ECON 160 MIDTERm

Paolo can walk three dogs or mow two lawns in two hours. Ashanti can walk six dogs or mow three lawns in two hours. Ashanti's opportunity cost for each additional dog walked is _____ lawn(s) mowed. 2.5 2.0 0.5 1.5

0.5

Jeremy's level of satisfaction from consuming the first cookie was 25 utils. The second cookie increased the level of satisfaction by 20 utils. Jeremy's total level of satisfaction after three cookies was 60. Thus, the marginal utility for the third cookie is 15. 25. 45. 60.

15

Economists wish to eliminate external benefits because they prevent the market from operating efficiently. True False

False

Paying a salesperson more for increased sales is an example of an opportunity cost. equity. efficiency. an incentive.

an incentive

Suppose that a customer's willingness-to-pay for a product is $79, and the seller's willingness-to-sell is $64. If the negotiated price is $65 producer surplus is greater than consumer surplus. consumer surplus is negative. producer surplus is negative. consumer surplus is greater than producer surplus.

consumer surplus is greater than producer surplus.

Supply and demand analysis is used in both microeconomics and macroeconomics. in neither microeconomics nor macroeconomics. only in macroeconomics. only in microeconomics.

in both microeconomics and macroeconomics

In which period can firms decide to leave an industry? market period short run long run present time period

long run

A utility-maximizing consumer will always choose to consume only the good that provides the highest utility per unit. maximize marginal utility. minimize expenditures. maximize total utility.

maximize total utility.

The economics of uranium mining would be studied in inductive logic. microeconomics. deductive logic. macroeconomics.

microeconomics

Other factors held constant, as the price of an iPad rises, the quantity demanded of iPads rises. quantity demanded of iPads falls. demand for iPads rises. demand for iPads falls.

quantity demanded of iPads falls.

Suppose the demand for toxic waste disposal is very elastic. The government imposes an excise tax on waste disposal. The deadweight loss associated with the production of toxic waste disposal will be relatively large. relatively small. a rational decision. zero.

relatively large.

Figure: Interpreting a Market Graph) The graph represents The graph plots quantity of shoes ranging from 0 to 60, with increments of 10 against price of shoes in dollars ranging from 0 to 120, with increments of 20 and depicts an upward-sloping curve that starts from (10, 20) and ends at (50, 100) passing through (20, 40), (30, 60), and (40, 80). the law of supply. the law of demand. willingness-to-pay. the price system.

the law of supply.

Rational behavior requires thinking at the margin. Which example represents this type of thinking deciding whether the overtime pay is worth working on your day off All of these examples represent thinking at the margin. deciding whether a second burger is worth the extra $2 deciding whether to pay a fine for polluting the local harbor or installing antipollution machinery

All of these examples represent thinking at the margin.

Which graph shows an increase in quantity supplied?

Graph 2

Rohit had the opportunity to choose between two investments. The first investment was described as having a 30% chance of succeeding, while the second investment was described as having a 70% chance of failing. Rohit opted for the first investment because he thought it sounded less risky than the second investment. The chances of succeeding and failing are the same for the two investments, however, which implies that Rohit is subject to overvaluing the present relative to the future. a framing bias. a sunk cost fallacy. overconfidence.

a framing bias.

The local school district wants to close down a neighborhood high school because its outdated heating and cooling systems make it too expensive to operate compared to the new high school being built nearby. Parents who are against closing the neighborhood school argue that the $2 million spent refurbishing the school over the past few years will be wasted if the school is shut down. This argument is an example of a framing bias. altruism. a sunk cost fallacy. overconfidence.

a sunk cost fallacy.

All other things equal, if the prices of the two goods the consumer buys decrease, the budget line shifts closer to the origin. budget line rotates to the right. indifference curve shifts to the right. budget line shifts to the right.

budget line shifts to the right.

