microecon exam 1: quiz questions

Which of the following involve a trade-off? a. Buying a new car b. Going to college c. Watching a football game on Saturday afternoon d. Taking a nap e. All of the answer choices involve trade-offs.

e. all of the answer choices involve trade-offs

According to the principle of comparative advantage, ________. a. countries should specialize in the production of goods that they enjoy consuming b. countries should specialize in the production of goods for which they use fewer resources in production than their trading partners c. countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners d. countries with a comparative advantage in the production of every good

fewer resources in production than their trading partners c. countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners

Which of the following statements is true about the impact of an increase in the price of lettuce? a. The supply of lettuce will decrease. b. The demand for lettuce will decrease. c. The equilibrium price and quantity of salad dressing will fall. d. The equilibrium price and quantity of salad dressing will rise. e. The demand for lettuce will decrease and the equilibrium price and quantity of salad dressing will fall.

C. The equilibrium price and quantity of salad dressing will fall.

Which of the following statements is true? a. A self-sufficient country at best can consume on its production possibilities frontier. b. Self-sufficiency is the road to prosperity for most countries. c. A self-sufficient country consumes outside its production possibilities frontier. d. Only countries with an absolute advantage in the production of every good should strive to be self-sufficient.

a. A self-sufficient country at best can consume on its production possibilities frontier.

Which of the following is most likely to produce scientific evidence about a theory? a. A tenured economist employed at a leading university analyzing the impact of bank regulations on rural lending b. A lawyer employed by Toyota addressing the impact of air bags on passenger safety c. A radio talk show host collecting data on how capital markets respond to taxation d. An economist employed by the AFL/CIO doing research on the impact of trade restrictions on workers' wage

a. A tenured economist employed at a leading university analyzing the impact of bank regulations on rural lending

Which of the following situations describes the greatest market power? a. Apple's impact on the price of smartphones b. Mitsubishi's impact on the price of autos c. A student's impact on college tuition d. A farmer's impact on the price of corn

a. Apple's impact on the price of smartphones

Suppose a frost destroys much of the Washington apple crop. At the same time, suppose consumer tastes shift toward apple juice. What would we expect to happen to the equilibrium price and quantity in the market for apple juice? a. Price will increase; quantity is ambiguous. b. Price will increase; quantity will increase. c. Price will increase; quantity will decrease. d. The impact on both price and quantity is ambiguous. e. Price will decrease; quantity is ambiguous. Hide Feedback

a. Price will increase; quantity is ambiguous.

Which of the following statements regarding the circular-flow diagram is true? a. The factors of production are owned by households. b. If Alicia works for Apple and receives a paycheck, the transaction takes place in the market for goods and services. c. If Apple sells a computer, the transaction takes place in the market for factors of production. d. The factors of production are owned by firms. e. None of the answer choices are correct.

a. The factors of production are owned by households.

Which of the following issues is related to microeconomics? a. The impact of oil prices on auto production b. The impact of the quantity of money on inflation c. The impact of technology on economic growth d. The impact of the deficit on saving

a. The impact of oil prices on auto production

Which of the following statements is normative? a. The unemployment rate should be lower. b. Printing too much money causes inflation. c. People work harder if the wage is higher. d. Large government deficits cause an economy to grow more slowly.

a. The unemployment rate should be lower.

Economic growth is depicted by ________. a. a shift in the production possibilities frontier outward b. a movement from inside the production possibilities frontier toward the frontier c. a shift in the production possibilities frontier inward d. a movement along a production possibilities frontier toward consumption goods

a. a shift in the production possibilities frontier outward

Foreign trade ________. a. allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home b. allows a country to avoid trade-offs c. is none of the answer choices d. increases the scarcity of resources e. makes the members of a country more equal

a. allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home

An increase (rightward shift) in the demand for a good will tend to cause ________. a. an increase in the equilibrium price and quantity b. a decrease in the equilibrium price and quantity c. an increase in the equilibrium price and a decrease in the equilibrium quantity d. a decrease in the equilibrium price and an increase in the equilibrium quantity e. none of the answer choices

