Microeconomics Quiz 2 Study Guide

The opportunity cost of 1 unit of cheese for Spain is (A) 1/2 unit of bread. (B) 2 hours of labor. (C) 2 units of bread. (D) 4 hours of labor.

(A) 1/2 unit of bread

The opportunity cost of 1 unit of bread for Spain is (A) 1/2 unit of cheese. (B) 2 units of cheese. (C) 3 units of cheese (D) 8 hours of labor.

(A) 1/2 unit of cheese

Assume that England and Spain can switch between producing cheese and producing bread at a constant rate The opportunity cost of 1 unit of cheese for England is (A) 1/4 unit of bread. (B) 1 hour of labor. (C) 4 units of bread. (D) 4 hours of labor.

(A) 1/4 unit of bread

Use Figure 1: Supply of Coconuts. If the price of coconuts decreased, it would be represented in the figure as a movement from: (A) A to B (B) B to A (C) C to A (D) E to B

(A) A to B

Use Figure 2: Shifts in Demand and Supply. The graph shows how supply and demand might shift in response to specific events. Suppose a new machine allows restaurants and fast-food outlets to produce french fries at a lower cost. Which panel BEST describes how this will affect the market for french fries? (A) Panel A (B) Panel B (C) Panel C (D) Panel D

(A) Panel A

Use Figure 2: Demand and Supply of Gasoline. A factor that may have changed supply from S1 to S2 is: (A) better technology in the production of gasoline. (B) increased demand. (C) lower labor productivity in gasoline production. (D) increased prices of substitutes in production for gasoline.

(A) better technology in the production of gasoline.

Refer to Table 1 England has a comparative advantage in the production of (A) cheese and Spain has a comparative advantage in the production of bread. (B) bread and Spain has a comparative advantage in the production of cheese. (C) both goods and Spain has a comparative advantage in the production of neither good. (D) neither good and Spain has a comparative advantage in the production of both goods.

(A) cheese and Spain has a comparative advantage in the production of bread.

Refer to Table 1 England should specialize in the production of (A) cheese and Spain should specialize in the production of bread. (B) bread and Spain should specialize in the production of cheese. (C) both goods and Spain should specialize in the production of neither good. (D) neither good and Spain should specialize in the production of both goods.

(A) cheese and Spain should specialize in the production of bread.

A farmer finds that when he produces more corn, he also has more cornstalks that he can sell as decorations. To the farmer, corn and cornstalks are: (A) complements in production. (B) substitutes in production. (C) unrelated goods. (D) inferior goods.

(A) complements in production.

A newspaper story recently reported that the price of new cars, a normal good, has decreased and the quantity of new cars sold has dropped. The new price and quantity could have been caused by a(n): (A) decrease in buyers' incomes. (B) increase in buyers' incomes. (C) increase in production costs. (D) decrease in production costs.

(A) decrease in buyers' incomes.

A negative relationship between quantity demanded (A) demand (B) increasing returns. (C) market clearing (D) supply

(A) demand

Excess supply (surplus) occurs when the: (A) price is above the equilibrium price. (B) quantity demanded exceeds the quantity supplied. (C) price is below the equilibrium price. (D) quantity demanded exceeds the quantity supplied and the price is below the equilibrium price.

(A) price is above the equilibrium price.

For consumers, pizza and hamburgers are substitutes. A rise in the price of a pizza causes a _____ in the equilibrium price of a hamburger and a(n) _____ in the equilibrium quantity of hamburgers. (A) rise; increase (B) rise; decrease (C) fall; increase (D) fall; decrease

(A) rise; increase

High-fructose corn syrup, which is derived from corn, is an important ingredient in the production of many soft drinks. If the price of corn increases, one would expect the: (A) supply curve for soft drinks to shift left. (B) quantity supplied of soft drinks to increase. (C) demand for soft drinks to increase. (D) supply curve for soft drinks to shift right.

(A) supply curve for soft drinks to shift left.

Table 2: The following table contains some production possibilities for an economy for a given month. If the production possibilities frontier is a straight line, then "?" could be (A) 150 (B) 300 (C) 400 (D) 375

(B) 300

The forces that make market economies work are (A) work and leisure. (B) demand and supply (C) regulation and restraint. (D) taxes and government spending.

