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1. While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that
A. trade can make everyone better off.
B. rational people think at the margin.
C. people face tradeoffs.
D. people respond to incentives.
C
2. A typical society strives to get the most it can from its scarce resources. At the same time, thesociety attempts to distribute the benefits of those resources to the members of the society in a fair manner. However, redistributing income from rich to poor reduces the reward for working hard. Therefore, society faces a tradeoff between
A. guns and butter.
B. efficiency and equality
C. inflation and unemployment.
D. work and leisure.
B
3. For which of the following individuals would the opportunity cost of going to college be high?
A. A promising young mathematician who will command a high salary once she earns a college degree
B. A student Who is we vest player on his college basketball team, but who lacks the skill necessary to play professional basketball
C. A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree
C
4 Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empt seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger i willing to pay $300, the airline should
A. sell the ticket because the marginal benefit exceeds the marginal cost.
B. sell the ticket because the marginal benefit exceeds the average cost.
C. not sell the ticket because the marginal benefit is less than the marginal cost.
D. not sell the ticket because the marginal benefit is less than the average cost.
A
5. Suppose the state of Wyoming passes a law that increases the tax on alcohol. As a result, alcohol consumers who live in Wyoming start purchasing their alcohol in surrounding states. Which of the following principles does this best illustrate?
A. People respond to incentives.
B. Rational people think at the margin.
C. Trade can make everyone better off.
D. Markets are usually a good way to organize economic activity.
A
6. If Korea is capable of producing either shoes or toy trains or some combination of the two, then
A. Korea should specialize in the product in which it has an absolute advantage.
B. it would be impossible for Korea to have an absolute advantage over another country in both products.
C. it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods.
D. Korea's opportunity cost of shoes is the inverse of its opportunity cost of toy trains.
D
7. If Shawn can produce more cupcakes in one day than Traci can produce in one day, then
A. Shawn has a comparative advantage in the production of cupcakes.
B. Traci has a comparative advantage in the production of cupcakes.
C. Shawn has an absolute advantage in the production of cupcakes.
D Traci has an absolute advantage in the production of cupcakes
C
8. If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then
A. Iowa has a comparative advantage in the production of corn.
B. Iowa has an absolute advantage in the production of corn.
C. Iowa should import com from Oklahoma.
D. Oklahoma should produce just enough corn to satisfy its own residents' demands.
A
9. Which of the following is not correct?
A. The producer who requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good.
B. The producer who gives up less of other goods to produce Good X has the smaller opportunity cost of producing Good X.
C. The producer who has the smaller opportunity cost of producing a good is said to have a comparative advantage in producing that good.
D. The gains from specialization and trade are based not on comparative advantage but on absolute advantage.
D
10. Suppose that when the price of a 16 oz. to-go cup of gourmet coffee is $4.25, students purchase 750 cups per day. If the price decreases to $3.75 per cup, which of the following is the most likely outcome?
A. Students would purchase fewer than 750 cups per day.
B. Students would continue to purchase 750 cups per day.
C. Students would purchase more than 750 cups per day.
D. We do not have enough information to answer this question.
C
11. Which of the following events would cause a movement upward and to the left along the demand curve for olives?
A. The number of people who purchase olives decreases.
B. Consumer income decreases, and olives are a normal good.
C. The price of pickles decreases, and pickles are a substitute for olives.
D. The price of olives rises.
D
12. Which of the following changes would not shift the demand curve for a good or service?
A. A change in income.
B. A change in the price of the good or service.
C. A change in expectations about the future price of the good or service.
D. A change in the price of a related good or service.
B
13. Pizza is a normal good if the demand
A. for pizza rises when income rises.
B. for pizza rises when the price of pizza falls.
C. curve for pizza slopes upward.
D. curve for pizza shifts to the right when the price of burritos rises, assuming pizza and burritos are substitutes.
A
14. Suppose scientists provide evidence that people who drink energy drinks are more likely to have a heart attack than people who do not drink energy drinks. We would expect to see
A. no change in the demand for energy drinks.
B. a decrease in the demand for energy drinks.
C. an increase in the demand for energy drinks.
D. a decrease in the supply of energy drinks.
B
15. Suppose you like to make, from scratch, pies filled with bananas and vanilla pudding. You notice that the price of bananas has increased. As a result, your demand for vanilla pudding would
