ECON 2302 Exam 1: Chapters 1-5

Economics is most importantly concerned with:

studying how we allocate scarce resources to satisfy unlimited wants.

From an economists' perspective, which of the following observations is NOT true?

self-interest is purely monetary in nature.

Identify the chain of events in creating a theory:

formulate a hypothesis, gather data, evaluate the results, support or refute the hypothesis, tentatively accept theory.

A scientist trying to test a theory about the relationship between people consumption of alcohol longevity would want to hold all the following variables constant except__.

the amount of alcohol that people in the experimental group consumed.

Which of the following is true?

all the above are true statements:

virtually all theories in economics are expressed using a ceteris paribus ("let everything else be equal" or "holding everything else constant") assumption

The fallacy of composition is that, even if something is true for an individual, it is not necessarily true for many individuals as a group

one must always be careful not to confuse correlation with causation

positive analysis involves statement about what is or what is likely to happen.

Which of the following is a positive statement?

all the above are positive statement:

Increased money supply growth will lead to a higher rate of inflation.

The moon is made of green cheese.

There are more millionaires in Uganda than in the United States.

People watch more TV during finals week than during the rest of the term.

Human capital is:

the skill or knowledge of individuals.

Economics: History:

94 76

87 84

77 91

A student has only a few hours to prepare for two different exams this afternoon, above table shows alternative possible exam scores with these alternative uses the student's time opportunity cost of scoring a 94 on the economics exam rather than a 77 is:

15 points on the history exam

The opportunity cost of an action is:

the value of the best foregone alternative.

Jared declines to purchase a new bicycle priced at $200. An economist would conclude

the expected marginal benefit of the bicycle to Jared is less than $200.

DVD rentals: Marginal Benefit:

1 $8.50

2 $7.50

3 $6.50

4 $5.50

5 $4.50

6 $3.50

7 $2.50

8 $1.50

If the price of DVD rental is $4, a consumer following the rule of rational choice will rent:

5 DVDs per month

Negative incentives:

decrease benefits or increase costs

In a market system, decisions about how to allocate resources are made:

by individuals and firms interacting markets coordinated by marketplaces.

If resources and goods are free to move across states, if Oregon producers choose to specialize in honey, and California producers choose to specialize in growing almonds, then we could reason that:

all the above are true:

California has a comparative advantage in producing almonds.

Oregon has a comparative advantage in producing honey.

The opportunity cost of growing almonds is lower in California than in Oregon.

The opportunity cost of producing honey is lower in Oregon than in California.

Three economic questions must be determined in all societies. What are they?

What goods will be produced? Howell the goods be produced? Who will get the goods produced?

In a market economy, the goods produced go to those who(m):

have sufficient incoming are willing to pay the price asked for those goods.

Which of the following would be an example of market failure?

all the above:

Second hand cigarette smoke.

Lack of funding for education.

Underproduction of a food by a monopoly.

Government policies that use taxes and government spending in attempt to stabilize the economy are known as:

fiscal policy

Which of the following does not contribute to economic growth?

substantial increases in money supply

The use of large amounts of labor relative to capital in an economy indicates:

labor-intensive production

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Refer to figure 3-1. In the circular flow diagram, goods and services:

flow in a counterclockwise direction

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Refer to Figure 3-2. An economy is operating at full employment, and then workers in the bread industry are laid off. This changes portrayed in movement from:

C to F

The law of increasing opportunity costs applies when:

resources are not equally adaptive among potential productive uses.

The concavity (bowed-out shape, of the production possibilities curve is the result of:

the law of increasing opportunity cost

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Refer to Figure 3-10 . Which of the following would most likely cassette production possibilities curve for breadfruit and fish to shift from AA to BB?

additions to the stock of capital

Which of the following will shift a production possibilities curve outward?

an improvement in technology

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Refer to Figure 3-14. Assuming that the production possibilities curve out further due to technological change, which of the following observations is correct?

There is a technological advance in food production but not in housing production.

The law of demand refers to the:

inverse relationship between the price of a good and the quantity demanded.

Price: Sven: Larry: Rest of Market:

$8 5 0 7

$6 8 5 9

$5 11 9 11

$4 14 11 14

$3 17 14 20

Shown are the demand schedules for gourmet ice cream of two individuals are the result of the market. At price $8, the quantity demanded in the market would be:

12

Which of the following would not cause an increase in demand for cheese?

a technological advance that makes it cheaper to produce cheese

All the following would shift a product's demanded curve except a(n):

increase in the price of the product

**

Refer to Figure 4-1. Using the graph and beginning on D_1, a shift to D_0 would indicate a(n):

decrease in demand

When the price of automobile insurance increases sharply, the likely impact on the market for automobiles are

a decrease in demand

Which of the following would be most likely to cause a reduction in the supply of Nintendo video games:

an increase in the price of the computer chips used to make Nintendo games.

Which of the following is true?

According to the law of supply, the higher the price of the good, the greater the quantity supplied.

A leftward shift in supply could be caused by:

some firms leaving the industry.

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Refer to Figure 4-6. A supply shift from S_0 to S_1 can be best explained by:

rise in taxes

You notice that the price of orange juice at your local store has increased. Which of the following statements is NOT a possible explanation for the risen the price orange juice?

Due to the bioengineering of orange trees, the domestic supply of oranges increases.

At an equilibrium price:

quantity demanded equals quantity supplied

Price: Demand: Supplied:

$10 1,000 5,500

$9 2,000 5,000

$8 3,000 4,500

$7 4,000 4,000

$6 5,000 3,500

$5 6,000 3,000

$4 7,000 2,500

$3 8,000 2,000

$2 9,000 1,500

$1 10,000 1,000

At price pf $10, there is a______ of _____ pizzas.

surplus; 4,500

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Refer to Figure 5-2. An increase in the quantity supplied, but not an increase in equilibrium moves from:

Point C to D

If we observe both an increase in the price of flour and in the number of units sold, this could be explained by:

an increase in the demand for flour

If both the supply and demand for computer games increase, then the equilibrium price of the games:

is indeterminate and the equilibrium quantity rises

Price: Demanded: Supplied:

$4.00 400 1,400

$3.50 600 1,100

$3.00 800 800

$2.50 1,000 500

$2.00 1,200 200

$1.50 1,400 50

$1.00 1,600 0

If the government intervenes in the market for milk and sets a price floor of ____ result is:

a surplus of 500 gallons of milk.

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Refer to Figure 5-5. The graph portrays the market for gasoline for which a _____ and, as result, a ______ of gasoline occurs.

price ceiling: shortage