When quantity demanded in a market equals quantity supplied, then the market is in temporary disequilibrium. market is in equilibrium. equilibrium price is less than expected by buyers. market will not clear without further price adjustments.

market is in equilibrium.

At any price below the equilibrium price the quantity demanded exceeds the quantity supplied in the market. demand exceeds supply in the market. the quantity demanded equals the quantity supplied in the market. the quantity demanded is less than the quantity supplied in the market.

the quantity demanded exceeds the quantity supplied in the market.

Figure: Interpreting Supply Shifts 3) When the supply shifts from S0 to S1, the equilibrium quantity changes from The graph plots quantity of shoes ranging from 0 to 60, with increments of 10 against price of shoes in dollars ranging from 0 to 120, with increments of 20. The downward-sloping curve extends from (5, 100) to (25, 20) connecting (10, 80), (15, 60), and (20, 40). The upward-sloping curve S subscript 0 extends from (10, 20) to (50, 100) through (20, 40), (30, 60), and (40, 80). The upward-sloping curve S subscript 1 is above the curve S subscript 0 extends from (5, 20) to (25, 100) through (10, 40), (15, 60), and (20, 80). The curve D intersects S subscript 0 at (15, 60) and S subscript 1 at (20, 40). $40 to $60. 15 units to 20 units. 20 units to 15 units. $60 to $40.

20 units to 15 units.

(Table) The table shows coffee and tea units produced for the United States and Japan. If Japan decides to increase production of tea from 12 to 24 units, the opportunity cost is The table shows the following data for the United States: Coffee: 25, tea: 0; Coffee: 20, tea: 2; Coffee: 15, tea: 4; Coffee: 10, tea: 6; Coffee: 5, tea: 8; Coffee: 0, tea: 10. The table shows the following data for Japan: Coffee: 58, tea: 0; Coffee: 52, tea: 12; Coffee: 44, tea: 24; Coffee: 34, tea: 36; Coffee: 20, tea: 48; Coffee: 0, tea: 60. 10 units of coffee. 10 units of tea. 8 units of coffee. 15 units of tea.

8 units of coffee.

Which of these is NOT an example of market failure? Competition leads firms to provide products at the lowest possible price. Air is polluted by a manufacturing firm. Water is polluted by a paper company located by the river. Consumers must buy water from one local water utility.

Competition leads firms to provide products at the lowest possible price

A good example of a government-imposed price floor is the equilibrium price. rent controls. the minimum wage. supply and demand.

the minimum wage.

Which is an example of capital in the production process of an amusement park? the ticket-taker the roller coaster the electricity used at the park the mechanics who maintain the equipment

the roller coaster

The primary determinant of the elasticity of supply is time. the availability of substitutes. income. the prices of substitutes.

time.

Figure: Understanding Surplus and Efficiency) In the graph, efficiency in this market is achieved at a price of The graph plots quantity ranging from 0 to 20 against price ranging from 0 to 16. The upward-sloping curve S extends from the vertical axis at (0, 4) to (20, 16) through (10, 10). The downward-sloping curve D extends from the vertical axis at (0, 14) to (20, 6) through (10, 10). $0. $10. $4. $14.

$10.

Table) According to the table, the equilibrium price is _____, and the equilibrium output is _____ units. The column headers are as follows: Price, quantity demanded, quantity supplied. The data are as follows: Row 1. Price: 15 dollars, quantity demanded: 40, quantity supplied: 80 Row 2. Price: 12 dollars, quantity demanded: 50, quantity supplied: 70 Row 3. Price: 10 dollars, quantity demanded: 60, quantity supplied: 60 Row 4. Price: 7 dollars, quantity demanded: 70, quantity supplied: 50 Row 5. Price: 5 dollars, quantity demanded: 80, quantity supplied: 40 $12; 70 $15; 40 $12; 60 $10; 60

