exam 1

If we observe that when the price of chocolate increases by 10%, quantity demanded falls by 5%, then the demand for chocolate is price inelastic.

true

The cost of an action is measured in terms of foregone opportunities.

true

Refer to Table 3-11. At which of the following prices would both Jamaica and Norway gain from trade with each other?

1 radio 10 cooler

Refer to Table 3-4. Which of the following combinations of toothbrushes and hairbrushes could Zimbabwe not produce in 120 minutes?

5 brush 11 tooth

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15 percent, then the quantity supplied of cheese will increase by

a. 9 percent in the short run and 21 percent in the long run.

If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?

b. One year after the price increase

Refer to Figure 4-4. The movement from point A to point B on the graph is called

b. an increase in the quantity supplied.

Which of the following increases quantity supplied, increases quantity demanded, and decreases the price that consumers pay?

c. the repeal of a tax on a good

Yvette buys and sells real estate. Two weeks ago, she paid $300,000 for a house on Pine Street, intending to spend $50,000 on repairs and then sell the house for $400,000. Last week, the city government announced a plan to build a new landfill on Pine Street just down the street from the house Yvette purchased. As a result of the city's announced plan, Yvette is weighing two alternatives: She can go ahead with the $50,000 in repairs and then sell the house for $290,000, or she can forgo the repairs and sell the house as it is for $250,000. She should

d. forgo the repairs and sell the house as it is for $250,000.

A farmer has the ability to grow either corn or cotton or some combination of the two. Given no other information, it follows that the farmer's opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton

equal 1

Price elasticity of demand along a linear, downward-sloping demand curve decreases as price falls.

false

What must be given up to obtain an item is called

opportunity cost

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that

people face tradeoffs

Fundamentally, economics deals with

scarcity

In a market economy, economic activity is guided by

self interest and prices

If a price floor is not binding, then

a. the equilibrium price is above the price floor.

What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell?

c. Price would fall, and the effect on quantity would be ambiguous.

Which of the following is not an example of a market?

a. In the United States, a sick person cannot legally purchase a kidney.

Some, but not all, government economists are employed within the administrative branch of government. Which of the following government agencies employ economists outside of the administrative branch?

a. The Congressional Budget Office

A tax on the buyers of cameras encourages

a. buyers to demand a smaller quantity at every price.

Eva wants to create a graph containing the prices of concert tickets and the corresponding quantities of concert tickets demanded by customers. She should use a

a. coordinate system.

Two goods are substitutes when a decrease in the price of one good

a. decreases the demand for the other good.

If a nation has a comparative advantage in the production of a good,

a. it can produce that good at a lower opportunity cost than its trading partner.

The "invisible hand" refers to

b. how the decisions of households and firms lead to desirable market outcomes.

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

b. people work less and produce fewer goods and services.

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

b. sell the ticket because the marginal benefit exceeds the marginal cost.

Elena's aunt gave her $100 for her birthday with the condition that Elena buys herself something. In deciding how to spend the money, Elena narrows her options down to four choices: Option A, Option B, Option C, and Option D. Each option costs $100. Finally, she decides on Option B. The opportunity cost of this decision is

b. the value to Elena of the option she would have chosen had Option B not been available.

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?

c. (2 mittens, 6 hats)

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is

c. This cannot be determined from the information given.

The term market failure refers to

c. a situation in which the market on its own fails to allocate resources efficiently.

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

c. decreases by 7 units.

Within the supply-and-demand model, a tax collected from the sellers of a good shifts the

c. supply curve upward by the size of the tax per unit.

What would happen to the equilibrium price and quantity of lattés if consumers' incomes rise and lattés are a normal good?

d. Both the equilibrium price and quantity would increase.

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?

d. Students would purchase more than 750 cups per day.

Which of the following areas of study typifies macroeconomics as opposed to microeconomics?

d. The effect on the economy of changes in the nation's unemployment rate

Refer to Table 2-2. Which of the following statements is correct?

d. The opportunity cost of an additional 200 shoes increases as more shoes are produced.

Goods produced abroad and sold domestically are called exports and goods produced domestically and sold abroad are called imports.

false