A. decrease.
B. increase.
C. be unaffected.
D. change, but you don't know how without more information.
A
16. Which of the following events would cause a movement downward and to the left along the supply curve for mangos?
A. The number of sellers of mangos decreases.
B. There is a destruction of technological machinery that increases the cost of producing mangos.
C. The price of fertilizer increases, and fertilizer is an input in the production of mangos
D. The price of mangos falls.
D
17. Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal govemment increases the minimum wage by S1.00 per hour, then it is likely that the
A. demand for bicycle assembly workers will increase.
B. supply of bicycles will shift to the right.
C. supply of bicycles will shift to the left.
D. fin must increase output to maintain profit levels.
C
18. Suppose an increase in the price of rubber coincides with an advance in the technology of tire production. As a result of these two events, the demand for tires
A. decreases, and the supply of tires increases.
B. is unaffected, and the supply of tires decreases.
C. is unaffected, and the supply of tires increases.
D. is unaffected, and the supply of tires could increase, decrease, or stay the same.
D
19. Oakley bakes cakes that he sells at the local farmer's market. If he purchases a new convection oven that reduces the costs of baking cakes, the
A. supply of Oakley's cakes will increase.
B. supply of Oakley's cakes will decrease.
C. demand for Oakley's cakes will increase.
D. demand for Oakley's cakes will decrease.
A
20. Which of the following events could cause an increase in the supply of ceiling fans?
A. The number of sellers of ceiling fans increases.
B. There is an increase in the price of air conditioners, and consumers regard air conditioners and ceiling fans as substitutes.
C. There is an increase in the price of the motor that powers ceiling fans.
D. The average temperature rises over time.
A
21. If a shortage exists in a market, then we know that the actual price is
A. below the equilibrium price, and quantity demanded is greater than quantity supplied.
B. above the equilibrium price, and quantity demanded is greater than quantity supplied.
C. above the equilibrium price, and quantity supplied is greater than quantity demanded.
D. below the equilibrium price, and quantity supplied is greater than quantity demanded.
A
22. Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?
A. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
B. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
C. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
D. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
D
23. Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation?
A. Consumers have experienced an increase in income, and beef-production technology has improved.
B. The price of chicken has risen, and the price of steak sauce has fallen.
C. New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy.
D. The demand curve for beef must be positively sloped.
C
24. Which of the following events would cause the price of oranges to fall?
A. There is a shortage of oranges.
B. The FDA announces that bananas cause strokes, and oranges and bananas are substitutes.
C. The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges.
D. At the current price, quantity demanded is greater than quantity supplied.
C
25. What would happen to the equilibrium price and quantity of smartphones if consumers' incomes rise and smartphones are a normal good?
A. Both the equilibrium price and quantity would increase.
B. Both the equilibrium price and quantity would decrease.
C. The equilibrium price would increase, and the equilibrium quantity would decrease.
D. The equilibrium price would decrease, and the equilibrium quantity would increase.
A
26. If consumers often purchase croissants to eat while they drink their cappuccinos at local coffee shops, what would happen to the equilibrium price and quantity of cappuccinos if the price of croissants falls?
A. Both the equilibrium price and quantity would decrease.
B. Both the equilibrium price and quantity would increase.
C. The equilibrium price would increase, and the equilibrium quantity would decrease.
D. The equilibrium price would decrease, and the equilibrium quantity would increase.
B
27. Suppose the United States had a short-term shortage of farmers. Which market mechanisms would adjust to remove the shortage?
A. The government would provide tax incentives to encourage people to become farmers.
B. The government would subsidize the production of food.
C. The prices of food and the wages of farmers would adjust.
D. There are no market mechanisms to remove the shortage.
C
28. Which of the following movements would illustrate the effect of an increase in the incomes of parents with school-aged children on the market for piano lessons?
A. Point C to Point D
B. Point A to Point D
C. Point A to Point B
D. Point C to Point B
D
29. Which of the following movements would illustrate the effect of an increase in the price of Kevlar, a material used to make bullet-proof vests, on the market for bullet-proof vests?
A. Point C to Point D
B. Point A to Point D
C, Point A to Point B
D. Point C to Point B
C
30. Which of the following movements would illustrate the effect of an improved high-speed mixer that allows bakers to produce cookies in less time on the market for cookies?