$10; 60

(Figure: Understanding Price Ceilings and Floors) In the graph, which price would allow for a binding price ceiling? The graph plots Q against P and depicts an upward-sloping curve S and a downward-sloping curve D. The curves intersect at (500, 50). The upward-sloping curve S extends from (0, 10) through (200, 25), (500, 50), beyond (800, 75). The downward-sloping curve D extends from (0, 90) through (200, 75), (500, 50), and (800, 25) to meet the horizontal axis. Dashed lines parallel to the vertical axis and to each other extend from 200, 500, and 800 on the horizontal axis through the following points respectively: (200, 0), (200, 50), through (200, 75). (500, 0), (500, 50), through (500, 75). (800, 0), (800, 50), through (800, 75). Dashed lines parallel to the horizontal axis and to each other extend from 25, 50, and 75 on the vertical axis respectively: (0, 25), (200, 25), (500, 25), (800, 25). (0, 50), (200, 50), (500, 50), (800, 50). (0, 75), (200, 75), (500, 75), (800, 75). $50 $25 $90 $75

$25

A lawyer can argue a case in court for one hour and make $300. She could alternatively use that hour of time to type a legal brief in her office. What is the opportunity cost of her typing the legal brief? nothing, since she would never type a legal brief $13.50, the average hourly wage for a typist nothing, since she would always hire an administrative assistant to type for her $300, since that is the amount she could have made by arguing a case in court

$300, since that is the amount she could have made by arguing a case in court

Suppose that a customer's willingness-to-pay for a product is $79, and the seller's willingness-to-sell is $64. If the negotiated price is $68, how much is producer surplus? $11 $21 $15 $4

$4

Jonathan purchased coffee for $5 at Jennifer's coffee shop, although he was willing to pay $9. Jennifer was willing to accept $3 for the coffee. The results of this transaction are a consumer surplus of $2 and a producer surplus of $4. $4 and a producer surplus of $2. $12 and a producer surplus of $10. $10 and a producer surplus of $12.

$4 and a producer surplus of $2.

Figure: Determining Surplus and Loss) In the graph, how much is deadweight loss at a price of $12? The graph plots Q against P and depicts an upward-sloping curve S and a downward-sloping curve D. The upward-sloping curve S extends from (2, 0) through (40, 8). The downward-sloping curve D extends from (16, 0) to a point on the horizontal axis through (40, 8). Three dashed lines parallel to the vertical axis start on the horizontal axis from 20, 40, and 60 and pass through the following points respectively: (20, 0), (20, 5), (20, 8), and extend beyond (20, 12). (40, 0), (40, 5), (40, 8), and extend beyond (40, 12). (60, 0), (60, 5), (60, 8), and extend beyond (60, 12). Three dashed lines parallel to the horizontal axis start on the vertical axis and pass through the following points respectively: (0, 12), (20, 12), (40, 12), and (60, 12). (0, 8), (20, 8), (40, 8), and extend beyond (60, 8). (0, 5), (20, 5), (40, 5), and (60, 5). The dashed lines intersect at (60, 5), (60, 8), (60, 12), (40, 5), (40, 8), (40, 12), (20, 5), (20, 8), and (20, 12) and form 9 rectangular plots. $0 $60 $70 $80

$70

Figure: Individual and Market Demand Curves) According to the graph, the market quantity demanded at $20 is The graph plots quantity ranging from 0 to 9, with increments of 1 against price in dollars ranging from 0 to 60 and depicts the demand curves for Joan, Juliana, and Jim. Joan's demand curve is above the other two and connects (1, 50), (2, 40), (4, 30), (6, 20), (7, 10), and (8, 0). Juliana's demand curve is below Joan's and extends from (0, 50) on the vertical axis to (7, 0) on the horizontal axis through (1, 40), (2, 30), (3, 20), and (5, 10). The demand curve for Jim extends from (0, 30) on the vertical axis to (4, 0) on the horizontal axis through (1, 20), and (3, 10). 10 units. 3 units. 1 unit. 6 units.

