Economics

Equilibrium at $25, Quantity 400 At a price of $35, there would be a a. surplus of 400 units. b. shortage of 400 units. c. surplus of 600 units. d. surplus of 200 units.

A

What must be given up to obtain an item is called a. absolute value. b. comparative worth. c. opportunity cost. d. out-of-pocket cost.

C

A worker in Vietnam can earn $6 per day making cotton cloth on a hand loom. A worker in the United States can earn $85 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages? a. Labor is more productive making cotton cloth with a mechanical loom than with a hand loom. b. U.S. textile workers belong to a union, whereas Vietnamese textile workers do not belong to a union. c. There is little demand for cotton cloth in Vietnam and great demand in the United States. d. Vietnam has a low-wage policy to make its textile industry more competitive in world markets.

A

Burrito:Taco Arturo (300,0),(0,400). Dina (200,0),(0,400). Refer to Figure 3-3. If Arturo and Dina each divides his/her time equally between the production of tacos and burritos, then total production is a. 400 tacos and 250 burritos. b. 400 tacos and 300 burritos. c. 800 tacos and 500 burritos. d. 200 tacos and 150 burritos.

A

Consider Luis's decision to go to college. If he goes to college, he will spend $21,000 on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to college, he will earn $16,000 working in a store and spend $7,200 on room and board. Luis's cost of going to college is a. $42,600. b. $57,000. c. $33,800. d. $49,800.

A

Consider two individuals, Marquis and Serena each of whom would like to wear sweaters and eat tasty food. The gains from trade between Marquis and Serena are most obvious in which of the following cases? a. Marquis's skills are such that he can produce only sweaters, and Serena's skills are such that she can produce only tasty food. b. Marquis and Serena both are very good at cooking tasty food, but neither has the necessary skills to knit a sweater. c. Marquis is very good at knitting sweaters and at cooking tasty food, but Serena's skills in both of these activities are very poor. d. Marquis's cooking and knitting skills are very poor, and Serena's cooking and knitting skills are also very poor.

A

If the government were to intervene and set a wage for unskilled labor above the market wage, then we would expect, relative to the market outcome, a. a decrease in the number of unskilled jobs available. b. an increase in the number of unskilled jobs available. c. an increase in the number of businesses using unskilled workers. d. a decrease in the number of workers wanting unskilled jobs.

A

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that the opportunity cost of 1 chair is a. 1/6 tables for Ken and 1/3 tables for Traci. b. 6 tables for Ken and 3 tables for Traci. c. 1/6 tables for Ken and 3 tables for Traci. d. 6 tables for Ken and 1/3 tables for Traci.

A

Lemonade:Pizza Alice: (400,0),(0,200) A: 200,100 Betty: (450,0),(0,300) B:180,180 If point A represents Alice's current production and point B represents Betty's current production, under what circumstances can both Alice and Betty benefit from specialization and trade? a. Alice produces more lemonade and Betty produces more pizzas. b. There are no circumstances under which both Alice and Betty can benefit from specialization and trade. c. Alice produces more pizzas and Betty produces more lemonade. d. Both Alice and Betty produce only pizzas.

A

Suppose Jim and Tom can both produce two goods: baseball bats and hockey sticks. Which of the following is not possible? a. Jim has a comparative advantage in the production of baseball bats and in the production of hockey sticks. b. Jim has an absolute advantage in the production of baseball bats and a comparative advantage in the production of hockey sticks. c. Jim has an absolute advantage in the production of hockey sticks and a comparative advantage in the production of baseball bats. d. Jim has an absolute advantage in the production of baseball bats and in the production of hockey sticks.

A

Suppose that when the price of a 16 oz. to-go cup of gourmet coffee is $4.25, students purchase 750 cups per day. If the price decreases to $3.75 per cup, which of the following is the most likely outcome? a. Students would purchase more than 750 cups per day. b. Student would continue to purchase 750 cups per day. c. We do not have enough information to answer this question. d. Students would purchase fewer than 750 cups per day.

A

The basic principles of economics suggest that a. government should become involved in markets when those markets fail to produce efficient or fair outcomes. b. government should become involved in markets when trade between countries is involved. c. markets are seldom, if ever, a good way to organize economic activity. d. government should never become involved in markets.

A

The overriding reason why households and societies face many decisions is that a. resources are scarce. b. incomes fluctuate with business cycles. c. goods and services are not scarce. d. people, by nature, tend to disagree.

