Microeconomics Exam 1 Multiple Choice

In economics, we assume that our wants and needs are ___________ our ability to satisfy them

greater than

Which of the following best describes what economists assume is true about human behavior?

People make rational decisions about how to allocate scarce resources and are motivated by self interest

Most college students work outside of school, but they typically work at jobs unrelated to their future career plans, i.e. at restaurants or other part-time jobs. Those students delay the beginning of their careers in order to attend college. For those students, what is the opportunity costs of attending college?

the income and work experience they would have earned by beginning their careers earlier

Which of the following is not a fundamental economic question that all societies must answer?

At what price will goods and services be sold

In the US, what is the primary resource allocation mechanism?

the market

Which of the following sets of factors determine the production possibilities frontier for a given country over a given period of time?

the resources it has available to it and its level of technology

If the production possibilities frontier for a given country increased (i.e. shifted up and to the right), what would this mean?

the country could produce more goods and services

If a country is producing at a point on its production possibilities frontier and it wanted to produce more of one good, it must also

-reallocate resources to the good it wants to produce more
-produce less of some other good
- incur an opportunity cost by changing what it produces

All of the Above

In 2008, farmers in the US began to grow more corn, in response to rising corn prices. The opportunity costs of this decision was

the value of other crops (i.e. soybeans) that farmers could have grown instead

All points above and to the right of a production possibilities frontier are considered to be

unattainable

All points underneath a production possibilities frontier are considered to be

inefficient

The market consists of the interaction of __________ and __________

demand; supply

Which of the following statements about the market is not true?

the market is controlled by a central planning organization

The demand curve is downward sloping because

a decrease in price will lead to an increase in quantity demanded

Which of the following events would tend to cause an increase in demand for economics textbooks?

an increase in the number of students enrolled in college economics classes

In question 15, economic textbooks and economics classes are considered to be

complements

If a good is considered inferior, we know that a(n) ____________ in income will cause a(n) __________ in demand for that good

increase; decrease

According to the Law of Supply, an increase in ___________ will cause an increase in ____________

price; quantity supplied

Which of the following events would cause the supply of economic textbooks to increase?

an increase in the number of publishers producing economics textbooks

Which of the following events would cause the supply of corn to decrease?

a widespread drought across the Midwest, where most corn is grown

The difference between the minimum price that a firm must receive in order to produce a good and the market price is also known as

producer surplus

Assume that you are willing to pay as much as $12 to see the remake of "Robocop," which hits theaters later this month. You decide to see the movie with two friends who are willing $10 and $9, respectively, to see the movie. If a ticket to the movie costs $8, what is the total consumer surplus for all three of you?

$7

Holding supply and demand constant, an increase in the price of a good will tend to ___________ consumer surplus and __________ producer surplus

decrease; increase

Which of the following is not true when a market is in equilibrium?

All consumers are able to purchase as much as they want

When the market price is set __________ equilibrium price, firms will experience a ___________, which creates an incentive for them to _________ prices.

above; surplus; reduce

If the demand for some good increases, the demand curve will shift

to the right

If the demand for some increases, this will tend to cause the price of that good to _______ and quantity of that good to _______

increase; increase

If the supply of some decreases, this will tend to cause the price of that good to _________ and quantity of that good to _________

increase; decrease

If the supply of some good decreases, the supply curve will shift

to the left

During the fall of each year, starting just after Labor Day, the price of gasoline tends to decrease, and fewer gallons of gasoline are sold. This is most likely due to

a decrease in the demand for gasoline

If the supply for cotton increased and price did not adjust accordingly, which of the following would happen as a result?

There would be a surplus of cotton

If the actual quantity of some good that is bought and sold is less than the equilibrium quantity, the result is

unexploited gains from trade

If the actual quantity of some good that is bought and sold is greater than the equilibrium quantity, the result is

wasted resources

A change in _________ will cause the quantity demanded of a good to change

price

The existence of a shortage creates an incentive for firms to

raise prices