Micro Final Review Questions
Refer to Table 12-1. What is the fixed cost of production?
A) $0 B) $500 C) $1,000 D) It cannot be determined. $1,000
Refer to Table 16-1. If the output price is $3, what is the marginal revenue product of the fifth unit of labor?
A) $1,050 B) $360 C) $210 D) $150 $150
Refer to Table 16-1.If the output price is $3, what is the marginal revenue product of the fifth unit of labor?
A) $1,050 B) $360 C) $210 D) $150 $150
Vipsana's Gyros House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. Calculate Vipsana's total cost per day when she produces 50 gyros using two workers?
A) $100 B) $124.40 C) $220 D) $340 $340
If the market price is $25 in a perfectly competitive market, the marginal revenue from selling the fifth unit is
A) $5. B) $12.50. C) $25. D) $125. $25.
If the market price is $25, the average revenue of selling five units is
A) $5. B) $12.50. C) $25. D) $125. $25.
The production possibilities frontier model shows that
A) if consumers decide to buy more of a product, its price will increase. B) a market economy is more efficient in producing goods and services than is a centrally planned economy. C) economic growth can only be achieved by free market economies. D) if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good. if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.
Refer to Figure 3-5. At a price of $15,
A) there would be a surplus of 4 units. B) there would be a shortage of 2 units. C) there would be a surplus of 6 units. D) there would be a shortage of 4 units. there would be a surplus of 4 units.
The explicit cost of production is also called
A) variable cost. B) accounting cost. C) direct cost. D) overhead cost. accounting cost.
Average total cost is equal to average variable cost minus average fixed cost.
True False False
Behavioral economics is the study of situations in which people make rational choices.
True False False
If the demand for labor is unchanged, population growth will increase the supply of labor and increase the equilibrium wage.
True False False
Technological advancements that increase labor's productivity shift the labor supply curve to the right.
True False False
f the market wage rate increases, a firm's labor demand curve does not shift but the labor supply curve shifts to the right.
True False False
A sunk cost is a cost that has already been paid and cannot be recovered.
True False True
An increase in the supply of capital, which is a substitute to labor, will lead to a decrease in the demand for labor.
True False True
Which of the following equations is correct?
A) AVC-ATC= AFC B) AVC+ ATC= AFC C) AFC+ AVC= ATC D) ATC+ AVC= AFC AFC+ AVC= ATC
Which of the following costs will not change as output changes?
A) marginal cost B) total variable cost C) average fixed cost D) total fixed cost total fixed cost
Refer to Table 11-1. What is the marginal product of the 4th worker?
A) 137 pounds B) 50 pounds C) 12.5 pounds D) 5 pounds 5 pounds
Refer to Figure 16-1.If the wage rate is $40, how many workers should Dale hire?
A) 6 B) 5 C) 4 D) 3 3
Which of the following equations is incorrect?
A) ATC-AFC= AVC B) AVC+ AFC= ATC C) AFC= ATC-AVC D) ATC= AVC-AFC ATC= AVC-AFC
Which of the following is a characteristic of a monopoly?
A) It is easy for new firms to enter the market. B) There is only one seller in the market. C) The product is not unique. D) The firm has no control over price. There is only one seller in the market.
Refer to Figure 12-2.What is the amount of profit if the firm produces Q2units?
A) It is equal to the vertical distance c to g. B) It is equal to the vertical distance c to Q2. C) It is equal to the vertical distance g to Q2. D) It is equal to the vertical distance c to g multiplied by Q2 units. It is equal to the vertical distance c to g.
What does the marginal rate of substitution measure?
A) It measures the rate at which a consumer must give up one good to purchase another good. B) It measures the rate at which a consumer will substitute one good for another when the price of one good changes. C) It measures the change in utility from consuming one additional unit of a good. D) It measures the rate at which a consumer is willing to trade off one product for another while keeping utility constant. It measures the rate at which a consumer is willing to trade off one product for another while keeping utility constant.
The marginal product of labor is calculated using the formula
A) L/Q. B) ΔL/ΔQ. C) ΔQ/ΔL. D) Q/L. ΔQ/ΔL.
Which of the following statements is true?
A) Opportunity cost = explicit cost - implicit cost. B) Total cost = fixed cost + implicit cost. C) Total cost = fixed cost + variable cost. D) Variable cost = wages + salaries + benefits. Total cost = fixed cost + variable cost.
