Exam 1
The extra benefit that results from carrying out one additional unit of an activity is the ________ of the activity.
marginal benefit
The extra cost that results from carrying out one additional unit of an activity is the ________ of the activity.
marginal cost
On a graph of a production possibilities curve, if a point is attainable, then it:
might or might not be efficient.
Points that lie below the production possibilities curve are inefficient because:
more of one good could be produced without producing less of the other.
An increase in worker productivity means that ________ goods are being produced by ________ resources.
more; the same or less
A country that must decrease production of one good in order to increase the production of another
must be producing on its production possibilities frontier.
The key indicator of a country's living standard and economic well-being is:
real GDP per person.
During a six-month period, the price of a popular shoe rises from $28 to $39 a pair. During this same period, demand for this shoe will probably
remain constant
If demand for rental apartments decreases as a result of an increase in income, _____.
rental apartments must be an inferior good
Most economists agree that ________ are the single most important source of productivity improvements.
technological advances
Milk can be used to produce cheese or butter. If the price of a pound of butter rises, what happens to the supply of cheese?
The supply of cheese decreases.
Which of the following is the best definition of economic growth?
The sustained expansion of production possibilities.
Refer to the figure below. If this restaurant makes 75 salads in one hour, then what's the maximum number of pizzas it can make in that same hour?
30
Entrepreneurs contribute to increased average labor productivity in each of the following ways except by:
assigning workers to jobs.
The average person's command over goods and services produced in an economy measured by real GDP or income per person is called:
economic standard of living.
Suppose you have a choice of working full-time during the summer or going full-time to summer school. Summer tuition and books are $3,200. If you worked, you could make $7,000. Your rent is $1,000 for the summer, regardless of your choice. If these are the only relevant costs to consider, the opportunity cost of going to summer school is:
$10,200
You have two options for how to spend the afternoon. You can either go see a movie with your roommate or work as a tutor for the Math Department. From experience, you know that going to see a movie gives you $20 worth of enjoyment, and with your student discount, a movie ticket only costs $12. If you spend the afternoon working as a math tutor, you will get paid $45. What is your opportunity cost of seeing a movie this afternoon?
$57
Refer to the figure below. Moving from point B to point C, the opportunity cost of 5 more pizzas is:
25 Salads.
Which of the following will cause the demand curve for gasoline to shift rightward?
A decrease in the price of cars
Which of the following is an example of an investment in physical capital?
A firm purchases new equipment for a manufacturing process.
Which of the following would not shift the production possibilities frontier?
An increase in the price level
Las Vegas, Nevada, is a popular vacation destination for residents of Hawaii. If the Hawaiian economy experiences strong economic growth and, as a result, household incomes increase on average by 10 percent, what will likely happen to the demand for airplane tickets from Hawaii to Las Vegas?
Demand will increase
Consider the production possibilities frontier (PPF) curves, which compare the ancient production of agricultural products to art and literature; Suppose the plow is invented and agricultural productivity greatly increases. Which of the following graphs best depicts how this would affect the PPF?
Graph B
Consider the production possibilities frontier (PPF) curves, which compare the ancient production of agricultural products to art and literature; Suppose that great a great plague wipes out half of the society's population. Which of the following graphs best depicts how this would affect the PPF?
Graph D
Going skiing will cost Adam $80 a day. He also loses $40 per day in wages because he has to take time off from work. Adam still decides to go skiing.
His decision is rational if Adam's marginal benefit of spending a day skiing is greater than his marginal cost of $120 per day.
What will be the impact of an economic downturn on the equilibrium price and quantity in the market for smart watches, given that smart watch is a normal good?
It leads to a reduction in the equilibrium price and quantity of smart watch .
I asked my neighbor to rake the leaves on his lawn because they were blowing into my yard. He responded that it would not be rational for him to do so. Why would this be the case?
My neighbor is a lawyer who values his time at $200 an hour and knows that he can hire a high school kid to rake leaves for $20 an hour.
Governments contribute to increased average labor productivity in each of the following ways except by:
Pay rates determined by a governmental planning agency provide workers with incentives to work hard.
Suppose Puerto Rico and Hawaii currently have the same production possibilities so that the above figure is the PPF for hotels and consumption goods in the two areas. Hotels are a capital good that, once built, will help produce still more consumption goods. If Puerto Rico produces more hotels than Hawaii,
Puerto Rico's PPF will shift outward further than Hawaii's PPF.
The downward slope of the production possibilities curve illustrates the:
Scarcity Principle.
Which of the following is NOT an assumption that economists make when developing a production possibilities frontier (PPF)?
Society will always be producing somewhere on the PPF.
What would be the impact of an increase in the price of gasoline on the market for RV rentals, ceteris paribus?
The demand for RV rentals will decrease.
According to a recent study, "Stricter college alcohol policies, such as raising the price of alcohol, or banning alcohol on campus, decrease the number of students who use marijuana." On the basis of this information, how would you describe alcohol and marijuana?
The two goods are complements in consumption.
What role do social institutions play in determining a nation's standard of living?
They affect incentives to produce.
One way to promote a new business is to offer free items. If you were to open a new restaurant and offer free food, you likely would have a line out the door. How would an economist understand the behavior of those standing in line?
Those waiting in line place a low value on the use of their time.
Which of the following changes in the coffee market would shift the supply curve to the right?
Twenty new Starbucks coffee shops open up.
You have two options for how to spend the afternoon. You can either go see a movie with your roommate or work as a tutor for the Math Department. From experience, you know that going to see a movie gives you $20 worth of enjoyment, and with your student discount, a movie ticket only costs $12. If you spend the afternoon working as a math tutor, you will get paid $45. Should you go see a movie or work as a math tutor?
You should work as a math tutor.
