Econ Test #1

Chapters 1-7

Which topic is studied in macroeconomics?

Recessions

Although freshwater is very abundant in most place, its scarce because:

There is not enough of it to meet all needs.

A resource is anything that:

can be used in production

The opportunity cost of something is:

What is given up to acquire it.

Margo spends $30,000 on one year’s college tuition. The opportunity cost of spending one year in college for Margo is:

Whatever she would have purchased with the $30,000 plus whatever she would have earned had she not been in college.

For an economist, the cost of something is:

What you give up to get it.

Which decision is the best example of making a choice at the margin?

Drinking another cup of coffee

Because people usually exploit opportunities to make themselves better off, if the price of gasoline rises and stays high for an extended period, we expect people to:

Use more public transportation

Florida schools offered cash bonus to students who scored high on the state’s standardized exams. The cash bonuses are motivated by which economic principle ?

People usually respond to incentives, exploiting opportunities to make themselves better off.

If equilibrium exists:

There will be no remaining opportunities for individuals to make themselves better off.

Economists define an efficient use of resources as a situation in which:

One person can be made better off but only by making another person worse off.

When the nations that constitute the Organization of Petroleum Exporting Countires restrict the supply of oil to increase their profits, the oil market:

Fails because there are no longer an efficient allocation of resources.

If Allison drives to a larger city 100 miles from her small community to do her back-to-school shopping, this will:

Hurt Allisons community because Allison’s spending will be income for people in the larger city.

The federal government regulates how much carbon dioxide a factory can emit. Which economic principle does this statement best represent?

When markets don’t achieve efficency, government intervention can improve society’s welfare

Equity is the same as efficiency.

False

The provision of disabled-parking passes to those with disabilities often requires that more than enough spaces be available for those with disabilities. As a result, many of these spaces are vacant quite often when they could be used by able-bodied individuals. Such a situation illustrates the:

Trade-off between efficiency and equity.

Mr. Freezee operates a fleet of ice cream trucks that drive around neighborhoods selling ice cream. He is trying to decide whether he should buy another ice cream truck to add to his fleet. He determines that one more truck will add $750 to his revenue but that the truck will also increase his costs by $1,000. Based on marginal analysis, Mr. Freezee decides:

That he should not purchase the truck since the costs outweigh the benefits.

Overall, trade between China and United States will:

Benefit both countries

I know when I shop at the local grocery store, I am helping my community. Which economic principle does this statement best represent?

One person's spending is another person's income.

The basic concern of microeconomics is to:

Study the choices people make.

When building a model, economists:

Simplify reality to highlight what really matters

The importance of an economic model is that it allows us to:

Focus on the effects of only one change at a time

(Ref 2-2 Figure: Guns and Butter) Use Figure: Guns and Butter. On this figure, points A, B, E, and F:

indicate combinations of guns and butter that society can produce using all of its factors efficiently.

(Ref 2-2 Figure: Guns and Butter) Use Figure: Guns and Butter. Suppose the economy produced 8 guns and 12 pounds of butter per period. Given that, which statement is true?

This is a possible choice, but it is inefficient.

In movement along a production possibility frontier, the opportunity cost to society of getting more of one good:

is measured by the amount of the other good that must be given up.

Technological improvements will:

shift the production possibility frontier outward.

One of the controversies surrounding the United States' energy markets is the trade-off between energy production and clean air. Assuming clean air has value, the United States will be on its production possibility frontier if and only if:

resources used to produce clean air and energy are being fully used.

An inward shift in the U.S. economy's production possibility frontier could represent:

U.S. workers moving to Canada.

Ref 2-7 Table: Trade-off of Study Time and Leisure Time) Use Table: Trade-off of Study Time and Leisure Time. Suppose a student sleeps 8 hours per day and divides the remaining time between study and leisure time. The table shows the combinations of study and leisure time that can be produced in the 16 waking hours of each day. Suppose this student is studying 4 hours and spending 10 hours doing leisure activities. This point is:

inside the production possibility frontier.

Ref 2-8 Figure: Wine and Wheat) Use Figure: Wine and Wheat. If this economy is producing on the production possibility frontier, what would allow it to produce at point *C*?

an improvement in technology

(Ref 2-9 Figure: Production Possibility Frontier) Use Figure: Production Possibility Frontier. A movement from point *C* producing 12 cars and 16 computers per period to point *B* means a _____of _____ cars and a _____ of _____ computers per period.

gain; 4; loss; 4

The slope of a typical production possibility frontier is:

negative

Ref 2-13 Figure: Sugar and Freight Trains) Use Figure: Sugar and Freight Trains. Suppose the economy is operating at point *B*. The opportunity cost of producing the third freight train would be _____ tons of sugar.