Letters are used to represent the terms used to answer this question: price (P), quantity of output (Q), total cost (TC) and average total cost (ATC). Which of the following equations is equal to a firm's average profit?
A) P - ATC B) (P - ATC) × Q C) (P × Q) - TC D) P - TC P - ATC
A firm will make a profit when
A) P> AVC. B) P> ATC. C) P= ATC. D) P= MC. P> ATC.
Refer to Figure 12-12. Consider a typical firm in a perfectly competitive industry that makes short-run profits. Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?
A) Panel A B) Panel B C) Panel C D) Panel D Panel B
Refer to Figure 10-7.A change in the price of candy only is shown in
A) Panel A. B) Panel B. C) Panel C. D) none of the above panels. Panel C.
Average variable cost can be calculated using any of the formulas below except
A) TVC/Q. B) (TC - FC)/Q. C) Δ(TC - FC)/ΔQ. D) (TC/Q) - AFC. Δ(TC - FC)/ΔQ.
Which of the following describes the substitution effect of a price change?
A) The change in demand that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power. B) The change in quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant. C) The change in quantity demanded of a good that results from the change in the price of a substitute for the good. D) The change in quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power. The change in quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
Which of the following is nota characteristic of a perfectly competitive market structure?
A) There are a very large number of firms that are small compared to the market. B) All firms sell identical products. C) There are no restrictions to entry by new firms. D) There are restrictions on exit of firms. There are restrictions on exit of firms.
Which of the following is not a characteristic of a monopolistically competitive market structure?
A) There is a large number of independently acting small sellers. B) All sellers sell products that are differentiated. C) There are low barriers to entry of new firms. D) Each firm must react to actions of other firms. Each firm must react to actions of other firms.
If the demand for labor is unchanged, an increase in the supply of labor will lead to
A) a decrease in the quantity of labor demanded and a decrease in the equilibrium wage. B) an increase in the quantity of labor demanded and a decrease in the equilibrium wage. C) an increase in the quantity of labor demanded and an increase in the equilibrium wage. D) a decrease in the quantity of labor demanded and an increase in the equilibrium wage. an increase in the quantity of labor demanded and a decrease in the equilibrium wage.
An increase in the wage rate causes
A) a rightward shift of the firm's labor demand curve. B) a leftward shift of the firm's labor demand curve. C) a decrease in the quantity of labor demanded. D) an increase in labor's marginal productivity. a decrease in the quantity of labor demanded.
What is productive efficiency?
A) a situation in which resources are allocated to their highest profit use B) a situation in which resources are allocated such that goods can be produced at their lowest possible average cost C) a situation in which resources are allocated such the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it D) a situation in which firms produce as much as possible a situation in which resources are allocated such that goods can be produced at their lowest possible average cost
A curve that shows combinations of consumption bundles that give a consumer the same utility is called
A) a utility curve. B) an indifference curve. C) a preference curve. D) a demand curve. an indifference curve.
Implicit costs can be defined as
A) accounting profit minus explicit cost. B) the non-monetary opportunity cost of using the firm's own resources. C) the deferred cost of production. D) total cost minus fixed costs. the non-monetary opportunity cost of using the firm's own resources.
At the minimum efficient scale
A) all possible economies of scale have not been exhausted. B) the firm has achieved the lowest possible average cost of production. C) any increases in the scale of operation will encounter further economies of scale. D) marginal cost is at its minimum. the firm has achieved the lowest possible average cost of production.
All of the following will shift the labor supply curve except
A) an increase in labor force participation rate among women. B) an increase in the average age of retirement. C) an increase in the wage rate. D) a change in a country's immigration policy. an increase in the wage rate.
The most direct effect of immigration is
A) an increase the labor demand. B) a decrease the labor demand. C) an increase the labor supply. D) a decrease the labor supply. an increase the labor supply.
Costs that have already been incurred, and which cannot be recovered, are known as
A) short-run fixed costs. B) implicit costs. C) unavoidable costs. D) sunk costs. sunk costs.
If a firm shuts down in the short run it will
A) break even. B) declare bankruptcy. C) suffer a loss equal to its variable costs. D) suffer a loss equal to its fixed costs. suffer a loss equal to its fixed costs.
Both individual buyers and sellers in perfect competition
A) can influence the market price by their own individual actions. B) can influence the market price by joining with a few of their competitors. C) have to take the market price as a given. D) have the market price dictated to them by government. have to take the market price as a given.
