moodle quizzes for exam 1 - econ 101

ability to produce a good at a lowest opportunity cost than other producers

comparative advantage

two goods for which an increase in the price of one of the goods leads to a decrease in the demand for the other (peanut butter and jelly)

complementary goods

a good that when there is an increase in income it leads to a decrease in demand (ramen noodles)

inferior good

the study of how households and firms make decisions and how they interact in markets

microeconomics (employment trends)

a good that when there is an increase in income it leads to an increase in demand (organic food)

normal good

type of economics that is subjective and value-based

normative economics

type of economics that is objective and fact based

positive economics

two goods for which an increase in the price of one leads to an increase in the demand for the other (ice cream and frozen yogurt)

substitutes

arguments for restricting trade

1) Jobs argument 2) National security argument 3) Infant-industry argument 4) Unfair-competition argument 5) Protection as bargaining chip argument

Another term for equilibrium price is Select one: a. market-clearing price. b. balance price. c. quantity-defining price. d. dynamic price.

A

If the best surgeon in town is also the best at cleaning swimming pools, then according to economic reasoning, this person should Select one: a. specialize in being a surgeon because its opportunity cost is lower. b. specialize in cleaning swimming pools because it is more labor-intensive. c. split his time evenly between being a surgeon and cleaning swimming pools. d. should pursue the activity he enjoys more.

A

If the opportunity cost of production for two goods is different between two countries , then Select one: a. mutually beneficial trade is possible. b. trade will only benefit both countries if one can lower its opportunity costs. c. only one country can be made better off by trade. d. trade cannot benefit either country.

A

In economics, the cost of something is Select one: a. what you give up to get it. b. always measured in units of time given up to get it. c. the dollar amount of obtaining it. d. often impossible to quantify, even in principle.

A

The "invisible hand" directs economic activity through Select one: a. prices. b. advertising. c. central planning. d. government regulations.

A

The phenomenon of scarcity stems from the fact that Select one: a. resources are limited. b. most economies' production methods are not very good. c. in most economies, wealthy people consume disproportionate quantities of goods and services. d. governments restrict production of too many goods and services.

A

The term price takers refers to buyers and sellers in Select one: a. perfectly competitive markets. b. monopolistic markets. c. markets in which buyers cannot buy all they want and/or sellers cannot sell all they want. d. markets that are regulated by the government.

A

Which of the following statements is true? Select one: a. Each country as a whole is made better off as a result of international trade, but individuals within each country may be made worse off. b. All individuals in both countries are made better off as a result of international trade. c. Although some individuals are made better off as a result of international trade, both countries may be made worse off overall. d. Within each country, some individuals are made better off as a result of international trade, but one of the countries will be worse off overall.

A

A tariff is Select one: a. a limit placed on the quantity of goods that can be imported into a country. b. a tax imposed by a government on goods imported into a country. c. a subsidy granted to importers of a vital input. d. a health and safety restriction imposed on an imported product.

B

K college instituted a new policy requiring you to pay for a permit to park your car in a campus parking lot. Select one: a. The cost of the parking permit is not part of the opportunity cost of attending college if you would not have to pay for parking otherwise. b. The cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise. c. The cost of the parking permit is not part of the opportunity cost of attending college under any circumstances. d. Only half of the cost of the parking permit is part of the opportunity cost of attending college.

B

Production possibilities frontiers are usually bowed outward. This is because Select one: a. the more resources a society uses to produce one good, the fewer resources it has available to produce another good. b. resources are specialized; that is, some are better at producing particular goods rather than other goods. c. of the effects of technological change. d. it reflects the fact that the opportunity cost of producing a good decreases as more and more of that good is produced.

B

Serena Haley Bracelets 8 9 Necklaces 16 12 Table 2-3 shows the output per week of two jewelers, Serena and Haley. They can devote their time to making bracelets OR making necklaces. Refer to Table 2-3. Which of the following statements is true? Select one: a. Serena has an absolute advantage in making both products. b. Haley has an absolute advantage in making bracelets and Serena in making necklaces. c. Haley has an absolute advantage in making both products. d. Haley has an absolute advantage in making necklaces and Serena in making bracelets.

B

Sophia is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that Select one: a. rational people think at the margin. b. people face tradeoffs. c. people respond to incentives. d. improvements in efficiency sometimes come at the expense of equality.

B

Stan decides to spend $8,000 restroring his 1966 Mustang and plans to sell the car for $9,000. As an alternative, he can spend an additional $3,000 replacing the engine. With a new engine the car would sell for $12,000. Stan should Select one: a. sell the car now for $9, 000. b. be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it. c. never try such an expensive project again. d. complete the repairs and sell the car for $12,000.

B

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that Select one: a. income must be earned. b. people face tradeoffs. c. goods are scarce. d. households face many decisions.