10 units.

Suppose the demand for gasoline is rising. Which statement describes a possible cause? Commuters are switching from driving to public transportation. Drivers are purchasing more fuel-efficient cars. Consumers expect prices to rise in the near future. Incomes are falling.

Consumers expect prices to rise in the near future.

Which is NOT considered a basic economic question? Who will receive the goods and services? What goods and services will be produced? How will these goods and services be produced? How will the system accommodate change?

How will the system accommodate change?

Which situation(s) may require government intervention? I. A local business has made a profit in each of the last 10 years. II. Students are having difficulty deciding whether to go the beach or to go hiking for their class trip. III. A manufacturing firm on a river is dumping production runoff into the water.

III only

Which statement is a key idea in economic thinking All of these are key ideas in economic thinking. Incentives matter. Scarcity exists for the poor but not for the rich. The value of a good can be objectively measured and is the same for everyone.

Incentives matter

_____ occurs when goods and services are produced with as few resources as possible, while _____ occurs when the mix of goods and services produced is the most desired by society. Allocative efficiency; production efficiency Production efficiency; social efficiency Production efficiency; allocative efficiency Allocative efficiency; social efficiency

Production efficiency; allocative efficiency

Suppose the equilibrium price of carrots is $1. The price floor instituted by the government is $1.50. Based on this information, which scenario would you expect to take place in the market? Farmers would switch from growing carrots to growing potatoes. There would be a surplus of carrots. The price floor would have no impact on the market because it is higher than the equilibrium price. There would be a shortage of carrots.

There would be a surplus of carrots.

Which statement is TRUE about specialization and exchange between two individuals? They generally benefit the richer individual at the expense of the poorer individual. They generally benefit the poorer individual as well as the richer individual. They generally benefit neither the poorer individual nor the richer individual. They generally benefit the poorer individual at the expense of the richer individual.

They generally benefit the poorer individual as well as the richer individual

Which item is most likely an inferior good? gasoline a city bus ticket a T-bone steak clothing

a city bus ticket

Figure: Predicting Demand Shifts 2) What would cause a shift from D1 to D2? The graph plots quantity of honey against price and depicts two downward-sloping demand curves D subscript 1 and D subscript 2. The curve D subscript 2 is parallel to D subscript 1 and shows a shift to the right. a decrease in the price of sugar, a honey substitute a new study that shows that honey reduces the risk of cancer a decrease in the price of honey a new virus that reduces the bee population

a new study that shows that honey reduces the risk of cancer

(Figure: Bread and Honey) In the graph, point b represents The graph plots honey against bread and depicts a concave down curve extending from (0, 90) through b (70, 75), and ending on the horizontal axis. Point b (70, 75) is on the curve, point a (30, 90) is outside the curve on the top left while point g is also outside the curve on the right. A rectangular plot connects (0, 0), (30, 0), a (30, 90), and (0, 90). The second rectangular plot connects (70, 0), (0, 0), b (70, 75), and (0, 75). a better economic situation than point a. a point where all of society's resources are fully employed. a point of inefficiency. economic growth.

a point where all of society's resources are fully employed.

Parami volunteers at a homeless shelter. It takes a lot of her time, and thus she sometimes takes off time from her job to do the volunteer work. Parami's behavior can be explained by overvaluing the present relative to the future. a framing bias. altruism. overconfidence.

altruism

(Figure: Wheat and Autos in the United States and South Korea) According to the graph, for every extra The graph plots automobiles in thousands ranging from 0 to 120 with increments of 20 against wheat in thousands of bushels ranging from 0 to 120 with increments of 20. The production possibility frontier for South Korea is a downward-sloping curve that extends between the axes connecting (0, 40) and (80, 0). The production possibility frontier for the United States is a downward-sloping curve above the production possibility frontier for South Korea and extends between the axes connecting (0, 100) and (100, 0). automobile the United States wants to produce, it must give up 100 bushels of wheat. automobile South Korea wants to produce, it must give up half a bushel of wheat. automobile South Korea wants to produce, it must give up 40,000 bushels of wheat. bushel of wheat the United States wants to produce, it must give up 100 automobiles.

automobile South Korea wants to produce, it must give up half a bushel of wheat.