Diminishing marginal product of labor occurs when adding another unit of labor
A) decreases output. B) changes output by an amount smaller than the output added by the previous unit of labor. C) increases output by an amount larger than the output added by the previous unit of labor. D) decreases output by an amount smaller than the output added by the previous unit of labor. changes output by an amount smaller than the output added by the previous unit of labor.
The price of a factor of production that is in fixed supply is called
A) economic rent. B) economic profit. C) a compensating differential. D) opportunity cost. economic rent.
For a firm in a perfectly competitive market, price is
A) equal to both average revenue and marginal revenue. B) equal to average revenue but greater than marginal revenue. C) greater than marginal revenue but less than average revenue. D) less than both average revenue and marginal revenue. equal to both average revenue and marginal revenue.
The law of diminishing marginal returns
A) explains why the average total cost and marginal cost curves are U-shaped in the short run. B) explains why the average total cost, average fixed cost, and the marginal cost curves are U-shaped in the short run. C) causes average total cost to rise at a decreasing rate as output increases. D) causes the difference between average total cost and average variable cost to get smaller as output increases. explains why the average total cost and marginal cost curves are U-shaped in the short run.
In the long run, the entry of new firms in an industry
A) harms consumers by forcing prices up above the level of average cost. B) benefits consumers by forcing prices down to the level of total cost. C)harms consumers by forcing prices up above the level of total cost. D) benefits consumers by forcing prices down to the level of average cost. benefits consumers by forcing prices down to the level of average cost.
Perfect competition is characterized by all of the following except
A) heavy advertising by individual sellers. B) homogeneous products. C) sellers are price takers. D) a horizontal demand curve for individual sellers. heavy advertising by individual sellers.
Which of the following factors will not cause the labor demand curve to shift?
A) increases in human capital B) changes in technology C) a change in the price of the product produced with labor D) the wage rate the wage rate
Which of the following variables will not cause the market supply curve of labor to shift?
A) increases in population B) a favorable change in consumer tastes C) a change in the labor participation rate of women D) an increase in the number of people between the ages of 16 and 65 a favorable change in consumer tastes
If preferences are transitive, indifference curves
A) intersect at the equilibrium consumption bundle. B) intersect at the optimum consumption bundle. C) intersect where the marginal rate of substitution for each indifference curve is equal. D) do not intersect. do not intersect.
The average total cost of production
A) is the extra cost required to produce one more unit. B) equals the explicit cost of production. C) equals total cost of production divided by the level of output. D) equals total cost of production multiplied by the level of output. equals total cost of production divided by the level of output.
In general, the supply curve for a natural resource
A) is vertical. B) is horizontal. C) slopes downward to reflect decreasing available quantities over time. D) slopes upward. slopes upward.
Refer to Figure 12-1. If the firm is producing 700 units
A) it is making a profit. B) it is making a loss. C) it should cut back its output to maximize profit. D) it should increase its output to maximize profit. it should cut back its output to maximize profit.
For a perfectly competitive firm, average revenue is equal to
A) marginal cost. B) the market prices. C) total revenue. D) average fixed cost. the market prices.
The limitation that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as
A) maximizing behavior. B) economizing behavior. C) the price constraint. D) the budget constraint. the budget constraint.
Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?
A) productive efficiency B) allocative efficiency C) marginal efficiency D) profit maximization allocative efficiency
The amount of income a consumer has to spend on goods and services is known as
A) purchasing power. B) effective demand. C) a budget constraint. D) wealth. a budget constraint.
Which of the following is a factor of production that generally is fixed in the short run?
A) raw materials B) labor C) a factory building D) water a factory building
In general, the labor supply curve
A) slopes downward because firms will hire fewer workers at higher wages. B) slopes upward because as the wage rises, the opportunity cost of leisure increases. C) is vertical at the equilibrium wage rate. D) is perfectly elastic at the equilibrium wage rate. slopes upward because as the wage rises, the opportunity cost of leisure increases.
The marginal product of labor is defined as
A) the additional sales revenue that results when one more worker is hired. B) the additional output that results when one more worker is hired, holding all other resources constant. C) the additional number of workers required to produce one more unit of output. D) the cost of hiring one more worker. the additional output that results when one more worker is hired, holding all other resources constant.
The marginal revenue product of labor is defined as
A) the change in the firm's revenue as a result of selling one more unit of output. B) the change in the firm's output as a result of hiring one more worker. C) the change in the firm's profit as a result of hiring one more worker. D) the change in the firm's revenue as a result of hiring one more worker. the change in the firm's revenue as a result of hiring one more worker.
