Econ 2306 Exam 1 Practice Test

There is a 15 percent increase in the price of lumber used by a firm that builds new homes. This causes A. a decrease in the supply of new homes. B. a decrease in the quantity of new homes supplied. C. an increase in the supply of new homes. D. an increase of the quantity supplied of new homes.

A. a decrease in the supply of new homes.

Which of the following is a behavioral implication of bounded rationality? A. a rule of thumb B. unbounded selfishness C. a rational mistake D. a nervous breakdown

A. a rule of thumb

Which of the answers below fills in the following blank? _________________ measures the percentage change in the quantity of good x resulting from a percentage change in the price of good y. A. Price elasticity of demand. B. Price elasticity of supply. C. Cross price elasticity. D. Income elasticity. E. Eta elasticity.

C. Cross price elasticity.

Which of the following is a positive statement? A. High interest rates are good for banks B. Increasing interest rates have resulted in higher unemployment C. Low unemployment helps households D. None of the above are positive statements E. Both a and c are positive statements

B. Increasing interest rates have resulted in higher unemployment

The income elasticity of demand A. is positive only. B. can be positive, negative, or zero. C. must lie between -1 and +1. D. is negative only.

B. can be positive, negative, or zero.

If the government places a $0.50 tax on an item for which demand is perfectly elastic A. the entire tax will be paid by the consumer. B. the entire tax will be paid by the producer. C. most of the tax will be paid by the consumer. D. the tax will be split equally between the consumer and producer, with each paying exactly $0.25.

B. the entire tax will be paid by the producer.

John and Mary work at a bakery. John can decorate either 10 ice-cream cakes or 4 wedding cakes; Mary can decorate either 8 ice-cream cakes or 2 wedding cakes. According to this scenario A. There is not enough information to determine the opportunity costs. B. the opportunity cost of decorating a wedding cake for Mary is 4 ice-cream cakes. C. the opportunity cost of decorating a wedding cake for Mary is 2 1/2 ice-cream cakes. D. the opportunity cost of decorating a wedding cake for Mary is 2/5 ice-cream cake. E. the opportunity cost of decorating a wedding cake for Mary is 1/4 ice-cream cake.

B. the opportunity cost of decorating a wedding cake for Mary is 4 ice-cream cakes.

The assumption that individuals will not intentionally make decisions that will leave them worse off is known as A. microeconomic analysis. B. the rationality assumption. C. macroeconomic analysis. D. a model or theory.

B. the rationality assumption.

When the price of a complement (cream) decreases, the demand for the related good (coffee) A. will fall. B. will shift outward. C. remains constant. D. will shift inward.

B. will shift outward.

https://elearn.uta.edu/bbcswebdav/pid-6088651-dt-content-rid-58266183_2/xid-58266183_2 To move from point C to point B costs A. Nothing B. Requires growth C. 20 public sector goods D. 20 private sector goods E. Would be moving in an inefficient direction

D. 20 private sector goods

https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mabb0126151123/f12g1q93g1.jpg In the above figure, the opportunity cost of moving from point A to point C is A. 50 ukuleles. B. 50 guitars. C. 0 guitars. D. 25 guitars.

D. 25 guitars.

Which of the following is a determinant of demand? A. Technology B. Number of firms C. Price D. Income E. Both c and d

D. Income

As defined in the videos a market is A. A place where people buy and sell things B. A tool to control the direction of the economy C. An institution that brings many buyers and sellers together D. Graph that plots the actions of buyers and sellers E. None of the above

C. An institution that brings many buyers and sellers together

Normative economics is A. decision making undertaken by households and business firms. B. analysis of the behavior of the economy as a whole. C. analysis involving value judgments about economic policies; or a statement of "what ought to be." D. analysis that is strictly limited to making either purely descriptive statements or scientific predictions.

C. analysis involving value judgments about economic policies; or a statement of "what ought to be."

Which of the following is a determinant of supply? A. Cost of inputs. B. Taxes and Subsidies. C. Incomes. D. All of the above. E. Both a and b.

E. Both a and b.

Given the normally shaped supply and demand curves a government set price that is below the equilibrium price A. Will result in a shortage B. Will result in a surplus C. Is called a price floor D. Is called a price ceiling E. Both a and d are true

E. Both a and d are true

If the price of smart phones increases which of the following will happen? A. The supply of smart phones will increase B. The demand for smart phones will increase C. The demand for smart phones will decrease D. Both a and c E. None of the above

E. None of the above

Total market supply can be derived by A. vertically summing individual supply curves at the current technology level. B. horizontally summing individual supply curves at each and every price level. C. adding up the largest quantity demanded at various prices. D. looking at the changes in the price of raw materials needed to produce the product.

