ECON EXAM 1
Suppose your expenses for this term are as follows: tuition: $5,000, room and board: $3,000, books and other educational supplies: $500. Further, during the term, you can only work part-time and earn $4,000 instead of your full-time salary of $10,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college?
$11,500
Cassie's Quilts alters, reconstructs and restores heirloom quilts. Cassie has just spent $800 purchasing, cleaning and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively, she can sell the quilt "as is" now for $900. What is the marginal cost of completing the task?
$200
Cassie's Quilts alters, reconstructs and restores heirloom quilts. Cassie has just spent $800 purchasing, cleaning and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively, she can sell the quilt "as is" now for $900. What is her marginal benefit if she sells the quilt "as is" now?
$900
In 2010, Smileytown consumed 50,000 tubes of toothpaste. In 2011, toothpaste consumption rose to 62,000 tubes. Calculate the percentage change in toothpaste consumption.
24%
Carmelita can perform either a combination of 35 manicures and 70 pedicures or a combination of 50 manicures and 45 pedicures. If she now performs 35 manicures and 70 pedicures, what is the opportunity cost of performing an additional 15 manicures?
25 pedicures
what do economics promote as way to make the best decision
Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost.
________ occurs when economic benefits are distributed fairly.
Equity
a worker hired by an auto manufacturer is what kind of factor
Factor of production
Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, "Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we're on the right track. We are producing the optimal number of t-shirts." Had the firm not produced and sold the last 400 t-shirts, would its profit be higher or lower, and if so by how much?
Its profit will be $800 higher.
define revenue
Revenue is the total amount received for selling a good or service.
Cassie's Quilts alters, reconstructs and restores heirloom quilts. Cassie has just spent $800 purchasing, cleaning and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively, she can sell the quilt "as is" now for $900. What should she do?
She should purchase the period fabric, complete the task and then sell the quilt.
How does the increasing use of MP3 players affect the market for compact discs?
The demand curve for compact discs shifts to the left.
Technological advancements have led to lower prices and an increase in the sale of digital cameras. How does this affect the digital photo printing paper market?
The demand curve for digital photo printing paper shifts to the right.
In September, buyers of silver expect that the price of silver will rise in October. What happens in the silver market in September, holding all else constant?
The demand curve shifts to the right.
How are the fundamental economic decisions determined in Cuba?
The government decides because Cuba is a centrally planned economy.
According to a recent study, "Stricter college alcohol policies, such as raising the price of alcohol, or banning alcohol on campus, decrease the number of students who use marijuana." On the basis of this information, how would you describe alcohol and marijuana?
The two goods are complements in consumption.
The term "market" in economics refers to
a group of buyers and sellers of a product and the arrangement by which they come together to trade.
If an increase in income leads to in an increase in the demand for peanut butter, then peanut butter is:
a normal good.
factor of production
a resource used to produce goods and services
When every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it, ________ occurs.
allocative efficiency
If you can produce more of something than others with the same resources, you have
an absolute advantage.
What does the term "marginal" mean in economics?
an additional or extra
what can cause a shift from inefficient to efficient
an increase in consumer wealth
If, in response to a decrease in the price of coffee, the quantity demanded of coffee increases, economists would describe this as
an increase in quantity demanded.
An outward (pos) shift of a nation's production possibilities frontier can occur due to:
an increase in the labor force.
Holding everything else constant, a decrease in the price of bicycles will result in:
an increase in the quantity of bicycles demanded.
A successful market economy requires well defined property rights and:
an independent court system to adjudicate disputes based on the law.
If a decrease in income leads to an increase in the demand for macaroni, then macaroni is:
an inferior good.
the machines workers have to work with is an example of __________________
capital
Economics is the study of the ________ people make to attain their goals, given their ________ resources.
choices; scarce
Markets promote __________ and ____________
competition / voluntary exchange
Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira, peanut butter and bananas are:
complements in consumption.
Specializing in the production of a good or service in which one has a comparative advantage enables a country to
consume a combination of goods that lies outside its own production possibilities frontier
In a market economy, who decides what goods and services will be produced?
consumers and producers
There is often a trade-off between:
economic efficiency and economic equity.
What is a description of an economic issue based on official government information.
economic model
The primary purpose of patents and copyrights is to
encourage the expenditure of funds on research and development to create new products.
To compete in the automobile market, BMW must make many strategic decisions such as whether to introduce a new car model, whether to produce alternative-fuel vehicles, and where to advertise. At BMW's Spartanburg, South Carolina plant, managers must decide on the monthly production quantities of their X3, X5 ,and X6 models. In making this decision, the managers
face a trade-off, because producing more of one model means producing less of the others.
