Econ Midterm

The negative slope of the production possibilities curve is a graphical way of indicating that:

to produce more of one product we must do with less of another.

The law of increasing opportunity costs exists because:

resources are not equally efficient in producing various goods.

Which of the following most closely relates to the idea of opportunity costs?

tradeoffs.

Opportunity cost is best defined as:

the amount of one product that must be given up to produce one more unit of another product.

The law of increasing opportunity costs is reflected in a production possibilities curve that is:

concave to the origin.

The concept of opportunity cost:

suggests that the use of resources in any particular line of production means that alternative outputs must be forgone.

Refer to the below diagram. The combination of computers and bicycles shown by point F: 

is attainable, but implies that the economy is not using all its resources.

A rational decision maker takes an action only if the

marginal benefit is greater than the marginal cost.

Refer to the below production possibilities curve. At the onset of the Second World War the Soviet Union was already at full employment. Its economic adjustment from peacetime to wartime can best be described by the movement from point:

c to point b.

Refer to the below diagram. The movement down the production possibilities curve from point A to point E suggests that the production of: 

computers, but not bicycles, is subject to increasing opportunity costs.

In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of:

scarcity and opportunity costs.

Refer to Figure 2-5. Suppose this economy is producing at point D. Which of the following statements would best explain this situation?

There is widespread unemployment in the economy.

Kara was out jogging and despite being tired, decided to run one more mile. Based on her actions, economists would conclude that Kara:

decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile.

Refer to the below tables. Opportunity costs of producing military goods are: 

smaller in Duckistan than Herbania.

A country can CONSUME some combination of goods outside its production possibilities curve by:

specializing and engaging in international trade.

College-age athletes who drop out of college to play professional sports

are well aware that their opportunity cost of attending college is very high.

Suppose that a university decides to spend $1 million to upgrade personal computers and scientific equipment for faculty rather than spend $1 million to expand parking for students. This example illustrates:

opportunity costs.

Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact:

implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.

A production possibilities frontier can shift outward if

there is a technological improvement.

Refer to the below tables. Suppose that Duckistan and Herbania are each producing 14 units of civilian goods and 2 unit of military goods. Then: 

Duckistan is fully employing its resources but Herbania is not.

Refer to the below diagram. If society is currently producing 9 units of bicycles and 4 units of computers and it now decides to increase computer output to 6, the cost: 

will be 4 units of bicycles.

Refer to the below tables. Suppose that technology and the quality of resources are the same in both countries. We can conclude that: 

Herbania has more resources than Duckistan.

The point on the production possibilities curve that is most desirable can be found by:

comparing marginal benefits and marginal costs.

Which of the following is an economic explanation for why most college-aged movie stars do not attend college.

the opportunity cost in terms of reduced income is too great

Refer to the below diagram. This production possibilities curve is: 

concave to the origin because of increasing opportunity costs.

Refer to the below diagram. The direct economic impact of the destruction and loss of lives caused by the terrorist attacks of September 11, 2001 is illustrated by the: 

shift of the production possibilities curve from CD to AB.

Refer to the below diagram. If society is currently producing the combination of bicycles and computers shown by point D, the production of 2 more units of bicycles: 

will cost 1 unit of computers.

In response to the terrorist attacks of September 11, 2001, the government decided to allocate more resources toward defense goods. The government's decision reflects their assessment that:

the marginal benefits of additional defense goods outweighed the marginal cost.

Refer to the below tables. Opportunity costs are:

increasing in both Duckistan and Herbania.

Refer to Figure 2-16. It is possible for this economy to produce

90 gadgets and 30 widgets.

Refer to the below production possibilities curve. At the onset of the Second World War the United States had large amounts of idle human and property resources. Its economic adjustment from peacetime to wartime can best be described by the movement from point: 

a to point b.

Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as:

rational self-interest, because he attempting to increase his own income by identifying and satisfying

someone else's wants.

 A person should consume more of something when its marginal:

benefit exceeds its marginal cost.

The production possibilities curve shows:

the various combinations of two goods that can be produced when society employs all of its scarce resources.

The construction of a production possibilities curve assumes:

technology is fixed.

Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:

opportunity costs.

Refer to the below tables. Suppose that the amount and quality of resources are the same in both countries. We can conclude that:

Herbania is technologically superior to Duckistan in producing civilian goods.

Consumers might leave a fast-food restaurant without being served because:

they conclude that the marginal cost (monetary plus time costs) exceeds the marginal benefit.

Refer to Figure 2-2. If households are sellers in the markets represented by Box D of this circular-flow diagram, then

All of the above are correct.

A bagel shop sells fresh baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has 8 dozen bagels left at 6:30 p.m. on a particular day, which of the following alternatives is most attractive?

Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen.

In recent years the economy of Japan has grown, despite the fact that the population of Japan has declined. Which of the following would best explain Japan's economic growth despite having a smaller population?

Advancements in technology that make labor more productive.

After much consideration, you have chosen Ireland over Spain for your Study Abroad program next year. However, the deadline for your final decision is still months away and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

The marginal benefit of going to Spain increases.

In drawing a production possibilities curve we hold constant:

both technology and resource supplies.

The optimal point on a production possibilities curve is achieved where:

each good is produced at a level where marginal benefits equal marginal costs.

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that

people face tradeoffs.

Refer to the below diagram. The combination of computers and bicycles shown by point G is: 

unattainable, given currently available resources and technology.

An exception to the advice "go to college, stay in college, and earn a degree" occurs when:

the opportunity cost of attending college is extraordinarily high.

The law of increasing opportunity costs exists because:

resources are not equally efficient in producing various goods.

Refer to the below diagram. Points A, B, C, D, and E show: 

combinations of bicycles and computers that society can produce by using its resources efficiently.

The law of increasing opportunity costs states that:

if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of other goods to do so.

If the price of SUVs increases, we would expect

the demand for gasoline to decrease.

Refer to Figure 4-19. If price in this market is currently $14, then there would be a(n)

excess supply of 40 units. The law of supply and demand predicts that the price will fall from $14 to a lower price.

Refer to the below diagram. A government minimal price support program to aid farmers is best illustrated by: 

price C.

A improvement in production technology will shift the

supply curve to the right.

Refer to Figure 4-8. Suppose the figure shows the market demand for coffee. Suppose the price of tea, a substitute good, increases. Which of the following changes would occur?

a shift from D2 to D1

Suppose that when income rises, the demand curve for doctor’s visits shifts to the right. In this case, we know doctor’s visits are

normal goods.

Suppose you like to make, from scratch, pies filled with banana cream and vanilla pudding. You notice that the price of bananas has increased. As a result, your demand for vanilla pudding would

decrease.

Refer to the below diagram. A government-set binding price ceiling is best illustrated by:

price A.

 Refer to the below diagram, which shows demand and supply conditions in the competitive market for product X. A shift in the demand curve from D₀

to D₁ might be caused by a(n): 

increase in the price of complementary good Y.

Price floors and price ceilings:

interfere with the rationing function of prices.

Refer to Figure 4-27. Which of the four panels illustrates a decrease in quantity supplied?

Panel (b)

A surplus of a product will arise when price is:

above equilibrium with the result that quantity supplied exceeds quantity demanded.

A market supply curve shows how the total quantity supplied of a good varies as

price varies.

Refer to the below diagram, which shows demand and supply conditions in the competitive market for product X. If supply is S₁

and demand D₀, then 

0F represents a price that would result in a shortage of AC.

Lead is an important input in the production of crystal. If the price of lead decreases, then we would expect the supply of

crystal to increase.

Suppose chocolate-dipped strawberries are currently selling for $30 per dozen, but the equilibrium price of chocolate-dipped strawberries is $20 per dozen. We would expect a

surplus to exist and the market price of chocolate-dipped strawberries to decrease.

If the supply of a product increases, then we would expect equilibrium price

to decrease and equilibrium quantity to increase.

A movement along the demand curve for Aquafresh toothpaste is caused by

a change in the price of Aquafresh toothpaste.

Refer to the below diagram. A government-set binding price floor is best illustrated by: 

price C.