Which type of payment would NOT be considered a market transaction? payment for a soft drink at a vending machine payment for purchase of shares at a stock exchange payment for a used book purchased on eBay payment made to a victim of a natural disaster

payment made to a victim of a natural disaster

(Figure: Understanding Price Ceilings and Floors) In the graph, if the government sets a minimum price of $75, this is an example of an The graph plots Q against P and depicts an upward-sloping curve S and a downward-sloping curve D. The curves intersect at (500, 50). The upward-sloping curve S extends from (0, 10) through (200, 25), (500, 50), beyond (800, 75). The downward-sloping curve D extends from (0, 90) through (200, 75), (500, 50), and (800, 25) to meet the horizontal axis. Dashed lines parallel to the vertical axis and to each other extend from 200, 500, and 800 on the horizontal axis through the following points respectively: (200, 0), (200, 50), through (200, 75). (500, 0), (500, 50), through (500, 75). (800, 0), (800, 50), through (800, 75). Dashed lines parallel to the horizontal axis and to each other extend from 25, 50, and 75 on the vertical axis respectively: (0, 25), (200, 25), (500, 25), (800, 25). (0, 50), (200, 50), (500, 50), (800, 50). (0, 75), (200, 75), (500, 75), (800, 75). efficient price ceiling. efficient price floor. binding price floor. binding price ceiling.

binding price floor.

Figure: Interpreting Demand Curves) In the demand curve shown, an increase in price from $1 to $2 will The graph plots quantity demanded ranging from 0 to 35, with increments of 5 against price in dollars ranging from 0 to 4, with increments of 0.5 and depicts a downward-sloping curve from (5, 3.5) through (10, 3), (15, 2.5), (20, 2), (25, 1.5), and (30, 1) to (35, 0.5). have no impact on sales. cause quantity demanded to rise from 20 to 30 units. make buyers angry. cause quantity demanded to fall from 30 to 20 units.

cause quantity demanded to fall from 30 to 20 units.

A production possibilities frontier that is a straight line is the result of constant opportunity costs. underemployment of resources. scarcity. increasing opportunity costs.

constant opportunity costs.

The limits on international trade include all of these EXCEPT Trade may hurt some industries and individuals within each country. transportation and communication costs. decreasing opportunity costs and increasing returns. increasing opportunity costs and diminishing returns.

decreasing opportunity costs and increasing returns.

Investment in human capital refers to increasing the financial capital in the economy. education, on-the-job training, and professional training activities. increasing the number of people working at companies. increasing the machinery and equipment that firms use.

education, on-the-job training, and professional training activities.

Figure: Supply and Demand for Shoes) If the price of shoes is $60, then the market The graph plots quantity of shoes ranging from 0 to 60, with increments of 10 against price of shoes in dollars ranging from 0 to 120, with increments of 20. The downward-sloping curve extends from (5, 100) to (25, 20) through (10, 80), (15, 60), and (20, 40). The upward-sloping curve extends from (10, 20) to (50, 100) through (20, 40), (30, 60), and (40, 80). experiences a shortage of shoes. experiences a surplus of shoes. There is not enough information to answer this question. is in equilibrium.

experiences a surplus of shoes.

Alvaro pays $40 in tax on a $120 item. Nurul pays $80 in tax on a $240 item. We can conclude that this is a _____ tax. regressive lump-sum flat progressive

flat

The opportunity costs of attending college do NOT include required student activity fees. the forgone wages that could have been earned working. food expenditures. the costs of textbooks or eBooks.

food expenditures.

