Econ 202 Exam 1 Nwoha

Economics is the study of how society manages its

unlimited wants and limited resources

Refer to figure 4-8. All else equal, the premature deaths of the thousands of turkeys would cause a move from

x to y

In the 1970s, long lines at gas stations in the United States were primarily a result of the fact that

The U.S. government maintained a price ceiling on gasoline

Productivity is defined as the

The amount of goods and services produced from each unit of labor input

Which of the following is not correct

The gains from specialization and trade are based not on comparative advantage but on absolute advantage.

In the circular-flow diagram, which of the following items flow from households to firms through the markets for goods and services

dollars spent on goods and services

A $1.50 tax levied on the buyers of pomegranate juice will shift the demand curve

downward by exactly $1.50

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. However, redistributing income from rich to poor reduces the reward for working hand. Therefore, society faces a tradeoff between

efficiency and equality

The term equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that

equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources

Goods produced abroad and sold domestically are called

exports

Economists make assumptions to

focus their thinking on the essence of the problem at hand

Instead of conducting laboratory experiments to generate data to test their theories, economists often

gather data from historical episodes of economic change

Central planning refers to

government guiding economic activity. Today many countries that had this system have abandoned it.

If an externality is present in a market, economic efficiency may be enhanced by

government intervention

Minimum-wage laws dictate

only a minimum wage that firms may pay workers

What must be given up to obtain an item is called

opportunity cost

Refer to figure 4-10. Which of the following movements would illustrate the effect in the market for golf balls of an increase in green fees

point C to point B

A competitive market is a market in which

no individual buyer or seller has any significant impact on the market price

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

positive, and the good is a normal good

A legal minimum on the price at which a good can be sold is called a

price floor

A professor spends 10 hours per day giving lectures and writing papers. For the professor, a graph that shows his various possible mixes of output (lectures given per day and papers written per day) is called his

production possibilities frontier

What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages

quantity will fall and the effect of price is ambiguous

When an economist points out that you and millions of other people are interdependent, she is referring to the fact that we all

rely upon one another fro the goods and services we consume

Fundamentally, economics deals with

scarcity

Efficiency means that

society is getting the most it can from its scarce resources

If the number of sellers in a market increases, then the

supply in the market will increase

A rational decision maker

takes an action only if the marginal benefit of that action exceeds the marginal cost of that action

For a self-sufficient producer, the production possibilities frontier

the PPF is bowed outward

Refer to figure 4-1. It is apparent from the figure that the

demand for the good conforms to the law of demand

A manufacturer produces 400 units when the market price is $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

22.

The vertical distance between points A and B represents the tax in the market. Refer to figure 6-10. The price that buyers pay after the tax is imposed is

24$

Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase total revenue

4

Refer to figure 4-4. The movement from point A to point B on the graph is called

an increase in the quantity supplied

If a decrease in income increases the demand for a good, then the good is a(n)

an inferior good

In the circular-flow diagram, which of the following is not a factor of production

money

Refer to figure 2-1. Morgan buys a refrigerator for his new home. To which of the arrows does this transaction directly contribute

A and B

Which of the following changes would not shift the demand curve for a good or service

A change in the price of the good or service

Suppose there is a flood in St. Louis, Missouri, that destroys several beer bottling facilities. Which of the following would not be a direct result of this event?

Buyers would not be willing to buy as much as before at each relevant price

In a market economy, economic activity is guided by

Self-interest and prices

Communist countries worked under the premise the

Central planners were in the best position to determine that allocation of scarce resources in the economy

Refer to figure 3-1. The rate of trade-off between producing chairs and producing couches is constant in

Graph (b) only

Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that

In order to consume beyond its PPE, the United States should produce more pork than what it requires and export some of it to Mexico

An increase in the overall level of prices in an economy is referred to as

Inflation

Refer to figure 4-10. Which of the following movements would illustrate the effect in the market for swimming lessons of an increase in the income of parents with school-aged children

Point A to point D

Refer to figure 2-3. Suppose this economy is producing at point D. Which of the following statements would best explain this situation

There is widespread unemployment in the economy

Trade between countries tends to

allow each country to consume at a point outside its production possibilities frontier

Trade between countries

allows each country to consume at a point outside its production possibilities frontier

Suppose scientist provide evidence that people who drink energy drinks are more likely to have a heart attack than people who do not drink energy drinks. We would expect to see

a decrease in the demand for energy drinks

If a surplus exists in a market, then we know that the actual price is

above the equilibrium price, and the quantity supplied is greater than quantity demanded

A decrease in supply will cause the the largest increase in price when

both supply and demand are inelastic

A good will have a more inelastic demand, the

broader the definition of the market

A tax on the buyers of cameras encourage

buyers to demand a smaller quantity at every price

Positive statements are

claims about how the world is

Equilibrium price must decrease when demand

decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously

Two goods are substitutes when a decrease in the price of one good

decreases in quanity demanded for the other good

Savion is restoring a care and has already spent $4,000 on the restoration. He expects to be able to sell the car for $5800. Savion discovers that he needs to do an additional $2400 of work to make the car worth $5800 to potential buyers. He could also sell the car now, without completing the additional work for $3800. What should he do

he should sell the car for 3,800$

A circular-flow diagram is a model that

helps to explain how the economy is organized

In the market for goods and services in the circular-flow diagram

helps to explain how the economy is organized

A popular celebrity that is paid highly for her time should probably not mow her own lawn because

her opportunity cost of mowing her lawn is higher than the cost of paying someone to mow it for her

Microeconomics is the study of

how individual households and firms make decisions.

The "invisible hand" refers to

how the decisions of households and firms lead to desirable market outcomes

Refer to figure 4-6. The shift from S to S' could be caused by an

improvement in production technology

If the price elasticity of supply is 1.2, and price increased by 5 percent, quantity supplied would

increase by 6 percent

A decrease in the price of a good will

increase in quantity demanded

If the government removes a binding price ceiling from a market, then the price paid by buyers will

increase, and the quantity sold in the market will increase

A farmer has the ability to grow either corn or cotton or some combination of the two. Give no other information, it follows that the farmer's opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton

is equal to 1

Refer to figure 2-3. This economy cannot currently produce 70 washers and 70 dryers because

it does not have the resources and technology to produce that level of output

An economy's production of two goods is efficient if

it is impossible to produce more of one good without producing less of the other

Demand is said to be inelastic if

the quantity demanded changes only slightly when the price of the good changes.

Cross-price elasticity of demand measures how

the quantity demanded of one good changes in response to a change in the price of another good.

If something happens to alter the quantity supplied at any given price, then

the supply curve shifts

When a country has a comparative advantage in producing a certain good

then specializing in the production of that good and trading for other goods could allow that country to consume at a point beyond its production possibilities frontier

A key determinant of the price elasticity of supply is the

time horizon