a. an increase in the equilibrium price and quantity

All of the following shift the supply of smartphones to the right except ________. a. an increase in the price of smartphones b. an advance in the technology used to manufacture smartphone c. a decrease in the wage of workers employed to manufacture smartphones d. manufacturers' expectations of lower smartphone prices in the future e. all of the answer choices cause an increase in the supply of smartphones

a. an increase in the price of smartphones

Suppose two economists are arguing about policies that deal with unemployment. One economist says, "The government could lower unemployment by one percentage point if it would just increase government spending by 50 billion dollars." The other economist responds, "That's ridiculous. If the government spent an additional 50 billion dollars, it would reduce unemployment by only one-tenth of 1 percent, and that effect would only be temporary!" These economists ________. a. disagree because they have different scientific judgments b. disagree because they have different values c. really don't disagree at all. It just looks that way d. do none of the answer choices Hide Feedback

a. disagree because they have different scientific judgments

Points on the production possibilities frontier are ________. a. efficient b. unattainable c. inefficient d. normative e. none of the answer choices

a. efficient

If demand is linear (a straight line), then price elasticity of demand is ________. a. elastic in the upper portion and inelastic in the lower portion b. elastic throughout c. constant along the demand curve d. inelastic in the upper portion and elastic in the lower portion e. inelastic throughout

a. elastic in the upper portion and inelastic in the lower portion

Suppose there is an increase in both the supply and demand for laptop computers. Furthermore, suppose the supply of laptops increases more than demand for laptops. In the market for laptops, we would expect the ________. a. equilibrium quantity to rise and the equilibrium price to fall b. equilibrium quantity to rise and the equilibrium price to rise c. equilibrium quantity to rise and the change in the equilibrium price to be ambiguous d. change in the equilibrium quantity to be ambiguous and t

a. equilibrium quantity to rise and the equilibrium price to fall

Productivity can be increased by ________. a. improving the education of workers b. raising minimum wages c. restricting trade with foreign countries d. raising union wages

a. improving the education of workers

f a nation has a comparative advantage in the production of a good, ________. a. it can produce that good at a lower opportunity cost than its trading partner b. it can produce that good using fewer resources than its trading partner c. it can benefit by restricting imports of that good d. it must be the only country with the ability to produce that good e. none of the answer choices are correct Hide Feedback

a. it can produce that good at a lower opportunity cost than its trading partner

A monopolistic market has ________. a. only one seller b. at least a few sellers c. many buyers and sellers d. firms that are price takers e. none of the answer choices

a. only one seller

In general, a flatter demand curve is more likely to be ________. a. price elastic b. price inelastic c. unit price elastic d. none of the answer choices

a. price elastic

Economics is the study of how ________. a. society manages its scarce resources b. society manages its unlimited resources c. to fully satisfy our unlimited wants d. to reduce our wants until we are satisfied e. to avoid having to make trade-off

a. society manages its scarce resources

Because people respond to incentives, we would expect that if the average salary of engineers increases by 50 percent while the average salary of teachers increases by 20 percent, ________. a. students will shift majors from education to engineering b. students will shift majors from engineering to education c. fewer students will attend college d. none of the answer choices are correct

a. students will shift majors from education to engineering

If an increase in the price of chicken leads to an increase in the demand for fish, then chicken and fish are ________. a. substitutes b. complements c. normal goods d. inferior goods e. none of the answer choices

a. substitutes

Suppose a country's workers can produce 4 pens per hour or 12 pencils per hour. If there is no trade, ________. a. the domestic price of 1 pencil is 1/3 of a pen b. the domestic price of 1 pencil is 1/4 of a pen c. the domestic price of 1 pencil is 3 pens d. the domestic price of 1 pencil is 4 pens e. the domestic price of 1 pencil is 12 pen

a. the domestic price of 1 pencil is 1/3 of a pen

If a supply curve for a good is price elastic, then ________. a. the quantity supplied is sensitive to changes in the price of that good b. the quantity supplied is insensitive to changes in the price of that good c. the quantity demanded is sensitive to changes in the price of that good d. the quantity demanded is insensitive to changes in the price of that good e. none of the answer choices