45

Use Table: Production of Good Z and Good X in Urbanville. This table shows the production possibility frontier for Urbanville. Suppose Urbanville is producing 5 of Z and 50 of X; this combination is:

feasible but inefficient.

A typical bowed-out production possibility frontier between two goods, guns and butter, shows that the opportunity cost of butter in terms of guns increases as more butter is produced. This implies that the opportunity cost of guns in terms of butter decreases as more guns are produced

False

Assume the United States imposes a new tariff on wines imported from France. Who benefits from this action?

U. S. winemakers

The table below shows that a worker in Australia can produce 20 units of food or 10 units of electronics in a day, and a worker in Korea can produce 5 units of food or 15 units of electronics in a day.  Which of the following statements about comparative advantage is true? 

Australia has a comparative advantage in the production of food while Korea has a comparative advantage in the production of electronics.

The law of demand states that, other things equal, as the price:

increases, the quantity demanded will decrease.

When the economy suffers a downturn and the incomes of many people decrease, vacationers are more likely to take car trips than to fly. Which statement provides one possible explanation for this phenomenon?

Air travel is a normal good and travel by car is an inferior good.

The demand curve for monthly subscriptions to HBO has shifted to the right. What could have caused it?

an increase in the incomes of buyers

The demand curve for running shoes has shifted to the right. What could have caused it?

an increased enthusiasm among the population for running as exercise

(Ref 5-2 Table: The Demand for Chocolate-Covered Peanuts) Use Table: The Demand for Chocolate-Covered Peanuts. If George, Barbara, and Dan are the only three buyers in the market and the price of a bag of chocolate-covered peanuts is $0.50, the total market quantity demanded is _____ bags per month.

210 add all customers

Suppose oranges and clementines are substitutes. Holding everything else constant, if the price of oranges increases, then the demand for _____ will _____.

clementines; increase

The demand for a good will increase if:

there is an increase in the number of consumers in this market.

How would each of the listed events affect the demand for new textbooks? \n

I. The price of a used textbook rises. Answer: Demand curve shift to the right, increase \n II. The price of college tuition rises. Answer: Shift to the left \n III. More high school graduates decide to attend college. Answer: Shift to the right

A decrease in the price of eggs will result in a(n):

movement along the demand curve for eggs.

A decrease in the price of a good will generally result in a(n):

increase in the quantity demanded.

Over the past several years, consumers have had an increasing interest in getting tattoos. This means that the _____ for tattoos has _____.

demand; increased

If goods A and Z are complements, an increase in the price of good Z will:

decrease the demand for good A.

Which factor will not cause an increase in the supply of cornflakes?

an increase in the price of cornflakes

Ref 6-1 Figure: Supply of Coconuts) Use Figure: Supply of Coconuts. An improvement in the technology used to harvest coconuts (e.g., a faster, less expensive coconut picker) would be represented in the figure as a movement from:

*A* to *C.*

_____ illustrates a positive relationship between price and quantity.

A supply curve

A decrease in supply of good X means:

a shift to the left of the entire supply curve for good X.

If the price of a commodity increases, you can usually expect the:

quantity supplied to increase.

Which factor is not a determinant of supply?

consumer tastes

Which factor would cause an increase in the supply of a good?

an advancement in the technology for producing the good

Ref 6-4 Table: The Market for Chocolate-Covered Peanuts) Use Table: The Market for Chocolate-Covered Peanuts. If the price of chocolate-covered peanuts is $0.80, there is a monthly:

surplus of 140 bags per month.

(Ref 6-5 Figure: The Demand and Supply of Wheat) Use Figure: The Demand and Supply of Wheat. If there is an increase in demand of 2,000 bushels per period at each price, the equilibrium price and quantity will be _____ and _____ bushels per period, respectively.

$7; 7,000

If the market for buffalo meat is in equilibrium, the price of buffalo meat will probably _____ in the near future.

not change

If the price of corn rises, we generally expect the:

quantity of corn supplied to rise.

How would each of the listed events affect the supply of compact cars?

I. The price of steel rises. Answer: Supply curve shift to the left \n II. The production technology for car manufacturing improves. Answer: Supply curve shifts to the right. \n III. The price of sport utility vehicles falls. Answer: Shift to the right

Researchers find a new strain of genetically modified seeds that result in a higher yield for corn producers. Holding all other things constant, this research will:

shift the supply curve for corn to the right.

Ref 7-2 Figure: Four Markets for Online Movie Rentals) Use Figure: Four Markets for Online Movie Rentals. Which of the graphs shows what may happen if *D*1 or *S*1 is the original curve and *D*2 or *S*2 is the new curve and if some of the online stores that rent online movie rentals close?

