Microeconomics Final Study Guide
Which of the following would best explain a decrease in the supply of squash? A. An increase in the price of other vegetables. B. An increase in the price of squash. C. A decrease in the cost of growing squash. D. A decrease in the price of squash.
A. An increase in the price of other vegetables.
When the going rate is $2.00 per hour, Ann wants to babysit 6 hours each week and Pat wants to babysit 4 hours each week. If the rate goes up to $4.00, Ann and Pat both double the number of hours they are willing to babysit each week. Based on this information, a combined supply curve will pass through the points: A. Price = $2.00, quantity supplied = 10 and price = $4.00, quantity supplied = 20. B. Price = $2.00, quantity supplied = 20 and price = $4.00, quantity supplied = 10. C. Price = $2.00, quantity supplied = 4 and price = $4.00, quantity supplied = 6. D. Price = $2.00, quantity supplied = 6 and price = $4.00, quantity supplied = 4.
A. Price = $2.00, quantity supplied = 10 and price = $4.00, quantity supplied = 20.
Tariffs can be thought of as indirect: A. Subsidies to domestic producers. B. Subsidies to foreign producers. C. Special taxes on domestic producers. D. Subsidies to domestic consumers.
A. Subsidies to domestic producers.
According to the law of supply: A. Supply curves slope upward. B. Price and quantity supplied are negatively related. C. Price and quantity supplied are inversely related. D. Supply curves slope downward.
A. Supply curves slope upward.
Refer to the graph below. Google launched Google Docs & Spreadsheets, a free word processing software allows multiple users to collaboratively edit the same document online. This feature is expected to increase productivity for all workers. Assuming that curve AB represents the production possibility curve for the economy before this innovation, which best reflects the impact of Google Docs & Spreadsheets on the economy? A. The production possibility curve shifts from AB to CD. B. The mix of products produced by the economy moves from F to E. C. The mix of products produced by the economy moves from E to F. D. The production possibility curve shifts from CD to AB.
A. The production possibility curve shifts from AB to CD.
Refer to the graph below. If the production possibility curve shifts along the Good Y axis which point will remain as a point of efficiency? A. B. B. D. C. A. D. C.
B. D.
Quantity restrictions benefit which group the most? A. Government. B. Existing suppliers. C. Consumers. D. Suppliers wanting to enter the market.
B. Existing suppliers.
In 1990 the UN placed trade sanctions on Iraqi oil. In 1996, Iraq was allowed limited export of oil to make war reparations. What was the predicted effect of the two events on equilibrium price and quantity of oil? A. Price rose initially, then fell (failing to regain its former losses); quantity rose, then fell. B. Price rose initially, then fell (failing to regain its former losses); quantity fell and then rose. C. Price fell initially, then rose (failing to return to its former low level); quantity rose and then fell. D. Price fell initially, then rose (failing to return to its former low level); quantity fell and then rose.
B. Price rose initially, then fell (failing to regain its former losses); quantity fell and then rose.
Suppose the equilibrium price of oranges is $0.79, but government takes steps to prevent the price from exceeding $0.60. The likely result will be a: A. Higher equilibrium price for oranges as the demand curve for oranges shifts to the right. B. Shortage of oranges as the price ceiling keeps the market from reaching equilibrium. C. Surplus of oranges as the price ceiling keeps the market from reaching equilibrium. D. Lower equilibrium price for oranges as the supply curve for oranges shifts to the right.
B. Shortage of oranges as the price ceiling keeps the market from reaching equilibrium.
If a production possibility curve representing a tradeoff between a grade in English and a grade in math has a negative slope, we know that: A. One can get better grades in English only if one gets better grades in math. B. There is an inverse relationship between grades in English and grades in math. C. There is no relationship between grades in English and grades in math. D. There is a direct relationship between grades in English and grades in math.
B. There is an inverse relationship between grades in English and grades in math.
Economic reasoning would argue that there is an opportunity cost to: A. More choices. B. Only choices that involve money. C. All choices. D. Only choices that do not involve money.
C. All choices.
Which of the following would not move either the supply or the demand curve in the market for housing? A. A possibility of higher construction costs. B. An increasing the number of people who are retiring. C. An increase in real-estate prices. D. An increase in the cost of home insurance.
C. An increase in real-estate prices.
The quantity of goods and services available to society: A. Is not of economic importance. B. Is fixed. C. Depends on human action. D. Will always grow to meet individuals' wants and desires.
C. Depends on human action.
Because you can only get more of one good by giving up some of another good, the shape of a production possibilities curve is: A. Perfectly vertical. B. Perfectly horizontal. C. Downward sloping. D. Upward sloping.