a. the quantity supplied is sensitive to changes in the price of that good

Suppose that at a price of $30 per month, there are 30,000 subscribers to Small Town Streaming Service. If Small Town Streaming Service raises its price to $40 per month, the number of subscribers will fall to 20,000. At which of the following prices does Small Town Streaming Service earn the greatest total revenue? a. Either $30 or $40 per month because the price elasticity of demand is 1.0 b. $30 per month c. $40 per month d. $0 per month

b. $30 per month

If consumers always spend 15 percent of their income on clothing, then the income elasticity of demand for clothing is ________. a. 0.15 b. 1.00 c. 1.15 d. 1.50 e. none of the answer choice

b. 1.00

Suppose that at a price of $30 per month, there are 30,000 subscribers to Small Town Streaming Service. If Small Town Streaming Service raises its price to $40 per month, the number of subscribers will fall to 20,000. Using the midpoint method for calculating the elasticity, what is the price elasticity of demand for this company's streaming service? a. 0.75 b. 1.4 c. 2.0 d. 0.66 e. 1.0

b. 1.4

Suppose the world consists of two countries— Canada and Mexico. Furthermore, suppose there are only two goods—food and clothing. Which of the following statements is true? a. If Canada has an absolute advantage in the production of food, then Mexico must have an absolute advantage in the production of clothing. b. If Canada has a comparative advantage in the production of food, then Mexico must have a comparative advantage in the production of clothing. c. If Canada has a comparative advanta

b. If Canada has a comparative advantage in the production of food, then Mexico must have a comparative advantage in the production of clothing.

Which of the following statements is true about a market economy? a. With a large enough computer, central planners could guide production more efficiently than markets. b. Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being. c. Taxes help prices communicate costs and benefits to producers and consumers. d. The strength of a market system is that it tends to distribute resources evenly across the population. Hide Feedback

b. Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being.

Suppose both buyers and sellers of corn expect the price of corn to rise in the near future. What would we expect to happen to the equilibrium price and quantity in the market for corn today? a. Price will increase; quantity will increase. b. Price will increase; quantity is ambiguous. c. Price will increase; quantity will decrease. d. Price will decrease; quantity is ambiguous. e. The impact on both price and quantity is ambiguous. Hide Feedback

b. Price will increase; quantity is ambiguous

Which of the following is not part of the opportunity cost of going on vacation? a. The money you could have made if you had stayed home and worked b. The money you spent on food c. The money you spent on a Broadway show d. The money you spent on airline tickets

b. The money you spent on food

In the short run, ________. a. an increase in inflation temporarily increases unemployment b. a decrease in inflation temporarily increases unemployment c. inflation and unemployment are unrelated d. the business cycle has been eliminated e. none of the answer choices are correct

b. a decrease in inflation temporarily increases unemployment

Economic models are ________. a. usually made of wood and plastic b. built with assumptions c. created to duplicate reality d. useless if they are simple

b. built with assumptions

An inferior good is one for which an increase in income causes a(n) ________. a. increase in demand b. decrease in demand c. increase in supply d. decrease in supply

b. decrease in demand

Suppose two economists are arguing about policies that deal with unemployment. One economist says, "The government should fight unemployment because it is the greatest social evil." The other economist responds, "That's ridiculous. Inflation is the greatest social evil." These economists ________. a. disagree because they have different scientific judgments b. disagree because they have different values c. really don't disagree at all. It just looks that way d. do none of the answer choices

b. disagree because they have different values

Raising taxes and increasing welfare payments ________. a. proves that there is such a thing as a free lunch b. improves equality at the expense of efficiency c. does none of the answer choices d. reduces market power e. improves efficiency at the expense of equality

b. improves equality at the expense of efficiency

If the income elasticity of demand for a good is negative, it must be a(n) ________. a. luxury good b. inferior good c. elastic good d. normal good

b. inferior good

An increase in the price of beef provides ________. a. information that tells consumers to buy less chicken b. information that tells producers to produce more beef c. no information because prices in a market system are managed by planning boards d. information that tells consumers to buy more beef

