Econ 2301 Final

In the production possibilities frontier shown above, what is the opportunity cost to society of the movement from point A to point C?

100 baseballs

An example of physical capital is:

A chainsaw

Belarus has a comparative advantage in the production of linen, but Russia has an absolute advantage in the production of linen. If these two countries decide to trade,

Belarus should export linen to Russia.

As the number of firms in an oligopoly ____, the oligopoly becomes more ____.

Decreases; like a monopoly Increases; like perfect competition (Both B and D)

Real gross domestic product is the total value of all:

Final goods and services adjusted for inflation.

Which of the following statements is true?

The opportunity cost of a decision is the value of the best foregone alternative.

Say you enroll in an 8 A.M. economics class, and you only come to campus to attend your economics class. The cost of coming to the economics class that day would then include:

The value of the time it took to drive to campus. The cost of the gasoline it took to get to campus. (Both A and B)

Which of the following is characteristic of a perfectly competitive market?

There is free entry into and exit from the market.

Which of the following is NOT correct? A. Trade is good for nations. B. Trade is based on absolute advantage. C. Trade allows for specialization. D. Trade allows individuals to consume outside of their individual production possibilities curve.

Trade is based on absolute advantage.

A worker's contribution to the firm's revenue is measured directly by the worker's:

Value of marginal product.

When would you expect economic profits in an industry to be zero?

When firms have no incentives to enter or exit.

Which of the following is not an example of a factor of production?

a product's price

The real core of most economic problem is to:

allocate limited resources among competing uses.

Rational choices:

are made based on expectations of the additional benefits and additional costs involved.

People will gather information on consumption alternatives:

as long as the marginal benefit to them of acquiring additional information exceeds the marginal cost to them.

If average fixed cost and average variable cost are summed together, the result is:

average total cost.

In a typical cartel agreement, the cartel maximizes profit when it:

behaves as a monopolist.

In a market system, decisions about how to allocate resources are made:

by individuals and firms interacting in markets coordinated by market prices.

An economic hypothesis:

can be tested using empirical analysis.

The reason why national defense is commonly provided by the government, while food is not, is that food:

can easily be withheld from those who refuse to pay for it.

Specialization

can lead to an increase in overall production.

Which of the following is a rival good that is non-excludable?

common resource

The ability to produce at a lower opportunity cost than someone else is referred to as:

comparative advantage.

The area between the market price and the demand curve provides a measure of:

consumer surplus.

Prices communicate information about relative availability of products. For example, a decrease in the price of corn signals to consumers and producers that:

corn is relatively more abundant than before.

An important and often ignored opportunity cost is the:

cost of missed market opportunities when funds are invested in a firm.

Negative externalities are:

costs incurred by individuals other than buyers and sellers.

A forestry worker who is out of work because of the temporarily low demand for wood products associated with a recession is defined as:

cyclically unemployed.

Given a fixed nominal interest rate on a loan, unanticipated inflation:

decreases the burden of paying off the loan.

Positive incentives do not:

discourage consumption.

The demand curve of a monopolist is:

downward sloping and above the marginal revenue curve.

A natural monopoly is likely to arise when:

economies of scale exist over the relevant range of demand.

Demand is said to be ____ when the quantity demanded changes by a bigger percent than the percent change in price.

elastic

If the price of a good decreases, then, in the market for the type of labor that is used to produce it:

employment will decrease.

There are two types of costs associated with production: ____ costs that require monetary payments, and ____ costs that do not.

explicit; implicit

If the government imposed a tax on each child born, you would expect that:

fewer children would be born.

The perfectly competitive model assumes that:

firms can enter and exit the industry with relative ease.

Tom is a castaway who washes up on a remote island. He can catch eight birds per day or catch ten fish per day. The natives on the island can catch ten birds per day or catch twenty fish per day. The natives have a comparative advantage in:

fishing.

Identify the chain of events in creating a theory:

formulate a hypothesis, gather data, evaluate the results, support or refute the hypothesis, tentatively accept theory.

An individual who voluntarily leaves one job and spends a period of time seeking another is considered:

frictionally unemployed.

Economics is a social science that primarily explores how:

goods and services are produced and distributed in a world with limited resources.

Public goods are:

goods which cannot be easily financed through the market system.

If a country wanted to maximize the value of its output, each job should be carried out by the person who:

has a comparative advantage in that activity.

Economics is primarily the study of:

how choices are made because of scarcity.

Fundamentally, economics is concerned with:

how limited resources are allocated to satisfy unlimited wants.

Additions to human capital can be made through:

improved education and on-the-job training.

If a profit-maximizing monopolist finds that marginal cost is increasing and exceeds marginal revenue, it will:

increase price and decrease output.

If the demand for the output produced by a firm's laborers increased, it would

increase the firm's demand for labor.

Lower wages will

increase the quantity of labor demanded.

Since 1980, the proportion of income received by the top 5 percent of Americans has:

increased substantially.