C. Downward sloping.
The marginal benefit from consuming another unit of a good: A. Must be less than the marginal cost or the unit will not be consumed. B. Equals the total benefit obtained from the consumption of all prior units. C. Equals the increase in total benefits from consuming the unit. D. Must equal the marginal cost or the unit will not be consumed.
C. Equals the increase in total benefits from consuming the unit.
Refer to the graphs above. The curve that best demonstrates the law of demand is: A. III. B. II. C. IV. D. I.
C. IV.
What kind of relationship exists between the price of gas and the quantity demanded for gas if the quantity demanded for gas falls when the price of gas increases? A. Direct. B. Normal. C. Inverse. D. Perverse.
C. Inverse.
The US Department of Defense (DoD) issued a report that calculated the cost of the Iraq war at $758 billion. Around the same time two economists wrote a book entitled the Three Trillion Dollar War, in which they claimed the full cost of the war stood at $3 trillion. One reason for the large difference in the cost estimates is likely to be that the authors of the book included in their calculations one of the following, and the DoD did not include it in its calculations: A. Sunk costs. B. Fixed costs. C. Opportunity costs. D. Marginal costs.
C. Opportunity costs.
In a market where there are strong social and political forces: A. Quantity demanded will be expected to equal quantity supplied. B. The market will be in disequilibrium. C. Quantity demanded might not equal quantity supplied. D. The invisible hand will overcome all other forces.
C. Quantity demanded might not equal quantity supplied.
Suppose that the table above shows the demand and supply schedules for pork bellies. Which of the following statements is true? A. There would be a surplus of pork bellies if the price were 50 cents per pound. B. There would be a shortage of pork bellies if the price were 50 cents per pound. C. There would be a shortage of pork bellies if the price were 25 cents per pound. D. There would be a surplus of pork bellies if the price were 25 cents per pound.
C. There would be a shortage of pork bellies if the price were 25 cents per pound.
Suppose when you are offered $7.00 per hour to work in the campus library, you choose not to work, but when you are offered $10.00 per hour, you accept a part-time position. Your behavior can best be explained by the fact that your supply of labor curve is: A. Horizontal. B. Downward-sloping. C. Upward-sloping. D. Vertical.
C. Upward-sloping.
Dorm rooms are not usually allocated by markets. Allocating dorm rooms is: A. Determined by prices. B. Not affected by economic forces. C. Not an economic problem. D. An economic problem.
D. An economic problem.
According to the law of supply, what will motivate firms to increase their quantity supplied of a product? A. Supply. B. Production cost. C. Fixed cost. D. Price.
D. Price.
Economist Steven Landsburg claims that with a death penalty, each execution deters about 8 murders, resulting in a benefit to society of approximately $56 million. He argues that computer hackers do far more damage to society with their worms and viruses. He argues that computer hackers should be executed as well. From a purely economic perspective, the death penalty for computer hackers is: A. Never reasonable because it is not possible to place a dollar value on a human life. B. Never reasonable because no one has died from computer hacking. C. The least efficient way to deter crime. D. Reasonable based on cost benefit analysis, but society must also take into account social, political, and religious factors.
D. Reasonable based on cost benefit analysis, but society must also take into account social, political, and religious factors.
Refer to the graph above. At a price of 60 cents per dozen: A. There is a surplus of 2,000 dozen eggs per week. B. The market is in equilibrium. C. There is a shortage of 3,000 dozen eggs per week. D. There is a shortage of 2,000 dozen eggs per week.
D. There is a shortage of 2,000 dozen eggs per week.
Suppose that the table above shows the demand and supply schedules for pork bellies. There is a shortage of 15,000 pounds at a price of: A. $0.25. B. $0.95. C. $0.75. D. $0.50.
A. $0.25.
Suppose that the table above shows the demand and supply schedules for pork bellies. Based on the above table, the equilibrium price of pork bellies is: A. $0.50/lb. B. $0.75/lb. C. $0.10/lb. D. $0.25/lb.
A. $0.50/lb.
Refer to the graph above. A price ceiling would be binding, resulting in a market shortage if it is set at: A. $1.50 B. $3.00 C. Either $3.00 or $1.50 D. $2.25
A. $1.50
Suppose you have bought and paid for a ticket to see Kendrick Lamar in concert. You were willing to pay up to $350 for this ticket, but it only cost you $100. On the day of the concert, a friend offers you a free ticket to SZA instead. You can resell your Kendrick Lamar ticket for $80. What do your sunk costs equal? A. $20. B. $0. C. $80. D. $100.
A. $20.
Refer to graphs above. A recent report indicates that the device known as the right heart catheter used to diagnose heart conditions poses more risks than previously thought. The effect of the report on the market for right heart catheters is best shown by which of the graphs? A. (I) B. (IV) C. (III) D. (II)
A. (I)
Refer to the graph below. Laura's production possibility curve for math and economics problems in one night is shown in the graph. Her opportunity cost of finishing 6 math problems instead of 4 math problems is: A. 1 economics problem. B. 2 economics problems. C. 3 economics problems. D. 4 economics problems.