b. information that tells producers to produce more beef

If a nation has an absolute advantage in the production of a good, ________. a. it can produce that good at a lower opportunity cost than its trading partner b. it can produce that good using fewer resources than its trading partner c. it can benefit by restricting imports of that good d. it will specialize in the production of that good and export it e. none of the answer choices are correct Hide Feedback

b. it can produce that good using fewer resources than its trading partner

If supply is price inelastic, the value of the price elasticity of supply must be ________. a. zero b. less than 1 c. greater than 1 d. infinite e. none of the answer choices

b. less than 1

If there is excess capacity in a production facility, it is likely that the firm's supply curve is ________. a. price inelastic b. price elastic c. unit price elastic d. none of the answer choices

b. price elastic

In general, a steeper supply curve is more likely to be ________. a. price elastic b. price inelastic c. unit price elastic d. none of the answer choices

b. price inelastic

The scientific method requires that ________. a. scientists use test tubes and have clean labs b. scientists be objective c. scientists use precision equipment d. only incorrect theories are tested e. only correct theories are tested

b. scientists be objective

If the price of a good is below the equilibrium price, ________. a. there is a surplus and the price will fall b. there is a shortage and the price will rise c. there is a surplus and the price will rise d. there is a shortage and the price will fall e. the quantity demanded is equal to the quantity supplied and the price remains unchanged

b. there is a shortage and the price will rise

Suppose you find $20. If you choose to use the $20 to go to the baseball game, your opportunity cost of going to the game is ________. a. nothing, because you found the money b. $20 (because you could have used the $20 to buy other things) c. $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game d. $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game, plus the cost of the dinner you purchased at the game

c. $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game

Which of the following shifts the demand for pizza to the right? a. A decrease in the price of pizza b. A decrease in consumer incomes if pizza is a normal good c. A decrease in the price of soda if soda and pizza are complements d. An increase in the price of pizza e. None of the answer choices

c. A decrease in the price of soda if soda and pizza are complements

Which of the following products would be least capable of producing an externality? a. Stereo equipment b. Inoculations against disease c. Food d. Cigarettes e. Education

c. Food

Which of the following would cause a demand curve for a good to be price inelastic? a. The good is a luxury. b. There are a great number of substitutes for the good. c. The good is a necessity. d. The good is inferior

c. The good is a necessity.

Which of the following statements about microeconomics and macroeconomics is not true? a. Macroeconomics is concerned with economy-wide phenomena. b. Microeconomics is a building block for macroeconomics. c. The study of very large industries is a topic within macroeconomics. d. Microeconomics and macroeconomics cannot be entirely separated.

c. The study of very large industries is a topic within macroeconomics.

Suppose consumer tastes shift toward the consumption of coffee. Which of the following statements is an accurate description of the impact of this event on the market for coffee? a. There is an increase in the quantity demanded of coffee and in the supply of coffee. b. There is a decrease in the quantity demanded of coffee and an increase in the supply of coffee. c. There is an increase in the demand for coffee and a decrease in the supply of coffee. d. There is an increase in the demand for cof

c. There is an increase in the demand for coffee and a decrease in the supply of coffee.

The demand for which of the following is likely to be the most price inelastic? a. Uber rides b. Greyhound bus tickets c. Transportation d. Delta airline tickets

c. Transportation

A decrease (leftward shift) in the supply for a good will tend to cause ________. a. an increase in the equilibrium price and quantity b. a decrease in the equilibrium price and quantity c. an increase in the equilibrium price and a decrease in the equilibrium quantity d. a decrease in the equilibrium price and an increase in the equilibrium quantity e. none of the answer choices Hide Feedback

c. an increase in the equilibrium price and a decrease in the equilibrium quantity

