firms

the overall performance of the economy as a whole

The income effect refers to the impact of a change in income on the price of a good the general price level caused by a change in the price of another good the price of a good on real income the price of a substitute for the good under consideration demand when income changes

the price of a good on real income

When quantity demanded of a good is less than the quantity supplied at the prevailing market price, the market is in equilibrium the price of the good tends to rise the price of the good tends to fall the demand curve shifts rightward until the surplus is eliminated the supply curve shifts leftward until the shortage is eliminated

the price of the good tends to fall

If there is a shortage in the market for jeans, producers' inventories will increase the price should begin to rise the demand curve will shift to restore equilibrium in the market the supply curve will shift to restore equilibrium in the market producers expect government to impose a price ceiling

the price should begin to rise

If the price of gasoline (a normal good) decreases, other things constant, the demand for gasoline increases the demand for gasoline decreases the quantity demanded of gasoline increases the quantity demanded of gasoline decreases neither the demand for gasoline nor the quantity demanded of gasoline changes because everything is assumed constant along a demand curve

the quantity demanded of gasoline increases

Suppose a market is in equilibrium and then a price floor is established below the equilibrium price. Which of the following will happen? quantity demanded will increase a surplus will develop a shortage will develop the quantity sold will rise the market will remain in equilibrium

the quantity sold will rise

Suppose you drink more tea because the price of coffee has increased. Which of the following best explains your action? the law of supply tea and coffee are complements the substitution effect the income effect your nominal income has increased

the substitution effect

When a market is in equilibrium, producers earn profits the minimum possible price is achieved there is no incentive for consumers or producers to change their current behavior excess demand is less than excess supply the maximum possible price is achieved

there is no incentive for consumers or producers to change their current behavior

Which of the following is the fundamental resource that is the basis of labor? capital natural resources time money entrepreneurial ability

time

Which of the following is most likely to be an inferior good? airline travel restaurant meals a subscription to the Wall Street Journal soft drinks used clothing

used clothing

Your opportunity cost of choosing a particular activity can be easily and accurately calculated cannot even be estimated does not change over time varies, depending on time and circumstances is measured by the money you spend on the activity

varies, depending on time and circumstances

Someone who commits the fallacy of composition is likely to assume that the simplest model is the best predictor event B, which follows event A, was caused by event A event B, which follows event A, was not necessarily caused by event A what is true for the individual is also true for the group what is true for the individual is not necessarily true for the group

what is true for the individual is also true for the group