Which of the following is most likely to be a fixed cost for a business?

interest payments on a loan used to finance the construction of a building

The rule of rational choice:

involves "marginal thinking."

The long run:

is a period in which there are no fixed costs.

Economics

is a science concerned with reaching generalizations about human behavior, like sociology or psychology.

Economists assume that the goal of a firm is to:

maximize profits.

A profit-maximizing firm in a perfectly competitive market will always produce a quantity of output that:

maximizes the amount by which total revenue exceeds total cost.

The marginal benefit of a slice of pizza is the:

maximum amount that a consumer is willing to pay for the slice.

Opportunity costs:

may or may not involve costs paid out-of-pocket.

The branch of economics that focuses on the conduct of affairs within narrowly defined units, such as households or business firms, is called:

microeconomics

In free market economies,

most market exchanges will result in all parties "winning."

A market economy without any ethics would have:

no value.

A market situation where a small number of sellers compose the entire industry is called:

oligopoly

Interdependence among firms is characteristic of:

oligopoly markets.

A special interest issue is best described as:

one in which a large number will each suffer small costs and a small number will each receive large benefits.

The prosperity of a nation today is typically measured by its:

output per capita.

When economies of scale exist:

per unit production costs decline as output expands.

For a time, either R. J. Reynolds or Phillip Morris raised prices of cigarettes twice a year by about 50 cents per carton. The other firms in the industry later raised their prices by the same amount. Economists call this:

price leadership.

The index of leading economic indicators usually turns downward:

prior to economic contractions.

The total social costs of production are:

private costs plus external costs

If the costs of producing of a good, like a university education, that produces positive externalities, are mostly paid by students and their families, then society will:

produce too little of the good since the marginal private benefit to students is less than the marginal social benefit.

Comparative advantage reflects

relative opportunity cost.

A competitive firm facing a perfectly elastic demand curve can:

sell all of its output at the market price.

The ceteris paribus assumption is used in economic analyses in order to:

simplify the analysis of a complex world.

Fred has lost his factory job, replaced by welding robots, and soon plans to go to technical school to learn computer repair because he cannot find a similar job to the one he lost. The type of unemployment facing Fred is:.

structural.

If the United States exports cars to France and imports cheese from Switzerland, then:

the United States has a comparative advantage in producing cars, and Switzerland has a comparative advantage in producing cheese.

In the long-run equilibrium, perfectly competitive firms earn zero economic profit because of

the ability of firms to enter and exit.

Which of the following is NOT potentially a barrier to entry into a product market?

the absence of economies of scale in the product market

The marginal cost of a good is:

the addition to total cost from producing one more unit of output.

Marginal revenue is:

the addition to total revenue from selling one more unit of output.

The rule of rational choice suggests that you will engage in more of an activity if:

the additional benefit received as a result of the activity exceeds the additional cost incurred.

The marginal product of labor measures:

the amount of output an individual worker contributes to a firm's total output.

The opportunity cost of an action is equal to:

the highest valued alternative sacrificed as a result of the action.

The additional benefit received as a result of undertaking an action is:

the marginal benefit.

The relationship between the wage rate and the quantity of labor that workers wish to supply is called:

the market supply curve for labor.

Monopoly results in a welfare loss because:

the monopolist restricts output below the socially efficient level.

The total labor force consists of:

the number of employed persons plus the number of unemployed persons.

The unemployment rate is calculated as:

the number of unemployed persons divided by the number of employed plus unemployed persons.

Deflation exists whenever:

the overall price level falls.

The presence of negative externalities leads to a misallocation of societal resources because:

there are some costs associated with production that the producer fails to take into consideration.

Production possibilities frontiers can shift outward if

there is an increase in technology.

In the production possibilities frontier shown above, a movement from point C to point D could most likely be caused by

unemployment

When perfectly competitive firms are earning zero accounting profits,

we would expect exit from the industry.

Which of the following groups of people would be included in the official unemployment rate?

workers temporarily laid off from jobs to which they expect to return

The price of a ticket to the latest Broadway musical is $80. You will purchase a ticket only if:

your expected marginal benefit from viewing the musical exceeds $80.

Which of the following is an example of moral hazard?

An individual drives less cautiously after obtaining automobile insurance.

Perfect competition implies that

A. there are many firms in the industry. B. all firms are producing the same identical product. C. all firms are price takers. D. All of the above answers are correct. D. All of the above answers are correct.

The long-run production period:

A.is a time when all inputs are variable. B. varies in length according to how capital goods are specialized. C. is likely longer for a steel manufacturer than for a retailer who sells watches off a cart at the local mall. D. is characterized by all of the above. D. is characterized by all of the above.

Which of the following explains why people tend to dedicate their resources to one primary activity, that is, to specialize rather than generalize?

Opportunity costs

Which of the following best illustrates the free-rider problem?

Some homeowners in a mountain resort area refuse to contribute toward paving the area's only access road.