Econ Exam 1

Which of the following is an assumption used when drawing a production possibilities frontier?

2 and 3 - only two goods are considered the level of technology is fixed and unchanging

Economic growth depends upon which of the following?

2 and 3- technological advancement and increasing the amount of capital

What would be an example of capital goods?

Antonio, the manager of the local Taco Hut, purchases a new deep fryer

Why is a production possibilities frontier bowed out (concave)?

The bowed shape reflects increasing opportunity cost

Suppose that the equilibrium price and quantity of new houses both increase. Which of the following could be a cause of this change?

The demand for new houses increased and the supply did not change

Assume that an association of young workers has lobbied Congress to require that all workers retire once they reach the age of fifty. What impact would this law have on the nation's production possibilities frontier?

The production possibilities frontier would shift inward

If a higher price of wheat decreases the quantity of corn being produced, which of the following describes what has occurred?

The quantity of wheat supplied increased and the supply of corn decreased

Plywood is used in the construction of house. If the price of plywood rises, what happens to the supply of houses?

The supply decreases so that the supply curve shifts leftward

In economics, cost is measured as _____ and benefit is measured as ___

What you must give you up to get something; what you are willing to give up to get it

Which of the following increases the supply of gasoline?

a decrease in the price of a resource used to produce gasoline, such as crude oil

If the demand for digital cameras increases when consumers' incomes rise, then digital cameras are

a normal good

Which of the following does NOT increase the supply of personal computers, that is, does NOT shift the supply curve of personal computers?

a rise the price of a personal computer

In a production possibilities frontier graph, the cost of producing more units of a good is measured by the

amount of the other good or service that must be forgone

Your economics professor offers 10 points extra credit if you attend a review session before your next exam. This extra credit is an example of

an incentive to attend the review session

Which of the following definitely results in a products equilibrium price rising?

an increase in demand combined with a decrease in supply

Consider the market for smart phones. Which of the following shifts the demand curve rightward?

an increase in the price of land-line phone service, a substitute for smart phones

An increase in the number of pineapple growers results in

an increase in the supply of pineapple and a rightward shift in the supply curve of pineapples.

An incentive is

an inducement to take a particular action

a product that has a negative income elasticity of demand is ___ good

an inferior

Economists measure opportunity cost

as the best thing given up

The production possibilities frontier is the

boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced, given the available factors of production and the state of technology.

The question of "What goods and services get produced?" Most closely relates to which of the following issues?

building a missile defense system, or putting a computer in every elementary school classroom

The price elasticity of demand is a measure of

buyers' responsiveness to changes in the price of a product

to extent to which the demand for a good changes when the price of a substitute or complement changes, other things remaining the same, is measured as the

cross elasticity of demand

The sustained expansion of production possibilities is called

economic growth

If the price elasticity of demand for moose hunting lessons is 4.23, then the demand for moose hunting lessons is

elastic

The circular flow model shows the flow of

expenditure and income throughout the economy

Millions of people from mexico have migrated to the U.S. this has reduced the supply of labor in Mexico and increased the supply of labor in the U.S. Assume that the demand for labor in Mexico and the U.S. is unchanged. then wages in the U.S. ____ and wages in Mexico ____

fall:rise

If a product is narrowly defined, it is likely to

have many substitutes and therefore its demand is elastic

Jan is attending college and studying to be an investment broker. To improve her chances of employment following college, she has interned a top brokerage firm during the last two summers. Jan's internship has increased her

human capital

Scarcity exists because

human wants exceed the resources available to satisfy them

Which of the following is true regarding demand?

i only-- demand is the relationship between quantity demanded and the price of a good when all other influences on buying plans remain the same

The total revenue test says

i only; demand is elastic if a decrease in price results in an increase in total revenue