Producers are buyers in the _________________
factors market.
Allocative efficiency is achieved when
firms produce the goods and services that consumers value most.
An ________ is represented by a rightward shift of the demand curve while an ________ is represented by a movement along a given demand curve.
increase in demand; increase in quantity demanded
A decrease in taste or preference has what effect on the demand curve?
it moves back
A decrease in the price of a substitute good would have what effect on the demand curve?
it moves back
If the product represented is an inferior good, an increase in income would have what effect on the demand curve?
it moves back
An increase in income has what effect on the demand curve (for a normal good)?
it moves forward
An increase in the expected future price of the product would have what effect in the demand curve?
it moves forward
An increase in the population has what effect on the demand curve?
it moves forward
An increase in the price of a product has what effect on the demand curve?
it moves higher along the curve
Competition forces firms to produce and sell products as long as the ________ to consumers exceeds the ________ of production.
marginal benefit; marginal cost
Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, "Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we're on the right track. We are producing the optimal number of t-shirts." Using marginal analysis terminology, what is another economic term for the incremental cost of producing the last 400 t-shirts?
marginal cost
Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, "Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we're on the right track. We are producing the optimal number of t-shirts." using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 400 t-shirts?
marginal revenue
An increase in the price of a complement has what effect on the demand curve?
moves it back
If a straight line passes through the point x = 12 and y = 4 and also through the point x = 4 and y = 8, the slope of this line is
negative one half.
Voluntary exchange increases economic efficiency because:
neither the buyer nor the seller would agree to a trade unless they both benefit
a suggestion is what kind of economic statement
normative
The ability to exercise control over one's own resources within the confines of the law refers to
one's property rights.
he principle of ________ is that the economic cost of using a factor of production is the alternative use of that factor that is given up.
opportunity cost
Economists assume that
optimal decisions are made at the margin.
If the price of gasoline rises, a smaller quantity of it will be bought- is what kind of economic statement
positive
By drawing a demand curve with ________ on the vertical axis and ________ on the horizontal axis, economists assume that the most important determinant of the demand for a good is the ________ of the good.
price; quantity; price
When goods and services are produced at the lowest possible cost, ________ occurs.
productive efficiency
Competition among sellers generates:
productive efficiency.
what market do firms operate in and what do they do there?
purchase final goods and services in the product market.
Economists assume that rational people
respond to economic incentives.
A critical function of the government in facilitating the operation of a market economy is
setting up and enforcing private property rights.
Increasing opportunity cost along a bowed out production possibilities frontier occurs because:
some factors of production are not equally suited to producing both goods or services.
If the best lawyer in town is also the best at operating a word processor, then according to economic reasoning, this person should
specialize in being a lawyer because its opportunity cost is lower.
In the circular flow model, households:
spend earnings from resource sales on goods and services in the product market.
Tomas increased his consumption of potato chips when the price of pistachios increased. For Tomas, potato chips and pistachios are:
substitutes in consumption.
The processes used to produce goods and services describes:
technology.
Comparative advantage means
the ability to produce a good or service at a lower opportunity cost than any other producer.
Human capital refers to
the accumulated skills and training workers have
if someone gets payed for their service it is between:
the factor market and firms
in a modern mixed economy, who decides what goods and services will be produced with the scarce resources available in that economy?
the government, consumers and producers
If you are considering buying either an Apple iPad or a Samsung Galaxy Tab, and you choose the Samsung only because the price is lower, then you consider....
the iPad and the Galaxy Tab to be substitutes.
product market.
the marketplace in which final goods or services are offered for purchase by consumers, businesses, and the public sector
The production possibilities frontier shows:
the maximum attainable combinations of two products that may be produced in a particular time period with available resources.
A demand curve shows the relationship between
the price of a product and the quantity of the product demanded.
if someone makes a purchase for an item it is between
the product market and household
if someone makes a purchase for an service it is between
the product market and household
The law of demand implies, holding everything else constant, that as the price of yogurt increases,
the quantity of yogurt demanded will decrease.
The circular flow model demonstrates
the roles played by households and firms in the market system.
better technology for the product on the horizontal axis will cause:
the vert. to increase
Without technological advancement, how can a nation achieve economic growth?
through an increase in supplies of factors of production
what is scarcity
unlimited want with limited resources
The resource income earned by those who supply labor services is called
wages and salaries.