econ test 1
1. The opportunity cost of a good is the same as its a. money price. b. relative price. c. price index. d. None of the above.
.A good's relative price tells how much of another good must be foregone to have another unit of the good, which is the opportunity cost of the good.
9. Allocative efficiency is achieved by producing the amount of a good such that the marginal benefit of the last unit produced exceeds its marginal cost by as much as possible
t
15. Learning-by-doing can lead to dynamic comparative advantage. Economic Coordination
t
2. In Figure 2.4 the opportunity cost of moving from point b to point c is 1/2 computer per television.
t
4. From a point within the PPF, rearranging production and producing more of all goods is possible..
t
6. Along a bowed-out PPF, as more of a good is produced, the opportunity cost of producing the good diminishes
t
8. If the price of chicken feed rises, the supply of chickens decreases
t
;a rise in the price of a complemen
t (a good that is used with another good) decreases demand and shifts the demand curve leftward.
The role of the entrepreneur always involves: taking risks playing it safe working for others high impact sales
taking risks
A positive statement can be
tested to see if it is true or false.
Production points inside
the PPF are inefficient, with misallocated or unused resources.
The key idea is that an individual compares
the additional (or "marginal") benefit from taking an action to the additional (or "marginal") cost of the action
Events in the market for a particular good are such that the market (equilibrium) price and market (equilibrium) quantity of the good move opposite direction (i.e., price falls as quantity rises, and\or price rises as quantity falls). It must therefore be true that
the decisive event in the marketplace is a shifting supply curve
Demand is
the entire relationship between the price of a good and the quantity demanded
The opportunity cost of an action is
the highest-valued alternative foregone. I
The opportunity cost of any action is
the highest−valued alternative given up.
Factors of production are
the inputs used to produce goods and services.
Where were the main characters when they were shot at?.
A. Both a car and a cave
Entrepreneurship: the
human resource that organizes land, labor, and capital.
Resource use is efficient
if it is not possible to make someone better off without making someone else worse off.
A choice involves
a tradeoff.
Capital earns interest; entrepreneurship earns profit
false
Who is Chairman of the Board of Governors of the Federal Reserve?
jerome powell
The opportunity cost of an increase in an activity is called
marginal cost
The marginal cost of a good i
s the opportunity cost of producing one more unit of it.
labor earns ;
wages
Which of the following best defines capital as a factor of production?
Instruments, machines, and buildings used in production.
One example of a positive economic statement is If minimum wage rates rise, then unemployment will rise. Full employment policies should be pursued. We should tax the wealthy more and use the money to provide services for the poor. The government should do something to help the homeless.
"If minimum wage rates rise, then unemployment will rise."
The law of demand states that
"other things remaining the same, the higher the price of a good, the smaller is the quantity demanded; and the lower the price of a good, the greater is the quantity demanded
The law of supply states that
"other things remaining the same, the higher the price of a good, the greater is the quantity supplied; and the lower the price of a good, the smaller is the quantity supplied.
If Y = 800 - 4X, what is the slope of this line?
-4
10. Producing 400 pounds of yak butter and 50 rutabagas is a. not possible for this nation. b. possible and is an efficient production point. c. possible, but is an inefficient production point. d. an abhorrent thought.
. c When 400 pounds of yak butter are produced, a maximum of 100 rutabagas can be produced; if only 50 rutabagas are produced, the combination is inefficient
15. The PPF shifts if a. the unemployment rate falls. b. people decide they want more of one good and less of another. c. the prices of the goods and services produced rise. d. the resources available to the nation change
. d An increase in resources shifts the PPF outward; a decrease shifts it leftward. (A decrease in the unemployment rate moves the nation from a point in the interior of the PPF to a point closer to the frontier.)
Studying the effects choices have on the national economy is part of a. scarcity. b. microeconomics. c. macroeconomics. d. global science
. macroeconomics.
13. An increase in the price of the cheese used to produce pizza shifts the supply curve of pizza ____ and shifts the demand curve for pizza ____. a. rightward; leftward b. leftward; leftward c. leftward; not at all d. not at all; leftward
13. c A change in the price of a factor used to produce a good shifts the supply curve but does not shift the demand curve.
14. To say that "supply increases" for any reason, means there is a a. rightward movement along a supply curve. b. leftward movement along a supply curve. c. rightward shift in the supply curve. d. leftward shift in the supply curve.
14. c An "increase in supply" means that the supply curve shifts rightward; a "decrease in supply" means the supply curve shifts leftward.
15. If the market for Twinkies is in equilibrium, then a. Twinkies must be a normal good. b. producers would like to sell more at the current price. c. consumers would like to buy more at the current price. d. the quantity supplied equals the quantity demanded. d. greater; fall
15. d At equilibrium, consumers and suppliers are simultaneously satisfied insofar as the quantity consumers are willing to buy matches the quantity producers are willing to sell.
17. In Figure 3.6 at the price of $80 there is a a. shortage and the price will rise. b. shortage and the price will fall. c. surplus and the price will rise. d. surplus and the price will fall
17. d There is surplus because, as illustrated in Figure 3.8, the quantity supplied at the price of $80 is 4. This quantity exceeds 2, the quantity demanded.
18. In a market, at the equilibrium price, a. neither buyers nor sellers can do business at a better price. b. buyers are willing to pay a higher price, but sellers do not ask for a higher price. c. buyers are paying the minimum price they are willing to pay for any amount of output and sellers are charging the maximum price they are willing to charge for any amount of production. d. None of the above is true.
18. a Buyers cannot find anyone willing to sell to at a lower price and sellers cannot find anyone willing to buy at a higher price.
22. A technological improvement lowers the cost of producing coffee. The technological improvement ____ the equilibrium price of a pound of coffee and ____ the equilibrium quantity of coffee a. rises; increases b. rises; decreases c. falls; increases d. falls; decreases
22. c The technological improvement increases the supply, that is, the supply curve shifts rightward. As a result, the quantity increases and the price falls.