Which of these is NOT correct? Price floors and price ceilings can interfere with the process leading to market equilibrium. can result in surpluses or shortages. are typically instituted by government. help a market balance the interests of sellers and buyers.

help a market balance the interests of sellers and buyers.

Which of these circumstances would NOT affect the supply of new automobiles? an improvement in automobile manufacturing technology a subsidy for struggling automobile manufacturers higher interest rates for new car financing a labor strike in the steel industry

higher interest rates for new car financing

Figure: Interpreting Supply Shifts 2) A shift to the right of the supply curve could be caused by a(n) The graph plots quantity ranging from 0 to 80, with increments of 20 against price in dollars from ranging from 0 to 120, with increments of 20 and depicts two upward-sloping parallel curves. The first curve starts at (20, 20) and connects (30, 40), (40, 60), (50, 80), and ends at (60, 100). The second curve starts at (10, 20) and connects (20, 40), (30, 60), (40, 80), and (50, 100). increase in the price of a complementary good. increase in the costs of resources. improvement in production technology. decrease in the number of sellers.

improvement in production technology.

In the study of economics, the goals of efficiency and equity are often objectively definable. compatible. in conflict with one another. given equal emphasis.

in conflict with one another

(Figure: Interpreting PPF Shifts) According to the graph, which changes may cause the production possibilities frontier to shift inward from PPF1 to PPF0? The graph plots Good 2 in thousands of units against Good 1 in thousands of units and depicts shifts in the concave down curves represented by the outer P P F subscript 1 curve with arrows pointing inward to the P P F subscript 0 nearer the origin. improve the skills of the workers increase in the labor force increase government regulation on businesses overall increase in the population

increase government regulation on businesses overall

Because they are so sure of their ability to pick winners, some people hang on to a stock even in the face of overwhelming evidence that its price is going to drop. These people are subject to a sunk cost fallacy. overconfidence. overvaluing the present relative to the future. a framing bias.

overconfidence

Reece stayed out late last night and is very tired. He plans to skip his 8 A.M. economics class, even though he knows his professor will cover material that will be on the final exam. Reece is subject to a framing bias. overvaluing the present relative to the future. a sunk cost bias. overconfidence.

overvaluing the present relative to the future.

Figure: Determining Surplus and Loss) Consider the graph. If the price is raised from $8 to $12, producer surplus The graph plots Q against P and depicts an upward-sloping curve S and a downward-sloping curve D. The upward-sloping curve S extends from (2, 0) through (40, 8). The downward-sloping curve D extends from (16, 0) to a point on the horizontal axis through (40, 8). Three dashed lines parallel to the vertical axis start on the horizontal axis from 20, 40, and 60 and pass through the following points respectively: (20, 0), (20, 5), (20, 8), and extend beyond (20, 12). (40, 0), (40, 5), (40, 8), and extend beyond (40, 12). (60, 0), (60, 5), (60, 8), and extend beyond (60, 12). Three dashed lines parallel to the horizontal axis start on the vertical axis and pass through the following points respectively: (0, 12), (20, 12), (40, 12), and (60, 12). (0, 8), (20, 8), (40, 8), and extend beyond (60, 8). (0, 5), (20, 5), (40, 5), and (60, 5). The dashed lines intersect at (60, 5), (60, 8), (60, 12), (40, 5), (40, 8), (40, 12), (20, 5), (20, 8), and (20, 12) and form 9 rectangular plots. decreases by $190 and deadweight loss increases by $70. increases by $50 and deadweight loss increases by $70. decreases by $50 and deadweight loss increases by $30. increases by $50 and deadweight loss increases by $30.

increases by $50 and deadweight loss increases by $70.

Home heating gas tends to have _____ demand because _____. inelastic; people do not have time to adjust their consumption patterns elastic; it has many close substitutes elastic; it is a necessity inelastic; people spend a large share of their incomes on heat

inelastic; people do not have time to adjust their consumption patterns

Scarcity can be eliminated with adequate resources. is faced by all individuals and societies. is eliminated with greater technology. is synonymous with poverty.

is faced by all individuals and societies.

