ECON Test 1

According to the Low-Hanging-Fruit Principle, in expanding production of a good, you should first employ those resources

with the lowest opportunity cost

A positively sloped production possibilities curve

would violate the principle of resource scarcity

Having a comparative advantage in a particular task means that:

you give up less to accomplish that task than do others.

In free markets which allow a high level of unethical corruption:

Suppliers may be forced to be corrupt or to leave the market.

Which of the following is NOT true of a market in equilibrium?

Supply equals demand.

Which of the following statements is TRUE?

The U.S. government defines and enforces business ethics in order to protect the economy.

If a price rise for good A causes increased demand for good B, then:

A and B are substitutes

The table below shows that a worker in Australia can produce 20 units of food or 10 units of electronics in a day, and a worker in Korea can produce 5 units of food or 15 units of electronics in a day. Which of the following statements about comparative advantage is true? Food Electronics Australia 20 10 Korea 5 15

Australia has a comparative advantage in the production of food while Korea has a comparative advantage in the production of electronics

If two countries specialize and trade, the country that benefits will be

Both countries will benefit

Which of the following statements is always true?

Comparative advantage does not require absolute advantage.

One observes that the initial equilibrium price of T-shirts, Pe, increases to Pe1, and the initial equilibrium quantity, Qe, falls to Qe1. Which of the following best fits the observed data?

Demand constant and a decrease in supply

If Leslie can produce two pairs of pants in an hour while Eva can make one pair an hour, then it must be the case that:

Leslie has an absolute advantage in producing pants.

During times of high unemployment, colleges often observe an increase in enrollment even if tuition remains unchanged. Why?

The opportunity cost of attending college is lower because students are less likely to have good full-time jobs.

Which of the following is not a determinant of demand for gasoline?

The price of gasoline

Austin gives tax credits to homeowners who install solar panels. This is an example of:

Using the incentive principle to encourage homeowners to switch to solar energy

If, when the price of good X rises, the demand for good Y decreases, one can conclude that

X and Y are complements

A free market lacking clear ethical rules, adequate oversight and meaningful punishments for rule breakers might suffer: A. decrease in market demand. B. decrease in market supply. C. decrease in equilibrium price. D. total market collapse

all of the above.

Suppose that both the equilibrium price and quantity of mustard rise. The most consistent explanation for these observations is

an increase in demand for mustard with no change in supply.

If a country experiences increasing opportunity costs, its production possibilities curve will

bow outward

In a free market, if the price of a good is below the equilibrium price, then

consumers, wanting to ensure that they acquire the good, will bid the price higher

If the wages paid to computer production workers increases, one would expect to see a(n)

decrease in the supply of computers

Increases in the prices firms pay for inputs cause

decreases in supply

A graph with price on the vertical axis and quantity on the horizontal axis depicting an inverse relationship between price and quantity is a

demand curve.

If everyone had the same opportunity cost of producing a good, then

everyone would have the same comparative advantage

In general, individuals should specialize in producing goods _________ other individuals.

for which they have a lower opportunity cost compared to

Application of the Principle of Comparative Advantage leads to:

greater specialization of labor and other factors of production

Generally speaking, demand for a good will increase

if the price of a complement decreases

At the beginning of the school year, San Marcos has a large increase in its student population, causing a(n)

increase in the demand for apartments

As the price of iPods increases, firms that produce iPods will

increase the quantity of iPods supplied

The benefits to specialization are enhanced when the two trading partners have

large comparative advantages in different goods.

In general, rational decision-making requires one to choose the actions that yield the ___________.

largest economic surplus

Last year interest rates fell. The field of economics that would be most concerned with this is:

macroeconomics

The buyer's reservation price of a particular good or service is the

maximum amount one would be willing to pay for it

Countries that trade on the basis of comparative advantage have __________ than countries that do not

more goods and services available to them

A market economy without any ethics would have

no value

An editorial argues that students should only be allowed to attend school if the marginal cost of educating that student is less than the marginal benefit of that student's education. This reasoning is an application of:

normative economics

If Superman spends his only $10 on his favorite food, hamburgers, rather than his second favorite food, beans, the beans are the _____________ of the hamburgers

opportunity cost

A "smart for one, dumb for all" situation may occur when

people other than buyers or sellers of a product bear some of the costs of it.

When a government reduces the ease with which international trade can occur (i.e. makes trade harder), it is

reducing the total amount of output available to domestic consumers

Based on their comparative advantages, Matt should specialize in _______ while Amy should specialize in _______

rotating tires, oil changes

A graph with price on the vertical axis and quantity on the horizontal axis depicting a direct relationship between price and quantity is a

supply curve

The core principle that is illustrated by the production possibilities curve is:

the Scarcity Principle

The production possibilities curve is:

the boundary that divides all production combinations into attainable ones and unattainable ones

An increase in the price of Shell gasoline, a substitute for Exxon gasoline, will cause

the demand for Exxon gasoline to increase.

The economic surplus of a particular action is

the difference between the benefit and the cost of the action

Which of the following is the basis for an argument against free trade?

the distribution of the benefits from trade

The United States was unable to maintain its dominance in the production of televisions because:

the jobs were outsourced to countries with workers who had lower opportunity costs than American workers

The production possibilities curve shows:

the maximum production of one good for every possible production level of the other good