23. The number of firms producing computer memory chips decreases. As a result, the price of a memory chip ____ and the quantity of memory chips ____. a. rises; increases b. rises; decreases c. falls; increases d. falls; decreases
23. b The decrease in the number of firms producing memory chips decreases the supply of memory chips, which raises the price and decreases the quantity of chips.
24. The rise in the price of paper shifts the a. demand curve rightward. b. demand curve leftward. c. supply curve rightward. d. supply curve leftward.
24. d Paper is used in the manufacture of paper books, so a rise in the price of paper increases the cost and shifts the supply curve of books leftward.
25. The fact that fewer people want to read paper books shifts the a. demand curve rightward. b. demand curve leftward. c. supply curve rightward. d. supply curve leftward..
25. b When people's preferences change so that they want to read fewer paper books, the demand curve for books shifts leftward. 26. c Both the decrease in demand and the decrease in supply lead to a decrease in the quantity, so the equilibrium quantity unambiguously decreases
26. The equilibrium quantity of paper books a. definitely increases. b. definitely does not change. c. definitely decreases. d. might increase, not change, or decrease.
26. c Both the decrease in demand and the decrease in supply lead to a decrease in the quantity, so the equilibrium quantity unambiguously decreases
We know that there have been shifts of both the demand curve for and the supply curve of a good. We also know that one end result of the changes in this market was that the equilibrium price of the good fell. Given this information, which combination of supply and demand changes could NOT have possibly occurred?
A. a decrease in supply and an increase in demand
16. If there is a shortage of a good, the quantity demanded is ____ than the quantity supplied and the price will ____. a. less; rise b. less; fall c. greater; rise d. greater; fall
A shortage occurs when the price is below the equilibrium price. The quantity demanded exceeds the quantity supplied and the resulting shortage means the price rises until it reaches its equilibrium.
9. Which of the following influences does NOT shift the supply curve? a. A rise in the wages paid workers b. Development of new technology c. People deciding that they want to buy more of the good d. A decrease in the number of suppliers
A change in preferences shifts the demand curve, not the supply curve.
6. Some sales managers are talking shop. Which of the following quotations refers to a movement along the demand curve? a. "Since our competitors raised their prices our sales have doubled." b. "It has been an unusually mild winter; our sales of wool scarves are down from last year." c. "We decided to cut our prices, and the increase in our sales has been remarkable." d. None of the above
A reduction in the price of the good leads to a
7. Which of the following could lead to the shift in the demand curve illustrated in Figure 3.5? a. An increase in the quantity demanded b. A rise in the price of a substitute good c. A rise in the price of a complement d. A fall in the price of the good
A rise in the price of a substitute shifts the demand curve rightward
A demand curve _______.
A.is a willingness dash and dash ability dash to dash pay curve
5. When producing at a production efficiency, than a. scarcity is no longer a problem. b. producing more of one good requires producing less of some other good. c. the most highly valued goods and services are being produced. d. producing another unit of the good has no opportunity cost.
All production points on the PPF are production efficient.
4. In Figure 2.5, at point b what is the opportunity cost of producing one more Blu-ray disc? a. 12 DVDs b. 3 DVDs c. 2 DVDs d. There is no opportunity cost.
As more Blu-ray discs are produced, the opportunity c
14. A positive statement is a. about what ought to be. b. about what is. c. always true. d. one used in an economic experiment.
b. about what is.
What do the bad guy and our lead character have in common?
Both had Dr. Lattimer as their dissertation advisor
20. Which of the following statements about absolute advantage is correct? a. Brandon has an absolute advantage in both plowing and planting. b. Brandon has an absolute advantage only in plowing. c. Brandon has an absolute advantage only in planting. d. Christopher has an absolute advantage both in plowing and planting.
Brandon can produce more of both goods than Christopher, so Brandon has an absolute advantage in both goods.
21. Brandon has a. a comparative advantage both in plowing and planting. b. a comparative advantage only in plowing. c. a comparative advantage only in planting. d. a comparative advantage in neither in plowing and planting.
Brandon's opportunity cost of planting an acre of land is plowing 2 acres, whereas Christopher's opportunity cost of planting an acre is plowing 4 acres.
23. Brandon and Christopher can a. both gain from exchange if Brandon specializes in planting and Christopher in plowing. b. both gain from exchange if Brandon specializes in plowing and Christopher in planting. c. exchange, but only Brandon will gain from the exchange. d. exchange, but only Christopher will gain from the exchange
By specializing according to their comparative advantages, both can gain from exchange.
What kind of job or profession does our male lead character have?
Econ grad student and college lecturer
21. You notice that the price of wheat rises and the quantity of wheat increases. This set of observations can be the result of the a. demand for wheat curve shifting rightward. b. demand for wheat curve shifting leftward. c. supply of wheat curve shifting rightward. d. supply of wheat curve shifting leftward.
Figure 3.9 shows that an increase in the demand for wheat, so that the demand curve shifts from D0 to D1, raises the price of wheat from $6 a bushel to $8 and increases its quantity from 30 billion bushels of wheat a year to 40 billion.
11. In addition to showing the quantity that will be supplied at different prices, a supply curve is also a a. willingness-and-ability-to-pay curve. b. marginal benefit curve. c. minimum-supply price curve. d. maximum-supply price curve.
For any unit of output, the supply curve shows the minimum price for which a producer is willing to produce and sell that unit of output.
4. If a rise in the price of gasoline decreases the demand for large cars, a. gasoline and large cars are substitutes for consumers. b. gasoline and large cars are complements for consumers. c. gasoline is an inferior good. d. large cars are an inferior good
For complementary goods, a rise in the price of one decreases the demand for the other. 15. c This answer is the definition of a "normal good."
