Econ Test #1

Product markets are where ______ are bought and sold. a) capital and labor; b) resources; c) goods and services; d) transactions in an economy

goods and services

Manny is attending college and majoring in economics. Manny is improving his scarce resource of: a) land, b) labor, c) capital, d) human capital

human capital

Figure- Demand and Supply of Gasoline: When the supply surve shifted from the initial equilibrium, the new intersection of supply and demand has a price of _____ and quantity of 400. This could have resulted from ____. a) $1.50; an increase in consumers' income; b) $1.50; an increase in refined technology; c) $2.00; an increase in the number of buyers; d) $2.00; an increase in consumers' income

$1.50; an increase in refined technology

Table- Coffee and Salmon Production Possibilities: The table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. The opportunity cost of producing 1 unit of coffee for Brazil is: a) 2 salmon; b) 1/4 salmon; c) 1 salmon; d) 1/2 salmon

1/2 salmon

Table: Production Possibilities Schedule II- If the economy is producing at alternative X, the opportunity cost of producing at Y instead of X is ____ units of consumer goods per period. a) 0, b) 6, c) 8, d) 14

6

Figure- Supply of Coconuts: If the price of coconuts decreases, then the movement that would take place in the model could be: a) A to B; b) B to A; c) C to A; d) E to B

A to B

Figure- Supply of Coconuts: If there is an improvement in the technology used to harvest coconuts (e.g. a faster, less expensive coconut picker), then the movement in the model could be: a) A to C; b) B to A; c) C to A; d) B to E

A to C

Figure- Demand for Coconut: If a coconut is a normal good and the price of coconuts increases, then the movement that would take place in the model could be: a) A to B; b) B to A; c) C to A; d) E to B

B to A

Figure- Bicycles and Radishes 1- The figure shows production possibility frontier for two countries that produce only radishes and bicycles. The axes of both graphs are measured in equivalent units. Country A is now operating at point M, and Country B is now operating at point N. The opportunity cost of producing an additional ton of radishes would be greater in: a) Country A; b) Country B; c) neither, the opportunity cost would be the same in both countries; d) there is not enough information given to answer the question

Country B

Which of the following is the best example of making a choice on the margin? a) buying a new car, b) quitting your job, c) drinking another cup of coffee, d) attending college

Drinking another cup of coffee

Starbucks is the largest coffeehouse company with more than 16,000 stores throughout the world. Suppose the following diagram illustrates the demand curve for Starbucks coffee. Part 1: Recently, fast food companies, such as McDonald's, have started offering premium coffee drinks. Use the copy tool to show how the model would change due to this change in the market. Label this new curve D2. Part 2: Starbucks introduces a Frequent Latte Card in its stores. With the card customers get free coffees after buying a certain number of drinks. Use the copy tool to show how the original demand curve would change after this new policy is introduced. Label this new curve D3. Tip: Assume you are starting from the original demand curve, D.

Graph 31- The likely effect of new competitors will be a decrease in the demand for Starbucks coffee. Illustrate this by drawing a new demand curve that lies to the left of the original curve. The introduction of a new product by Starbucks is likely to lead to an increase in demand. To illustrate this, draw a new demand curve that lies to the right.

Part 1: Use the line drawing tool to draw a demand curve for cocoa. Label this line D. Part 2: Use the drop line tool to mark a point on the demand curve. Label this point A. Part 3: Assume that there is an increase in the quantity demanded. Illustrate this by plotting a new point using the drop line tool. Label this point B. Part 4: Relative to drop line A, assume that there is a decrease in the quantity demanded. Illustrate this by plotting a new drop line and label this C.

Graph 32- Almost without exception, demand curves are downward sloping as you look from left to right. They might be steeply downward-sloping, or flat, linear or curved, but they usually have a negative slope. Therefore to draw the demand curve you would start with one point somewhere close to (or even ON) the vertical axis and then choose a second point that is lower and to the right of the first point. You can choose any point on the line and label it A. An increase in the quantity demanded occurs when the price of a good decreases. As a result of the lower price, consumers buy more. Therefore the point you choose to label as B should be somewhere on the demand curve between point A and the horizontal axis, meaning that it is a point that is to the right of and below point A, thus showing a larger quantity purchased at a lower price. A decrease in the quantity demanded occurs when the price of a good increases. As a result of the higher price, consumers buy less. Therefore, the point you choose to label as C should be somewhere on the demand curve between point A and the vertical axis, meaning that it is a point that is to the left and above A, thus showing a smaller quantity purchased at a higher price. Review Module 5; Section: The Demand Curve.

If they spend all night writing computer programs, Laurence can write 10 programs while Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 while Carrie Anne can make 4. We know that: a) Laurence has a comparative advantage in programs; b) Laurence has a comparative advantage in both programs and sunglasses; c) Carrie Anne has a comparative advantage in programs; d) Carrie Anne has a comparative advantage in both programs and sunglasses

Laurence has a comparative advantage in programs.

