ECON

Who receives the goods and services produced in the US, depends largely on

how income is distributed

positive economics is descriptive because:

it explains what has happened or predicts what will happen

in economics, scarcity refers to the situation of:

having more wants than can be satisfied with available resources

decisions about how to allocate resources are made by:

resource allocation decisions are made by all of these

economic reasoning implies that economic agents will make decisions:

by comparing the costs and benefits of various options

opportunity cost defined as

the highest valued alternative that must be given up to engage in an activity

which of the following statements best describes the study of economics?

economics studies how individuals and groups manage resources

which of the following is an example of a positive economic statement?

higher interest rates will encourage more savings

which of the following is an example of a topic studied by macroeconomists?

total output of an economy

which of the following is considered a microeconomic issue?

the local university decides to raise tuition for online course offerings

when the unemployment rate rises, college enrollment increases because workers seek to expand training. this is an example of:

correlation and causation

as corn prices rise, salsa sales tend to fall. this is an example of:

a negative correlation

the deadline for your research paper is tomorrow and you still need a day of work to complete the paper. unfortunately, you are scheduled to work all day in the cafeteria. you can turn the paper in one day late for a 10 percent penalty or take the day off of work and turn the paper in by the deadline. losing a day of wages will cost you $90. the marginal cost of turning the paper in on time is:

$90 in forgone wages

which of the following is an example of a disincentive?

law enforcement creates a "Mug Shots" section to post all recent arrests online in order to discourage potential law breakers

making a decision "on the margin" involves comparing:

additional benefits against additional costs

opportunity cost:

is the value of your next best alternative

you decided to take a college accounting course to brush up on your knowledge of the language of business. the tuition expense was $500. after the date has expired to receive a refund for the course, you are offered a job that would conflict with your class time. in making the decision to accept or decline the offer, the $500 is:

a sunk cost

the extra cost associated with producing or consuming the next unit is called:

marginal cost

saturday afternoon you can either attend a street festival, work and earn $100, or study for your midterm exam. you flip a coin between the street festival and studying, but did not really consider working. the coin flip determined that you would stay home and study. the opportunity cost of the time spent studying includes:

the benefit that could have been received at the street festival

cameron can spend the afternoon playing golf, driving his boat, or cleaning his house. although he enjoys golf, he sometimes becomes frustrated when playing. he decides to enjoy a more relaxing afternoon on his boat. cameron never thought about cleaning the house but did give golf some serious consideration. cameron's opportunity cost of taking his boat out was:

the enjoyment he would have gotten from playing golf

_____ is concerned with the fair distribution of resources across society.

equity

in a market economy, _____ interact in markets to decide the answers to the fundamental economic questions

households and firms

which of the following is an example of a positive economic statement?

higher interest rates will encourage more savings

in a market economy, those who are willing and able to buy what is produced

receive the most of what is produced

which of the following statements is true?

central planners in command economies have to make decisions that prices would have automatically made in market economies

which of the following could be an example of a question that would be studied in microeconomics?

how will the legalization of marijuana affect the market for cigarettes?

which of the following is considered a microeconomic issue? 2

all:

- apple releases a new version of the iPhone

-a family decides to drive its child to school instead of relying on a school bus

-coors light packages alcohol in bottles that turn blue when cold

causation occurs when:

change in one variable is the reason for the change in another variable

your sister always brags about how savvy of a grocery shopper she is. she believes that she saves lots of money by paying with coupons and making her grocery purchases at multiple stores to get the lowest prices on all goods. she may overestimate her savings if:

all:

-she does not count the cost of the gas used driving extra miles to multiple grocery stores

-she does not count the value of the time it took to sort and clip coupons as a cost

-she does not count the value of the extra time it takes to stand in multiple lines at multiple stores and use multiple coupons compared to a trip to one store with no coupons

a movie costs you and your friend $15 each. after one hour of watching the movie, you have struggled to stay awake while your friend has been on facebook and is also bored with the movie. you suggest that you and your friend leave the movie and go to the park. your friend responds by stating that he is not going to waste his $15 that was previously spent on the movie. your friend is considering:

a sunk cost

you decide to skip work and drive your car on a long road trip. the opportunity cost of driving your car:

includes lost wages that you could have earned working instead of taking the trip

if the graph shown represents Suzi's budget constraint, what can be said about hairbands?