What ultimately happened to Rex?
He was shot and died.
Economics explores two big questions:
How do choices end up determining what, how, and for whom goods and services get produced? Do the choices that people make in the pursuit of their own self-interest unintentionally promote the broader social interest?
Economic decisions are made at every level in society. When we try to decide which production method to use among several alternatives, which of the following key economic questions are we trying to answer? How do we produce the products? What products do we produce? Who consumes the products?
How do we produce the products?
30. Is it possible for the price of a good to stay the same while the quantity increases? a. Yes, if both the demand and supply of the good increase by the same amount. b. Yes, if the demand increases by the same amount the supply decreases. c. Yes, if the supply increases and the demand does not change. d. No, it is not possible
If both the demand and supply increase by the same amount, the equilibrium price will not change and the equilibrium quantity will increase.
28. Suppose that the effect from people deciding they want to read fewer books is larger than the effect from the increase in the price of paper. In this case, the equilibrium quantity of paper books a. definitely increases. b. definitely does not change. c. definitely decreases. d. might increase, not change, or decrease
If the shift in the demand curve exceeds the shift in the supply curve, the equilibrium price decreases. This result is illustrated in Figure 3.10, where the equilibrium price decreases from $35 to $30.
10. The price of jet fuel rises, so the a. demand for airplane trips increases. b. demand for airplane trips decreases. c. supply of airplane trips increases. d. supply of airplane trips decreases
Jet fuel is a factor used to produce airplane trips, so a rise in the price of this resource decreases the supply of airplane trips.
Who rescues the main characters from their captivity
Julia Brooks
Refer to images A, B, & C. These represent what type of graphs? One variable graphs Two variable graphs Three variable graphs Four variable graphs
One variable graphs
Which game were 'Adam Smith' and his friends playing that ended in their arrest?
Poker
From what country is "Adam Smiths' " human host?
Romania
What country wanted the thesis formula
Russia
29. Which of the following definitely raises the equilibrium price? a. An increase in both demand and supply. b. A decrease in both demand and supply. c. An increase in demand combined with a decrease in supply. d. A decrease in demand combined with an increase in supply.
Separately, the increase in demand and decrease in supply both raise the equilibrium price, so the two of them occurring together definitely raise the price.
What are the four goals of any economic system? (Order does not matter but spelling does! Separate them with a comma.) Stability comma equity comma efficiency comma
Stability, equity, efficiency, growth
What kind of car does the male lead character drive?
Station wagon
20. How does an unusually cold winter affect the equilibrium price and equilibrium quantity of antifreeze? a. It raises the price and increases the quantity. b. It raises the price and decreases the quantity. c. It lowers the price and increases the quantity. d. It lowers the price and decreases the quantity.
The cold winter shifts the demand curve rightward, as consumers increase their demand for antifreeze; the supply curve does not shift. As a result, the equilibrium price rises and the quantity increases
27. The equilibrium price of a paper book a. definitely rises. b. definitely does not change. c. definitely falls. d. might rise, not change, or fall.
The equilibrium price of a paper work rises if the decrease in supply is larger than the decrease in demand, falls if the decrease in demand is larger than the decrease in supply, and does not change if the decrease in demand equals the decrease in supply.
Which of the graphs represents a relationship between two variables?
The graph on the left
3. The law of demand concludes that a rise in the price of a golf ball ____ the quantity demanded and ____. a. increases; shifts the demand curve for golf balls rightward b. decreases; shifts the demand curve for golf balls leftward c. decreases; creates a movement up along the demand curve for golf balls d. increases; creates a movement down along the demand curve for golf balls
The law of demand points out that a higher price decreases the quantity demanded and creates a movement up along the demand curve for golf balls.
8. A fall in the price of a good leads producers to decrease the quantity of the good supplied. This statement reflects a. the law of supply. b. the law of demand. c. a change in supply. d. the nature of an inferior good
The law of supply points out the positive relationship between the price of a good or service and the quantity supplied.
Every week, Kate trains at gymnastics for two hours, and her grade on each English test is 85 percent. Last week, after training for two hours, Kate considered training for another hour. She decided to train for another hour and cut her study time by one hour. But last week, her English grade fell to 80 percent. Given that Kate spent a third hour training, what can you conclude about the marginal benefit and marginal cost of the second hour of training?
The marginal benefit of the second hour of training exceeded its marginal cost.
26. Which of the following does NOT help achieve economic coordination? a. Firms b. Markets c. The production possibilities frontier d. None of the above because all these answers given help organize trade.
The production possibilities frontier shows the limits to production and does not help achieve economic coordination
2. The money price of a pizza is $12 per pizza and the money price of a taco is $2 per taco. The relative price of a pizza is a. $12 per pizza. b. $24 per pizza. c. 6 tacos per pizza. d. 1 6 pizza
The relative price of the pizza is its money price relative to the money price of a taco, which equals ($12 per pizza)/($2 per taco) or 6 tacos per pizza.
19. Pizza and hamburgers are substitutes for consumers. A rise in the price of pizza ____ the equilibrium price of a hamburger and ____ in the equilibrium quantity of hamburgers. a. raises; increases b. raises; decreases c. lowers; increases d. lowers; decreases
The rise in the price of a pizza increases the demand for hamburgers, which results in a rise in the price of a hamburger aand an increase in the quantity of hamburgers.
Which of the following statements is true about the value of the slope of this line? The value of the slope is the same between points a and b and points c and d. The value of the slope is greater between points a and b than between points c and d. The value of the slope is smaller between points a and b than between points c and d.
The value of the slope is the same between points a and b and points c and d.
5. A normal good is one a. with a downward sloping demand curve. b. for which demand increases when the price of a substitute rises. c. for which demand increases when income increases. d. None of the above
This answer is the definition of a "normal good."