The marginal revenue product of capital is
A) the cost to the firm of renting an additional unit of capital. B) the change in the firm's revenue as a result of employing one more unit of capital, such as a machine. C) the economic rent received by hiring an additional unit of capital. D) the revenue generated by substituting capital for labor in the production process. the change in the firm's revenue as a result of employing one more unit of capital, such as a machine.
The demand for labor is different from the demand for final goods and services because
A) the demand for labor is derived from the demand for the good or service the labor is used to produce. B) it is a demand for people, not inanimate objects. C) the demand for labor is more inelastic than the demand for the goods and services produced with this labor. D) the law of demand does not apply to the demand for labor. the demand for labor is derived from the demand for the good or service the labor is used to produce.
The substitution effect of a wage increase is observed when
A) the higher wage income causes workers to take more leisure and work less. B) leisure's higher opportunity cost causes workers to take less leisure and work more. C) the higher wage income causes workers to take more leisure and work more. D) leisure's higher opportunity cost causes workers to take more leisure and work less. leisure's higher opportunity cost causes workers to take less leisure and work more.
The slope of the indifference curve is referred to as
A) the marginal rate of substitution. B) the price ratio. C) the marginal rate of consumption. D) the marginal tradeoff rate. the marginal rate of substitution.
Refer to Figure 10-1.When the price of hoagies increases from $5.00 to $5.75, quantity demanded decreases from Q1 to Q0. This change in quantity demanded is due to
A) the price and output effects. B) the income and substitution effects. C) the fact that marginal willingness to pay falls. D) the law of diminishing marginal utility. the income and substitution effects.
When a firm experiences a positive technological change
A) the price of a share of the firm's stock rises. B) the firm is able to produce more output using the same inputs, or the same output using fewer inputs. C) the value of the firm's assets rises. D) the firm will hire additional workers in order to increase production. the firm is able to produce more output using the same inputs, or the same output using fewer inputs.
Refer to Figure 10-10.The change in the budget constraint from BC1 to BC2 implies
A) the prices of DVDs and CDs have increased. B) income and the prices of DVDs and CDs have increased. C) the price of DVDs has increased, and the price of CDs has decreased. D) the price of DVDs has decreased, and the price of CDs has increased. the price of DVDs has increased, and the price of CDs has decreased.
An industry's long-run supply curve shows
A) the relationship in the long run between market price and quantity supplied. B) how the government determines the price of the product. C) how average productivity is changing. D) greater than normal profit. the relationship in the long run between market price and quantity supplied.
The equilibrium wage and quantity of labor in the market for skilled workers is determined by
A) the strength of labor unions. B) the monopsony power of firms. C) the demand and supply of labor. D) the market value created by the output of these skilled workers. the demand and supply of labor.
When the price of audio books, a normal good, falls, causing your purchasing power to rise, you buy more of them due to
A) the substitution effect. B) the income effect. C) the deadweight loss effect. D) the elasticity effect. the income effect.
If a firm experiences positive technological change, it is able to produce more output using the same inputs.
True False True
Increases in population shift the market supply curve for labor to the right.
True False True
Refer to Table 9-6. What is the opportunity cost to produce 1 hat in Belize?
A) 1/2 of a clock B) 2/3 of a clock C) 1.5 clocks D) 2 clocks 1/2 of a clock
Refer to Table 10-1. If Keegan can drink all the bubble tea he wants for free, how many glasses will he consume?
A) 4 glasses B) 5 glasses C) 6 glasses D) He would consume an infinite amount of bubble tea if it is free. 6 glasses
Refer to Table 3-1. The table above shows the demand schedules for loose-leaf tea of two individuals (Sunil and Mia) and the rest of the market. At a price of $5, the quantity demanded in the market would be
A) 51 lbs. B) 63 lbs. C) 76 lbs. D) 146 lbs. 63 lbs.
In 2019, Hooverville consumed 205,000 tons of sugar. In 2020, sugar consumption rose to 245,000 tons. Calculate the percentage change in sugar consumption.
A) 8.37% B) 11.95% C) 19.51% D) 26.33% 19.51%
Price elasticity of supply is used to gauge
A) how responsive suppliers are to price changes. B) how responsive suppliers are to changes in future prices. C) how responsive suppliers are to a change in demand. D) how responsive sales are to a change in input prices. how responsive suppliers are to price changes.