If, in response to an increase in the price of coffee, the quantity of coffee demanded decreases, economists would describe this as
a decrease in quantity demanded.
All else equal, relative to a person who earns minimum wage, a person who earns $30 per hour has:
a higher opportunity cost of taking the day off work.
An increase in the price of pineapples will result in
a larger quantity of pineapples supplied.
A summer in Miami turned out to be cooler than usual, causing people to consume less cola. This can be represented by:
a leftward shift of the demand curve for cola.
John losses his job and decides to start buying instant noodles instead of enriched pasta. For John, enriched pasta is example of
a normal good
The Great Depression of the 1930s with a large number of workers and factories unemployed would be represented in a production possibilities frontier graph by
a point inside the frontier.
U.S. productivity growth rebounded in 1995-2000 largely as a result of:
advances in information and communication technology.
Suppose that both the equilibrium price and quantity of electric cars rise in the market. The most consistent explanation for these observations is:
an increase in demand for electric cars with no change in supply.
Assume consumers eat either rice or pasta for dinner every night. If the price of rice increases, in the pasta market one would expect to see:
an increase in the demand for pasta.
Which of the following would cause a decrease in the supply of peanut butter?
an increase in the price of peanut
Suppose over the next several years the productivity of firms producing electric cars improves dramatically. The advance in productivity leads to
an increase in the supply electric cars so that the supply curve shifts rightward.
The acai berry and products made from it are a popular dietary supplement, believed to reverse diabetes and lead to weight loss. Suppose that a peer reviewed medical study reveals that there are no health benefits from consuming acai berry products. The likely effect of this medical study will be to ________.
cause a decrease in demand.
If prices rise but income stays the same, what is the effect on demand?
demand stays the same
Refer to the figure below. Demand for coffee (roast coffee bags at supermarkets), last Monday is shown in bold and labeled D(Monday). On Tuesday, the news featured a story explaining that the coffee crop has been contaminated with disease-causing bacteria. The following week:
demand will shift to D(A).
Economic growth depends upon which of the following?
i. Increasing the productivity of labor. iii. Advancing technology.
A president of the United States promises to produce more defense goods without any decreases in the production of other goods. This promise can be valid
if the United States is producing at a point inside its production possibilities frontier.
Refer to the diagram below which shows various points on three different production possibilities frontiers for a nation. Which of the events listed above could cause a movement from W to Y?
ii - general technological advancement
The United Auto Workers bargained for higher wages and more benefits for autoworkers. As a result of the higher wages and increased benefits,
ii. the supply of new automobiles decreases.
Government support of basic research by funding scientists through the National Science Foundation is an example of a government policy to promote economic growth by:
improving technology.
Economic growth can result from a(n):
increase in the amount of productive resources.
As the price of cookies increases, firms that produce cookies will:
increase the quantity supplied of cookies.
If professors at Your School begin giving As to students in exchange for roses, we would expect the price of roses in the surrounding area to __________ and the quantity sold of roses to __________.
increase; increase
Refer to the figure below. The opportunity cost of making an additional pizzas:
increases as the number of pizzas increases.
As consumers' incomes decrease, the demand curve for bologna sandwiches shifts to the right. Therefore bologna sandwiches are:
inferior goods.
A decrease in the demand for bananas with no concurrent change in the supply of bananas will result in a __________ equilibrium price and a(n) ___________equilibrium quantity.
lower; lower
Lorenzo has plans to go to an opera and already has a $100 nonrefundable, nonexchangeable, and nontransferable ticket. Now Neha, whom Lorenzo has wanted to date for a long time, asks him to a party. Lorenzo would prefer to go to the party with Neha and forgo the opera, but he doesn't want to waste the $100 he spent on the opera ticket. If he uses cost-benefit analysis to choose between going to the concert and going out with Neha, the opportunity cost of going out to the party with Neha should include:
only the entertainment value of the concert.
Refer to the production possibilities frontier in the figure above. Suppose a country is producing at point a. A movement to ________ means that the country ________.
point d; must give up 20 million capital goods
Consider the market for imported wine and sprits. In response to Covid-19 pandamic, in January 2020, the U.S. government raised tariff on French Champagne and other sparkling wines. As the result of higher tariff, the price of imported wine will ________ and the quantity of imported wine will __________ .
rise; fall
consider the market for pumpkin. Hurricane Irene floods the Northeast US, and people expect shortages of pumpkin. This will cause the price of pumpkin this season to _________ and the equilibrium quantity to ____________.
rise; fall
Refer to the figure above. At a price of $9, the market will experience _______________ in the amount of ________________ units.
surplus; 5 units
Economics is concerned with the trade-offs that emerge because of scarcity. The term "trade-offs" refers to:
the alternatives given up when making choices.
An example of a government policy to increase physical capital formation is:
the construction of an interstate highway system.
If the price of vanilla ice cream increases, it is likely that:
the demand for chocolate ice cream will increase.
The rules of the game refer to:
the formal and informal institutions that promote economic activity.
Alex received a four-year scholarship to State U. that covered tuition and fees, room and board, and books and supplies. If Alex becomes a full-time student, then:
the opportunity cost of attending State U. includes the money Alex could have earned working for four years.
An example of a government policy to increase human capital formation is:
the provision of publicly-funded education.
Following an increase in the demand curve,
there will be a shortage, and the price must rise to bring the market back to equilibrium.
Following an increase in the supply curve,
there will be a surplus, and the price must fall to bring the market back to equilibrium.
Elijah divides his time between studying Physics and studying Economics. His production possibilities curve for his final grade in each class is shown below. Elijah needs to earn at least an 80 in both economics and physics to keep his scholarship. Given his current PPC, an 80 in both classes is ______.
unattainable
