Microeconomics Ch. 1-3

The ________ illustrates the trade-offs facing an economy that produces only two goods.

production possibility frontier

The problem of scarcity is confronted by:

all societies.

The economy's factors of production are not equally suitable for producing different types of goods. This principle generates:

the law of increasing opportunity cost.

The cost of leaving the skating championship before it ends is ________, while the cost of staying for the entire match is ________.

the opportunity cost of not seeing the perfect "10" performance that happens; the opportunity cost of what else you could have done during that time

The cost of leaving a championship soccer match before it ends is ________, while the cost of staying for the entire match is ________.

the opportunity cost of not seeing the winning goal with two minutes to go; the opportunity cost of what else you could have done during that time

A production possibility frontier that is a straight line sloping down from left to right would suggest that:

the opportunity costs of the products are constant.

When a chef creates a dinner plate of food for a customer, which of the following represents the physical capital resource?

the oven

A shortage is the result of when:

the price of a good is held below the equilibrium price.

How people choose among the alternatives available to them is:

the study of microeconomics.

Although water is very abundant in most places, it is scarce because:

there is not enough of it to meet all needs.

The basic concern of microeconomics is:

to study the choices people make.

The opportunity cost of something is:

what is given up to acquire it.

For an economist, the cost of something is:

what you gave up to get it.

The best measure of the opportunity cost of any choice is:

whatever you have given up to make that choice, even if no monetary costs are involved.

If the supply curve shifts to the left, and the demand curve does not change then the equilibrium price:

will increase, and the quantity will decrease.

The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost is

your enjoyment of the bagel.

You can spend $100 on either a new economics textbook or a new CD player. If you choose to buy the new economics textbook, the opportunity cost is:

your enjoyment of the new CD player.

If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has:

a constant, negative slope.

Too little spending in an economy often leads to:

a recession.

The problem of determining what goods and services society should produce:

exists because there are not enough resources to provide all of the goods and services that people want to purchase.

The importance of an economic model is that it allows us to:

focus on the effects of only one change at a time.

Manny is attending college and majoring in economics. Manny is improving his:

human capital.

The production possibility frontier illustrates that:

if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.

If the price of a bale of cotton increases from $0.80 to $1.20, and a pound of Kenyan coffee decreases from $12 a pound to $10 a pound, we can expect a(n):

increase in the quantity demanded of Kenyan coffee.

If coffee is a normal good, then an increase in consumer income will:

increase the demand for coffee.

The upward slope of the supply curve indicates that:

producers supply more of a good when its price increases.

(Figure: Production Possibility Frontier for Tealand) Look at the figure Production Possibility Frontier for Tealand. In the figure, Tealand is producing at point C on its production possibility frontier. What is the opportunity cost in Tealand of increasing the production of tea from 20 million cups to 30 million cups?

5 million scones

Many firms compete in providing overnight delivery services. If the market for overnight delivery services experiences an increase in price, what must have happened?

An increase in demand and a decrease in supply.

(Figure: Tom's Production Possibilities) Look at the figure Tom's Production Possibilities. In the figure, which point or points would represent an inefficient combination of coconuts and fish for Tom to produce?

C only

For which of the following decisions would marginal analysis be most relevant?

Should I eat another doughnut?

If air travel to Hawaii becomes less expensive, what is likely to happen in the market for hotel rooms in Hawaii?

The demand curve for hotel rooms will shift to the right.

Which of the following would cause a surplus of newsprint?

The demand for newsprint decreases, and the price does not change.

How would an increase in the price of cotton affect the market for cotton T-shirts at your university bookstore?

The supply curve for cotton T-shirts will shift to the left.

Consider the market for kayaks. What happens when the process of manufacturing kayaks becomes less costly through the use of new technology?

The supply curve for kayaks will shift to the right.

Suppose that over time, you have observed an increase in the number of people owning digital cameras and a decrease in the price of these cameras. Which of the following would account for this?