The law of demand implies, holding everything else constant, that as the price of gelato
A) increases, the demand for gelato will increase. B) increases, the quantity of gelato demanded will increase. C) decreases, the quantity of gelato demanded will increase. D) decreases, the demand for gelato will increase. decreases, the quantity of gelato demanded will increase.
Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.
A) -0.66 B) 0.5 C) 1.5 D) 2 0.5
If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula.
A) 0.17 B) 0.62 C) 1.62 D) 5 1.62
Refer to Figure 6-3. Using the midpoint formula, calculate the absolute value of the price elasticity of demand between e and f.
A) 0.32 B) 0.4 C) 2.5 D) 3.125 3.125
Refer to Figure 6-3.Using the midpoint formula, calculate the absolute value of the price elasticity of demand between e and f.
A) 0.32 B) 0.4 C) 2.5 D) 3.125 3.125
Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units. Use the midpoint formula to calculate the price elasticity of supply.
A) 1.22 B) 1.0 C) 0.82 D) 0.07 1.22
Refer to Table 9-6. What is the opportunity cost to produce 1 clock in Belize?
A) 1/2 of a hat B) 2/3 of a hat C) 1.5 hats D) 2 hats 2 hats
Refer to Table 9-6. What is the opportunity cost to produce 1 hat in Denmark?
A) 1/6 of a clock B) 1/2 of a clock C) 2 clocks D) 6 clocks 2 clocks
Refer to Figure 6-11. What is the value of the price elasticity of supply between g and h?
A) 20 percent B) 0.5 C) 2 D) 0.02 2
Refer to Figure 1-1. Using the information in the figure above, calculate the percentage change in revenue from alcoholic beverage sales between 2013 and 2016.
A) 23.1% B) 23.8% C) 30% D) 42.9% 42.9%
Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good. Calculate the price elasticity of supply and characterize the product.
A) 2; The product is elastic. B) 0.2; The product is inelastic. C) 0.5; The product is inelastic. D) 50%; The product is inelastic. 0.5; The product is inelastic.
Refer to Table 10-7. What is Antonio's marginal utility from consuming the fifth beer?
A) 4 B) 13.6 C) 69 D) 134 4
If a consumer receives 22 units of marginal utility for consuming the first can of soda, 20 units from consuming the second, and 15 from the third, the total utility of consuming the three units is
A) 57. B) 35. C) 15. D) unknown as more information is needed to determine the answer. 57
Suppose the value of the price elasticity of demand is -3. What does this mean?
A) A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent. B) A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. C) A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent. D) A $1 increase in price causes quantity demanded to fall by 3 units. A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.
5) Refer to Figure 3-1. An increase in population would be represented by a movement from
A) A to B. B) B to A. C) D1 to D2. D) D2 to D1. D1 to D2.
Refer to Figure 3-1. An increase in the expected future price of the product would be represented by a movement from
A) A to B. B) B to A. C) D1 to D2. D) D2 to D1. D1 to D2.
Refer to Figure 3-1. A decrease in taste or preference would be represented by a movement from
A) A to B. B) B to A. C) D1 to D2. D) D2 to D1. D2 to D1.
Refer to Figure 3-1. If the product represented is an inferior good, an increase in income would be represented by a movement from
A) A to B. B) B to A. C) D1 to D2. D) D2 to D1. D2 to D1.
Refer to Figure 3-2. An increase in the number of firms in the market would be represented by a movement from
A) A to B. B) B to A. C) S1 to S2. D) S2 to S1. S1 to S2.
Refer to Figure 3-2. A decrease in productivity would be represented by a movement from
A) A to B. B) B to A. C) S1 to S2. D) S2 to S1. S2 to S1.
Refer to Figure 3-2. An increase in price of inputs would be represented by a movement from
A) A to B. B) B to A. C) S1 to S2. D) S2 to S1. S2 to S1.
is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors.
A) Absolute advantage B) Specialization C) Autarky D) Comparative advantage Comparative advantage
is a situation in which a good or service is produced at the lowest possible cost.
A) Allocative efficiency B) Productive efficiency C) Equity D) Optimal marginalism Productive efficiency
Refer to Table 9-6. Which country has a comparative advantage in producing hats?
A) Denmark B) Belize C) both countries D) neither country Belize
Refer to Table 9-6. Which country has an absolute advantage in producing clocks?
A) Denmark B) Belize C) both countries D) neither country Denmark
Refer to Table 9-6. Which country has an absolute advantage in producing hats?