they cost half as much as earrings

if we compare budget constraint A to budget constraint B in the graph shown, what can be said of the relative prices reflected in the two?

because A is steeper, soda is relatively less expensive in A than in budget constraint B

when a person's income decreases, the slope of the individual's budget constraint stays the same because:

the relative prices of the goods haven't changed

assume Claudia's budget constraint is demonstrated by line A in the graph shown. which of the following would cause Claudia's budget constraint to shift to line C?

none of these changes alone

after browsing his cabinets to see what meals he can make, Ken is deciding whether to make nachos or spaghetti for dinner. if ken makes spaghetti, we can conclude

ken will get more utility from having spaghetti for dinner than nachos

barbie is deciding whether to play soccer or go swimming over the next hour. she decides to swim. economists would conclude that barbie:

all:

-will choose swimming over soccer in other situations, ceteris paribus

-is revealing a preference for swimming over soccer

-will get more utility from swimming during the next hour than playing soccer

the general rule for benefit maximization suggest that in personal equilibrium:

the ratio of marginal benefits to price should be identical across all goods

a demand schedule is:

a table which shows the quantities of a particular good or service that consumers are willing to purchase at various prices

the demand curve represents the relationship between:

price and quantity demanded with everything else held constant

after getting a raise at work, jennie now regularly buys steak instead of hamburger. based on this behavior, we can assume:

steak is a normal good, and hamburger is an inferior good for jennie

you just heard about burtons annual tent sale going on next week. this will likely cause your demand for a burton jacket today to:

decrease because of your expectations of the price of burton jackets next week

roy just got a big promotion at work which includes a sizable pay increase. roy's demand for ramen noodles, an inferior good, will likely:

decrease, and his demand curve will shift to the left

the most likely complementary good for cereal would be:

milk

the city of burlington gets very hot each summer and very cold each winter. we would expect:

the demand for lemonade to increase each summer and decrease each winter

ray's company just announced that everyone will be getting their pay cut by 5% in order to avoid having to close down. ray's demand for coffee, a normal good, will likely:

decrease, and his demand curve will shift to the left

considering the concept of cross-price elasticity, when two goods are complements:

an increase in the price of one will cause a decrease in the quantity demanded of the other

considering the concept of cross-price elasticity, when 2 goods are substitutes:

an increase in the price of one will cause an increase in the demand of the other

cross-price elasticity refers to:

how much the demand for one good changes in response to a change in the price of a different good

the calculated price elasticity of demand:

is always a negative number, although many times is reported as an absolute value

dave and buster play 2 games of tennis, then decide to go have lunch. using the concept of utility to explain their choices, we can conclude that:

the marginal utility from playing a third game must be less than the utility from having lunch

the general rule for benefit maximization suggests that in personal equilibrium:

the ratio of marginal benefits to price should be identical across all goods

a(n) ______ shows the bundles of two goods that provide an equal level of satisfaction to the consumer

indifference curve

for almost all goods, the:

lower the price goes, the higher the quantity demanded

jan heads to the store to buy burgers for dinner. seeing a sale on hot dogs, she buys those those instead. the change in her demand for burgers is due to which factor?

prices of related goods

an increase in the price of heinz ketchup is likely to cause:

an increase in the demand for hunt's catsup, due to a change in the price of a substitute good

a table which shows the quantities of a particular good or service that consumers are willing to purchase at various prices is known as:

a demand schedule

a decrease in the price of ice cream is likely to cause:

an increase in the demand for ice cream cones due to a change in the price of a complementary good

the latest news report stated that the housing market is making a comeback and that house prices are on the rise. this information is likely to:

increase demand for houses now due to a change in expectations of future prices

when two goods are complements, we expect their cross-price elasticity of demand to:

be negative

income elasticity will be positive for:

all normal goods

which of the following statements is true of the cross-price elasticity of demand?

the cross-price elasticity of demand between complements is negative

if a 1% change in the price of a good causes a 1% change in the quantity demanded, the good has an elasticity of demand:

equal to 1

tina withdraws $20,000 from her money market account to start up her own house cleaning business. the account earns 3 percent interest. in order to properly account for all costs of her business, tina must not forget:

the opportunity cost of $600

when economic profits are zero, accounting profits are most likely:

positive

davy's doggie daycare rents a warehouse and field for $2000 a month to house its boarding pooches. farmer fred owns the property; he used to use it for farming and made $3000 a month, but has since retired. what is the cost of the warehouse and field to davy?