A. Point C to Point D
B. Point A to Point D
C. Point A to Point B
D. Point C to Point B
A
31. Which of the following movements would illustrate the effect of an increase in the price of beach towels on the market for bathing suits?
A. Point C to Point D
B. Point A to Point D
C. Point A to Point B
D. Point C to Point B
B
32. If the price of almonds rises, many people would switch from consuming almonds to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of
A. the availability of close substitutes in determining the price elasticity of demand.
B. a necessity versus a luxury in determining the price elasticity of demand.
C. the definition of a market in determining the price elasticity of demand.
D. the time horizon in determining the price elasticity of demand.
A
33. Which of the following is likely to have the most price elastic demand?
A. Dental floss
B. Milk
C. Diamond earrings
D. Salt
C
34. Which of the following is likely to have the most price inelastic demand?
A. White chocolate chip with macadamia nut cookies
B. Salt
C. Hardback novels
D. Box seats at a major league baseball game
B
35. Which of the following is consistent with the elasticities given in the table below
Price Elasticity
Good A: 1.9
Good B: 0.8
A. A is a luxury, and B is a necessity.
B. A is a good after an increase in income, and B is that same good after a decrease in income.
C. A has fewer substitutes than B.
D. A is a good immediately after a price increase, and B is that same good three years after the price increase.
A
36. For a particular good, a 14 percent increase in price causes a 7 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?
A. There are many close substitutes for this good.
B. The market for the good is broadly defined
C. The good is a luxury.
D. The relevant time horizon is long.
B
37. Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result,
A. the equilibrium quantity decreases, and the equilibrium price is unchanged.
B. the equilibrium price increases, and the equilibrium quantity is unchanged.
C. the equilibrium quantity and the equilibrium price both are unchanged.
D. buyers' total expenditure on the good is unchanged.
A
3S. Dalia says that she would smoke one pack of cigarettes each day regardless of the price. If she is telling the truth, Dalia's
A. demand for cigarettes is perfectly inelastic.
B. price elasticity of demand for cigarettes is infinite.
C. income elasticity of demand for cigarettes is 0.
D. demand for cigarettes is unit elastic
A
39. You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that
A. the mayor thinks demand is elastic, and the city manager thinks demand is inelastic.
B. both the mayor and the city manager think that demand is elastic.
C. both the mayor and the city manager think that demand is inelastic.
D. the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.
D
40. You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would
A. be negative, and your roommate's would be positive.
B. be positive, and your coommate's would be negative.
C. be zero, and your roommate's would approach infinity.
D. approach infinity, and your roommate's would be zero.
B
41. For which pairs of goods is the cross-price elasticity most likely to be positive?
A. Peanut butter and jelly
B. Bicycle frames and bicycle tires
C. Pens and pencils
D. Digital college textbooks and iPhones
C
42. Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will
A. raise both price and total revenues.
B. lower both price and total revenues.
C. raise price and lower total revenues,
D. lower price and raise total revenues.
b
43. On June 14, 2011, the Delaware Senate approved a gun buyback program. The yearlong program would authorize the state to pay $100 for every gun turned over to police. What sort of guns should Delaware officials expect to get if this plan becomes law?
A. small guns, usually used as self-defense in bad neighborhoods
B. heavy guns, usually used by criminals to support their illegal enterprises
C. nonworking guns, usually kept in someone's back closet
D. guns that use a lot of bullets very quickly
C
44. In medieval Europe, there were two basic types of waterwheels. With an undershot wheel, water flowed below the wheel to turn it. With an overshot wheel, water flowed over the top of the wheel to turn it. Because the overshot wheel cooperated better with gravity, it was more efficient than an undershot wheel, but it also required a hill. Which wheel had a more inelastic supply curve and why?
A. an undershot wheel, because Europe is much smaller than the rest of the world
B. an undershot wheel, because it was less efficient than the overshot wheel
C. an overshot wheel, because it was more efficient than the undershot wheel
D. an overshot wheel, because it was more difficult to find locations to build them
D
45. Because of aging requirements, it takes many years to make good Scotch. If a technology were invented that made it possible to create good Scotch literally overnight, how would the short-run supply of good Scotch change?
A. It would become more elastic.
B. It would become less elastic.
C. Its elasticity would remain the same
D. It is impossible to say anything about the change.
A
46. The supply of wooden toothpicks is likely _____ to be very _____ of wood used in production.
A. inelastic; small
B. inelastic; large
C. elastic; small
D. elastic; large
C
47. The day after a hurricane has hit the coast of Florida, you would expect the supply of generators to be _____ the supply of generators two weeks following the hurricane.