6. The existence of the tradeoff along the PPF means that the PPF is a. bowed outward. b. linear. c. negatively sloped. d. positively sloped.
When production is on the PPF, the tradeoff is that if more of one good is produced, then some other good must be foregone. This result means that the PPF has a negative slope.
Which of the following is NOT part of the first big economic question? a. What goods and services are produced? b. How are goods and services produced? c. For whom are goods and services produced? d. Why are goods and services produced?
Why are goods and services produced?
the solid line can be expressed algebraically as . .
Y = a + bX
If you do, you won't be able to take your usual summer job that pays $8,000 for the summer, and you won't be able to live at home for free. The cost of transportation is $1,000, visas cost $300, and living expenses are $2,000. What is the opportunity cost of your plan to travel in Europe?
Your opportunity cost is what you would have purchased with $11,300 if you did not go to Europ
You plan to go to school this summer. If you do, you won't be able to take your usual summer job that pays $10,000 for the summer. The cost of tuition is $2,000 and textbooks cost $100. You live with your family, which covers your living expenses of $1,600. What is your opportunity cost of going to school this summer?
Your opportunity cost of going to summer school is the goods and services you could have purchased with $12,100
11. Moving along a bowed-out PPF between milk and cotton, as more milk is produced the marginal cost of an additional gallon of milk a. rises. b. does not change. c. falls. d. probably changes, but in an ambiguous direction
a Along a bowed-out PPF, as more of a good is produced, its marginal cost — the opportunity cost of producing another unit — rises.
12. An increase in the number of producers of gruel ____ the supply of gruel and shifts the supply curve of gruel ____. a. increases; rightward b. increases; leftward c. decreases; rightward d. decreases; leftward
a An increase in supply is reflected by a rightward shift of the supply curve.
16. An increase in the nation's capital stock will a. shift the PPF outward. b. lead to a movement along the PPF upward and leftward. c. lead to a movement along the PPF downward and rightward. d. move the nation from producing within the PPF to producing at a point closer to the PPF
a Increases in a nation's resources create economic growth and shift the nation's PPF outward.
2. If the United States can increase its production of automobiles without decreasing its production of any other good, the United States must have been producing at a point a. within its PPF. b. on its PPF. c. beyond its PPF. d. None of the above are correct because increasing the production of one good without decreasing the production of another good is impossible
a Only from points within the frontier can the production of a good increase without decreasing the production of another good.
13. If the marginal benefit from another computer exceeds the marginal cost of the computer, then to use resources efficiently, a. more resources should be used to produce computers. b. fewer resources should be used to produce computers. c. if the marginal benefit exceeds the marginal cost by as much as possible, the efficient amount of resources are being used to produce computers. d. none of the above is correct because marginal benefit and marginal cost have nothing to do with using resources efficiently.
a The benefit from the computer exceeds the cost of producing the computer, so society will gain if resources are allocated so that the computer is produced
25. A nation can consume at a point outside its PPF a. when it trades with other nations. b. when it is producing products as efficiently as possible. c. when there is no unemployment. d. at no time ever.
a When a nation specializes according to its comparative advantage and trades with another specialist nation, both can consume at levels beyond their PPFs.
The quantity demanded of
a good is the amount that consumers plan to buy during a given time period at a particular price
Income effect —
a higher relative price reduces the amount of goods people can buy. Usually this effect decreases the amount people buy of the good that rose in price.
prices of related goods —
a rise in the price of a substitute (a good that can be used in place of another good) increases demand shifts the demand curve rightward
Which of the following --- by itself --- causes a decrease in demand for a certain good?
a rise in the price of some item that is a complement of the good
The question, "Should desktop computers or laptop computers be produced?" is an example of which part of the first big economic question? a. The "what" part. b. The "how" part. c. The "where" part. d. The "for whom" part
a. The "what" part.
If a drug executive sets the price of a new drug at $1,000 a dose because that is the price that is best for the executive, the executive is definitely making a a. self-interested choice. b. choice in the social interest. c. globalization choice. d. factors of production choice.
a. self-interested choice.
A tradeoff is
an exchange—giving up one thing to get something else.
The benefit that arises from
an increase in an activity is called marginal benefit.
for a normal good,
an increase in income ncreases demand and shifts the demand curve rightward;
A change in demand and a shift of the demand curve, occur when
any factor that influences buying plans changes, other than the price of the good
Physical capital includes
any goods, equipment or tools used in the production process.
Production points inside and on the PPF a
are attainable
Only the additional benefit—the marginal benefit—and additional cost—the marginal cost—
are relevant because they are the benefits and costs that the person will enjoy and incur if the action is undertaken.
Points beyond the PPF
are unattainable.
9. In moving from combination b to a, the opportunity cost of producing more pounds of yak butter is a. 0.10 rutabaga per pound of yak butter. b. 0.50 rutabaga per pound of yak butter. c. 1.00 rutabaga per pound of yak butter. d. 2.00 rutabagas per pound of yak butter
b 100 rutabagas are foregone, so the opportunity cost is (100 rutabagas)/(200 pounds of yak butter), or 0.50 rutabagas per pound of yak butter. Note how the opportunity cost of a rutabaga is the inverse of the opportunity cost of a pound of yak butter, as calculat
1. Production points on the PPF itself are a. efficient but not attainable. b. efficient and attainable c. inefficient but not attainable. d. inefficient and attainable
b Only points on the frontier are both attainable and efficient
A rational choice a. must reflect the person's self interest. b. compares costs and benefits and selects the action that gives the greatest benefit over cost. c. comes close to eliminating scarcity. d. cannot reflect a tradeoff because the choice is rational.
b. compares costs and benefits and selects the action that gives the greatest benefit over cost.