A. 1 economics problem.
Refer to the graph below. Point A represents a price of: A. 3 and a quantity of 5. B. 3 and a quantity of 3. C. 5 and a quantity of 5. D. 5 and a quantity of 3.
A. 3 and a quantity of 5.
New York City has been experiencing a housing emergency for quite some time. Apartments are difficult to come by. In fact, the vacancy rate has been below 5 percent since World War II. The most likely cause of the housing emergency is: A. A price ceiling on rent lower than equilibrium price. B. Too high incomes in New York City. C. A lack of a rationing mechanism to distribute existing apartments. D. A price floor on rent higher than equilibrium price.
A. A price ceiling on rent lower than equilibrium price.
A CIA student, Tommy, decides to go to Darby's with a group of friends from his microeconomics class. The whole group has an important micro exam the next day. The group shoots pool, all drinking sparkling water except for Tommy, who decides to drink several shots of tequila. After two hours of playing pool the group leaves to go to the LSC for a two hour microeconomics review. Tommy is too inebriated to attend the session and goes home. All the students that attend the review earn A's on the exam, Tommy doesn't sit the exam (he's too hung-over) and earns an F grade. The opportunity cost of Tommy's tequila drinking is most likely: A. An A grade on the exam. B. The value of the fun he had drinking tequila. C. An awful headache, an upset stomach, and a feeling of foolishness. D. There is no opportunity cost because there's no dollar cost involved.
A. An A grade on the exam.
Which of the following could be responsible for the shift of the supply curve for snow skis from S1 to S2? A. An increase in the price of the fiberglass used in ski production. B. An increase in the price of snow skis. C. An increase in the number of firms involved in ski production. D. A decrease in the price of snow skis.
A. An increase in the price of the fiberglass used in ski production.
Increasing marginal opportunity cost means that the production possibility curve is: A. Bowed out so that for every additional unit of a good given up, you get fewer and fewer units of the other good. B. Bowed in so that for every additional unit of one good given up, you get more and more units of the other good. C. Bowed out so that for every additional unit of one good given up, you get more and more units of the other good. D. Bowed in so that for every additional unit of one good given up, you get fewer and fewer units of the other good.
A. Bowed out so that for every additional unit of a good given up, you get fewer and fewer units of the other good.
This production possibility table illustrates: (eggs and rye) A. Constant marginal opportunity cost. B. Decreasing marginal opportunity cost. C. Zero opportunity cost. D. Increasing marginal opportunity cost.
A. Constant marginal opportunity cost.
Suppose that college tuition is higher this year than last year and that more students are enrolled in college this year than last year. Based on this information, we can best conclude that: A. Despite the increase in price, quantity demanded rose due to some other factor changing. B. This situation has nothing to do with the law of demand. C. The demand for a college education is positively sloped. D. The law of demand is invalid.
A. Despite the increase in price, quantity demanded rose due to some other factor changing.
Given that diesel cars get much better gas mileage than the typical car, an increase in the price of gasoline would be expected to: A. Increase the demand for diesel cars. B. Increase the demand for gasoline. C. Decrease the demand for gasoline. D. Decrease the demand for diesel cars.
A. Increase the demand for diesel cars.
The U.S. imposes substantial taxes on cigarettes but not on loose tobacco. When the tax on cigarettes went into effect, the demand for home cigarette rolling machines most likely: A. Increased, causing the price of cigarette rolling machines to rise and the quantity of machines purchased to rise. B. Increased, causing the price of cigarette rolling machines to rise and the quantity of machines purchased to fall. C. Decreased, causing the price of cigarette rolling machines to fall and the quantity of machines purchased to fall. D. Decreased, causing the price of cigarette rolling machines to rise and the quantity of machines purchased to fall.
A. Increased, causing the price of cigarette rolling machines to rise and the quantity of machines purchased to rise.
When people heard that there was a shortage of Furby dolls, they wanted even more of them. Because of this effect the pressure on the price of these dolls increased. The price of the dolls remained the same however. Thus, the shortage of these dolls: A. Increased. B. Decreased. C. Did not change. D. May have increased or decreased.
A. Increased.
Investment in capital goods is one way to increase the standard of living in the future. Investment in capital goods, however, means that we must forgo consumption today. One of the trade-offs facing an economy is consumption today and consumption in the future. The following table presents such a trade-off. With this information we know that the opportunity cost of which of the following is the greatest? Current consumption Future consumption 800 100 750 260 650 340 600 380 550 400 A. Increasing current consumption from 750 to 800. B. Increasing current consumption from 550 to 600. C. Increasing current consumption from 600 to 650. D. Increasing current consumption from 650 to 750.
