ECON TEST 1
For which of the following individuals would the opportunity cost of going to college be highest?
a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree
For which of the following problems can well-designed public policy enhance economic efficiency?
both externalities and market power
Refer to Figure 4-9. If price in this market is currently $14, then there would be a(n)
excess supply of 40 units and the law of supply and demand predicts that the price will fall from $14 to a lower price.
Laws that penalize pollution in public places (like the side of the highway) are examples of government intervention that is intended to reduce
externalities.
In a particular country in 2000, the average worker needed to work 40 hours to produce 55 units of output. In that same country in 2008, the average worker needed to work 30 hours to produce 45 units of output. In that country, the productivity of the average worker
increased by about 9 percent between 2000 and 2008
When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good
increases as more of the good is produced.
An economy's production of two goods is efficient if
it is impossible to produce more of one good without producing less of the other
A tradeoff exists between a clean environment and a higher level of income in that
laws that reduce pollution raise costs of production and reduce incomes.
Economics deals primarily with the concept of
scarcity
Efficiency means that
society is getting the maximum benefits from its scarce resources.
Which of the following statements about the circular-flow diagram is correct?
The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms.
The slow growth of U.S. incomes during the 1970s and 1980s can best be explained by
a decline in the rate of increase in U.S. productivity.
Which of these terms are used interchangeably?
"inputs" and "factors of production"
Refer to Figure 4-9. In this market, equilibrium price and quantity, respectively, are
$10 and 50.
Refer to Figure 2-8, Panel (a). The opportunity cost of moving from point K to point L is
0 cups of coffee
If the production possibilities frontier is bowed outward, then "?" could be
310
Refer to Figure 2-8, Panel (a). The opportunity cost of one cup of coffee is highest when the economy produces
6 cups of coffee
In the simple circular-flow diagram,
All of the above
The country of Econoland produces two goods, textbooks and widgets. Last year, it produced 200 textbooks and 500 widgets. This year, it produced 250 textbooks and 600 widgets. Given no other information, which of the following events could not explain this change?
Any of these events could, in fact, explain the change
In the figure above, which movement reflects a decrease in quantity demanded but NOT a decrease in demand?
From point a to point e
Tom is restoring a car and has already spent $3500 on the restoration. He expects to be able to sell the car for $5000. Tom discovers that he needs to do an additional $2000 of work to make the table worth $5000 to potential buyers. He could also sell the car now, without completing the additional work, for $2800. What should he do?
He should complete the additional work and sell the car for $5000.
Which of the following statements is correct about the roles of economists?
In trying to explain the world, economists are scientists; in trying to improve the world, they are policy advisers.
When government policies are enacted,
None of the above are correct.
Refer to Figure 4-4. The graphs show the demand for cigarettes. In Panel (b), the arrows are consistent with which of the following events?
The prohibition of cigarette advertisements on television
Which of the following transactions does not take place in the markets for factors of production in the circular-flow diagram?
a woman buys corn for dinner
The circular-flow diagram
an economic model
Refer to Figure 2-8, Panel (a) and Panel (b). A shift of the economy's production possibilities frontier from Panel (a) to Panel (b) could be caused by
an improvement in donut production technology.
In competitive markets, buyers
and sellers are price takers.
Any point on a country's production possibilities frontier represents a combination of two goods that an economy
can produce using all available resources and technology
Communist countries worked under the premise that
central planners were in the best position to determine the allocation of scarce resources in the economy.
Economists speaking like policy advisers make
claims about how the world should be.
Rational people make decisions at the margin by
comparing marginal costs and marginal benefits
For a very long time Tropicland has had inflation of 12%. Suddenly its inflation rate drops to 4%. The drop in the inflation rate
could be due to slower money supply growth. We would expect unemployment to be higher
Economists use the word equality to describe a situation in which
each member of society has the same income
Refer to Figure 2-11. The shift of the production possibilities frontier from A to B can best be described as
economic growth
A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between
efficiency and equality.
Refer to Figure 2-2. Enid regularly buys fruits and vegetables at a grocery store. Santo regularly pays a lawn-care company to mow his lawn. If the flow of fruits and vegetables from the grocery store to Enid is represented by an arrow from Box C to Box B of this circular-flow diagram, then the money paid by Santo to the lawn-care company is represented by an arrow
from Box B to Box C.
Refer to Figure 4-12. All else equal, buyers expecting turkey to be more expensive in the future would cause a current move
from DB to DA
An example of an externality is the impact of
pollution from a factory on the health of people in the vicinity of the factory
Refer to Figure 2-8, Panel (a). Production is
possible at points J, K, L, and M, but efficient only at points J, L, and M.
Refer to Figure 2-8, Panel (a) and Panel (b). Which of the following is not a result of the shift of the economy's production possibilities frontier from Panel (a) to Panel (b)?
production of 1 donut and 4 cups of coffee becomes efficient
The overriding reason as to why households and societies face many decisions is that
resources are scarce.
The primary determinant of a country's standard of living is
the country's ability to produce goods and services.
Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is
the enjoyment and exercise he would have received had he played tennis.
A certain production possibilities frontier shows production possibilities for two goods: wheat and shirts. Which of the following concepts cannot be illustrated by this model?
the flow of dollars between sellers of wheat and shirts and buyers of wheat and shirts
When computing the opportunity cost of attending a Broadway show you should include
the price you pay for the ticket and the value of your time
Market economies are distinguished from other types of economies largely on the basis of
the ways in which scarce resources are allocated
Which of the following is not a reason people choose to depend on others for goods and services?
to allow people to produce outside their production possibilities frontiers
Refer to Figure 2-8, Panel (a). The movement from point M to point K could be caused by
unemployment.
A positive economic statement such as "Pollution taxes decrease the quantity of pollution generated by firms"
would require data but not values in order to be evaluated.