A decrease in supply (shift to the left) will increase total revenue in that market if ________. a. demand is price elastic b. supply is price inelastic c. demand is price inelastic d. supply is price elastic

c. demand is price inelastic

High and persistent inflation is caused by ________. a. OPEC raising the price of oil too much b. regulations raising the cost of production too much c. governments increasing the quantity of money too much d. unions increasing wages too much

c. governments increasing the quantity of money too much

The law of supply states that an increase in the price of a good ________. a. decreases the quantity demanded for that good b. does none of the answer choices c. increases the quantity supplied of that good d. decreases the demand for that good e. increases the supply of that good

c. increases the quantity supplied of that good

A perfectly competitive market has ________. a. only one seller b. at least a few sellers c. many buyers and sellers d. firms that set their own prices e. none of the answer choices

c. many buyers and sellers

The price elasticity of demand is defined as ________. a. the percentage change in price of a good divided by the percentage change in the quantity demanded of that good b. the percentage change in income divided by the percentage change in the quantity demanded c. the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good d. the percentage change in the quantity demanded divided by the percentage change in income e. none of the answer cho

c. the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good

Adam Smith coined the phrase "invisible hand" to suggest that ________. a. workers should unite and overthrow the capitalist b. markets work like an invisible hand which reaches into the pockets of consumers and induces them to spend their income c. the pursuit of self-interest can promote the good of society as a whole d. we are unable to see how improvements in technology move the economy to higher levels of production

c. the pursuit of self-interest can promote the good of society as a whole

If the price of a good is equal to the equilibrium price, ________. a. there is a surplus and the price will rise b. there is a shortage and the price will fall c. the quantity demanded is equal to the quantity supplied and the price remains unchanged d. there is a shortage and the price will rise e. there is a surplus and the price will fall

c. the quantity demanded is equal to the quantity supplied and the price remains unchanged

If the price of a good is above the equilibrium price, ________. a. there is a shortage and the price will rise b. there is a surplus and the price will rise c. there is a surplus and the price will fall d. there is a shortage and the price will fall e. the quantity demanded is equal to the quantity supplied and the price remains unchanged

c. there is a surplus and the price will fall

If an increase in the price of a good has no impact on the total revenue in that market, demand must be ________. a. price inelastic b. price elastic c. unit price elastic d. all of the answer choices

c. unit price elastic

You have spent $1,000 building a snow cone stand based on estimates of sales of $2,000. The snow cone stand is nearly completed, but now you estimate total sales to be only $800. You estimate that you can complete the snow cone stand for another $300. (Assume that snow cones cost you nothing.) Your decision rule should be to complete the snow cone stand as long as the cost to complete the stand is less than ________. a. $500 b. you should not complete the snow cone stand. c. $300 d. $800 e. $100

d. $800

Which of the following will not shift a country's production possibilities frontier outward? a. An increase in the labor force b. An increase in the capital stock c. An advance in technology d. A reduction in unemployment

d. A reduction in unemployment

In making which of the following statements is an economist acting more like a scientist? a. The unemployment rate should be reduced because unemployment robs individuals of their dignity. b. The rate of inflation should be reduced because it robs the elderly of their savings. c. The state should increase subsidies to universities because the future of our country depends on education. d. A reduction in unemployment benefits will reduce the unemployment rate.

d. A reduction in unemployment benefits will reduce the unemployment rate.

Which of the following activities is most likely to produce an externality? a. A student eats a sandwich in the student union. b. A student reads a novel for pleasure. c. A student sits at home and watches television. d. A student has a party in their dorm room.

d. A student has a party in their dorm room.

Which of the following is not a factor of production? a. Land b. Labor c. Capital d. Money e. All of the answer choices are factors of production.

d. Money

suppose consumer tastes shift toward the consumption of coffee. Which of the following statements is an accurate description of the impact of this event on the market for coffee? a. There is an increase in the quantity demanded of coffee and in the supply of coffee. b. There is a decrease in the quantity demanded of coffee and an increase in the supply of coffee. c. There is an increase in the demand for coffee and a decrease in the supply of coffee. d. There is an increase in the demand for cof

d. There is an increase in the demand for coffee and an increase in the quantity supplied of coffee.