A. Increasing current consumption from 750 to 800.
If quantity supplied exceeds quantity demanded, there is a tendency for: A. Price to fall to restore equilibrium. B. The demand curve to shift to the left to restore equilibrium. C. The demand curve to shift to the right to restore equilibrium. D. Price to rise to restore equilibrium.
A. Price to fall to restore equilibrium.
If the price of college education increases, the supply and demand model would most likely predict which of the following: A. The demand for textbooks will decrease. B. The supply of textbooks will decrease. C. The supply of textbooks will increase. D. The demand for textbooks will increase.
A. The demand for textbooks will decrease.
The textbook largely attributes the growth of economies over the last 200 years to: A. The development of markets. B. Laissez-faire policies. C. A decrease in the size of the world population. D. The discovery of additional resources.
A. The development of markets.
Which of the following is a normative statement? A. The governments should spend more to aid the poor. B. Tariffs on imported cars result in higher prices for domestic auto consumers. C. A tax cut will cause higher inflation. D. Reducing the budget deficit will also reduce the balance of trade deficit.
A. The governments should spend more to aid the poor.
According to Adam Smith, individuals are directed to do those things for which they have a comparative advantage by: A. Their self-interest. B. The educational system. C. Corporate management. D. Government policy.
A. Their self-interest.
In a third-party payer system: A. Total expenditures generally rise. B. Total expenditures generally fall. C. Quantity supplied generally falls. D. Quantity demanded generally falls.
A. Total expenditures generally rise.
The law of demand states that the quantity demanded of a good is inversely related to the price of that good. Therefore, as the price of a good goes: A. Up, the quantity demanded goes down. B. Down, the quantity demanded goes down. C. Up, the quantity demanded also goes up. D. Down, the quantity demanded stays the same.
A. Up, the quantity demanded goes down.
Two CIA students Aliyah and Ximena decide to spend their Saturday afternoon playing FIFA 19. Malia paid $55.99 for the video game. They eat pomegranate, flirt, and play for 5 hours, enjoying every minute of the time. If they were not playing FIFA they could both be working as line cooks at Essie's in Poughkeepsie earning $14.00 per hour. The opportunity cost of their video game playing, flirting and pomegranate eating is collectively: A. $55.99 B. $140.00 C. $195.99 D. $14.00
B. $140.00
Refer to the graphs above. Americans nationwide have been complying with recycling regulations with unexpected zeal. The effect on the market for recycled paper is best shown by which graph? A. (II) B. (I) C. (III) D. (IV)
B. (I)
With the resources available, you can make the combinations of Ums and Umies (trinkets from a place called Bandarban) shown in the table. The opportunity cost of producing 60 Umies instead of 30 Umies is: A. 30 Ums. B. 20 Ums. C. 40 Ums. D. 10 Ums.
B. 20 Ums.
Graphically, a change in price causes: A. The supply curve to shift. B. A movement along a given supply curve, not a shift. C. The demand curve to shift. D. Both supply and demand to shift.
B. A movement along a given supply curve, not a shift.
The principle of increasing marginal opportunity cost does not hold in which of the following cases? A. Each input is adaptable to the production of a limited number of goods. B. All inputs are equally adaptable to the production of all goods. C. Some inputs are more adaptable to the production of certain goods. D. Some inputs are less adaptable to the production of certain goods.
B. All inputs are equally adaptable to the production of all goods.
Which of the demand curves best reflects the demand table? A. D. B. C. C. B. D. A.
B. C.
Chuck offers $70,000 for a house. The seller turns down the offer but says she will sell the house for $72,000. However, Chuck refuses to pay the higher price. If Chuck was following the economic decision rule, the marginal benefit of the house to: A. Chuck must be greater than $72,000. B. Chuck must be less than $72,000. C. The seller must be less than $70,000. D. The seller must be less than $72,000.
B. Chuck must be less than $72,000.
Brooke and Sandy both attend the same college and have the same expenses for tuition, books, and supplies. However, Brooke is a famous actress who could earn $2 million per year if she were not attending college while Sandy could earn $10,000 a year serving hamburgers if he were not attending college. It follows that the opportunity cost of attending college: A. Is the same for both Brooke and Sandy. B. Is greater for Brooke than for Sandy. C. Is greater for Sandy than for Brooke. D. For Brooke and Sandy cannot be compared.
B. Is greater for Brooke than for Sandy.
Which of the following situations best demonstrates the law of demand? A. Movie-goers see fewer movies per year due to an overall decrease in the quality of newly released motion pictures. B. Movie-goers react to an increase in the price of a theater ticket by seeing fewer movies per year. C. An increase in the number of people writing Economics textbooks results in a decrease in average textbook prices. D. A drought causes a decrease in the availability of pumpkins, resulting in fewer jack-o-lanterns displayed on Halloween.