The factor of production that earns the most income is ____. a. land b. labor c. capital d. entrepreneurship
b. labor
Choices made in the pursuit of self interest ____ the social interest. a. always further b. sometimes further c. never further d. are no comparable to choices made in the
b. sometimes further
A change in quantity demanded will
be a movement along an existing curve.
Production points on the PPF achieve production efficiency
because there the goods and services are produced at the lowest possible cost
3. In Figure 2.5, at point a what is the opportunity cost of producing one more Blu-ray disc? a. 14 DVDs b. 3 DVDs c. 2 DVDs d. There is no opportunity cost
c By producing 1 more Blu-ray disc, DVD production falls by 2 (from 14 to 12), so the opportunity cost of the Blu-ray disc is the ratio of 2 DVDs to the 1 Blu-ray, that is, 2 DVDs per Blu-ray disc.
14. Economic growth a. creates unemployment. b. has no opportunity cost. c. shifts the PPF outward. d. makes it more difficult for a nation to produce on its PPF
c Economic growth makes attainable previously unattainable production levels.
17. An opportunity costs of economic growth is a. capital accumulation. b. technological change. c. reduced current consumption. d. the gain in future consumption.
c If a nation devotes more resources to capital accumulation or technological development, which are the main sources of growth, fewer resources can be used to produce goods for current consumption.
8. In moving from combination a to b, the opportunity cost of producing more rutabagas is a. 6 pounds of yak butter per rutabaga. b. 4 pounds of yak butter per rutabaga. c. 2 pounds of yak butter per rutabaga. d. 0 pounds of yak butter per rutabaga.
c Moving from a to b gains 100 rutabagas and loses 200 pounds of yak butter, so the opportunity cost is (200 pounds of yak butter)/(100 rutabagas), or 2 pounds of yak butter per rutabaga
12. The most anyone is willing to pay for another purse is $30. Currently the price of a purse is $40, and the cost of producing another purse is $50. The marginal benefit of a purse is a. $50. b. $40. c. $30. d. An amount not given in the answers above
c The marginal benefit from a good is the maximum that a person is willing to pay for the good.
18. In general, the more resources that are devoted to technological research, the a. greater is current consumption. b. higher is the unemployment rate. c. faster the PPF shifts outward. d. more the PPF will bow outward
c The more resources used for technological research, the more rapid is economic growth.
To make a choice on the margin, an individual a. ignores any opportunity cost if the marginal benefit from the action is high enough. b. will choose to use his or her scarce resources only if there is a very large total benefit from so doing. c. compares the marginal cost of the choice to the marginal benefit. d. makes the choice with the smallest opportunity cost.
c. compares the marginal cost of the choice to the marginal benefit.
When the government chooses to use resources to build a dam, these resources are no longer available to build a highway. This fact best illustrates the concept of a. a market. b. macroeconomics. c. opportunity cost. d. marginal benefit.
c. opportunity cost.
From 9 to 10 A.M., Fred can sleep in, go to his economics lecture, or play tennis. Suppose that Fred decides to go to the lecture but thinks that, if he hadn't, he would otherwise have slept in. The opportunity cost of attending the lecture is a. sleeping in and playing tennis. b. playing tennis. c. sleeping in. d. one hour of time.
c. sleeping in.
The benefit of a good is measured by ____ and its cost is measured by ____. a. the dollar value of the good; the dollar cost of the good b. the tradeoff necessary to purchase the good; the incentives necessary to motivate the person to buy the good c. what a person is willing to give; what a person must give up d. None of the above answers are correct because benefit is impossible to measure.
c. what a person is willing to give; what a person must give up
What kind of economic system relies on private ownership of resources, direct incentives and decisions made via markets and the price mechanism?
capitalism
The line shift from the solid line to the dashed line is caused by a
change in the value of a, which is the y-intercept.
Microeconomics is the study of
choices that individuals and businesses make, the way these choices interact in markets, and the influence of governments.
We categorize spring break vacations and sunscreen as
complements
Pizza and sausage are _______. Wheat and corn are _______.
complements; substitutes
27. In markets, people's decisions are coordinated by a. specialization according to absolute advantage. b. changes in property rights. c. learning-by-doing. d. adjustments in prices
d Changes in prices create incentives for people to change their actions.
22. Christopher has a. an absolute advantage only in planting. b. an absolute advantage only in plowing. c. a comparative advantage only in planting. d. a comparative advantage only in plowing.
d Christopher's opportunity cost of plowing an acre is planting1 4 an acre, while Brandon's opportunity cost is planting1 2 an acre.
7. The bowed-outward shape of a PPF a. is due to capital accumulation. b. reflects the unequal application of technology in production. c. illustrates the fact that no opportunity cost is incurred for increasing the production of the good measured on the horizontal axis but it is incurred to increase production of the good measured along the vertical axis. d. is due to the existence of increasing opportunity cost.
d Increasing opportunity cost means that, as more of a good is produced, its opportunity cost increases. As a result, the PPF bows outward.
19. In order to achieve the maximum gains from trade, people should specialize according to a. property rights. b. PPF. c. absolute advantage. d. comparative advantage.
d Specializing according to comparative advantage reduces the opportunity cost of producing goods and services
24. A nation can produce at a point outside its PPF a. when it trades with other nations. b. when it is producing products as efficiently as possible. c. when there is no unemployment. d. at no time ever.
d The PPF shows the maximum amounts that can be produced
Which of the following is a positive statement? a. The government must lower the price of a pizza so that more students can afford to buy it. b. The best level of taxation is zero percent because then people get to keep everything they earn. c. My economics class should last for two terms because it is my favorite class. d. An increase in college tuition will lead fewer students to apply to college.
d. An increase in college tuition will lead fewer students to apply to college.
