microeconomics practice exam 1

21. The law of demand states that: A.price and quantity demanded are inversely related. B.the larger the number of buyers in a market, the lower will be product price. C.price and quantity demanded are directly related. D.consumers will buy more of a product at high prices than at low prices.

A

A nation's production possibilities curve is bowed out from the origin because: A.resources are not equally efficient in producing every good. B.the originator of the idea drew it this way and modern economists follow this convention. C.resources are scarce. D.wants are virtually unlimited.

A

An increase in product price will cause: A.quantity demanded to decrease. B.quantity supplied to decrease. C.quantity demanded to increase. D.the supply curve to shift to the right.

A

In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of: A.scarcity and opportunity costs. B.money and real capital. C.complementary economic goals. D.full production.

A

Money is not an economic resource because: A.money, as such, is not productive. B.idle money balances do not earn interest income. C.it is not scarce. D.money is not a free gift of nature.

A

The law of increasing opportunity costs states that: A.if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of other goods to do so. B.the sum of the costs of producing a particular good cannot rise above the current market price of that good. C.if the sum of the costs of producing a particular good rises by a specified percent, the price of that good must rise by a greater relative amount. D.if the prices of all the resources used to produce goods increase, the cost of producing any particular good will increase at the same rate.

A

Which of the following is a labor resource? A.a computer programmer B.a computer C.silicon (sand) used to make computer chips D.a piece of software used by a firm

A

Which of the following most closely relates to the idea of opportunity costs? A.tradeoffs B.economic growth C.technological change D.capitalism

A

A decrease in the price of cameras will: A.cause the demand curve for film to become vertical. B.shift the demand curve for film to the right. C.shift the demand curve for film to the left. D.not affect the demand for film.

B

An effective price floor will: A.force some firms in this industry to go out of business. B.result in a product surplus. C.result in a product shortage. D.clear the market.

B

An increase in demand means that: A.given supply, the price of the product will decline. B.the demand curve has shifted to the right. C.price has declined and consumers therefore want to purchase more of the product. D.the demand curve has shifted to the left.

B

If there is a shortage of product X: A.fewer resources will be allocated to the production of this good. B.the price of the product will rise. C.the price of the product will decline. D.the supply curve will shift to the left and the demand curve to the right, eliminating the shortage.

B

Macroeconomics can best be described as the: A.analysis of how a consumer tries to spend income. B.study of the large aggregates of the economy or the economy as a whole. C.analysis of how firms attempt to maximize their profits. D.study of how supply and demand determine prices in individual markets.

B

Some agricultural sub-Saharan nations of Africa have overfarmed and overgrazed their land to the extent that significant portions of it have turned into desert. This suggests that: A.the concavity of the production possibilities curves of such nations has increased. B.the production possibilities curves of such nations have shifted inward. C.the production possibilities curves of such nations have shifted outward. D.these nations are operating at some point outside of their production possibilities curves.

B

The French term "laissez-faire" means: A."there is no free lunch." B."let it be." C."circular flow." D."public ownership."

B

The scarcity problem: A.persists only because countries have failed to achieve continuous full employment. B.persists because economic wants exceed available productive resources. C.has been solved in all industrialized nations. D.has been eliminated in affluent societies such as the United States and Canada.

B

Which of the following is associated with macroeconomics? A.an examination of the incomes of Harvard Business School graduates B.an empirical investigation of the general price level and unemployment rates since 1990 C.a study of the trend of pecan prices since the Second World War D.a case study of pricing and production in the textbook industry

B

(Last Word) Which of the following has to do with the idea that generalizations that apply to individuals are also always valid for a group? A.the law of large numbers B.the law of averages C.the fallacy of composition D.the post hoc, ergo propter hoc fallacy

C

A production possibilities curve shows: A.that resources are unlimited. B.that people prefer one of the goods more than the other. C.the maximum amounts of two goods that can be produced assuming the full use of available resources. D.combinations of capital and labor necessary to produce specific levels of output.

C

At the point where the demand and supply curves intersect: A.the buying and selling decisions of consumers and producers are inconsistent with one another. B.the market is in disequilibrium. C.there is neither a surplus nor a shortage of the product. D.quantity demanded exceeds quantity supplied.

C

Copyrights and trademarks are examples of: A.capital goods. B.human capital. C.property rights. D.public goods.

C

Households and businesses are: A.both buyers in the resource market. B.both sellers in the product market. C.sellers in the resource and product markets respectively. D.sellers in the product and resource markets respectively.

C

The demand curve shows the relationship between: A.money income and quantity demanded. B.price and production costs. C.price and quantity demanded. D.consumer tastes and the quantity demanded.

C

The term quantity demanded: A.refers to the entire series of prices and quantities that comprise the demand schedule. B.refers to a situation in which the income and substitution effects do not apply. C.refers to the amount of a product that will be purchased at some specific price. D.means the same thing as demand.

C

When the economist says that economic wants are insatiable, this means that: A.economic resources are valuable only because they can be used to produce consumer goods. B.economic resources--land, labor, capital, and entrepreneurial ability--are scarce. C.these wants are virtually unlimited and therefore incapable of complete satisfaction. D.the structure of consumer demand varies from time to time and from country to country.

C

When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement describes: A.an inferior good. B.the rationing function of prices. C.the substitution effect. D.the income effect.

C

Which of the following is an economic explanation for why most college-aged movie stars do not attend college. A.they are too dumb to get into college B.they would find college life boring C.the opportunity cost in terms of reduced income is too great D.they cannot afford the room, board, and tuition fees most colleges charge.

C

A normal good is one: A.whose amount demanded will increase as its price decreases. B.whose amount demanded will increase as its price increases. C.whose demand curve will shift leftward as incomes rise. D.the consumption of which varies directly with incomes.

D

A price floor means that: A.inflation is severe in this particular market. B.sellers are artificially restricting supply to raise price. C.government is imposing a maximum legal price that is typically below the equilibrium price. D.government is imposing a minimum legal price that is typically above the equilibrium price.

D

Any point inside the production possibilities curve indicates: A.the presence of technological change. B.that resources are imperfectly substitutable among alternative uses. C.the presence of inflationary pressures. D.that more output could be produced with available resources.

D

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by: A.an increase in the cost of making donuts. B.an increase in the price of coffee. C.consumers expecting donut prices to fall. D.a change in buyer tastes.

D

The invisible hand concept suggests that: A.changes in product demands are only randomly reflected in changes in the demands for resources. B.profit maximization is inconsistent with an efficient allocation of resources. C.government action is necessary to correct for market failures. D.when firms maximize their profits, society's output will also be maximized.

D

Which of the following is a land resource? A.a farmer B.an oil drilling rig C.a machine for detecting earthquakes. D.natural gas

D