Econ E251 Exam 1 IU James Self

1. Which of the following is NOT a factor of production?

the wages paid to workers

the ultimate cost of any choice

is the highest-valued alternative forgone

Your friend Jane makes the statement, "The cost of books has increased 100 percent over the past year," she is

making a positive statement

When the production possibilities frontier is bowed outwards, the opportunity cost of producing more of one good

increases in terms of the amount forgone of the other good

opportunity cost of economic growth is

present consumption that a nation gives up to accumulate capital

In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eight-hour day, Adam can produce either 8 loaves of bread or 8 pounds of butter. We know that Andy has a comparative advantage in the production of

bread, while adam has a comparative advantage in the production of butter

Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following is correct?

both homer and teddy would be better off if Homer specialized in catching fish and Teddy specialized in picking fruit

Considering only candy bars and fast food meals, if the price of a candy bar is $1 and the price of a fast food meal is $5, we can say that

the relative price of a fast food meal is 5 candy bars

Consumers come to expect that the price of a gallon of gasoline will decrease next week. As a result, you would expect:

todays demand for gasoline decreases

DVDs and CDs are substitutes in production and not related in consumption. If there is an increase in the demand for DVDs that increases the market price of a DVDs, we would expect to see

a decrease in the supply of CDs

Beef and leather belts are complements in production. If people's concern about health decreases the demand for beef, then in the market for leather belts there will be

a higher equilibrium price for a leather belt that results from a decrease in the supply of leather belts

Suppose that you observe the price of tomatoes decreases after the supply for tomatoes increased. You then observe that people buy more lettuce at any price. These observations suggest that lettuce and tomatoes are ________.

complements in consumption

After you graduate, you have decided to accept a position working at the Bureau of Labor Statistics for $45,000.00 a year. The two other offers you received were working for Wal-Mart for $38,000 and working for Ernst and Young consulting for $42,000. Of these two offers, you would have preferred the job at Ernst and Young. What is the opportunity cost of accepting the position at the Bureau of Labor Statistics?

the $42,000 you would have been paid working for Ernst and Young

Suppose that the government of New York state promises to decrease taxes to a firm if it decides to stay in New York instead of moving to another state. This policy on the part of the state constitutes ________, to make the ________ of the firm remaining in New York.

an incentive; marginal benefit exceed the marginal cost

Suppose that the government of Indiana state promises to decrease taxes on a firm if it decides to stay in Indiana instead of moving to another state. This policy on the part of the state constitutes ________, to make the ________ of the firm remaining in Indiana

an incentive; marginal benefit exceed the marginal cosr

Jed had an exam score of 50 percentage points. There is an extra credit assignment that Jed can complete that will raise his exam score by 20 percentage points. Jed has determined that the extra credit assignment will take 10 hours of his time. Jed will complete the assignment he values the

20 percentage points more than the 10 hours of his time

"every time i wear my schools colors on Saturday, our team wins it's football game" this statement is an example of

post hoc fallacy

post hoc fallacy

when you assume an event that happens after another is the cause of the second event

A system of property rights

encourages economic growth by creating incentives to invest in capital and to be innovative

suppose the price of burgers increases from $2 to $3 each. the degree to which quantity demanded responds to this price increase depends on the

price elasticity of demand

the price elasticity of demand depends on the values of the goods price and quantity relationship

but does not depend on the units used to measure price nor the units used to measure quantity

Suppose a rise in the price of peaches from $5.50 to $6.50 per bushel decreases the quantity demanded from 12,500 to 11,500 bushels. Using the midpoint formula the absolute value of the price elasticity of demand is ____.

0.5

Taco Bell's economists determine that the absolute value of the price elasticity of demand for their tacos is 2.0. So, if Taco Bell raises the price of its tacos by 6.0 percent, the quantity demanded will decrease by ________ percent

12

A decrease in the price of eggs from $1.50 to $1.30 per dozen resulted in an increase in egg purchases in two cities. In Philadelphia, daily egg purchases increased from 6000 to 8000 dozens; in nearby Dover, Delaware, daily egg purchases increased from 300 to 400 dozens. The price elasticity of demand is therefore:

the same in Philadelphia as in Dover

"Last October, due to an early frost, the price of a pumpkin increased by 10 percent compared to the price in the previous Halloween season. As a result, the quantity demanded county-wide decreased from 2 million to 1.5 million." Based on this statement, it is certain that the:

total revenue from the sale of pumpkins decreased

A university conducts a survey of students, which shows that a 10 percent tuition hike would lead to a 7 percent decrease in the enrollment. If the university wants to increase its total revenue, it should ________ tuition because the demand for education at this university is ________.

raise; inelastic

If the absolute value of the price elasticity of demand for peaches is 1.76 and the absolute value of the price elasticity of demand for apples is 1.59, then we can conclude that consumers are:

more sensitive to a change in the price of peaches than they are to a change in the price of apples

a principle that states we should strive to achieve the greatest happiness for the greatest number is called

utilitarianism

Utilitarianism

idea that the goal of society should be to bring about the greatest happiness for the greatest number of people

Adam makes $25,000 per year and Bob makes $45,000 a year, and they both have the same marginal benefit curve. According to the utilitarian view, if a dollar is transferred from Bob to Adam, then

Adam's marginal benefit increases by more than Bob's marginal benefit decreases

symmetry policy

all similar individuals must be treated similarly

Which of the following is inconsistent with Robert Nozick's view of fairness as expressed in the symmetry principle?

the requirement that all people should have equal outcomes

effective minimum wage creates

inefficiency because it causes a surplus of labor hours

Suppose you are given a free ticket to take a night cruise on the campus River, which is nontransferable and has no resale value. The same night there is a concert by your favorite band the Marginalists, which is your next best alternative. Tickets to see the Marginalists cost $100. On any given day, you would be willing to pay up to $105 to the Marginalists. Assume there are no other costs for going on the cruise or seeing the concert. Based on this information, what is the opportunity cost of going on the cruise?

$35

If the U.S. Surgeon General announces in a well believed report that increased wheat consumption could cause heightened anxiety levels among children and adults, what happens to the equilibrium price and quantity of shredded wheat?

the equilibrium price falls and the equilibrium quantity decreases

Suppose that soup is an inferior good. If consumer income declines at the same time that the number of soup suppliers increases, then the equilibrium price will _____ and the equilibrium quantity will _____.

be indeterminate; increase

The price elasticity of demand for oil is estimated at 0.05. This value means a 10 percent increase in the:

price of oil will decrease the quantity of oil demanded by 0.5 percent

Suppose a drought destroys much of the U.S. orange crop. Also during this time, the number of buyers of oranges in the United States increases. Additionally, the drought effect is anticipated to be much less in size than the buyer effect. Accordingly, the equilibrium price of oranges will _____ and the equilibrium quantity will _____.

increase; increase