People have different amounts of income. This observation is most directly related to which part of the first big economic question? a. The "what" part. b. The "how" part. c. The "why" part. d. The "for whom" part
d. The "for whom" part
Economic models a. include only normative statements. b. are tested using only statistical investigations. c. must include all known facts about a situation. d. include only details considered essential.
d. include only details considered essential.
Making a choice at the margin means ________
deciding to do a little bit more or a little bit less of an activity
Nonlinear relationships will have a
different slope at every point on the line.
Marginal analysis deals with
economic decision-making that is always approached from a marginal cost versus marginal benefit perspective.
Human capital refers to
education, training or skill sets that a worker might possess.
Understanding economics can help policymakers devise strategies to do all of the following except: eliminate climate change increase our standard of living reduce poverty levels encourage business formation
eliminate climate change
One of the first steps in deciding whether to complete your education is to:
evaluate the marginal cost and marginal benefit of that decision.
1. In Figure 2.4 production point a is NOT attainable.
f
12. Daphne definitely has a comparative advantage in producing sweaters if she can produce more than can Lisa.
f
13. A rise in the price of a good decreases the quantity demanded, so there can never be a situation with both the good's equilibrium price rising and its equilibrium quantity increasing.
f
14. If the United States has an absolute advantage in growing corn and making computers, it must have a comparative advantage in growing corn.
f
15. If both the demand and supply curves shift rightward, the equilibrium price definitely rises.
f
16. Buyers and sellers must meet face-to-face in a market.
f
17. Price adjustments coordinate decisions in goods markets, but not in factor markets
f
2. A good's relative price can fall even though its money price rises
f
3. From a point on the PPF, rearranging production and producing more of all goods is possible.
f
3. The law of demand states that, if nothing else changes, as the price of a good rises, the quantity demanded decreases
f
4. A decrease in income decreases the demand for all goods and services
f
5. "An increase in demand" means a movement down and rightward along a demand curve.
f
5. Production efficiency requires producing at a point on the PPF.
f
6. New technology for manufacturing computer chips shifts the demand curve for computer chips.
f
7. A supply curve shows the maximum price required in order to have the last unit of output produced.
f
7. The marginal cost of the 20th ton of cement equals the cost of producing all 20 tons of cement.
f
8. As people consume more of a good, its marginal benefit decreases.
f
9. If the price of orange juice rises, the supply curve of orange juice shifts rightward
f
Consumers' actions indicate that airline tickets and hotel rooms are complements. Suppose that for some reason the price that airline companies pay to buy airplane fuel falls. As a result --- assuming all other relevant factors remain unchanged --- the price of airline tickets _____________, and the price of hotel rooms ______________
falls; rises
Almost always, goods and services can be produced many different ways, so the "how" question must be answered separately from the "what" question
false
Although a positive statement is, indeed, about what is, a normative statement tells what policies should be followed.
false
People make self-interested choices, that is, they make the choices they are best for them
false
Scarcity exists because people's wants exceed their ability to meet those wants, and this fact of life is true for any person, rich or poor
false
The "how" part of the first big question asks, "How are goods and services produced?"
false
As more people buy gym memberships, the demand for running shoes will increase and the price of a pair of running shoes will decrease. The fall in the price of a pair of running shoes will decrease the supply of running shoes." Is this statement true or false? Why?
false; an increase in demand for running shoes does not decrease the price of a pair of running shoes and a decrease in the price of a pair of running shoes does not decrease the supply of running shoes
Hire factors of production Organize factors of production to produce and sell goods and services
firms
Four issues in today's world
globalization, information age monoplies, climate change, pandemic
Production points on the PPF achieve production efficiency because there the
goods and services are produced at the lowest possible cost.
In the previous series of graphs, which graph shows a negative and increasing relationship between X and Y? Graph C Graph A Graph B Graph D
graph c
In the previous graph, the value of the slope is: greater between points g and h than between points i and j greater between points i and j than between points g and h the same between any two points on the curve indeterminate since the relationship is not linear
greater between points g and h than between points i and j
The opportunity cost of something is t
he highestvalued alternative that must be given up to get it.
Macroeconomics can be used to understand all of the topics listed below, except: how a consumer decides between the purchase of two different cars how the national economy works what causes economic booms and recessions national unemployment trends
how a consumer decides between the purchase of two different cars
In the following list, which is the correct combination of factor of production and income? Question content area bottom Part 1 _______ earns _______
howard schultz, head of starbucks. profit
preferences —
if people like a good more, its demand increases and the demand curve shifts rightward.
expected future prices
if the price of a good is expected to rise in the future, the opportunity cost of rent demand increases and the demand curve shifts rightward
Scarcity - be it in time, talent, or money - forces all of us to make choices. But according to economists, those choices can be influenced.
incentives
for an inferior good an
increase in income decreases demand and shifts the demand curve leftward
In the previous graph, the relationship between output produced and cost of production can best be described as the cost of production: increases at a decreasing rate up to point a, then it increases at an increasing rate decreases up until point a, then it increases increases rapidly up until point a, then it increases slowly equals zero if there is no output produced
increases at a decreasing rate up to point a, then it increases at an increasing rate
The success of Guardians of the Galaxy _______ the opportunity cost of hiring Chris Pratt. Movie producers now have _______ incentive to hire Chris Prat
increases; more
Microeconomics is the study of
individual and firm choices, industry structure, taxation, and the distribution of income among other topics.
capital earns ;
interest
economics: is concerned with how people respond to incentives is a natural science is unconcerned with value judgments deals with assumptions and is therefore unrealistic
is concerned with how people respond to incentives
The basic assumption about human behavior made by economists
is that people act to make themselves as well off as possible.