(B) demand and supply

In a competitive market, (A)only a few sellers sell the same product. (B) each seller has a limited degree of control over the price of his product. (C) if one buyer chooses to purchase a large quantity of the product, the price will rise. (D) if one seller withholds his product from the market, prices will rise.

(B) each seller has a limited degree of control over the price of his product.

Each of the following is a determinant of demand except (A) tastes. (B) technology. (C) expectations. (D) the prices of related goods.

(B) technology.

The opportunity cost of 1 unit of bread for England is (A) 1/4 unit of cheese. (B) 1/4 hour of labor. (C) 4 units of cheese. (D) 4 hours of labor.

(C) 4 units of cheese

Use Figure 1: Supply of Coconuts. If the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport coconuts increased, it could be represented in the figure as a movement from: (A) A to B (B) B to A (C) C to A (D) E to B

(C) C to A

Which of the following events could shift the demand curve for gasoline to the left? (A) Income of gasoline buyers rises, and gasoline is a normal good. (B) Income of gasoline buyers falls, and gasoline is an inferior good. (C) Public service announcements are run on television, encouraging people to walk or ride bicycles instead of driving cars. (D) The price of gasoline rises

(C) Public service announcements are run on television, encouraging people to walk or ride bicycles instead of driving cars.

Which factor would shift the demand curve for new textbooks to the right? (A) a decrease in the price of paper (B) a fall in the price of used textbooks (C) an increase in college enrollment (D) a fall in the price of new textbooks

(C) an increase in college enrollment

England has an absolute advantage in the production of (A) cheese and Spain has an absolute advantage in the production of bread. (B) bread and Spain has an absolute advantage in the production of cheese. (C) both goods and Spain has an absolute advantage in the production of neither good. (D) neither good and Spain has an absolute advantage in the production of both goods.

(C) both goods and Spain has an absolute advantage in the production of neither good.

An increase in the number of college scholarships issued by private foundations would (A) increase the supply of education. (B) decrease the supply of education. (C) increase the demand for education. (D) decrease the demand for education.

(C) increase the demand for education.

Currently you purchase 6 packages of hot dogs a month. You will graduate from college in December and you will start a new job in January. You have no plans to purchase hot dogs in January. For you, hot dogs are (A) substitute goods (B) normal goods (C) inferior goods (D) complementary goods

(C) inferior goods

The production possibilities frontier illustrates: (A) the combinations of output that an economy should produce. (B) the combinations of output that an economy should consume. (C) the combinations of output that an economy can produce. (D) all of the above

(C) the combinations of output that an economy can produce.

Use Figure 2: Demand and Supply of Gasoline. The initial equilibrium price and quantity (at intersection of S1 and D) of gasoline are: (A) $2.00 and 450 gallons. (B) $1.50 and 400 gallons. (C) $2.00 and 200 gallons. (D) $2.50 and 300 gallons.

(D) $2.50 and 300 gallons.

Suppose there are only two people in the world. Each person's production possibilities frontier also represents his or her consumption possibilities when (A) neither person faces trade-offs. (B) the frontiers are straight lines. (C) the frontiers are bowed out. (D) they choose not to trade with one another.

(D) They choose not to trade with one another

Refer to Figure 2. The movement from point A to point B on the graph shows (A) a decrease in demand. (B) an increase in demand. (C) a decrease in quantity demanded. (D) an increase in quantity demanded.

(D) an increase in quantity demanded.

Market equilibrium occurs when: (A) there is no incentive for prices to change in the market. (B) quantity demanded equals quantity supplied. (C) the market clears. (D) there is no incentive for prices to change in the market, quantity demanded equals quantity supplied, and the market clears.

(D) there is no incentive for prices to change in the market, quantity demanded equals quantity supplied, and the market clears.

Use Figure 1: Four Markets for Online Movie Rentals. Which of the graphs shows what may happen if D1 or S1 is the original curve and D2 or S2 is the new curve and if some of the online stores that rent online movie rentals close? A B C D

B

Figure 1: Four Markets for Online Movie Rentals) Which of the graphs illustrates what may happen in the market for online movie rentals if D1 or S1 is the original curve and D2 or S2 is the new curve and if the cost to the firm of producing online movie rentals falls? A B C D

D