Refer to Figure 4-25. All else equal, a major paper manufacturer filing for bankruptcy and shutting down as a result of an IRS tax evasion investigation would cause a move from

S_B to S_A.

Refer to Figure 4-27. Panel (d) shows which of the following?

a decrease in quantity demanded and a decrease in supply

Refer to Figure 4-27. Which of the four panels illustrates an increase in quantity demanded?

Panel (c)

An decrease in the price of oranges would lead to a(n)

a movement down and to the left along the supply curve for oranges.

Refer to Figure 4-18. At what price would there be an excess demand of 200 units of the good?

$20

Refer to the below diagram, which shows demand and supply conditions in the competitive market for product X. Other things equal, a shift of the supply curve from S₀ to S₁ might be caused by a(n): 

increase in the wage rates paid to laborers employed in the production of X.

Refer to Figure 4-11. The movement from point A to point B on the graph is caused by

an increase in the price of the good.

Suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are

substitute goods.

Refer to the below diagram, which shows demand and supply conditions in the competitive market for product X. If the initial demand and supply curves are D₀ and S₀, equilibrium price and quantity will be: 

0F and 0C respectively.

Refer to Figure 4-1. The movement from point A to point B on the graph shows a(n)

increase in quantity demanded.

In January, buyers of gold expect that the price of gold will fall by February. What happens in the gold market in January, holding all else constant?

The demand curve shifts to the left.

Suppose that coffee growers sell 200 million pounds of coffee beans at $2 per pound in 2007, and sell 240 million pounds for $3 per pound in 2008. Based on this information we can conclude that the:

demand for coffee beans has increased.

Refer to Figure 4-6. Suppose that the federal government is concerned about obesity in the United States. Congress is considering two plans. One would require “junk food” producers to include warning labels on all junk food. The other would impose a tax on all products considered to be junk food (tax on the producers). We could illustrate the tax as producing a movement from

Point A to Point C in Panel 2.

A price floor means that:

government is imposing a minimum legal price that is typically above the equilibrium price.

Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market?

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for wedding cakes resulting from a decrease in the number of pastry chefs?

Point C to Point D

The current price of blue jeans is $30 per pair, but the equilibrium price of blue jeans is $25 per pair. As a result,

All of the above are correct.

Funsters, Inc., the largest toy company in the country, sells its most popular doll for $15. It has just learned that its leading competitor, Toysorama, is mass-producing an excellent copy and plans to flood the market with their $5 doll in six weeks. Funsters should

increase the supply of its doll now before the other doll hits the market.

Refer to Figure 4-22. At a price of $12, there is a

shortage of 4 units.

Farmers can plant either corn or soybeans in their fields. Suppose that a new technology for converting corn into liquid fuel increases the demand for corn. Which of the following is most likely to occur?  

The supply of soybeans will decrease.

Refer to the below diagram. A binding rent controls are best illustrated by: 

price A.

If mayonnaise and Miracle Whip are substitutes, then which of the following would increase the demand for Miracle Whip?

an increase in the price of mayonnaise

Refer to Figure 4-25. All else equal, an increase in the price of the pulp used in the paper production process would cause a move from

S_B to S_A.

Suppose that salsa manufacturers sell 2 million bottles at $3.50 in one year, and 3 million bottles at $3 in the next year. Based on this information we can conclude that the:

supply of salsa has increased.

If toast and butter are complements, then which of the following would increase the demand for toast?

a decrease in the price of butter

several studies have shown promising links between green tea consumption and cancer

prevention. How does this affect the market for green tea?

The demand for green tea curve shifts to the right because of a change in tastes and preferences in favor of green tea.

Refer to Figure 4-25. All else equal, the return of college students to campus in the fall would cause a move from

x to y.

If, at the current price, there is a shortage of a good, then

the price is below the equilibrium price.

A decrease in the number of sellers in the market causes

the supply curve to shift to the left.

A likely example of substitute goods for most people would be

apple juice and orange juice.

Refer to the below diagram, which shows demand and supply conditions in the competitive market for product X. Given D₀, if the supply curve moved from S₀ to S₁, then: 

supply has decreased and equilibrium quantity has decreased.