Total utility is the total satisfaction derived from the consumption of given quantity of a good. is the change in total satisfaction derived from consuming one more unit of a good. is the change in marginal satisfaction derived from consuming one more unit of a good. decreases with the consumption of each additional good.

is the total satisfaction derived from the consumption of given quantity of a good.

People use _____ to determine how many hours to work, and businesses use _____ to determine how much of their product they are willing to supply to the market. marginal analysis; allocative efficiency allocative efficiency; production efficiency production efficiency; marginal analysis marginal analysis; marginal analysis

marginal analysis; marginal analysis

At an all-you-can eat buffet, a person will stop eating when marginal utility increases at a diminishing rate. marginal utility is equal to zero. total utility is equal to zero. total utility increases at a diminishing rate.

marginal utility is equal to zero.

In a _____ economy, individuals and firms own most resources, and in a _____ economy, the government controls most resources. planned; market planned; socialist market; planned socialist; planned

market; planned

Supply is defined as the _____ over a particular time period at various prices, holding all other relevant factors constant. minimum amount of a product that sellers are willing and able to provide for sale minimum amount of a product that buyers are willing and able to purchase maximum amount of a product that buyers are willing and able to purchase maximum amount of a product that sellers are willing and able to provide for sale

maximum amount of a product that sellers are willing and able to provide for sale

A theory composed of a number of assumptions and facts boiled down to their basic relevant elements is called a conclusion. metaphor. practice. model.

model

In general, the flatter the supply curve is, the less elastic is supply. fewer the adjustments to price changes that firms can make. shorter the period for adjustment. more elastic is supply.

more elastic is supply.

If the government of Spain decides to spend less on the military and more on health care, the forgone spending on military items represents the _____ of the extra health care. allocative cost production efficiency opportunity cost cost factor

opportunity cost

When the government chooses to use resources to build tourist centers, the selected resources are no longer available to build highways. This BEST illustrates the concept of efficiency. macroeconomics. opportunity cost. scarcity.

opportunity cost

A market exists when people exchange money for goods and services. the cost of production is equated to the price by a government agency. an absolute advantage is achieved by one country. a physical location is created to facilitate the exchange of personal information about consumer choices.

people exchange money for goods and services.

Because of scarcity people face tradeoffs in nearly every choice they make. resources are limitless. wants are limited. choices are unlimited.

people face tradeoffs in nearly every choice they make

Economics is BEST defined as the study of how to classify resources used to produce final goods and services. resources are apportioned to satisfy human wants. technology can be used to change scarce resources into free resources. people make rational decisions.

people make rational decisions.

Figure: Interpreting Elasticity of Supply) How would you describe supply as shown in the graph? A graph plots quantity per period against price per unit and depicts the supply curve S parallel to the horizontal axis. elastic at high prices and inelastic at low prices unitary for all prices perfectly elastic perfectly inelastic

perfectly elastic

Laws that prohibit price gouging are often politically popular, but result in shortages. unpopular and result in surpluses. unpopular and result in shortages. popular, but result in surpluses.

popular, but result in shortages.

When goods are produced at the lowest possible cost, an economy is said to have achieved allocative efficiency. production efficiency. inferior quality goods. cheap production.

production efficiency.

Which is NOT a source of economic growth? increasing business investment reducing the level of international trade reducing barriers to financial aid for higher education increasing research and development

reducing the level of international trade

A tax in which the percentage of income tax rises as income falls is known as a _____ tax. regressive lump-sum progressive flat

regressive

If demand is extremely elastic, it is likely that _____ will bear most of the burden of a tax and that the deadweight loss will be relatively _____. buyers; large sellers; large buyers; small sellers; small

sellers; large

If the United States experiences an inflationary episode in which prices of goods and services rise faster than incomes, budget lines for U.S. consumers will shift inward. pivot outward. pivot inward. shift outward.

shift inward.