B. Movie-goers react to an increase in the price of a theater ticket by seeing fewer movies per year.
Refer to the graph above. If the marginal cost of each weekend trip this year is $600 no matter how many trips Rodney takes, then assuming he is rational, Rodney will: A. Take 2 trips this year. B. Not take any trips this year. C. Take 3 trips this year. D. Take 1 trip this year.
B. Not take any trips this year.
England has a relatively cool and cloudy climate, which is ill-suited for grape growing. It can produce 200 units of wine for every 400 units of cloth. Portugal, meanwhile, has a relatively warm and sunny climate, good for growing grapes. It can produce 200 units of wine for every 100 units of cloth. Which country has the higher opportunity cost of producing cloth? A. England: 2 units of wine for every unit of cloth. B. Portugal: 2 units of wine for every unit of cloth. C. Portugal: ½ unit of wine for every unit of cloth. D. England: ½ unit of cloth for every unit of wine.
B. Portugal: 2 units of wine for every unit of cloth.
Say that an economic model concludes that "government can maintain current Social Security benefit levels for every retiree by raising payroll taxes." This conclusion is: A. A statement in the art of economics because it is about policy. B. Positive statement because raising payroll taxes is one way to maintain Social Security benefits. C. False because there is no payroll tax rate high enough to maintain current benefits. D. Normative statement because there is disagreement over whether or not Social Security benefits should be maintained.
B. Positive statement because raising payroll taxes is one way to maintain Social Security benefits.
When the Polio vaccine first became available in the United States, the government controlled the price with an effective price ceiling. Production of the vaccine was not sufficient to fill all orders and the government had to regulate its distribution. Had the vaccine been sold without government intervention, the shortage would have been eliminated by price: A. Falling, demand decreasing, and supply increasing. B. Rising, quantity demanded decreasing, and quantity supplied increasing. C. Falling, quantity demanded decreasing, and supply increasing. D. Rising, demand decreasing, and quantity supplied increasing.
B. Rising, quantity demanded decreasing, and quantity supplied increasing.
Prostitution is legal in Churchill County, Nevada, but a referendum threatened to close two brothels (prostitution businesses) in that county. What idea from the textbook does this story best illustrate? A. Microeconomics and macroeconomics are very much interrelated. B. Social and political forces sometimes rein in market forces. C. Marginal revenue should equal marginal cost. D. Sunk costs do not matter in making decisions.
B. Social and political forces sometimes rein in market forces.
French bakery associations La Fédération des Entrepreneurs de Boulangerie and Les Fabricants de Biscuits et Gâteaux de France have raised the alarm about increasing milk prices in the European Union. The associations are concerned about the price increases because of the relationship of milk to butter. Compounding their concern is a recent industry publication reporting that high butter prices result in the enhanced popularity of spreads and margarine, particularly in terms of people with low incomes. Which of the following will most likely be the result of these two variables changing in the butter market according to the supply and demand model: A. The equilibrium price of butter decreases, the effect on equilibrium quantity is ambiguous. B. The equilibrium quantity of butter decreases, the effect on equilibrium price is ambiguous. C. The equilibrium quantity of butter increases, the effect on equilibrium price is ambiguous. D. The equilibrium price of butter increases, the effect on equilibrium quantity is ambiguous.
B. The equilibrium quantity of butter decreases, the effect on equilibrium price is ambiguous.
After several years of slow economic growth, world demand for petroleum began to rise rapidly in the 1990s. Much of the increase in demand was met by additional supplies from sources outside OPEC. OPEC during this time was unable to restrain output among members in its effort to lift oil prices. What best describes these events? A. The rise in demand shifted the demand for oil to the right. OPEC actions shifted the demand for oil back to the left. B. The rise in demand shifted the demand for oil to the right. As price rose, quantity of oil supplied rose. C. The rise in demand reflects a movement down along the demand curve as supply shifted to the right when suppliers produced more oil. D. The rise in demand shifted the demand for oil to the right. As price rose, supply of oil also rose.
B. The rise in demand shifted the demand for oil to the right. As price rose, quantity of oil supplied rose.
A student registers and pays $4,000 for a course entitled "Meat Consumption: The Ethics of Industrial Farm Animal Production". He purchases the required books for the course at a cost of $200; the books have no resale value. The school has an add/drop policy in which students are allowed to add and drop courses in the first week of classes at no additional cost; in the second week of classes students can drop classes but will forfeit 50% of the class tuition. In the third class meeting (the class meets twice per week) the professor screens gruesome images of day old male chicks being tossed live into a shredding machine (male chicks have no value to the egg industry). The student is deeply upset by the images and considers dropping the class. Which of the following best demonstrates the student engaging in economic reasoning: A. The student takes into account the $4,000 tuition cost but ignores the $200 book cost when making his decision. B. The student ignores the $200 book cost and $2,000 of the tuition when making his decision. C. The student takes into account the $4,000 tuition and the $200 book cost when making his decision D. The student ignores the $4,000 tuition and the $200 paid for the books when making his decision.