One of the basic assumptions of economics ``
is that people are rational
The production possibilities frontier (PPF )
is the boundary between those combinations of goods and services that can be produced and those that cannot.
he price of food increased during the past year. Explain why the law of demand applies to food just as it does to other goods and services. Explain how the substitution effect influences food purchases when the price of food rises and other things remain the same. Explain how the income effect influences food purchases and provide some examples of the income effect.
its relative price rises; purchase more of a different food that is less expensive
The resources provided by nature and used to produce goods and services are also known as: land
land
A change in the price of the good or service
leads to a change in the quantity demanded and a movement along the demand curve
A competitive market is a
market that has many buyers and sellers, so no single buyer or seller can influence the price
Facilitate trade Enable buyers/sellers to get info and do business with each other
markets
14. If both the demand and supply curves shift rightward, the equilibrium quantity definitely increases.
t
in the demand for smartphones together with an increase in the supply of smartphones ______ create a surplus or a shortage of smartphones at the original price
might; might fall, rise, or not change
Anything accepted as a means of payment Makes trading efficient
money
Factors of production include all of the following EXCEPT
money
The price of a good rises and other influences stay the same.
movemnt up
If the president announced that "we should do something to stimulate economic growth" this is an example of a __________. normative statement positive statement democratic statement
normative statement
Goods and services are the
objects that people value and produce to satisfy human wants.
For all linear relationships, you will find the slope
of the line does not change. Therefore, regardless of which points selected to calculate the slope, it will not change. This same rule does not hold for nonlinear relationships
The equilibrium price is the best deal available for both buyers and sellers because buyers _______ and sellers _______.
pay the highest price they are willing to pay; receive the lowest price at which they are willing to sel
Economists assume that
people make rational choices, which means that they compare the costs and benefits and then make the choice that achieves the greatest benefit over cost for the person making the choice
Macroeconomics is the study of the
performance of the national economy and the global econom
The stock of computers, factory buildings and machine tools used to produce goods is known as: physical capital financial capital human capital technology
physical capital
The benefit of something is the
pleasure that it brings and is determined by the person's preference
Macroeconomics is concerned with all of the following except:
political party affiliation
Changes in what six things cause a shift of the demand curve?
prefrences, related goofs, fuutre prices, income, future income, population
A change in _________ (one word) causes movement along a demand curve and a change in quantity _______ demanded (two words).
price; quanity demand
Jobs alone are not the measure of economic well-being. If this were the case, then we could increase the well-being of an economy by giving highway workers spoons rather than backhoes and garment workers needles and thread instead of computerized sewing machines. What does provide the source of high living standards?
production of goofs and services people value
and entrepreneurship earns .
profit
Govern ownership & use of things people value Provide incentive to specialize/produce
property rights
Macroeconomics is concerned with the broader perspective
related to the overall economy. Things like economic booms and recessions, unemployment levels and monetary policy are all big picture macroeconomic topics
Land earns ;
rent
The fact that wants cannot be fully satisfied with available resources reflects the definition of a. incentives. b. scarcity. c. the output-inflation tradeoff. d. for whom to produce
scarcity
The principle of opportunity cost evolves from the concept of: scarcity wealth poverty consumer spending
scarcity
economics is the study of choice under conditions of:
scarcity
The price of a good is expected to rise in the future.
shft left
The price of a complement in production falls.
shift left
Advances in technology lower the cost of producing existing products.
shift right
The number of suppliers of a good increases..
shift right
The weather that year is particularly perfect for agriculture
shift right
A demand curve
shows the relationship between the quantity demanded of a good and its price, everything else remaining the same
13. If two individuals have different opportunity costs of producing goods, both can gain from specialization and trade.
t
Choose the correct statements about competitive markets. 1. Competitive markets exist for goods, services, money, factors of production, and inputs. 2. A competitive market has many sellers. 3. In a competitive market, prices are eventually driven down to zero. 4. A competitive market is a market for goods but not for services.
statements 1 and 2
Positive statements —
statements about what is.
Normative statements —
statements about what ought to be. These are matters of opinion and are not testable
Positive economic statements are
statements of fact that imply no value judgment.
financial capital refers to
stocks, bonds, money and other financial assets.
In what part of the body was 'Adam Smith' shot?
stomch
Pasta and pizza are _______. A video game and a laptop are _______.
substitutes; complements
Coal and oil are _______. A skateboard and roller blades are _______.
substitutes; substitutes
uppose that there is a substantial fall in the price of apples. Apples are (obviously) the major ingredient in apple juice. As a result of this event, the market for apple juice changes in this way: ________________.
supply increases and price falls
1. A good with a high relative price must have a low opportunity cost.
t
10. Economic growth is illustrated by outward shifts in the PPF..
t
10. If a market is at its equilibrium price, unless something changes, the price will not change.
t
11. If there is a surplus of a good, its price falls.
t
11. Increasing a nation's economic growth rate has an opportunity cost.
t
12. If the expected future price of a good rises, its current price rises
t
The money price of a good is t
the number of dollars that must be given up it
The income effect influences food purchases because when the price of a certain food rises, other things remaining the same, _______. Consumers _______
the price rises relative to income; cannot afford to buy all the things they previously bought, so they normally buy less of the food that has experienced the price rise
The relative price of a jar of pasta sauce is an opportunity cost because _______.
the relative price tells us how many boxes of ramen noodles we must give up to get
Capital:
the tools, instruments, machines, buildings, and other constructions that businesses use to produce goods and services. The productive resource "capital" differs from financial capital, which includes money, stocks, and bonds.
Note that a flatter curve, or portion of the curve,
translates to a lower slope
A role of economics is to discover when choices made in the self interest advance the social interest and when they conflict with the social interest
true
Benefit is measured by how much the person is willing to give up to get something; cost is measured by how much the person must give up to get something.
true
Natural experiments, along with statistical investigations and economic experiments, are used to test economic models.
true
The definition of making a choice at the margin means that choice revolves around a small change
true
The opportunity cost is the burrito that was foregone in order to buy the pizza.
true
Macroeconomics studies the entire economy; microeconomics studies separate parts of the economy
ttrue
Goods and services are produced
using productive resources called
The slope of a straight line equals the change in the value on the __________ axis __________ by the change in the value of the other axis measured between any two points on the line.
vertical, divided
All economic questions arise because we have an abundance of resources. want more than we can get. want more than we need. have limited wants that need to be satisfied.
want more than we can get.