Specialization in production was the starting point for what book in economics that many regard as the beginning of economics?

The Wealth of Nations by Adam Smith

The primary difference between a change in demand and a change in the quantity demanded is: a) a change in demand is a movement along the demand curve and a change in quantity demanded is a shift in the demand curve; b) a change in quantity demanded is a movement along the demand curve and a change in demand is a shift in the demand curve; c) both a change in quantity demanded and a change in demand are shifts in the demand curve, only in different directions; d) both a change in quantity demanded and a change in demand are movements along the demand curve, only in different directions

a change in quantity demanded is a movement along the demand curve and a change in demand is a shift in the demand curve

Which of the following is most likely to shift the supply of milk to the right? a) a tax on each gallon of milk produced; b) an increase in household income and milk is a normal good; c) a decrease in the price of feed given to dairy cows; d) the bankruptcy of many small dairy farms

a decrease in the price of feed given to dairy cows

Which of the following is likely to cause a rightward shift in the demand for home-delivered pizza? a) a lower price of pizza; b) a lower price of fast-food hamburgers; c) a higher price of pepperoni; d) a larger population

a larger population

"All other relevant factors remain unchanged" is another way of saying: a) all other things equal b) allow several variables to change in order to understand how those variables affect one variable held constant, c) allow all variables to change and attempt to understand how the variables interact with each other, d) no variables change

all other things equal

Figure- DVD Market: At a rental price of $3, there will be: a) equilibrium in the rental market for DVDs; b) an increase in demand; c) an excess supply of 40 DVDs rentals; d) an excess demand of 40 DVD rentals

an excess demand of 40 DVD rental

If there is a tremendous natural disaster, the effect can be shown by: a) point interior to the production possibility frontier; b) an outward expansion of the production possibility frontier; c) a movement from one point to another along the production possibility frontier; d) an inward contraction of the production possibility frontier

an inward contraction of the production possibility frontier

An economy is said to have a comparative advantage in the production of a good if it can produce that good: a) with more resources than another economy; b) with a higher opportunity cost than another economy; c) outside its production possibility frontier; d) at a lower opportunity cost than another economy

at a lower opportunity cost than another economy

The circular-flow diagram illustrates how households _____ goods and services and ____ factors of production. a) buy;sell, b) buy;buy, c) own; buy, d) own; sell

buy; sell

Suppose oranges and clementines are considered to be substitutes. Holding everything else constant, if the price of oranges increases, then the: a) demand for clementine will increase; b) demand for clementines will decrease; c) demand for oranges will increase; d) demand for oranges will decrease

demand for clementines will increase

The simplest circular-flow model shows the interaction between households and firms. In this model: a) only barter transactions take place; b) households and firms interact in the market for goods and servies, but firms are the only participants in the factor markets; c) firms supply goods and services to households, which, in turn, supply factors of production to firms; d) attention is focused on "real" flows of goods, services, and factors of production, but money flows between households and firms are ignored for simplicity

firms supply goods and services to households, which, in turn, supply factors of production to firms

The factors of production include: a) land, labor, services, and capital; b) land, goods, human capital and interest; c) land, labor, wages, and interest; d) land, labor, capital, and human capital

land, labor, capital, and human capital

In China, which of the following would not be a resource in the production of rice? a) fertile land, b) labor, c) capital equipment, d) money

money

Figure- Comparative Advantage: Eastland has a comparative advantage in producing: a) oranges only; b) peaches only; c) both oranges and peaches; d) neither oranges nor peaches

oranges only

A shift of the demand curve for Luis's Pizza would not be caused by a change in the: a) buyers' incomes; b) price of Luis's Pizza; c) price of Humberto's Pizza; d) popularity of Luis's Pizza

price of Luis's pizza

We are forced to make choices because of: a) exploitation, b) efficiency, c) scarcity, d) the margin

scarcity

The economy's factors of production are not equally suitable for producing different types of goods. This principle generates: a) economic growth, b) technical efficiency, c) resource underutilization, d) the law of increasing opportunity cost

the law of increasing opportunity cost

An example of a positive statement is: a) the rate of unemployment is 4%, b) a high rate of economic growth is good for the country, c) everyone in the country needs to be covered by national health insurance, d) baseball players should not be paid higher salaries than the president of the US

the rate of unemployment is 4%

Figure: Guns and Butter- If the economy were producing 8 units of funs and 12 unites of butter per period: a) this is a possible choice, but would involve unemployment and/or inefficiency, b) this notion of increasing opportunity cost is invalidated, c) the economy is still efficient but has made a decision not to buy as much as it could, d) something must be done to reduce the amount of employment

this is a possible choice, but would involve unemployment and/or inefficiency