B. The student ignores the $200 book cost and $2,000 of the tuition when making his decision.
The opportunity cost of attending college for one year is best measured by the: A. Tuition paid for the year. B. Value of the next-best activity forgone by attending college. C. Benefit received by the student. D. Total money expenses associated with attending college.
B. Value of the next-best activity forgone by attending college.
In the early 2000s, the number of Eastern Europeans moving to England to join the labor force increased. This has led to fears by British citizens that Eastern Europeans will steal jobs from Western Europeans. What best describes their fear? A. Cost of living in Britain will increase as the demand for goods increases. B. Wages in Britain will fall since the supply of labor is increasing. C. Wages in Britain will fall as the demand for immigrants increases. D. Wages in Britain will fall since the quantity of labor supplied is increasing.
B. Wages in Britain will fall since the supply of labor is increasing.
John and Jane Smith are both economists who are deciding how to split household chores of cooking and cleaning. They discover that John has a comparative advantage in cooking. Does this discovery tell them anything about comparative advantage in cleaning? A. No; both or neither may have a comparative advantage in cleaning. B. Yes; Jane must have a comparative advantage in cleaning. C. No; either one may have a comparative advantage in cleaning. D. Yes; John must also have a comparative advantage in cleaning.
B. Yes; Jane must have a comparative advantage in cleaning.
Given the production possibilities model below, we know the opportunity cost of watching each additional episode of Tiger King when moving from point B to point A is on average: A. 3 articles. B. ½ article. C. 2 articles. D. 1 article.
B. ½ article.
Seo-Yun's marginal benefit per day from drinking espresso at Apple Pie Bakery is given in the table below. The price of an espresso is $2.50. Assume the price is Seo-Yun's marginal cost. Quantity Marginal Benefit 0 $0 1 $6.00 2 $5.50 3 $5.00 4 $4.00 5 $3.00 6 $2.00 Seo-Yun has taken my microeconomics class, so of course she will use economic reasoning (marginal analysis) to determine the quantity of espressos she will consume. How many will she drink? A. 6. B. 3. C. 5. D. 4.
C. 5.
Suppose a scientific report states that fish contain dangerously high levels of mercury (toxic to humans). At the same time, the price of diesel fuel, used by fishermen to fuel their boats, falls. What is the effect on the market for fish? A. A decrease in demand and supply; price and quantity sold falls. B. A decrease in demand and a fall in price and quantity sold. C. A decrease in demand and an increase in supply; price falls but the change in quantity is ambiguous. D. A decrease in demand and supply; price and quantity sold rises.
C. A decrease in demand and an increase in supply; price falls but the change in quantity is ambiguous.
Suppose a price floor is imposed on eggs above their equilibrium price. The likely result will be: A. A higher equilibrium price for eggs as the supply curve for eggs shifts left. B. An increase in the quantity of eggs demanded. C. A decrease in the quantity of eggs demanded. D. A lower equilibrium price for eggs as the demand curve for eggs shifts left.
C. A decrease in the quantity of eggs demanded.
If the quantity demanded for a good rises as the price falls, then the curve representing this relationship will be: A. Horizontal. B. Cannot be determined. C. Downward sloping. D. Upward sloping.
C. Downward sloping.
Which of the following statements about sunk costs is FALSE? I. Sunk costs are those that cannot be recovered, no matter what future action is taken. II. Because sunk costs cannot be recovered, they are irrelevant for future decision-making. III. Sunk costs can affect future decision-making, if they are large enough. A. II and III only. B. I and III only. C. III only. D. II only.
C. III only.
Mexico has a comparative advantage in producing corn: A. If its opportunity cost of producing corn is higher than the opportunity cost in other countries. B. Regardless of the opportunity cost in other countries. C. If its opportunity cost of producing corn is lower than the opportunity cost in other countries. D. If its opportunity cost of producing corn is the same as the opportunity cost in other countries.
C. If its opportunity cost of producing corn is lower than the opportunity cost in other countries.
An effective price ceiling is best defined as a price: A. Lower than any supplier is willing to sell. B. Higher than any consumer is willing to pay. C. Imposed by government below equilibrium price. D. Imposed by government above equilibrium price.