it is an explicit cost of $2000

fixed costs are:

costs that don't depend on the the quantity of output produced

economists assume the central goal of any business is to:

maximize profit

total cost can be defined as:

the amount that a firm spends on all inputs that go into producing a good or service

the increase in output that is generate by an additional unit of input is called the:

marginal product

the principle of demising marginal product states:

the marginal product of an input decreases as the quantity of the input increases

a production function represents:

the relationship between the quantity between the quantity of inputs and the quantity of outputs

if the marginal cost of hiring another worker to produce sandwiches is $4 per sandwich, and sandwiches sell for $5 each, then:

another worker should be hired

a firm producing 10 units of output incurs a total cost of $800. when it produces 11 units, the total cost increases to $890. what is the marginal cost of producing the eleventh unit?

$90

marginal cost:

is calculated as change in total cost divided by change in total output

A firm currently employs four workers in a sandwich shop, and produces sandwiches at a total cost per sandwich (ATC) of $3. The sandwiches sell for $5. If the marginal cost of hiring another worker to produce sandwiches is $5.50 per sandwich, then:

all:

-it will cost $5.50 to make another sandwich, which can only be sold for $5

-the firm should no hire a fifth worker

-the firm will lose $.50 per sandwich if it hires another worker

as long as market price remains above the average total cost, and the firm chooses the profit-maximizing level of output, it will:

make profits

in a perfectly competitive market price takers exist because:

there are many buyers and sellers

for a firm in a perfectly competitive market, if it is producing at a level of output where marginal costs are less than marginal revenue:

it should increase production to increase profits

in the long run, firms will enter a perfectly competitive market if the existing firms are making:

a profit

which of the following goods is likely to have the lowest price elasticity of demand?

life-saving drugs

which of the following pairs of goods has a negative cross-price elasticity?

pans and paper notebooks

suppose Chip's chips produces bags of potato chips that sell for $3 a bag. if the sold 12,000 bags and incurred total costs of $30,000, what was the company's profit?

6,000

Mike withdraws $100,000 from her trust fund to start up her own manicure business. the trust fund earns 4 percent interest. in order to properly account for all costs of her business, Mika must not forget:

the implicit cost of $4000

when accounting profits are positive, economic profits could be:

all:

-negative

-zero

-positive

costs that require a firm to spend money are considered:

explicit costs

profit is the:

total revenue minus total cost

when the slope of the total production curve steepens, it means:

the marginal product must be increasing

the additional cost a firm will incur by producing one additional unit of output is the:

marginal cost

Firms in perfectly competitive markets who wish to maximize profits should produce where:

marginal revenue and marginal cost are equal

Firms in perfectly competitive markets who wish to maximize profits should:

all:

-produce less as long as marginal cost is greater than marginal revenue

-keep producing more as long as marginal cost is less than marginal revenue

-produce where marginal cost and marginal revenue are equal

a fall in the price of flour, used in making cakes, is likely to:

increase the supply of cakes

the amount of a particular good that sellers in a market will sell at a given price during a specified period is called:

quantity supplied

supply describes how much of something producers:

are willing and able to offer for sale under certain circumstances

the prices of related goods matters when determining supply because:

it affects the opportunity cost of production

the supply curve and the demand curve intersect at the point:

where supply and demand are at equilibrium

consider a market that is in equilibrium. if it experiences both an increase in demand and an increase in supply, what can be said of the new equilibrium?

the equilibrium quantity will definitely rise, while the equilibrium price cannot be predicted

a factory recently added new robots to its production line, increasing productivity. this will likely cause:

a rightward shift of the supply curve

Consider the market for ride-on lawn mowers and the recent increases in the price of oil. The recent increase in the price of oil makes it more expensive to manufacture ride-on lawn mowers. An increase in the price of oil also makes it more expensive to run a ride-on mower. What is likely to happen to equilibrium price and quantity of lawn mowers as a result in the changing price of oil?

Supply and demand will both decrease, decreasing equilibrium quantity and having an indeterminate effect on price.

we study the simple model of competitive markets because it helps to:

provide useful insights about markets that may or may not be perfectly competitive