Economic Analysis Exam 1

13. An increase in the price of hamburger would probably result in _____ in the demand for hamburger buns. A) a decrease B) an increase C) no change D) random fluctuations

A) a decrease

14. Pizza is a normal good. If students' incomes at your college increase, the effect on pizza will be: A) an increase in the demand. B) an increase in the quantity demanded. C) a decrease in the demand. D) no change in the demand.

A) an increase in the demand.

Use the following to answer question 17: Figure: Demand and Supply of Gasoline 17. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. A factor that may have changed supply from S1 to S2 is: A) better technology in the production of gasoline. B) increased demand. C) lower labor productivity in gasoline production. D) increased prices of substitutes in production for gasoline.

A) better technology in the production of gasoline.

2. A resource is anything that: A) can be used in production. B) you pay for. C) is in abundant supply. D) can be consumed.

A) can be used in production.

20. Good X and good Y are related. If the price of good X increases and the demand for good Y shifts left, these goods are: A) complements. B) substitutes. C) inferior. D) normal.

A) complements.

10. A negative relationship between quantity demanded and price is called the law of: A) demand. B) increasing returns. C) market clearing. D) supply.

A) demand.

1. Scarcity in economics means that: A) we do not have sufficient resources to produce all of the goods and services we want. B) the wants of people are limited. C) there must be poor people in rich countries. D) shortages exist in nearly all markets.

A) we do not have sufficient resources to produce all of the goods and services we want.

Use the following to answer question 6: 6. (Table: Production Possibilities Schedule I) Look at the table Production Possibilities Schedule I. If the economy produces 10 units of capital goods per period, it also can produce at most _____ units of consumer goods per period. A) 5 B) 4 C) 3 D) 2

B) 4

Use the following to answer question 7: 7. (Table: Production Possibilities Schedule II) Look at the 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

B) 6

9. If they spend all night writing computer programs, Laurence can write 10 programs, and Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 pairs, and Carrie Anne can make 4. Given this information and supposing Laurence and Carrie Anne have constant opportunity costs, we know that _____ has an absolute advantage in _____. A) Laurence; programs but not in sunglasses. B) Laurence; both programs and sunglasses. C) Carrie Anne; programs but not in sunglasses. D) Carrie Anne; both programs and sunglasses.

B) Laurence; both programs and sunglasses.

21. A beneficial technological change is developed in the production of cranberries. At the same time, scientists discover that cranberries have significant health benefits. This will result in: A) an increase in both the equilibrium price and quantity in the cranberry market. B) an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of cranberries. C) a decrease in both the equilibrium price and quantity in the cranberry market. D) a decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of cranberries.

B) an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of cranberries.

11. If goods A and Z are complements, an increase in the price of good Z will: A) increase the demand for good A. B) decrease the demand for good A. C) decrease the demand for good Z. D) decrease the demand for both good A and good Z.

B) decrease the demand for good A

19. When a market is in equilibrium, the quantity: A) demanded is equal to zero. B) demanded is equal to quantity supplied. C) demanded is greater than quantity supplied. D) supplied is zero.

B) demanded is equal to quantity supplied.

Use the following to answer question 18: 18. (Table: Competitive Market for Good Z) Look at the table Competitive Market for Good Z. If the price of good Z is $15, there will be: A) excess demand of 25 units. B) excess supply of 25 units. C) a shortage of 20 units. D) a surplus of 45 units.

B) excess supply of 25 units.

23. A statement that the minimum wage should be increased is a: A) positive statement. B) normative statement. C) ceteris paribus assumption. D) scientific conclusion based on marginal analysis.

B) normative statement.

8. A production possibility frontier illustrates the _____ facing an economy that _____ only two goods. A) prices; sells B) trade-offs; produces C) trade-offs; sells D) shortages; produces

B) trade-offs; produces

4. Grades are low in class and your professor makes available a 10-point extra credit assignment. Most of the students turn in the assignment. This statement best represents this economic concept: A) The real cost of something is what you must give up to get it. B) "How much" is a decision at the margin. C) People usually exploit opportunities to make themselves better off. D) There are gains from trade.

C) People usually exploit opportunities to make themselves better off.

16. A leftward shift of a supply curve is caused by: A) an increase in the number of sellers. B) a technological improvement in production. C) an increase in the cost of an input. D) an increase in the number of buyers.

C) an increase in the cost of an input.

22. A normative statement deals with: A) the facts. B) what was, is, or will be. C) what ought to be. D) the scientific method.

C) what ought to be.

3. A new fast-food restaurant offered a free meal (valued at $5) a week for a year to its first 100 customers. Ramona camped out for 48 hours before the opening to be one of the first 100 customers. The opportunity cost of the free meal a week for a year for Ramona was: A) zero. B) $260. C) whatever else she would have done with the 48 hours. D) The cost is impossible to determine.

C) whatever else she would have done with the 48 hours.

15. Which of the following is likely to cause a rightward shift in the demand for 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

D) a larger population

5. The models used in economics: A) are always limited to variables that are directly related. B) are essentially not reliable because they are not testable in the real world. C) are of necessity unrealistic and not related to the real world. D) emphasize basic relationships by abstracting from complexities in the everyday world.

D) emphasize basic relationships by abstracting from complexities in the everyday world.

12. After graduation from college, you might have an increase in your income from a new job. If as a result you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger is a(n) _____ good. A) normal B) substitute C) complementary D) inferior

D) inferior