C. Imposed by government below equilibrium price.
In the late 1990s "mad cow" disease caused people to buy less beef. It also caused the EU to ban imported British beef and the British government to ban the sale of older cattle. What is the effect of the following on price and quantity of British beef sold worldwide? A. Price of British beef falls and quantity sold also falls. B. Price of British beef falls initially, but regains some of its losses. Quantity sold initially rises, then falls. C. Price of British beef falls initially, but regains some of its losses. Quantity sold falls. D. Price of British beef rises and quantity sold falls.
C. Price of British beef falls initially, but regains some of its losses. Quantity sold falls.
Suppose that there is a renewed interest in eating caviar at the same time that the supply of Russian caviar shrinks. What would be the most likely effect of these events on the price and quantity of caviar sold? A. Price fell and the effect on the quantity of caviar sold is ambiguous. B. Price rose and quantity sold fell. C. Price rose and the effect on the quantity of caviar sold is ambiguous. D. Price fell and quantity sold rise.
C. Price rose and the effect on the quantity of caviar sold is ambiguous.
Consider the table below, where each production choice represents a point on a production possibility curve. This production possibility table could be graphed as a: A. Curved line with negative slope. B. Curved line with positive slope. C. Straight line with negative slope. D. Straight line with zero slope.
C. Straight line with negative slope.
Economic reasoning would never help you decide: A. Whom to marry. B. What kind of work to do. C. What is morally right and what is wrong. D. Whether to read a book.
C. What is morally right and what is wrong.
Research has demonstrated an inverse relationship between educational attainment and obesity (education is the independent variable). Which of the following statements states that relationship correctly: A. When obesity increases, educational attainment decreases. B. When educational attainment increases there is no change in the incidence of obesity. C. When educational attainment increases, the incidence of obesity decreases. D. When educational attainment increases so too does the incidence of obesity.
C. When educational attainment increases, the incidence of obesity decreases.
Which of the following is not one of the three central coordination problems of the economy given in the textbook? A. How. B. What. C. Whether. D. For whom.
C. Whether.
Based on the production possibility table for a bakery below what's the opportunity cost per unit (on average) when the bakery switches from producing 40 doughnuts to producing 60 doughnuts? A. 20 apple pies. B. 10 apple pies. C. 1 apple pie. D. .5 of an apple pie.
D. .5 of an apple pie.
The table below shows how the marginal benefit of film downloads varies for Marisol with the number downloaded per month. Films Marginal Benefit of Downloading an Additional Downloaded Film 1 $6.00 2 $5.00 3 $4.00 4 $3.00 5 $2.00 The price of each film download is reduced from $2.99 to $1.99. Assuming that the price of a download accurately reflects the marginal cost to Marisol and that she is rational, she will increase the number of downloads per month from: A. 3 to 4. B. 2 to 3. C. 1 to 2. D. 4 to 5.
D. 4 to 5.
Assume that each of the following rows represents the choice faced by policy makers given the current set of U.S. institutions and technology. What is the opportunity cost of reducing unemployment from 8 percent to 4 percent? Unemployment rate Inflation rate 10% 3% 8% 4% 6% 5% 5% 7% 4% 10% A. 4 percentage points of unemployment. B. 6 percentage points of unemployment. C. 4 percentage points of inflation. D. 6 percentage points of inflation.
D. 6 percentage points of inflation.
The growing popularity of the Atkins (low-carb) Diet caused: A. An increase in the demand for bread. B. A movement down and to the right along the demand for bread curve. C. A movement up and to the left along the demand for bread curve. D. A decrease in the demand for bread.
D. A decrease in the demand for bread.
Studies have shown a significant increase in the rate of autism diagnoses in the United States over the last 20 years. Studies have also shown that during the same period the quantity of genetically modified food consumed by US household has increased significantly. These studies demonstrate: A. A direct causal relationship between autism and the consumption of genetically modified food. B. An inverse correlation between the consumption of genetically modified food and autism. C. An inverse causal relationship between the consumption of genetically modified food and autism. D. A direct correlation between the consumption of genetically modified food and autism.
D. A direct correlation between the consumption of genetically modified food and autism.
Sunk costs: A. Should be considered only when there is no information about marginal cost and marginal benefit. B. Should be considered, but only when marginal cost is less than marginal benefit. C. Are essential parts of economic reasoning. D. Are irrelevant to economic reasoning.
D. Are irrelevant to economic reasoning.
Refer to the graphs above. The effect of an increase in price is best shown by which arrow? Select one: A. A. B. C. C. B. D. D.
D. D.
When you produce cars, it is enormously expensive to produce one car, but then the costs per car decrease as more are produced. This would be an example of: A. Constant marginal opportunity costs. B. Increasing returns to scale. C. Increasing marginal opportunity costs. D. Decreasing marginal opportunity costs.