A

The term market failure refers to a. a situation in which the market on its own fails to allocate resources efficiently. b. a firm that is forced out of business because of losses. c. an unsuccessful advertising campaign which reduces demand for a product. d. a situation in which competition among firms becomes ruthless.

A

Which of the following demonstrates the law of supply? a. When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup. b. When car production technology improved, car producers increased their supply of cars. c. When sweater producers expected sweater prices to rise in the near future, they decreased their current supply of sweaters. d. When leather became more expensive, belt producers decreased their supply of belts.

A

Which of the following statements best represents the principle represented by the adage, "There ain't no such thing as a free lunch"? a. Dani must decide between going to Florida or Brazil for spring break. b. Justin is hungry and homeless. c. Diego can attend the concert only if he takes his sister with him. d. Zehra must repair the tire on her bike before she can ride it to class.

A

Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. Labor Hours Needed to Make 1 Cooler Radio Aruba. 2. 5 Iceland. 1. 4 Refer to Table 3-3. Assume that Aruba and Iceland each has 80 labor hours available. If each country divides its time equally between the production of coolers and radios, then total production is a. 120 coolers and 36 radios. b. 60 coolers and 18 radios. c. 30 coolers and 9 radios. d. 28 coolers and 50 radios.

B

Assume that Max and Min can switch between producing mittens and producing hats at a constant rate. Labor Hours Needed to Make 1 Quantity produced in 36 hours Mitten Hat. Mitten Hat Max 2 6 18 6 Min 2 4 18 9 Refer to Table 3-6. Which of the following points would not be on Max's production possibilities frontier, based on a 36-hour production period? a. (6 mittens, 4 hats) b. (2 mittens, 6 hats) c. (12 mittens, 2 hats) d. (18 mittens, 0 hats)

B

Barb and Jim run a business that sets up and tests computers. Assume that Barb and Jim can switch between setting up and testing computers at a constant rate. The following table applies. Minutes Needed To # of comp set up or test in 40hr wk Set up 1 comp/Test comp set up/comp tested Barb 48/? 50/40 Jim 30/40 80/60 Refer to Table 3-7. The number of minutes needed by Barb to test a computer is a. 64. b. 60. c. 36. d. 48.

B

Burrito:Taco Arturo (300,0),(0,400). Dina (200,0),(0,400). Refer to Figure 3-3. If the production possibilities frontier shown for Arturo is for 100 hours of production, then how long does it take Arturo to make one burrito? a. 3 hours b. 1/3 hour c. 1/4 hour d. 4 hours

B

Making rational decisions at the margin means that people a. evaluate how easily a decision can be reversed if problems arise. b. compare the marginal costs and marginal benefits of each decision. c. always calculate the dollar costs for each decision. d. make those decisions that do not impose a marginal cost.

B

Price Quantity Demanded Bert Ernie Grover. Oscar 0 20 16 6 8 .5 18 12 4. 6 1 14 10 2 5 1.5 12 8 0 4 2 6 6 0 2 2.5 0 4 0 0 Refer to Table 4-2 . If these are the only four buyers in the market, then when the price increases from $1.00 to $1.50, the market quantity demanded a. increases by 2 units. b. decreases by 7 units. c. decreases by 1.75 units. d. decreases by 24 units.

B

Prices direct economic activity in a market economy by a. allocating goods and services in the most equitable way. b. influencing the actions of buyers and sellers. c. reducing opportunity cost of goods and services produced. d. reducing scarcity of the goods and services produced.

B

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth a. is less equal and less efficient for society. b. is more equal but less efficient for society. c. is more efficient and more equal for society. d. is more efficient but less equal for society.

B

The most obvious benefit of specialization and trade is that they allow us to a. spend more money on goods that are beneficial to society, and less money on goods that are harmful to society. b. consume more goods than we otherwise would be able to consume. c. consume more goods by forcing people in other countries to consume fewer goods. d. work more hours per week than we otherwise would be able to work.

B

Total output in an economy increases when each person specializes because a. there is less competition for the same resources. b. each person spends more time producing that product in which he or she has a comparative advantage. c. government necessarily plays a larger role in the economy due to specialization. d. a wider variety of products will be produced within each country due to specialization.

B

When society requires that firms reduce pollution, there is a. a tradeoff only if some firms are forced to close. b. a tradeoff because of reduced incomes to the firms' owners and workers. c. no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements. d. no tradeoff, since everyone benefits from reduced pollution.

B

When we move along a given supply curve, a. all determinants of quantity supplied are held constant. b. all nonprice determinants of supply are held constant. c. technology and price are held constant. d. only price is held constant.