B

Ref 7-4 Figure: Shifts in Demand and Supply II) Use Figure: Shifts in Demand and Supply II. The figure shows how supply and demand might shift in response to specific events. Suppose the technology for producing ethanol fuel improves. Which panel BEST describes how this will affect the market for ethanol?

Panel C

Which factor always results in an increase in price and quantity?

an increase in demand with no change in supply

If tortilla chips are a normal good, when there is an increase in income, equilibrium price _____ and equilibrium quantity _____.

increases; increases

Consider two competing motorcycle manufacturers, Harley-Davidson and Honda. If Harley-Davidson raises the price of its motorcycles, we can expect:

a shift to the right in the demand curve for Hondas and higher prices for Hondas.

In the market for grass-fed beef, what would cause a price increase?

The prices of grass and corn increase.

Many public utilities burn oil to generate electricity. If the price of oil increases, we expect a shift to the _____ in the _____ curve for _____ and a _____ price for electricity.

left; supply; electricity; higher

A decrease in demand and a decrease in supply will lead to a(n) _____ in equilibrium quantity and a(n) _____ in equilibrium price.

decrease; indeterminate change

It is almost certain that the equilibrium quantity will fall when:

supply shifts to the left and demand stays the same.

Rice and potatoes are substitutes in consumption. If the price of rice rises and there is a bumper crop of potatoes, in the market for potatoes one would expect the equilibrium price to _____ and the equilibrium quantity to _____.

fall, rise, or stay the same; rise

It is certain that the equilibrium price will fall when:

the supply curve shifts to the right and the demand curve shifts to the left.

Consider the market for corn. What happens if there is an increased demand for corn tortillas and, at the same time, a new corn seed becomes available that dramatically increases the yield per acre?

the supply curve shifts to the right and the demand curve shifts to the left.

Suppose the input costs associated with manufacturing hair replacement treatments decrease over time. This would lead to a(n):

\
increase in the supply of such treatments, lower prices, and an increase in the equilibrium quantity.

An increase in the price of hamburger would probably result in _____ in the demand for hamburger buns.

a decrease

Which two goods are most likely substitutes in consumption?

loaves of bread and hamburger buns

When the price of gas goes down, the demand for tires goes up. A likely possibility is that tires and gas are:

complements.

A decrease in the price of eggs will result in a(n):

movement along the demand curve for eggs.

A small private college increases tuition while a large public university in the same state does not. What will happen to the demand (enrollment) for both schools?

The small college is likely to see a decrease in quantity demanded, appearing as a movement upward along the demand curve. If students see the two schools as substitutes, the demand curve will shift rightward for the large public university

Alice goes to the local supermarket to purchase one package of kale. She often pays $1.50 for a package, but she finds they are on sale for $1 each. According to the law of demand, one can expect shoppers like Alice to:

purchase more kale than they normally would.

Holding all other things constant, and assuming that ramen noodles are an inferior good for Vanessa, then as her income increases, her demand curve for ramen noodles:

will shift left

Ref 6-1 Figure: Supply of Coconuts) Use Figure: Supply of Coconuts. An expectation on the part of coconut suppliers that the price of coconuts will be significantly higher in the very near future would be represented in the figure as a movement from:

*B* to *E.*

The primary difference between a change in supply and a change in the quantity supplied is that:

a change in quantity supplied is a movement along the supply curve, while a change in supply is a shift in the supply curve.

If the quantity of housing supplied in a community is greater than the quantity of houses demanded, the existing price:

is above the market equilibrium price.

Ref 6-5 Figure: The Demand and Supply of Wheat) Use Figure: The Demand and Supply of Wheat. If a price of $8 temporarily exists in this market, a _____ of _____ bushels per period will result.

surplus; 4,000

If the quantity of housing supplied in a community is greater than the quantity of houses demanded, the existing price:

is above the market equilibrium price.

If two of a producer's goods are substitutes in production, this suggests that the producer (with her fixed set of resources) will need to reduce production of one good when she:

produces more of the other good.

A farmer finds that when he produces more corn, he also has more cornstalks that he can sell as decorations. To the farmer, corn and cornstalks are:

complements in production.

If suppliers expect prices for their product to rise __next year__, then one would expect a:

shift to the left in the supply curve for the product this year.

An example of a government transfer is a(n):

Social Security payment.

Investment spending is spending on:

productive physical capital.

If we add up the consumer spending on goods and services, investment spending, government purchases of goods and services, and the value of exports, then subtract the value of imports, we have measured the nation's:

gross domestic product.

Purchases of foreign-produced goods and services are:

imports.

A laptop computer purchased by a private individual for personal use is considered to be:

consumption spending.

Which definition best describes GDP?

the total value of all final goods and services produced in the economy during a given year

Which example illustrates an intermediate good?

tires General Motors purchased from Goodyear for new electric cars