A. relatively less elastic than
B. relatively more elastic than
C. equal to
D. not related to
A
48. In 2005, Ireland began taxing residents on how much garbage they threw away to promote recycling. In response, residents began burning trash-which is environmentally more harmful and resulted in an increase in bum victims as people accidentally set themselves on fire. This story suggests that the elasticity of demand for trash collection was more ______ than lawmakers believed because _____ than previously thought.
A elastic; the tax took up a larger part of residents' budgets
B. elastic; there were more substitutes for trash collection
C. inelastic; the tax took up a smaller part of residents' budgets
D. inelastic; there were fewer substitutes for trash collection
B
49. Why might the demand for massages be more elastic than the demand for chiropractic adjustments?
A. Relative to massages, there are more substitutes for chiropractic adjustments.
B. People get massages in the short run and chiropractic adjustments in the long run.
C. Massages are much cheaper than chiropractic adjustments.
D. Massages tend to be luxuries, and chiropractic adjustments tend to be necessities.
D
50. Over time, the demand for cable television service has become more elastic. This is likely because:
A. more movie theaters have been built.
B. people have become more interested in watching television.
C. the increase in the number of streaming services has created more substitutes.
D. books have become cheaper.
C
Your opportunity cost of going to a movie is _______.
a. the price of the ticket plus the cost of any soda and popcorn you buy at the theater
b. the total cash expenditure needed to go to the movie plus the value of your time
c. the price of the ticket
d. zero, as long as you enjoy the movie and consider it a worthwhile use of time and money
B
Because people respond to incentives, _______.
a. policymakers can alter outcomes by changing punishments or rewards
b. policies can have unintended consequences
c. society faces a trade-off between efficiency and equality
d. all of the answer choices are correct
D
A nation will typically import those goods in which _______.
a. the nation has a comparative advantage
b. other nations have an absolute advantage
c. the nation has an absolute advantage
d. other nations have a comparative advantage
D
Which of the following involve a trade-off?
a. Buying a new car
b. Going to college
c. Watching a football game on Saturday afternoon
d. Taking a nap
e. All of the answer choices involve trade-offs.
E
Trade-offs are required because wants are unlimited and resources are _______.
a. efficient
b. economical
c. marginal
d. scarce
e. unlimited
D
Because people respond to incentives, we would expect that if the average salary of engineers increases by 50 percent while the average salary of teachers increases by 20 percent, ________.
a. students will shift majors from education to engineering
b. students will shift majors from engineering to education
c. fewer students will attend college
d. none of the answer choices are correct
A
Which of the following is not part of the opportunity cost of going on vacation?
a. The money you spent on a Broadway show
b. The money you could have made if you had stayed home and worked
c. The money you spent on food
d. The money you spent on airline tickets
C
If a nation has an absolute advantage in the production of a good, ________.
a. it can produce that good at a lower opportunity cost than its trading partner
b. it can produce that good using fewer resources than its trading partner
c. it can benefit by restricting imports of that good
d. it will specialize in the production of that good and export it
e. none of the answer choices are correct
B
Which of the following statements about trade is true?
a. People that are skilled at all activities cannot benefit from trade.
b. Unrestricted international trade benefits every person in a country equally.
c. Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage.
d. Trade can benefit everyone in society because it allows people to specialize in activities in which they have an absolute advantage.
C
Which of the following statements is true?
a. Only countries with an absolute advantage in the production of every good should strive to be self-sufficient.
b. A self-sufficient country at best can consume on its production possibilities frontier.
c. A self-sufficient country consumes outside its production possibilities frontier.
d. Self-sufficiency is the road to prosperity for most countries.
B
Which of the following statements is true about the impact of an increase in the price of lettuce?
a. The demand for lettuce will decrease and the equilibrium price and quantity of salad dressing will fall.
b. The supply of lettuce will decrease.
c. The equilibrium price and quantity of salad dressing will fall.
d. The equilibrium price and quantity of salad dressing will rise.
e. The demand for lettuce will decrease.