A) Denmark B) Belize C) both countries D) neither country Denmark
refers to reductions in a firm's costs that result from an increase in the size of an industry.
A) Internal economies B) External economies C) Autarkial dominance D) Streamlining External economies
What is an indifference curve?
A) It is a curve that shows the total utility and the marginal utility derived from consuming a bundle of goods. B) It is a curve that shows the combinations of consumption bundles that give the consumer the same utility. C) It is a curve that ranks a consumer's preference for various consumption bundles. D) It is a curve that shows the tradeoff a consumer faces among different combinations of consumption bundles. It is a curve that shows the combinations of consumption bundles that give the consumer the same utility.
Goods with upward sloping demand curves are referred to as
A) Marshall goods. B) Giffen goods. C) substitute goods. D) luxury goods. Giffen goods.
Refer to Figure 6-1. A perfectly elastic demand curve is shown in
A) Panel A. B) Panel B. C) Panel C. D) Panel D. Panel B.
Which of the following statements about scarcity is true?
A) Scarcity refers to the situation in which unlimited wants exceed limited resources. B) Scarcity is not a problem for the wealthy. C) Scarcity is only a problem when a country has too large a population. D) Scarcity only arises when there is a wide disparity in income distribution. Scarcity refers to the situation in which unlimited wants exceed limited resources.
What is the difference between an "increase in demand" and an "increase in quantity demanded"?
A) There is no difference between the two terms; they both refer to a shift of the demand curve. B) An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve. C) There is no difference between the two terms; they both refer to a movement downward along a given demand curve. D) An "increase in demand" is represented by a movement along a given demand curve, while an "increase in quantity demanded" is represented by a rightward shift of the demand curve. An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.
If an increase in income leads to in an increase in the demand for peanut butter, then peanut butter is
A) a neutral good. B) a normal good. C) a necessity. D) a complement. a normal good.
If a good has a negative income elasticity of demand, this indicates that the good is
A) a substitute with another good. B) a complement with another good. C) inferior. D) normal. inferior
The ratio at which a country can trade its exports for imports from other countries is called
A) a trade barrier. B) the terms of trade. C) autarky. D) a free trade agreement. the terms of trade.
The concept of ________ explains how trade between two countries can make each better off.
A) absolute advantage B) comparative advantage C) autarky D) trade barriers comparative advantage
In economics, the term ________ means "additional" or "extra."
A) allocative B) marginal C) equity D) optimal marginal
Refer to Table 2-2. Assume that Billie's Bedroom Shop only produces pillows and blankets. A combination of 27 pillows and 14 blankets would appear
A) along Billie's production possibilities frontier. B) inside Billie's production possibilities frontier. C) outside Billie's production possibilities frontier. D) at the vertical intercept of Billie's production possibilities frontier. outside Billie's production possibilities frontier.
You have an absolute advantage whenever you
A) are better educated than someone else. B) can produce more of something than others with the same resources. C) prefer to do one particular activity. D) can produce something at a lower opportunity cost than others. can produce more of something than others with the same resources.
Sunk costs
A) are costs associated with repairing something you already own. B) are important for optimal decision making. C) are costs that have already been paid and cannot be recaptured in any significant way. D) are costs that firms sink into marketing. are costs that have already been paid and cannot be recaptured in any significant way.
Allocative efficiency is achieved when firms produce goods and services
A) at the lowest possible cost. B) that consumers value most. C) at the lowest opportunity cost. D) at a marginal cost of zero. that consumers value most.
A situation in which a country does not trade with other countries is called
A) autarky. B) self-actualization. C) autonomy. D) independence. autarky
When BMW, a German company, purchases a welding machine that was made in Toronto, the purchase is
A) both a German and a Canadian import. B) a German import and a Canadian export. C) a German export and a Canadian import. D) neither an export nor an import for either country. both a German and a Canadian import.
When Roxanne, a U.S. citizen, purchases a designer dress from Saks Fifth Avenue that was made in Milan, the purchase is
A) both a U.S. and an Italian import. B) a U.S. import and an Italian export. C) a U.S. export and an Italian import. D) neither an export nor an import for either the United States or Italy. a U.S. import and an Italian export.
Demand for a luxury item, such as a yacht, is likely to be
A) both income inelastic and price inelastic. B) both income elastic and price elastic. C) income elastic and price inelastic. D) income inelastic and price elastic. both income elastic and price elastic.
If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.