B. horizontally summing individual supply curves at each and every price level.

Moving down a straight-line demand curve, the absolute price elasticity of demand A. is constant. B. increases. C. decreases. D. varies in uncertain ways.

C. decreases.

When Fred's income was $100 per week, 10 units of good X were demanded. Now his income is $150 per week and 12 units of good X are demanded. Using the percentage change formula, the income elasticity of demand for good X equals A. 0.45. B. 2.50. C. 2.20. D. 0.40.

A. 0.45.

Suppose you are told that the equilibrium price of gasoline has increased, while the equilibrium quantity of gasoline has fallen. You are also told that either the demand changed or supply changed, but not both. Which of the following must have occurred? A. Supply decreased. B. Demand increased. C. Demand decreased. D. Supply increased.

A. Supply decreased.

Suppose that short skirts that were fashionable in the 1990s become unfashionable in the late 2000s. If other factors were held constant, then there would be A. a leftward shift in the demand curve. B. a rightward movement along the supply curve. C. a leftward movement along the supply curve. D. a rightward shift of the demand curve.

A. a leftward shift in the demand curve.

The law of demand shows that there is A. an inverse relationship between price and quantity demanded. B. a direct relationship between price and quantity demanded. C. an inverse relationship between price and resource cost. D. an inverse relationship between price and profit. E. a direct relationship between income and quantity demanded.

A. an inverse relationship between price and quantity demanded.

Under a pure price system, the decision of resource allocation is made by A. individuals who own the resources. B. the head of the government. C. no one. D. a queen or king.

A. individuals who own the resources.

The basic problem in economics is A. scarcity. B. demand. C. unlimited needs. D. limited resources.

A. scarcity.

Economic growth can be pictured in a production possibilities curve diagram by A. shifting the production possibilities curve out. B. moving from a point inside the production possibilities curve to a point on the curve. C. making the production possibilities curve straighter. D. shifting the production possibilities curve in.

A. shifting the production possibilities curve out.

Which of the following might have caused an increase in the price of software? (Assume all other things remain constant in this normal market with normal supply and demand functions) A. An improvement in the technology used to create software B. A decline in the price of computers a compliment for software C. A decrease in the demand for software D. An improvement in production in the television industry a substitute for the software industry E. None of the above

B. A decline in the price of computers a compliment for software

Which of the following is an example of the law of demand? A. An increase in the price of tablets is followed by an increase in the sale of tablets. B. An increase in the price of magnetic optical disks is followed by a reduction in the amount of magnetic optical disks purchased. C. The amount of smartphones sold increases while the price of smartphones is constant. D. A decrease in the price of milk has no effect on the amount of milk consumed.

B. An increase in the price of magnetic optical disks is followed by a reduction in the amount of magnetic optical disks purchased.

Which of the following is a normative statement? A. The interest rate cut will lower unemployment. B. The War has hurt the economy. C. Unemployment is increasing. D. Bush s tax cuts increased the national debt. E. Both b and d are normative statements.

B. The War has hurt the economy.

Which of the following might have caused the price of pizza to go up? A. The price of cheese, an input, decreasing. B. The price of Chinese food (a substitute for pizza) going up. C. A new technological breakthrough making it easier to produce pizzas. D. A report by the surgeon general stating that pizzas cause cancer. E. The price of beer, a complement to pizzas, goes up.

B. The price of Chinese food (a substitute for pizza) going up.

Which of the following is an example of a product made available in the US through a traditional part of the economy? A. A shirt bought at a store. B. Shoes bought from a friend. C. Elderly being cared for by their children. D. Children being educated in public schools. E. There are no traditional aspects to the US economy.

C. Elderly being cared for by their children.

Which of the following is a normative economic statement? A. An increase in corporate income taxes will cause the unemployment rate to increase. B. The costs of medical care are increasing faster than the incomes of U.S. citizens. C. Teenage unemployment is too high. D. Teenage unemployment is over ten percent.