C
Suppose a frost destroys much of the Washington apple crop. At the same time, suppose consumer tastes shift toward apple juice. What would we expect to happen to the equilibrium price and quantity in the market for apple juice?
a. Price will increase; quantity will increase.
b. Price will decrease; quantity is ambiguous.
c. Price will increase; quantity is ambiguous.
d. Price will increase; quantity will decrease.
e. The impact on both price and quantity is ambiguous.
C
If pasta is an inferior good, then the demand curve shifts to the ________ when ________ rises.
a. left; consumers' income
b. right; the price of pasta
c. right; consumers' income
d. left; the price of pasta
A
Which of the following moves the pizza market up along a given supply curve?
a. A decrease in the price of cheese, an input to pizza
b. A kitchen fire that destroys a popular pizza joint
c. An increase in the price of root beer, a complement to pizza
d. An increase in the price of pizza
D
Which of the following shifts the supply curve for pizza to the right?
a. An increase in the price of pizza
b. A kitchen fire that destroys a popular pizza joint
c. An increase in the price of root beer, a complement to pizza
d. A decrease in the price of cheese, an input to pizza
D
Movie tickets and film streaming services are substitutes. If the price of film streaming increases, what happens in the market for movie tickets?
a. The demand curve shifts to the right.
b. The supply curve shifts to the right.
c. The demand curve shifts to the left.
d. The supply curve shifts to the left.
A
The discovery of a large new reserve of crude oil will shift the ________ curve for gasoline, leading to a ________ equilibrium price.
a. demand; higher
b. supply; higher
c. supply; lower
d. demand; lower
C
If the economy goes into a recession and incomes fall, what happens in the markets for inferior goods?
a. Prices fall, and quantities rise.
b. Prices and quantities both rise.
c. Prices rise, and quantities fall.
d. Prices and quantities both fall.
a
Which of the following might lead to an increase in the equilibrium price of jelly and a decrease in the equilibrium quantity of jelly sold?
a. An increase in consumers' incomes, as long as jelly is a normal good
b. An increase in the price of grapes, an input into jelly
c. An increase in the price of peanut butter, a complement to jelly
d. An increase in the price of Marshmallow Fluff, a substitute for jelly
B
An increase in ________ will cause a movement along a given supply curve, which is called a change in ________.
a. demand; supply
b. supply; demand
c. demand; quantity supplied
d. supply; quantity demanded
C
A good tends to have a small price elasticity of demand if _______.
a. the good is a necessity
b. there are many close substitutes
c. the long-run response is being measured
d. the market is narrowly defined
A
An increase in a good's price reduces the total amount consumers spend on the good if the ________ elasticity of demand is ________ than one.
a. price; greater
b. income; less
c. income; greater
d. price; less
A
The citizens of Rohan spend a higher fraction of their income on food than do the citizens of Gondor. The reason could be that _______.
a. Rohan has lower food prices, and the price elasticity of demand is 0.5
b. Rohan has lower food prices, and the price elasticity of demand is zero
c. Rohan has lower income, and the income elasticity of demand is 1.5
d. Rohan has lower income, and the income elasticity of demand is 0.5
D
The ability of firms to enter and exit a market over time means that, in the long run, _______.
a. the demand curve is less elastic
b. the demand curve is more elastic
c. the supply curve is less elastic
d. the supply curve is more elastic
D
An increase in the supply of grain will reduce the total revenue grain producers receive if _______.
a. the demand curve is elastic
b. the supply curve is inelastic
c. the supply curve is elastic
d. the demand curve is inelastic
D
An increase in the supply of grain will reduce the total revenue grain producers receive if _______.
a. the demand curve is elastic
b. the supply curve is inelastic
c. the supply curve is elastic
d. the demand curve is inelastic
d
If the price elasticity of supply is zero, the supply curve is _______.
a. horizontal
b. fairly flat at low quantities but steeper at larger quantities
c. vertical
d. upward sloping
C
Because the demand curve for oil is ________ elastic in the long run, OPEC's reduction in the supply of oil had a ________ impact on the price in the long run than it did in the short run.
a. less; smaller
b. more; larger
c. less; larger
d. more; smaller
D
A decrease in supply (shift to the left) will increase total revenue in that market if ________.
a. supply is price inelastic
b. demand is price elastic
c. supply is price elastic
d. demand is price inelastic
D
The demand for which of the following is likely to be the most price inelastic?
a. Uber rides
b. Delta airline tickets
c. Greyhound bus tickets
d. Transportation
D
Note 
Flashcard (196)