Econ test 1

Refer to Table 4-7. If these are the only four sellers in the market for ice cream, then when the price decreases from $10 to $8, the market quantity supplied decreases by

10 gallons

Refer to Figure 3-17. Suppose Maxine decides to increase her production of tarts by 5. What is the opportunity cost of this decision?

10 pies

Refer to Figure 4-4. Suppose Yasmine and Mercedes are the only two consumers in the market. When the market price falls from $12 to $6, the quantity demanded increases by

15 units

Refer to Figure 1-7. A decrease in the price of the product would be represented by a movement from

B to A.

Refer to Figure 3-18. Bintu has an absolute advantage in the production of

cups and Juba has an absolute advantage in the production of bowls

According to Adam Smith, the success of decentralized market economies is primarily due to

individuals' pursuit of self-interest.

Refer to Figure 1-3. A movement from Y to Z

is the result of advancements in plastic production technology.

Trade makes costs

lower and raises the variety of goods and services available

In economics, the term ________ means ʺadditionalʺ or ʺextraʺ

marginal

Which markets are represented in the simple circular-flow diagram?

markets for goods and services and markets for factors of production

Refer to Table 3-31. Relative to the farmer, the rancher has an absolute advantage in the production of

meat, but not in the production of potatoes.

Refer to Figure 6-24. The per-unit burden of the tax on buyers of the good is

$6

Refer to Table 3-24. The opportunity cost of 1 unit of bread for Spain is

2 units of cheese

Refer to Figure 1-8. At a price of $10, how many units will be sold?

200

Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves. If she now produces 60 silk roses and 80 silk leaves, what is the opportunity cost of producing an additional 10 silk roses?

25 silk leaves

What is Haleyʹs opportunity cost of making a necklace?

3/4 of a bracelet

Refer to Figure 1-1. What is the opportunity cost of one pound of vegetables?

3/4 pound of meat

What is Haleyʹs opportunity cost of making a bracelet?

4/3 necklaces

Lorenzo's opportunity cost of producing 1 bushel of rye is ............... bushels of corn

5

Refer to Figure 1-4. If the economy is currently producing at point W, what is the opportunity cost of moving to point X?

5 million tons of paper

Refer to Table 4-9. Which combination would produce an increase in equilibrium quantity and an indeterminate change in equilibrium price?

A

Refer to Figure 1-6. A decrease in the price of the product would be represented by a movement from

A to B.

In the simple circular-flow diagram

A. households own the factors of production. B. land, labor, and capital flow from households to firms. C. households buy all the goods and services that firms produce. D. All of the above are correct.

What is the difference between an ʺincrease in demandʺ and an ʺincrease in quantity demandedʺ?

An ʺincrease in demandʺ is represented by a rightward shift of the demand curve while an ʺincrease in quantity demandedʺ is represented by a movement along a given demand curve.

Refer to Figure 1-6. An increase in population would be represented by a movement from

D1 to D2.

Refer to Figure 1-6. A decrease in taste or preference would be represented by a movement from

D2 to D1.

If one producer has the absolute advantage in the production of all goods, then that same producer will have the comparative advantage in the production of all goods as well.

False

In the markets for the factors of production in the circular-flow diagram, households are buyers and firms are sellers.

False

Refer to Table 1-1. Which of the following statements is true?

Haley has an absolute advantage in making bracelets and Serena in making necklaces

Refer to Figure 1-5. One segment of the circular flow diagram in the figure shows the flow of labor services from market K to economic agents J. What is market K and who are economic agents J?

K = factor markets; J = firms

Refer to Figure 2-7. Efficient production is represented by which point(s)?

L, M

Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for chocolate chip cookies of an improved high-speed mixer that allows bakers to produce cookies in less time?

Point A to Point B

Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for doctor's visits of an increase in the number of medical students graduating from medical school and successfully completing their residency programs?

Point A to Point B

In the market for oranges what will be the effect of a decrease in the supply due to bad weather on the equilibrium price and quantity of oranges?

Price will Increase but Quantity will decrease

Refer to Figure 1-7. An increase in the number of firms in the market would be represented by a movement from

S1 to S2.

Tom Searchinger, a senior attorney at the Environmental Defense Fund, observed that generous farm subsidies have encouraged farmers to produce more corn and more wheat. How does this affect the market for fertilizer?

The demand for fertilizer increases.

Adam Smith wrote that a person should never attempt to make at home what it will cost him more to make than to buy

True

At the equilibrium price, the quantity that buyers want to buy exactly equals the quantity that sellers want to sell.

True

Chips and salsa are complements. If the price of salsa decreases, the demand for chips will increase.

True

Economic efficiency is a market outcome in which the marginal benefit of consumers is equal to the marginal cost of production and the sum of consumer surplus and producer surplus is maximized.

True

Optimal decisions are made at the point where marginal benefit equals the marginal cost.

True

Scarcity refers to a situation in which unlimited wants exceed the limited resources available to fulfill those wants.

True

Refer to Figure 2-6. The opportunity cost of this economy moving from point K to point H is

Zero

Refer to Figure 4-7. The shift from Db to Da is called

a decrease in demand.

If the price of grapefruit rises, the substitution effect due to the price change will cause

a decrease in the quantity demanded of grapefruit

Rational people make decisions "at the margin" by comparing

additional costs and benefits

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is

an inferior good.

Economists assume that individuals

are rational and respond to incentives.

Refer to Figure 6-16. In this market, a minimum wage of $7.25 is

binding and creates unemployment.

Refer to Figure 6-4. A government-imposed price of $12 in this market is an example of a

binding price floor that creates a surplus

Refer to Figure 6-15. Suppose a price ceiling of $2 is imposed on this market. As a result

buyers' total expenditure on the good decreases by $75

If the government levies a $500 tax per car on sellers of cars, then the price received by sellers of cars would

decrease by less than $500

Refer to Figure 4-10. The movement from Point A to Point B represents a(n)

decrease in the quantity supplied

When the government redistributes income from the wealthy to the poor,

equality is improved, but efficiency is not.

Productive efficiency is achieved when

firms produce goods and services at the lowest cost

The production possibilities frontier model shows that

if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

The highest valued alternative that must be given up to engage in an activity is the definition of

opportunity cost.

Refer to Figure 2-10, Panel (a). Production is

possible at points V, W, Y, and Z, but efficient only at points V, W, and Z

Positive statements are not

prescriptive.

By drawing a demand curve with ________ on the vertical axis and ________ on the horizontal axis, economists assume that the most important determinant of the demand for a good is the ________ of the good.

price; quantity; price

What is the most important factor that explains differences in living standards across countries?

productivity

Refer to Figure 4-21. At a price of $16, there is a

surplus of 3 units.

Marginal cost is

the additional cost to a firm of producing one more unit of a good or service.

The income effect of a price change refers to the impact of a change in

the quantity demanded when income changes.

Refer to Figure 1-9. The figure above represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $3

the quantity supplied is less than the economically efficient quantity

Suppose when the price of laptops fall, college students buy more laptops. This implies that

there is a negative relationship between laptop prices and quantities purchased by college students.

Refer to Figure 1-8. If the price is $10,

there would be a shortage of 600 units.

The idea that because of scarcity, producing more of one good or service means producing less of another good or service refers to the economic concept of

trade-off.

Factors of production are

used to produce goods and services