C. Teenage unemployment is too high.

"When asked to rank which candies she liked the most Jill said that she liked Snickers, Kit Kat, M&M s, and Crunch bars in that order" If Jill chooses to buy a snickers bar what is her opportunity cost? A. The M&M s B. One dollar C. The Kit Kat D. All of the above E. A million billion dollars

C. The Kit Kat

Which of the following in the US economy is mostly produced in a manner reflecting command aspects of the system? A. The production of automobiles B. The raising of children C. The building roads D. The provision of clothing E. The baking of bread

C. The building roads

The value of the best alternative sacrificed to obtain something you want is referred to as A. marginal cost. B. sunk cost. C. opportunity cost. D. explicit cost.

C. opportunity cost.

If the absolute price elasticity of demand is 2, a 10 percent increase in the price will cause A. the quantity demanded to decrease by 5 percent. B. the quantity demanded to decrease by 0.2 percent. C. the quantity demanded to decrease by 20 percent. D. the quantity demanded to decrease by 2 percent.

C. the quantity demanded to decrease by 20 percent.

Which of the following might have caused the price of DVD players to decrease? A. A new law making it harder to download movies. (assume movie downloads are a substitute for DVD's) B. The government placing a new tax on every DVD player sold. C. The government subsidizing DVD's (a complement to DVD players). D. A technological breakthrough that makes it easier to produce Blu Ray players (a substitute to DVD players). E. None of the above will decrease the price of DVD players.

D. A technological breakthrough that makes it easier to produce Blu Ray players (a substitute to DVD players).

Which of the following was a time period listed when discussing the topic of price elasticity of supply? A. The market period. B. The short run. C. The long run. D. All of the above. E. None of the above.

D. All of the above.

Which of the following would be a micro economic topic? A. Determining what will occur in the market for oranges when there is an early freeze. B. Determining what will occur to inflation when the government increases taxes. C. Determining the affects of a war in Iraq on the price of steel. D. Both a and c. E. None of the above.

D. Both a and c.

Which of the following has been defined as an economic resource of production? A. Money B. Demand C. Markets D. Capital E. All of the above

D. Capital

Which of the following is a normative statement? A. Opportunity costs were not talked about in class B. Opportunity costs were talked about in class C. I chose an incorrect answer for question one D. I should have practiced opportunity costs for this test E. None of the above are normative statements

D. I should have practiced opportunity costs for this test

Which of the following was a justification for the law of supply? A. Common Sense B. Decreasing Marginal Utility C. The Income Affect D. Increased potential profit E. All of the above were justifications given for the law of supply

D. Increased potential profit

A price ceiling is A. a legal minimum price below which a good or service cannot be sold. B. the lowest price a seller can charge without losing all of its customers. C. a nonprice rationing device. D. a legal price above which a good or service cannot be sold.

D. a legal price above which a good or service cannot be sold.

https://elearn.uta.edu/bbcswebdav/pid-6088651-dt-content-rid-58266185_2/xid-58266185_2 What can be said about point E? A. At point E there are unemployed resources in this economy B. Point E is currently unattainable C. Point E could be obtained if there was growth D. both b and c are correct E. In the overall scheme of the universe is there ever REALLY a point E? (hint this answer is incorrect)

D. both b and c are correct

According to the concept of comparative advantage, a good should be produced in that nation in which A. terms of trade are maximized. B. domestic opportunity cost is greatest. C. None of the above D. domestic opportunity cost is the smallest. E. money is used.

D. domestic opportunity cost is the smallest.

The supply curve has a A. undefined slope. B. slope equal to -1. C. negative slope. D. positive slope.

D. positive slope.

https://elearn.uta.edu/bbcswebdav/pid-6088651-dt-content-rid-58266184_2/xid-58266184_2 What can we say if the economy is operating at point D? A. That there are unemployed resources in this economy B. That this economy is at full employment C. That the government in this economy is running a deficit D. That there is constant opportunity costs in this economy E. None of the above

A. That there are unemployed resources in this economy

If the price of a computer drops from $1000 to $500 and the quantity demanded goes from 5000 to 15000 which of the following is true A. The price elasticity of demand for this computer is elastic B. The price elasticity of demand for this computer is inelastic C. This suggests this is a luxury good D. This suggests this is a normal good E. Both b and c are true

A. The price elasticity of demand for this computer is elastic

In September 2005, destruction to U.S. gasoline refineries was caused by back-to-back storms along the U.S. Gulf Coast-Hurricane Katrina and Hurricane Rita. In one week, the average price of a gallon of gasoline in the United States increased by about 40 cents. Which of the following best explains why these events pushed up the price of gasoline? A. The supply curve for gasoline shifted to the left along the demand curve for gasoline. B. The demand curve for gasoline shifted to the right along the supply curve for gasoline. C. The demand curve for gasoline shifted to the left along the supply curve for gasoline. D. The supply curve for gasoline shifted to the right along the demand curve for gasoline.

