ECON 2143 exam 1 – Flashcards

1) Which of the following best defines economics? A) Economics teaches how to limit our wants. B) Economics studies how to choose the best alternative when coping with scarcity. C) Economics helps you earn as much money as possible. D) Economics analyzes all aspects of human behavior in general. E) Economics is concerned with prices and quantities of goods and services, both at the individual level and at the industry level.

2) Which of the following BEST describes macroeconomics? A) It analyzes the aggregate effects on the national economy of the choices made by individuals, firms, and governments. B) It studies the choices that individuals and businesses make when coping with scarcity. C) It examines how the choices that individuals affect governments. D) It is not a social science because its predictions cannot be tested. E) Proving causation is never a problem for macroeconomics.

3) Suppose that, instead of taking this test, you could either have worked and earned income or partied and had a pleasurable time. Your opportunity cost of taking the test is the A) forgone work. B) forgone party. C) forgone working and partying. D) forgone working or partying, depending on which was your next best choice. E) test because you are taking it.

4) Which of the following is an example of a positive economic statement? A) Voter ID laws should be strictly enforced in all states. B) Illegal immigration is the biggest threat to national security that we face today. C) Medicare recipients should only be allowed to visit a doctor for non-emergency reasons on Mondays, Wednesdays, and Fridays. D) The death penalty is a strong deterrent to violent criminal activity. E) The Affordable Care Act should be repealed.

5) What typically happens to benefits as the amount of an activity is increased? A) Total benefits remain constant. B) Marginal benefit increases. C) Marginal benefit remains constant. D) Marginal benefit decreases. E) The marginal benefit changes only if the marginal cost changes.

7) As an economy increasingly specializes in producing one good, the opportunity cost of that good increases. The opportunity cost increases because A) resources are not equally productive in all activities. B) what must be paid to resources increases. C) human wants are virtually unlimited. D) not all goods are equally valuable. E) as more of a good is produced, the profit from its production must rise.

8) Which of the following would most likely cause a country's production possibilities set to shift outward at every point along the frontier? A) a decrease in idle capital B) a decrease in unemployment C) a technological advance in only one sector of the economy D) a general technological advance that affects all sectors of the economy E) none of the above

9) David takes 10 minutes to process a customer, and 20 minutes to stock the shelves. Danny takes 15 minutes to process a customer, and 15 minutes to stock the shelves. Which of the following statements is true? A) David has an absolute advantage in performing both tasks. B) Danny has an absolute advantage in performing both tasks. C) David has a comparative advantage in processing customers but not in stocking shelves. D) Danny has a comparative advantage in processing customers but not in stocking shelves. E) Danny has a comparative advantage in processing customers and in stocking shelves.

10) Gains from trade A) occur when one party to the trade has an absolute advantage in both goods. B) result in being able to consume beyond the trading individuals' production possibilities frontiers. C) occur when people do not specialize. D) occur when opportunity costs are equal. E) always benefit one party but not the other party of any trade.

11) The law of demand refers to how A) demand changes when people's incomes change. B) demand changes when the prices of substitutes and complements change. C) the quantity demanded changes when the price of the good changes. D) the price of the good changes when people's demand for the good changes. E) the quantity demanded changes when the demand for the good changes.

12) Which of the following increases the demand for a good or service? A) a fall in the price of the good or service B) a smaller number of consumers wanting to buy the good or service C) a rise in the price of the good or service D) a rise in the price of a substitute good or service E) a rise in the price of a complement

13) Which of the following does NOT increase the supply of personal computers, that is, does NOT shift the supply curve of personal computers? A) an advance in the technology used to produce personal computers B) an increase in the number of firms producing personal computer C) a fall in the cost of the components used to assemble personal computers D) a rise the price of a personal computer E) a change in the expected future price of a personal computer

15) Because of a sharp increase in the price of gasoline, the demand for Sports Utility vehicles (SUVs) has decreased. So, the high price of gasoline leads to a A) leftward shift of the demand curve for SUVs and the supply curve of SUVs. B) leftward shift of the demand curve for SUVs and no shift in the supply curve of SUVs. C) leftward shift of the demand curve for SUVs and a rightward shift of the supply curve of SUVs. D) leftward shift of the supply curve of SUVs and no shift in the demand curve for SUVs. E) rightward shift of the supply curve of SUVs and no shift in the demand curve for SUVs.

16) If the percentage change in price is 10 percent and the demand is elastic, then the percentage change in the quantity demanded A) is greater than 0 percent but less than 10 percent. B) is larger than 10 percent. C) equals 0 percent. D) equals 10 percent. E) More information is needed to determine the magnitude of the change in the quantity demanded.

17) When the price of a cup of coffee falls from $3.00 to $2.50, the quantity demanded increases from 1,000 per month to 1,150 per month. Using the midpoint method, the price elasticity of demand is A) 0.77. B) 1.30. C) 0.07. D) 3.00. E) 2.50.

18) Goods are ________ when the income elasticity of demand is positive. A) complements B) elastic C) inferior D) substitutes E) normal

19) The opportunity cost of producing a good rises only slightly as the quantity produced increases. This good has A) an inelastic demand. B) an elastic demand. C) an elastic supply. D) an inelastic supply. E) a perfectly elastic supply.

20) Goods are ________ when the income elasticity of demand is less than zero. A) substitutes B) complements C) inferior D) elastic E) normal

21) Mandy saved her allowance to buy a 12 pack of cream soda. When Mandy's brother saw the soda, he took four. Sodas were allocated between Mandy and her brother through A) force. B) majority rule. C) first-come, first-served. D) sharing equally. E) personal characteristics.

22) When a society achieves allocative efficiency, it A) is not achieving production efficiency. B) is producing that combination of goods and services that society values most highly. C) might or it might not be producing at a point on society's PPF. D) is producing a combination of goods and services whose marginal cost exceeds their marginal benefit. E) is producing the combination of goods and services for which marginal benefit exceeds marginal cost by as much as possible.

26) A price ceiling in the market for gasoline that is below the equilibrium price will lead to A) the quantity demanded of gasoline exceeding the quantity supplied. B) an increase in the demand for gasoline. C) a decrease in the supply of gasoline. D) the quantity supplied of gasoline exceeding the quantity demanded. E) no change in the market since the price ceiling is below the equilibrium price.

27) Suppose the equilibrium price of a gallon of milk is $4. If the government imposes a price floor of $5 per gallon of milk, the A) quantity supplied of milk falls short of the quantity demanded. B) quantity supplied of milk exceeds the quantity demanded. C) supply increases. D) demand decreases. E) price of milk remains $4 per gallon.

28) A price floor in an agricultural market is called A) an agricultural floor. B) a farm support. C) a price support. D) a farm subsidy. E) a farm support price.

29) Neither the demand nor the supply of automobiles is perfectly elastic or inelastic. If the government imposes a $1,000 tax on automobiles, then the price of an automobile buyers pay A) increases by $1,000. B) increases by less than $1,000. C) increases by more than $1,000. D) decreases by $1,000. E) does not change.