The what, how, and for whom questions in economics are questions about _______.
what goods and services do we produce, how do we use the factors of production to produce these goods, and who consumes the goods and services that are produced
Production points inside the PPF are inefficient,
with misallocated or unused resources
The vertical axis on a graph is also known as the:
y-axis
The slope at a line tangential to the maximum or minimum of a nonlinear curve will always be equal to: zero one a negative number a positive number
zero
Substitution effect
— a higher relative price raises the opportunity cost of buying a good, so people buy less of it.
population
— an increase in population increases demand and shifts the demand curve rightward.
expected future income and credit
— when expected future income increases or when credit is easy to obtain, current demand might increase.
In the above graph, which of the following formulas is the correct expression for the slope of the line between points a and b? (Y2 - Y1) / (X2 - X1) (Y2 - X2) / (Y1 - X1) (X2 - X1) / (Y2 - Y1) (X2 - Y1) / (Y2 - X1)
(Y2 - Y1) / (X2 - X1)
What is the value of the slope of this line?
-1 / 5
the night before a midterm exam, you decide to go to the movies instead of studying for the exam. You score 60 percent on your exam. If you had studied the night before, you'd have scored 70 percent. What was the opportunity cost of your evening at the movies?
10 percent off your grade.
Your employer has asked you to start working overtime and has offered to pay $18 per hour for every hour you work beyond forty hours a week. The wage rate for each of the first forty hours will continue to be the usual $15 per hour. In terms of dollars, what is the marginal benefit of working each hour of overtime?
18.00
The money price of a box of ramen noodles is $0.50 and the money price of a jar of pasta sauce is $1.00 .The opportunity cost of is _______.
2.00 boxes of ramen noodles, which is the relative price of
In the previous graph, the solid line can be expressed algebraically as Y = a + bX. What causes the line to shift from the solid line to the dashed line? A change in the value of a A change in the value of b A change in the value of X A change in the value of bX
A change in the value of a
Refer to the previous graph. What is the best descriptor of the relationship between disposable income and consumption spending?
A positive relationship
A smartphone and a text message are _______. A text message and an email are _______.
A. complements; substitutes
the quantity demanded of a good or service is _______.
A.not necessarily the same as the quantity actually bought
In what type of economy does the government decide how most economic resources will be allocated? Centrally planned economy Market economy Mixed economy
Centrally planned economy
According to the economic way of thinking, people: Compare costs and benefits and make a choice to achieve the greatest benefit over the cost for the person making the choice. Do not ever take into account the interests or well-being of others. Can never consider each of the most relevant alternatives. Use rules of thumb to make choices
Compare costs and benefits and make a choice to achieve the greatest benefit over the cost for the person making the choice.
A supply curve _______.
D.tells us the lowest price at which someone is willing to sell
Keep in mind that a change in price or quantity alone is simply a movement up or down an existing curve. In this case, a third variable changed that reduced the quantity of pizza demanded at every price level.
In this case, a third variable changed that reduced the quantity of pizza demanded at every price leve
__________ is the study of how households and businesses make choices, how they interact in markets, and how government influences their choices.
Microeconomics
Which of the following countries has an economy where most of the resource allocation is determined by a central planning authority?
North Korea
Susan a math student, buys four cups of coffee a day, which costs her $10.00. She decides to buy one more cup each day and her expenditure on coffee increases to $12.50. What is Susan's marginal cost of a cup of coffee? Susan's marginal cost of a cup of coffee is _______.
Susan's marginal cost of a cup of coffee is 2.50
Which of the following is not a possible opportunity cost of attending college? The cost of housing Backpacking across Europe instead of attending college Starting a business instead of attending college Wages you could have made instead of attending class and studying
The cost of housing
In the above graph, what move describes the impact of an increase in income on consumption? The move from b to c The move from c to d The move from d to c The move from c to b
The move from b to c
Which of these is a macroeconomic study? The study of how fast prices in general are rising. Unselected The study of how households and businesses make choices. Unselected The study of how households and businesses interact in the market.
The study of how fast prices in general are rising.
Assume there are three variables involved in the previous graph: (1) price, (2) quantity, and (3) a third variable. Which of these variables cause a move from Point C to Point D in the graph? The third variable Price Quantity Unselected Both price and quantity
The third variable
Macroeconomics focuses on which of the following topics? Unemployment, inflation, growth, and trade Individual firms, taxation, and industry structure Households, industries, and the distribution of income
Unemployment, inflation, growth, and trade
In what type of economy does the government decide how economic resources will be allocated? a centrally planned economy a market economy a mixed economy
a centrally planned economy
Most economies are mixed with some elements of both a centrally planned economy and a market economy.
a centrally planned economy and a market economy.
Conversely, a steeper curve represents a higher slope.
a higher slope.
Graphs are often used in economics because they:
can simplify complex topics
Think of examples of goods whose relative price has risen or fallen by a large amount. In 2009, the price of a gallon of gas was $2.59. In 2019, the price of a gallon of gas was $2.32 In 2009, the price of a dozen eggs was $1.63. In 2019, the price of a dozen eggs was $1.40. Between 2009 and 2019, the relative price of a gallon of gas with respect to a dozen eggs _______ and the relative price of a dozen eggs with respect to a gallon of gas _______
rose; fell
A decrease in the price of a raw material of production.
shift right
Production will require
some input from all types of capital and technology refers to the type of production process used by the firm.