The law of supply states that, other things remaining the same,

if the price of a good increases, the quantity supplied increases

Which of the following is a positive statement

if we reduce welfare payments give to the poor, they will find jobs

which of the following statements is correct? the

income elasticity of demand for normal goods is positive

Suppose a medical study reveals new benefits to consuming beef and at the same time a bumper corn crop reduces the cost of feeding steers. The equilibrium quantity of beef will

increase

A professor changes the penalty for cheating on exams from getting a 0 on the exam to getting an F in the course. The professor has

increased the marginal cost of cheating

During 2008 the supply of gasoline decreased while at the same time the demand for gasoline increased. If the magnitude of the increase in demand was greater than the magnitude of the decrease in supply, then the equilibrium price of gasoline ___ and the equilibrium quantity ____

increased; increased

As more time passes, the price elasticity of gasoline

increases

Moving from one point to another on a production possibilities frontier implies

increasing the production of one good and decreasing the production of another

When the percentage change in the quantity demanded is less than the percentage change in price, then demand is

inelastic

Moving from a point inside the production possibilities frontier to a point on the production possibilities frontier, the opportunity cost of producing more of the good on the horizontal axis

is 0

A demand schedule

is a list of the quantities demanded at each different price when all other influences on buying plans remain the same

Dan missed class the day the professor covered the circular flow model. Dan asked his friend Joan to explain markets to him. Joan correctly stated that a market

is any arrangement that brings buyers and sellers together

Huey has eaten two hamburgers and is considering a third. The marginal benefit in his decision is the pleasure from consuming

just the third hamburger

As a factor of production, oil reserves are counted as

land

Scarcity requires that we

make choices about what goods and services to produce

The production possibilities frontier illustrates the

maximum combinations of goods and services that can be produced

the greater the amount of time that passes after a price change, the

more elastic supply becomes

If the price of a good rises, then moving along a demand curve the percentage change is the quantity demanded will be

negative

The cross elasticity between computers and software is

negative because they are complements

The value of the best thing that a person must give up when making a decision is known as the

opportunity

The statement that "increases in the tax on gasoline increase the price of gasoline" is an example of a

positive statement

The price elasticity of supply is a measure of the extend to which the quantity supplied of a good changes when the

price changes

Suppose the equilibrium quantity of movie tickets is 1000. If the demand curve shifts ___ the equilibrium quantity of movie tickets will

rightward; increase

The phrase " a change in demand" most directly implies a

shift of the demand curve

If two goods have a cross eleasticity of demand of -2, then when the price of one good increases, the demand curve of the other good

shifts leftward

the supply schedule

shows the relationship between the quantity supplied and the price of a good when all other influences on selling plans remain the same

If the price of a Brita water filtration system increases and the quantity demanded for bottled water increases, then these two goods are

subsitutes

If the demand for used cars decreases after the price of a new car falls, used cars and new cars are

substitute goods

Market demand curves are obtained by

summing the quantities every consumer is willing to buy at each different price

Consider the market for bread. If the price of wheat rises, then the

supply curve of bread shifts leftward

suppose the equilibrium price of oranges is 2.00 per pound. If the actual price is above the equilibrium price a

surplus exists and the price falls to restore equillibrium

Which of the following increases the supply of a good and shifts its supply curve rightward?

technological advance in how the good is produced

What is the " quantity demanded"

the amount of a good people are able and willing to buy a specific time period and at a given price

The quantity supplied of a good, service, or resource is ____ during a specified period and at a specified price

the amount that people are able and willing to sell

In stores, it is common to find seasonal products marked down when the season ends, what explains this behavior?

the law of demand is being used to increase the quantity demanded

Market equilibrium occurs when

the quantity demanded equals the quantity supplied

Correlation means

the values of two variables move in a predictable and related way

Consider the market for peanut butter. If there is an increase in the price of peanuts,

there is a decrease in the supply of peanut butter

The "law of demand" refers to the fact that, other things remaining the same, when the price of a good rises,

there is a movement up along the demand curve to a smaller quantity demanded

The price of salsa rises. How does the increase in the price of salsa affect the supply of salsa

there is no change to the supply of salsa, but the quantity of salsa supplied decreases

To economists, scarcity means that

unlimited wants cannot be satisfied by the limited resources

Which of the following statements best describes the study of economics? Economics studies how

we make choices in the face of scarcity