ECON exam 1

3. What is factors of production? a. Labor b. Land c. Capital (buildings and machines used in production) d. All of the above

All of the above

8. If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is a. A normal good b. An inferior good c. A substitute good d. A complementary good

An inferior good

1. Which of the following terms would best describe the consequence of scarcity? a. Limited resources b. Tradeoffs c. Unlimited wants d. Poverty and possibly starvation

Limited resources

4. An additional cost resulting from a small increase in some activity is called the: a. Marginal cost b. Opportunity cost c. Sunk cost d. Fixed cost

Marginal cost

5. The principle that the cost of something is equal to what is sacrificed to get it is known as the: a. Reality principle b. Marginal principle c. Principle of opportunity cost d. Principle of diminishing return

Principle of opportunity cost

2. Absolute advantage is the ability of an individual, firm, or country to: a. Produce a good or service at the lower opportunity cost than other producers b. Consume more good or service than competitors at lower cost c. Produce more of a good or service than competitor using the same amount of resources d. Reach a higher production possibilities frontier by raising opportunity cost

Produce more of a good or service than competitor using the same amount of resources

15. If automobiles are a normal good, what will happen when the price of automobiles rises, holding all else constant. a. Demand for automobiles will rise. b. Quantity demanded for automobiles will fall. c. Demand for automobiles will fall. d. Supply of automobiles will fall.

Quantity demanded for automobiles will fall.

7. A rational person does not act unless a. The action is ethical. b. The action produces marginal costs that exceed marginal benefits. c. The action produces marginal benefits that exceed marginal costs. d. The action makes money for the person.

The action produces marginal benefits that exceed marginal costs.

14. Law of supply is the claim that: a. The quantity supplied of a good falls when the price of good rises, other things equal. b. The price of a good rises when quantity supplied of good falls. c. The quantity supplied of a good stay the same when its price falls or rises. d. The quantity supplied of a good rises when the price of good rises, other things equal.

d. The quantity supplied of a good rises when the price of good rises, other things equal.

6. The ______________ the opportunity cost of doing something, the _____________ likely it will be done. a. Lower, less b. Higher, less c. Higher, more d. None of the above

higher, less