In which of the following cases is the assumption most reasonable? a. To address the impact of money growth on inflation, an economist assumes that money is strictly coins. b. To address the impact of taxes on income distribution, an economist assumes that everyone earns the same income. c. To estimate the speed at which a beach ball falls, a physicist assumes that it falls in a vacuum. d. To address the benefits of international trade, an economist assumes that there are two countries, each producing two goods.

d. To address the benefits of international trade, an economist assumes that there are two countries, each producing two goods.

Which of the following statements about trade is true? a. People that are skilled at all activities cannot benefit from trade. b. Trade can benefit everyone in society because it allows people to specialize in activities in which they have an absolute advantage. c. Unrestricted international trade benefits every person in a country equally. d. Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage.

d. Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage.

If an increase in consumer incomes leads to a decrease in the demand for hamburger, then hamburger is ________. a. a complementary good b. a substitute good c. a normal good` d. an inferior good e. none of the answer choices

d. an inferior good

If the cross-price elasticity between two goods is negative, the two goods are likely to be ________. a. necessities b. substitutes c. luxuries d. complements

d. complements

The law of demand states that an increase in the price of a good ________. a. increases the supply of that good b. increases the quantity supplied of that good c. does none of the answer choices d. decreases the quantity demanded for that good e. decreases the demand for that good

d. decreases the quantity demanded for that good

If consumers think that there are very few substitutes for a good, then ________. a. supply would tend to be price elastic b. supply would tend to be price inelastic c. demand would tend to be price elastic d. demand would tend to be price inelastic e. none of the answer choices are correct

d. demand would tend to be price inelastic

Technological improvements in agriculture that shift the supply of agricultural commodities to the right tend to ________. a. reduce total revenue to farmers as a whole because the demand for food is elastic b. increase total revenue to farmers as a whole because the demand for food is elastic c. increase total revenue to farmers as a whole because the demand for food is inelastic d. reduce total revenue to farmers as a whole because the demand for food is inelastic

d. reduce total revenue to farmers as a whole because the demand for food is inelastic

Trade-offs are required because wants are unlimited and resources are _______. a. marginal b. economical c. unlimited d. scarce e. efficient

d. scarce

Positive statements are ________. a. microeconomic b. macroeconomic c. statements of prescription that involve value judgments d. statements of description that can be tested

d. statements of description that can be tested

A rational person does not act unless ________. a. the action makes money for the person b. the action is ethical c. the action produces marginal costs that exceed marginal benefits d. the action produces marginal benefits that exceed marginal costs e. none of the answer choices are correct

d. the action produces marginal benefits that exceed marginal costs

Workers in the United States enjoy a high standard of living because ________. a. unions in the United States keep the wage high b. we have protected our industry from foreign competition c. employers in the United States are particularly generous d. workers in the United States are highly productive e. none of the answer choices are correct

d. workers in the United States are highly productive

If a farmer must sell all of their daily harvest of vegetables before they spoil for whatever price they are offered, once the vegetables are picked, the farmer's price elasticity of supply for fresh vegetables is ________. a. infinite b. one c. unable to be determined from this information d. zero

d. zero

Suppose there is an increase in both the supply and demand for laptop computers. In the market for laptops, we would expect the ________. a. equilibrium quantity to rise and the equilibrium price to fall b. equilibrium quantity to rise and the equilibrium price to remain constant c. change in the equilibrium quantity to be ambiguous and the equilibrium price to rise d. equilibrium quantity to rise and the equilibrium price to rise e. equilibrium quantity to rise and the change in the equilibrium

e. equilibrium quantity to rise and the change in the equilibrium price to be ambiguous

If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is ________. a. income elastic b. income inelastic c. price inelastic d. unit price elastic e. price elastic

e. price elastic

uppose a country's workers can produce 4 pens per hour or 12 pencils per hour. If there is no trade, ________. a. the opportunity cost of 1 pen is 4 pencils b. the opportunity cost of 1 pen is 1/4 of a pencil c. the opportunity cost of 1 pen is 12 pencils d. the opportunity cost of 1 pen is 1/3 of a pencil e. the opportunity cost of 1 pen is 3 pencils

e. the opportunity cost of 1 pen is 3 pencils