Figure: Determining Surplus and Loss) In the graph, if the government sets a maximum price of $5, there is a The graph plots Q against P and depicts an upward-sloping curve S and a downward-sloping curve D. The upward-sloping curve S extends from (2, 0) through (40, 8). The downward-sloping curve D extends from (16, 0) to a point on the horizontal axis through (40, 8). Three dashed lines parallel to the vertical axis start on the horizontal axis from 20, 40, and 60 and pass through the following points respectively: (20, 0), (20, 5), (20, 8), and extend beyond (20, 12). (40, 0), (40, 5), (40, 8), and extend beyond (40, 12). (60, 0), (60, 5), (60, 8), and extend beyond (60, 12). Three dashed lines parallel to the horizontal axis start on the vertical axis and pass through the following points respectively: (0, 12), (20, 12), (40, 12), and (60, 12). (0, 8), (20, 8), (40, 8), and extend beyond (60, 8). (0, 5), (20, 5), (40, 5), and (60, 5). The dashed lines intersect at (60, 5), (60, 8), (60, 12), (40, 5), (40, 8), (40, 12), (20, 5), (20, 8), and (20, 12) and form 9 rectangular plots. surplus of 20 units. shortage of 20 units. surplus of 40 units. shortage of 40 units.

shortage of 40 units.

The theory of comparative advantage says that countries can never benefit from specialization in trade. should import those goods they can produce at a lower opportunity cost than another country. should restrict trade by cutting off all imports. should export those goods they can produce at a lower opportunity cost than another country.

should export those goods they can produce at a lower opportunity cost than another country.

After Janine bought a magazine subscription, she found she does not enjoy the articles in the magazine. However, she dutifully reads the entire magazine every month because she already paid for the subscription, and she feels the money will be wasted if she does not read it. What psychological factor associated with behavioral economics explains Janine's behavior? sunk cost fallacy overconfidence framing bias overvaluing the present relative to the future

sunk cost fallacy

(Figure: Bread and Honey) In the graph, a movement from point f to point g could occur if The graph plots honey against bread and depicts a concave down curve extending from (0, 90) through b (70, 75), and ending on the horizontal axis. Point b (70, 75) is on the curve, point a (30, 90) is outside the curve on the top left while point g is also outside the curve on the right. A rectangular plot connects (0, 0), (30, 0), a (30, 90), and (0, 90). The second rectangular plot connects (70, 0), (0, 0), b (70, 75), and (0, 75). people decide they prefer bread to honey. people decide they prefer honey to bread. unemployed workers find jobs. technological improvements occur.

technological improvements occur.

A consumer is in equilibrium when an equal amount is spent on every commodity. the same total utility is derived from each commodity. the addition to total utility per dollar is the same for every commodity. marginal utilities are equal.

the addition to total utility per dollar is the same for every commodity.

Consumer surplus is defined as the difference between _____ and the market price. the demand curve a price ceiling a price floor the supply curve

the demand curve

Producer surplus is defined as the difference between a price floor and the market price. the demand curve and the market price. a price ceiling and the market price. the market price and the supply curve.

the market price and the supply curve.

Flu vaccination shots provide external benefits. Thus too few flu vaccination shots are given. the private market provides the socially desirable output of shots. the private market collapses. too many flu vaccination shots are given.

too few flu vaccination shots are given.

The measure of society's benefits due to a market transaction is called deadweight loss. consumer surplus. total surplus. producer surplus.

total surplus.

If an economy is operating at a point that is inside of its production possibilities frontier, then it can be assumed that its resources are underutilized. efficiently allocated. fully utilized. overutilized.

underutilized

Macroeconomics is concerned with issues such as which job to take. which orange juice to buy. unemployment. what price to charge for goods.

unemployment