A. The supply curve for gasoline shifted to the left along the demand curve for gasoline.

The macroeconomist would most likely study A. the effects of changing apple prices on the market for oranges. B. the effects of a lower income tax rates on the nation's total production of goods and services. C. the effect of increased union wages on the cost of producing automobiles. D. the effects of an increase in wage rates on a woman's decision to enter the labor force.

A. the effects of changing apple prices on the market for oranges.

The production possibilities curve represents the maximum feasible production combinations resulting from A. the mix of current resources that utilizes all available inputs using current technology. B. a fixed amount of demand by consumers. C. the lack of trade-offs in production. D. the lack of technology used in production.

A. the mix of current resources that utilizes all available inputs using current technology.

https://elearn.uta.edu/courses/1/2178-PRINCIPLES-OF-MICROECONOMICS-82906-006/ppg/et18mabb0126151123/f23g1q72g1.jpg Refer to the above figure. If the government imposes a price floor of $60 A. the quantity of goods that will be traded is 100. B. the quantity of goods that will be traded is 150. C. the quantity of goods that will be traded is 0. D. the quantity of goods that will be traded is 200.

A. the quantity of goods that will be traded is 100.

As a firm with control over your price you know that you have a demand elasticity greater than one If you wish to raise your total revenues your best alternative is to A. Increase price B. Decrease price C. Leave price unchanged D. None of the above E. Man I wish I had studied more (Hint this is not the BEST answer and is thus wrong)

B. Decrease price

In the market for domestic avocados, what would happen to the market clearing price and the equilibrium quantity if there was a drought in avocado growing areas? A. The market clearing price would rise, and the equilibrium quantity would rise. B. The market clearing price would fall, and the equilibrium quantity would fall. C. The market clearing price would rise, and the equilibrium quantity would fall. D. The market clearing price would fall, and the equilibrium quantity would rise.

C. The market clearing price would rise, and the equilibrium quantity would fall.

Other things being equal, you can make $20,000 a year teaching, $25,000 a year typing, $30,000 a year driving a cab, and $40,000 a year as a chef. You have a comparative advantage in A. teaching. B. one of them but we need more information to know which. C. being a chef. D. driving a cab.

C. being a chef.

What happens as the result of a shortage? A. Supply of the good decreases. B. There is downward pressure on prices. C. Consumers begin to view the good as an inferior good because they have a hard time finding it. D. There is upward pressure on prices.

D. There is upward pressure on prices.

If the price of a candy bar goes from $1 to $2 and the quantity demanded goes from 1000 to 750 which of the following is true? A. This suggests that this product is a complimentary good. B. This suggests that this product is a substitute good. C. This product has a an elastic demand curve. D. This product has an inelastic demand curve. E. This product is an inferior good.

D. This product has an inelastic demand curve.

Which of the following is a micro-economic topic? A. What happens to interest rates as savings increases? B. How will the government deficit affect unemployment? C. How many people will lose jobs if inflation increases from 7 to 9 percent? D. What happens to the price of oil if there is a war in Iran? E. None of the above are micro-economic topics

D. What happens to the price of oil if there is a war in Iran?

John believes that when the price of a good increases people will purchase more of the good. This statement is A. referring to money prices. B. consistent with the law of supply. C. consistent with the law of demand. D. inconsistent with the law of demand.

D. inconsistent with the law of demand.

In economics, ________ are limited but ________ are unlimited. A. wants; resources B. ideas; money C. money; ideas D. resources; wants

D. resources; wants

Efficiency is achieved A. when consumers are able to buy everything that they want. B. when prices of all goods and services go to zero. C. when output is being produced at a point inside a production possibilities curve. D. when producers are getting the maximum possible output from the available resources.

D. when producers are getting the maximum possible output from the available resources.

The imposition of a per unit tax on a product A. will cause the supply curve to shift downward and to the right. B. will encourage producers to increase the quantity supplied of the product. C. will reduce the quantity supplied of the product. D. will cause the supply curve to shift upward and to the left.

D. will cause the supply curve to shift upward and to the left.