A) bowed out B) bowed in C) non-linear D) linear linear
Refer to Figure 2-4. A movement from X to Y
A) could be due to a change in consumers' tastes and preferences. B) could occur because of an influx of immigrant labor. C) is the result of advancements in food production technology only, with no change in the technology for plastic production. D) is the result of advancements in plastic production technology only, with no change in food production technology. could occur because of an influx of immigrant labor.
If a demand curve shifts to the left, then
A) demand has increased. B) quantity demanded has increased. C) demand has decreased. D) quantity demanded has decreased. demand has decreased.
An outward shift of a nation's production possibilities frontier represents
A) economic growth. B) rising prices of the two goods on the production possibilities frontier model. C) an impossible situation. D) a situation in which a country produces more of one good and less of another. economic growth.
The points outside the production possibilities frontier are
A) efficient. B) attainable. C) inefficient. D) unattainable. unattainable.
The demand for gasoline in the short run is
A) elastic because people can easily switch to public transportation. B) perfectly inelastic because people have no choice but to buy gasoline. C) unit elastic because people tend to consume a stable amount of gasoline per period. D) inelastic because there are very few good substitutes for gasoline. inelastic because there are very few good substitutes for gasoline.
In economics, the term "equity" means
A) everyone has an equal standard of living. B) the hardest working individuals consume all they want. C) only elected officials have high standards of living. D) economic benefits are distributed fairly. economic benefits are distributed fairly.
Goods and services bought domestically but produced in other countries are referred to as
A) exports. B) imports. C) transfer payments. D) foreign consumption. imports.
A tariff is a tax imposed by a government on
A) exports. B) services. C) imports. D) luxury items. imports.
Productive efficiency is achieved when
A) firms add a low profit margin to the goods and services they produce. B) firms produce the goods and services that consumers value most. C) firms produce goods and services at the lowest cost. D) there are no shortages or surpluses in the market. firms produce goods and services at the lowest cost.
Microeconomics is the study of
A) how households and firms make choices. B) the economy as a whole. C) the global economy. D) topics such as unemployment, inflation, and economic growth. how households and firms make choices.
Price elasticity of demand measures
A) how responsive suppliers are to price changes. B) how responsive sales are to changes in the price of a related good. C) how responsive quantity demanded is to a change in price. D) how responsive sales are to a change in buyers' incomes. how responsive quantity demanded is to a change in price.
The concept of opportunity cost is that
A) in a market economy, taking advantage of profitable opportunities involves some money cost. B) the economic cost of using a factor of production is the alternative use of that factor that is given up. C) taking advantage of investment opportunities involves costs. D) the cost of production varies depending on the opportunity for technological application. the economic cost of using a factor of production is the alternative use of that factor that is given up.
A supply schedule
A) is a table that shows the relationship between the price of a product and the quantity of the product supplied. B) is a curve that shows the relationship between the price of a product and the quantity of the product supplied. C) is the relationship between the supply of a product and the cost of producing the product. D) is a table that shows the relationship between the price of a product and the quantity of the product that producers and consumers are willing to exchange. is a table that shows the relationship between the price of a product and the quantity of the product supplied.
The production possibilities frontier shows the ________ combinations of two products that can be produced in a particular time period with available resources.
A) minimum attainable B) maximum attainable C) only D) equitable maximum attainable
If a straight line passes through the point x = 14 and y = 3 and also through the point x = 4 and y = 10, the slope of this line is
A) negative 11 divided by 6. B) seven-tenths. C) negative seven-tenths. D) 6 divided by 11. negative seven-tenths.
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
A) optimization. B) efficiency. C) a trade-off. D) equity. a trade-off
The ________ demonstrates the roles played by households and firms in the market system.
A) production possibilities frontier B) circular flow model C) theory of comparative advantage D) business cycle circular flow model
Households ________ final goods and services in the ________ market.
A) purchase; factor B) purchase; product C) sell; factor D) sell; product purchase; product
Refer to Figure 10-6. The consumer can afford consumption bundles
A) r, s, t, and u. B) r, s, v, and u. C) s, v, and u only. D) s, v, t, and u. s, v, t, and u.
When the price of pistachio nuts is $7.50 per lb. the quantity demanded is 48 lbs. When the price of pistachio nuts is $9.00 per lb. the quantity demanded is 40 lbs. When the midpoint formula is used to measure the price elasticity of demand, we can say that the demand for pistachio nuts is
A) relatively, but not perfectly, elastic. B) unit elastic. C) completely inelastic. D) relatively, but not perfectly, inelastic. unit elastic.