B

The unique point at which the supply and demand curves intersect is called Select one: a. equivalence. b. equilibrium. c. coincidence. d. market harmony.

B

When the price of a good or service changes, Select one: a. the demand curve shifts in the opposite direction. b. there is a movement along a given supply curve. c. the supply curve shifts in the same direction. d. the supply curve shifts in the opposite direction.

B

A decrease in supply is represented by Select one: a. a rightward shift of a supply curve. b. a movement downward and to the left along a supply curve. c. a leftward shift of a supply curve. d. a movement upward and to the right along a supply curve.

C

A production possibilities frontier can shift outward if Select one: a. government increases the amount of money in the economy. b. resources are shifted from the production of one good to the production of the other good. c. there is a technological improvement. d. the economy abandons inefficient production methods in favor of efficient production methods.

C

An economic principle that explains why countries produce different goods and services is Select one: a. absolute advantage. b. trade as a percentage of GDP. c. comparative advantage. d. NAFTA.

C

An example of a perfectly competitive market would be the Select one: a. shampoo market. b. breakfast cereal market. c. soybean market. d. cable TV market.

C

Comparative advantage means the ability to produce a good or service Select one: a. of a higher quality than any other producer. b. at a higher profit level than any other producer. c. at a lower opportunity cost than any other producer. d. at a lower selling price than any other producer.

C

Economics is the study of Select one: a. the interaction of business and government. b. how households decide who performs which tasks. c. how society manages its scarce resources. d. production methods.

C

Lead is an important input in the production of crystal. If the price of lead decreases, then we would expect the supply of Select one: a. crystal to decrease. b. lead to increase. c. crystal to increase. d. crystal to be unaffected.

C

The economy of the former Soviet Union is best described as a Select one: a. hybrid economy. b. primitive economy. c. centrally-planned economy. d. market economy.

C

Which of the following is the best example of a quota? Select one: a. a $5,000 per-car fee imposed on all sport utility vehicles imported into the United States b. a tax placed on all sport utility vehicles sold in the domestic market c. a limit imposed on the number of sport utility vehicles that the United States can import from Japan d. a subsidy granted by the U.S. government to domestic garment manufacturers so they can compete more effectively with foreign garment manufacturers

C

Which of the following statements is true? Select one: a. Individuals who have never been the best at doing anything perform all tasks at a higher opportunity cost than others. b. Individuals who have never been the best at doing anything must have an absolute advantage in at least ones task. c. Individuals who have never been the best at doing anything can still have a comparative advantage in producing some product. d. Individuals who have never been the best at doing anything cannot have a comparative advantage in producing any product.

C

A rational decision maker takes an action if Select one: a. average benefit is greater than the average cost. b. marginal benefit is greater than both the average cost and the marginal cost. c. marginal benefit is less than the marginal cost. d. marginal benefit is greater than the marginal cost.

D

An increase in quantity supplied Select one: a. shifts the supply curve to the right. b. shifts the supply curve to the left. c. results in a movement downward and to the left along a fixed supply curve. d. results in a movement upward and to the right along a fixed supply curve.

D

If Canada imports fishing poles from Mexico and Mexico imports bacon from Canada, which of the following would explain this pattern of trade? Select one: a. Mexico must have an absolute advantage in producing fishing poles and Canada must have an absolute advantage in bacon. b. Mexico has a lower opportunity cost of producing bacon than Canada c. Mexico has a higher opportunity cost of producing fishing poles than Canada d. Canada has a higher opportunity cost of producing fishing poles than Mexico

D

In a competitive market, the quantity of a product produced and the price of the product are determined by Select one: a. sellers. b. None of the above is correct. c. buyers. d. both buyers and sellers.

D

Most markets in the economy are Select one: a. perfectly competitive. b. markets in which buyers, rather than sellers, control the price of the product. c. markets in which sellers, rather than buyers, control the price of the product. d. highly competitive.

D

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do all of the following except Select one: a. engage in mutually beneficial trade with other nations. b. increase the variety of products that it can consume with no increase in resources. c. consume a combination of goods that lies outside its own production possibilities frontier. d. produce a combination of goods that lies outside its own production possibilities frontier.

D

The law of demand states that, other things equal, Select one: a. when the price of a good falls, the demand for the good rises. b. when the price of a good rises, the quantity demanded of the good rises. c. when the price of a good rises, the demand for the good falls. d. when the price of a good falls, the quantity demanded of the good rises.

D

Which of the following is not held constant in a demand schedule? Select one: a. tastes b. expectations c. income d. price

D

You have an absolute advantage whenever you Select one: a. can produce something at a lower opportunity cost than others. b. are better educated than someone else. c. prefer to do one particular activity. d. can produce more of something than others with the same resources.

D

study of economy as a whole

Macroeconomics (what type of ice cream you buy)

ability to produce a good using fewer inputs than ANOTHER producer

absolute advantage