B

Which of the following is true? a. As long as the economic pie continually gets larger, no one will have to go hungry. b. Efficiency refers to the size of the economic pie; equality refers to how the pie is divided. c. Government policies usually improve upon both equality and efficiency. d. Efficiency and equality can both be achieved if the economic pie is cut into equal pieces.

B

Lemonade:Pizza Alice: (400,0),(0,200) A: 200,100 Betty: (450,0),(0,300) B:180,180 Both Alice and Betty a. would benefit from specializing in lemonade production. b. would benefit from specializing in pizza production. c. face a constant trade-off between producing pitchers of lemonade and pizzas. d. can produce more pizzas than pitchers of lemonade if they devote all of their time to pizza production.

C

Productivity is defined as the a. amount of labor that can be saved by replacing workers with machines. b. number of workers required to produce a given amount of goods and services. c. amount of goods and services produced from each unit of labor input. d. actual amount of effort workers put into an hour of working time.

C

Suppose the cost of operating a 75-room hotel for a night is $6,000 and there are five empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay a. more than $80; because the average benefit will exceed the marginal cost. b. more than $80; because the marginal benefit will exceed the marginal cost. c. more than $40; because the marginal benefit will exceed the marginal cost. d. more than $40; because the average benefit will exceed the marginal cost.

C

Trade between countries a. limits a country's ability to produce goods and services on its own. b. can best be understood by examining the countries' absolute advantages. c. allows each country to consume at a point outside its production possibilities frontier. d. must benefit both countries equally; otherwise, trade is not mutually beneficial.

C

When a country has a comparative advantage in producing a certain good, a. the country should produce just enough of that good for its own consumption. b. the country should import that good. c. then specializing in the production of that good and trading for other goods could allow that country to consume at a point beyond its production possibilities frontier . d. the country's opportunity cost of that good is high relative to other countries' opportunity costs of that same good.

C

Which of the following statements about comparative advantage is not true? a. The principle of comparative advantage applies to countries as well as to individuals. b. A country may have a comparative advantage in producing a good, even though it lacks an absolute advantage in producing that good. c. Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources. d. Economists use the principle of comparative advantage to emphasize the potential benefits of free trade.

C

Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. Output Produced in One Day Coolers Radios Jamaica 12 6 Norway 24 3 Refer to Table 3-11. At which of the following prices would both Jamaica and Norway gain from trade with each other? a. 1 radio for 15 coolers b. 1 radio for 10 coolers c. 1 radio for 1 cooler d. 1 radio for 4 coolers

D

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that a. people respond to incentives. b. rational people think at the margin. c. improvements in efficiency sometimes come at the expense of equality. d. people face tradeoffs.

D

If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then a. Iowa should import corn from Oklahoma. b. Oklahoma should produce just enough corn to satisfy its own residents' demands. c. Iowa has an absolute advantage in the production of corn. d. Iowa has a comparative advantage in the production of corn.

D

If the number of buyers in a market decreases, then a. supply will decrease. b. supply will increase. c. demand will increase. d. demand will decrease.

D

Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigarettes in surrounding states. Which of the following principles does this best illustrate? a. Markets are usually a good way to organize economic activity. b. Trade can make everyone better off. c. Rational people think at the margin. d. People respond to incentives.

D

The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good, a. should be the only producer of that good. b. has a low opportunity cost of producing that good, relative to the opportunity costs of other producers. c. has a comparative advantage in the production of that good. d. has an absolute advantage in the production of that good.

D

The quantity supplied of a good is the amount that a. buyers are willing and able to purchase. b. sellers are able to produce. c. buyers and sellers agree will be brought to market. d. sellers are willing and able to sell.

D

Trade can make everybody better off because it a. increases cooperation among nations. b. reduces competition among domestic companies. c. requires some workers in an economy to be retrained. d. allows people to specialize according to comparative advantage.

D

Which of the following is an important cause of inflation in an economy? a. Increases in productivity in the economy b. The influence of positive externalities on the economy c. Lack of property rights in the economy d. Growth in the quantity of money in the economy

D

The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that a. equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources. b. equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits. c. equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits. d. equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs.

a

The business cycle is the a. positive relationship between the quantity of money in an economy and inflation. b. irregular fluctuations in economic activity. c. predictable changes in economic activity due to changes in government spending and taxes. d. relationship between unemployment and inflation.

b

The primary determinant of a country's standard of living is a. the average age of the country's labor force. b. the country's ability to produce goods and services. c. the total supply of money in the economy. d. the country's ability to prevail over foreign competition.

b