In the circular flow model, producers
A) sell goods and services in the input market. B) and households spend earnings from resource sales on goods and services in the factor market. C) hire resources sold by households in the factor market. D) spend earnings from resource sales on goods and services in the product market. hire resources sold by households in the factor market.
Which of the following goods would have the most inelastic demand?
A) ski vacations B) bread C) luxury cars D) big screen TVs bread
Exports are domestically produced goods and services
A) sold to other countries. B) sold to the government. C) sold at home. D) which are used to produce other goods and services. sold to other countries.
An example of a factor of production for Dell is
A) stock issued by Dell. B) the computers exported by Dell. C) corporate bonds sold by Dell. D) a worker hired by Dell. a worker hired by Dell.
If the cross-price elasticity of demand for computers and software is negative, this means the two goods are
A) substitutes. B) complements. C) inferior. D) normal. complements.
Households ________ factors of production and ________ goods and services.
A) supply; demand B) supply; supply C) demand; supply D) demand; demand supply; demand
Refer to Figure 2-1. Point A is
A) technically efficient. B) unattainable with current resources. C) inefficient in that not all resources are being used. D) the equilibrium output combination. inefficient in that not all resources are being used.
Refer to Figure 2-1. Point C is
A) technically efficient. B) unattainable with current resources. C) inefficient in that not all resources are being used. D) is the equilibrium output combination. unattainable with current resources.
Absolute advantage is
A) the ability to produce more of a good or service than competitors when using the same amount of resources. B) the ability to produce higher quality goods compared to one's competitors. C) the ability to produce a good or service at a higher opportunity cost than one's competitors. D) the ability to produce more of a good or service than competitors that have fewer resources. the ability to produce more of a good or service than competitors when using the same amount of resources.
Marginal utility is
A) the change in total utility divided by the price of the last unit of a good or service consumed. B) the change in total utility a person receives from consuming an additional unit of a good or service. C) the utility from consuming a given quantity of a good or service. D) the decrease in total utility from consuming more and more units of a good or service. the change in total utility a person receives from consuming an additional unit of a good or service.
A consumer's budget constraint is
A) the limited income that a consumer has to spend on goods and services. B) the rate at which the consumer must give up one good to purchase an additional unit of the other goods in the market. C) the price ratio a consumer faces in the marketplace. D) the extent to which one's preferences are limited by one's income. the limited income that a consumer has to spend on goods and services.
At a product's equilibrium price
A) the product's demand curve is the same as the product's supply curve. B) the quantity of the product demanded is greater than the quantity of the product supplied. C) the quantity of the product demanded is less than the quantity of the product supplied. D) the product's demand curve crosses the product's supply curve. the product's demand curve crosses the product's supply curve.
The income elasticity of demand measures
A) the responsiveness of quantity demanded to change in income. B) how a consumer's purchasing power is affected by a change in the price of a product. C) the percentage change in the price of a product divided by the percentage change in consumer income. D) the income effect of a change in price. the responsiveness of quantity demanded to change in income.
Which of the following is a microeconomic question?
How much will be saved and how much will be produced in the entire economy? B) What will the level of economic growth be in the entire economy? C) What factors determine the price of carrots? D) What determines the average price level and inflation? What factors determine the price of carrots?
A tariff is a tax imposed by a government on its own exports.
True False False
An increase in the number of firms in a market will cause the quantity of a good supplied to increase.
True False False
The ability of a firm or country to produce a good or service at a lower opportunity cost than other producers is called absolute advantage.
True False False
The payment received by suppliers of entrepreneurial skills is called interest.
True False False
A common mistake made by consumers is the failure to take into account the sunk costs of their actions.
True False True
Chips and salsa are complements. If the price of salsa decreases, the demand for chips will increase.
True False True
Examining the conditions that could lead to a recession in an economy is an example of a macroeconomic topic.
True False True
For a person to have a comparative advantage in producing a product, she must be able to produce that product at a lower opportunity cost than her competitors.
True False True
If at a price of $10, a vendor sells 5 units of a product and at a price of $8, 6 units are sold. Using the midpoint formula, the demand for this good is inelastic.
True False True
In the circular flow model, households supply resources such as labor services in the factor market.
True False True
Necessities tend to have more inelastic demand than luxuries.
True False True
The decisions Apple makes in determining production levels for its iPhone is an example of a microeconomic topic.
True False True
When there are few substitutes available for a good, demand tends to be relatively inelastic.
True False True