Microeconomics: Test 1
Suppose the figure shown represents the production possibilities frontier for Country A. Which of the following combinations of goods could Country A consume in the absence of trade?
5 airplanes, 30 trucks
Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. For a worker in Country A, the trade-off of making one tomato is:
5 bananas
For which reason might you incorrectly conclude that an idea no other person has implemented is highly profitable?
All of these might lead to you incorrectly believe an idea is profitable
You read a news article that states "More people purchase ChapStick after the weather report predicts a windy week." Which of the following statements is true?
Buying chapstick is positively correlated with the announcement of a windy week
Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Which of the following statements is true
Country A has a comparative advantage at producing cars and Country B has a comparative advantage at producing trucks
An increase in price causes: I. a decrease in revenue due to the price effect. II. an increase in revenue due to the price effect. III. a decrease in revenue due to the quantity effect. IV. an increase in revenue due to the quantity effect.
II and III
Suppose that, given the same number of workers, the United States can produce five times as many computers or ten times as many airplanes as Mexico. Which of the following statements is true?
The United States has an absolute advantage at producing both airplanes and computers
suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. On the other hand, a Canadian worker can produce 10 pairs of shoes or grow 20 apples per fay. Which of the following statements is true?
The United States has an absolute advantage at producing both shoes and apples
Suppose the government would like to reduce smoking rates among teenagers. Which of the following policies is designed to achieve this goal by changing incentives?
The government raises the tax on cigarettes
How does the amount of time consumers have to adjust to a price change affect elasticity?
The more time consumers have to adjust, the more elastic their demand will be
Which of the following is considered a macroeconomic issue?
The unemployment rate in the U.S falls during the month of June
If a producer incorrectly sets the price of its product too low:
a shortage (excess demand) will result
The concepts of comparative advantage, specialization, and trade can be useful in explaining why:
all of these statements are true
Suppose the graph shown depicts the demand for a normal good. A shift from A to B might be caused by:
an increase in income
The most fundamental financial principle for any business is:
cash in must exceed cash out
Suppose the cross-price elasticity of demand between two goods is −2. This tells us the two goods are:
complements
when an economist says that a country can experience gains from trade, this means it can
consume at a point outside its production possibilities frontier
The most difficult thing a business has to do is to
convince a customer to buy the product
When toilet paper sales increase, quarterly economic growth rates tend to rise. This is an example of:
correlation without causation
A decrease in the price of spaghetti noodles is likely to cause a(n) _____ in the demand for penne pasta, due to a change in the price of a _____.
decrease: substitute good
The single most costly item for most businesses is
employees
Thomas Malthus was an early 19th century economist who created a model describing the relationship between population growth and:
food production
A perfectly competitive market is one in which _____ buyers and sellers easily trade a standardized good or service.
fully informed; price-taking
Consider the production possibilities frontier in the figure shown. The opportunity cost of cars between points B and C is:
greater than the opportunity cost of cars between points A and B
A linear demand curve:
has a constant slope
Bob just got laid off from his job and now has no income. What can we assume about his demand?
his demand for inferior goods will increase
With the baby boomer generation hitting the retirement age, waiting lists to get into nursing homes are on the rise. In this situation, we could reasonably expect the demand for geriatric care to:
increase due to the number of buyers increase
When two countries specialize and trade with one another, total production:
increases, but only if a comparative advantage exist
If increasing the admission charge for national parks increases the National Park Service's total revenue, then the demand for national park visits is:
inelastic
Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand of 0.4 indicates an _____ demand, meaning the percentage change in quantity demanded will be _____ than the percentage change in price.
inelastic; less
the two flows, or things being exchanged, in the circular flow model are:
inputs/outputs and money
the price elasticity of demand for eggs is -0.27 and the price elasticity of demand for soft drinks is -0.70. Therefore, the demand for eggs:
is less elastic than the demand for soft drinks
The demand for a subway ride is likely _____ price elastic than the demand for a car because _____.
less; a subway ride requires a smaller portion of one's income
For almost all goods, the:
lower the price goes, the higher the quantity demanded
The goal of a business is:
maximize profit or minimize loss
A baker of chocolate chip cookies is likely to have a _____ price elasticity of supply than the seller of rare baseball cards due to _____.
more elastic; the availability of inputs
Ren loves to go to the movies, and he just learned that he can buy a ticket at a discounted price using his student ID. Ren now sees movies at the theater even more frequently. The change in Ren's behavior would be shown graphically by a:
movement down along his demand curve
an increase in the price of butter is likely to cause the demand for:
olive oil to increase
The most commonly used measures of elasticity are:
price elasticity of demand and price elasticity of supply
what is every business in business for?
provide a product or service
After getting a raise at work, Tiana now regularly buys steak instead of hamburger. Based on this behavior, what can we assume about these goods for Tiana?
steak is a normal good and hamburger is an inferior good
Economists typically use the mid-point method of calculating elasticity because:
the elasticity between two points is the same, regardless of the direction of the movement
The slope of a production possibilities frontier measures:
the opportunity cost of producing one good in terms of the other
The prices of related goods matter when determining supply because they affect:
the opportunity cost of production
A product is a quality product if it
the product satisfies the consumer for the price they paid
the most valuable asset for most (if not all) businesses is
their employees
The way a business continues to succeed over an extended period is
to differentiate the product
The amount that a firm receives from the sale of goods and services is:
total revenue
a supplier should price a product based on
whatever the customer will pay