The supply curve has shifted to the right and the demand curve has remained constant.

Which of the following could account for the fact that ice cream prices have recently increased and that consumption of ice cream has declined?

The supply of ice cream has decreased.

What would be the dominant effect in the market for new homes of an increase in the wages of skilled tradesmen who work in housing construction?

The supply of new homes would shift to the left.

What happens in the market for wheat when dry winter weather causes a poor harvest?

The supply of wheat decreases and the demand remains unchanged.

What best describes the competitive market?

There are many buyers and sellers of the same good.

(Table: Trade-off of Study Time and Leisure Time) Look at the table Trade-off of Study Time and Leisure Time. A student sleeps 8 hours per day and divides the remaining time between study and leisure time. Suppose this student is studying 4 hours and spending 10 hours doing leisure activities. What is true about this allocation of his scarce resources?

This point is inside the production possibility frontier.

The effect of a tremendous natural disaster can be shown by:

an inward shift of the production possibility frontier.

If the demand curve shifts to the left, and the supply curve does NOT change, then the equilibrium price:

and quantity both will decrease.

The production possibility frontier will shift outward for which of the following reasons?

better technology that improves worker productivity

(Figure: Guns and Butter) Look at the figure Guns and Butter. This production possibility frontier is:

bowed out from the origin because of increasing opportunity costs.

If an economy has to sacrifice increasing amounts of good X for each unit of good Y produced, then its production possibility frontier is:

bowed out from the origin.

If resources are "scarce," it means that they:

cannot provide enough goods or services to satisfy all human material wants and needs.

The downward slope of the demand curve indicates that, all else equal:

consumers will buy more of a good when its price decreases.

Which of the following changes would cause a decrease in the demand for DVD rentals?

decrease in the price of movie admissions

If government decided to increase taxes or decrease its spending, most likely this was to correct:

inflation.

(Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods. Point Z:

is unattainable, all other things unchanged.

The opportunity cost of production:

is what you give up to produce the good.

If an economy is producing at a point on its production possibilities frontier:

it is efficient in production but not necessarily in allocation.

Consider gas stations. As a result of an economic recession and a decrease in consumer incomes, there will be a:

leftward shift in the station's demand curve and lower gas prices.

Some baseball fans leave the game in the seventh or eighth inning to avoid the post-game traffic. The fans are:

making marginal decisions by comparing the cost of leaving early to the benefit of leaving early.

If the state government allocates additional spending on education, the opportunity cost is:

measured in terms of the best alternative uses for that money.

The study of a single firm and how it determines prices would fall under the study of:

microeconomics.

If an economy is producing a level of output that is on its production possibility frontier, the economy has:

no idle resources and is using resources efficiently.

To encourage young people to go to college within their home state, state universities can:

offer lower tuition to in-state students.

A price above the equilibrium price will:

result in quantity supplied being greater than quantity demanded.

(Table: Production Possibilities Schedule II) Look at the figure Production Possibilities Schedule II. The production of 14 units of consumer goods and 1 unit of capital goods per period would:

result in some unused or inefficiently used resources.

(Figure: Strawberries and Submarines) Look at the figure Strawberries and Submarines. As the economy moves from point A toward point D, it will find that the opportunity cost of each additional submarine:

rises

Corner offices in high-rise office buildings usually cost more to rent than other offices. This best illustrates the economic principle of:

scarce resources.

Technological improvements will:

shift the production possibility frontier outward.

The university recently inherited a large mansion from a wealthy alumnus. The university plans to use the mansion for faculty parties and to house distinguished guests. The opportunity cost of the mansion to the university is:

the amount the university would receive if it sold the mansion.

You have $1 to spend on a vending machine snack. A bag of chips will cost you $1 and the candy bar will also cost you $1. If you choose the bag of chips, the opportunity cost of buying the chips is:

the enjoyment you would have received from the candy bar.