D. Decreasing marginal opportunity costs.
According to the text, economics is the study of how: A. Governments allocate resources in the face of constraints. B. Government policies can be used to meet individuals' wants and desires. C. Scarce resources are allocated to their most productive uses. D. Human beings coordinate their wants and desires in the face of constraints.
D. Human beings coordinate their wants and desires in the face of constraints.
You're deciding whether to install a $400 moonroof and a $200 security system in your car. Suppose the marginal benefit from the moonroof is $350 while the marginal benefit from the security system is $300. The economic decision rule dictates that you should: A. Purchase only the moonroof because that will provide you with the greatest marginal benefit. B. Not purchase either because the benefits of each do not exceed the costs. C. Purchase both options because the combined cost of both is less than the combined benefit. D. Purchase only the security system because its marginal benefit exceeds its marginal cost.
D. Purchase only the security system because its marginal benefit exceeds its marginal cost.
To keep the price of gas from rising quickly after Katrina, the government instituted price ceilings on the price of gasoline in some states. These price ceilings caused ______ in the gasoline market. A. Movement along the demand curve. B. Surpluses. C. Movement of the demand curve. D. Shortages.
D. Shortages.
Suppose that in Slovakia, one unit of labor can produce either 20 tons of wheat or 40 tons of soy while in Poland, one unit of labor can produce either 40 tons of wheat or 20 tons of soy. If each country has two units of labor, which of the following consumption combinations can be attained only with trade? A. Slovakia consumes 80 tons of soy. B. Poland consumes 80 tons of wheat. C. Poland consumes 40 tons of wheat and 20 tons of soy. D. Slovakia consumes 30 tons of both soy and wheat.
D. Slovakia consumes 30 tons of both soy and wheat.
If the price in a market is above its equilibrium level, there will be a: A. Surplus and upward pressure on price. B. Shortage and upward pressure on price. C. Shortage and downward pressure on price. D. Surplus and downward pressure on price.
D. Surplus and downward pressure on price.
In January, Saoirse (a CIA student) decided this was the year she was going to get fit. She signed a year-long, binding contract at the local gym, agreeing to pay $40 per month in membership fees. She also spent $300 on very stylish gym clothes. This morning, Saoirse looked out the window of her apartment and saw snow falling outside. She wondered whether or not to go to the gym. Which of the following is relevant to her decision? A. All of the above are relevant. B. The $40 that she paid the gym this month. C. The $300 she spent on gym clothes. D. The fact that she has a microeconomics test this afternoon.
D. The fact that she has a microeconomics test this afternoon.
The price of a new model of iPad tends to fall significantly a year after it is first introduced. Suppose Jane bought an iPad as soon as it was introduced (a year ago) and paid a premium price for it. Now she wants to buy a new iPad cover. Which of the following should she consider before buying the new accessory? A. The price of the iPad cover had she bought it with the iPad, the current price of the iPad cover, and the benefit she'll receive from using the iPad cover. B. The price of replacing her iPad, the price of the iPad cover, and the benefit she'll receive from using the iPad cover. C. The price she paid for her iPad, the price of the iPad cover, and the benefit she'll receive from using the iPad cover. D. The price of the iPad cover and the benefit she'll receive from using the iPad cover.
D. The price of the iPad cover and the benefit she'll receive from using the iPad cover.
Tick borne diseases like Lyme already cost Northeastern states $1.3 billion in annual healthcare costs. Scientists predict that because of climate change the range of the ticks and one of their favorite hosts the white-footed mouse will increase northward into areas that have yet to be exposed to Lyme disease. As a result of the increased range of the ticks healthcare costs related to Lyme are expected to reach $3 billion annually for the region. Assuming that the total annual cost of preventing the climate change is $2.9 billion: A. The states should not pay the prevention costs because the marginal benefit of prevention outweighs the marginal cost. B. The states should not pay for prevention because climate change is a hoax perpetrated by radical environmentalists. C. The states in the area should pay the prevention costs because the marginal cost of doing so outweighs the marginal benefit of preventing the climate change. D. The states should pay the prevention costs because the marginal benefits outweigh the marginal costs of prevention.
D. The states should pay the prevention costs because the marginal benefits outweigh the marginal costs of prevention.
Current consumption Future consumption 800 100 750 260 650 340 600 380 550 400 Investment in capital goods is one way to increase the standard of living in the future. Investment in capital goods, however, means that we must forgo consumption today. One of the trade-offs facing an economy is consumption today and consumption in the future. The table above presents such a trade-off. With this information we know that the opportunity cost of which of the following is the greatest? Select one: A.Increasing current consumption from 650 to 750. B. Increasing current consumption from 550 to 600. C.Increasing current consumption from 600 to 650. D.Increasing current consumption from 750 to 800.
D.Increasing current consumption from 750 to 800.
