question

There is no such thing as a free lunch?

answer

People face tradeoffs

question

What represents, there is no such thing as a free lunch?

answer

Dani must decide between going to Florida or Brazil for spring break

question

Which doesn't illustrate, there is no such thing as a free lunch?

answer

Melissa needs to pay her rent and her electrical bill.

question

There is no such thing as a free lunch applies to

answer

families individuals and society

question

Guns and butter represent trade off between

answer

National defense and consumer goods

question

Tradeoff between higher income and pollution exisits because

answer

No tradeoff, since the cosst of reducing pollution falls only on the firms affected by the rest

question

When society requires that firms reduce pollution, there is

answer

A tradeoff because of reduced incomes to the firms' owners and workers

question

Economists use the word equality to describe a situation in which

answer

Each member of society has the same income

question

Efficiency means that

answer

Society is getting max benefits from scarce resources

question

10. The terms equality and effieciency are similar in that they both refer to the benefits to society.

answer

They are different in that equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources

question

Which of the following phrases best explains efficiency?

answer

Minimum waste

question

Which of the following words and phrases best captures the notion of equality?

answer

Sameness

question

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between

answer

Efficiency and equality

question

When the government redistributes income from the wealthy to the poor,

answer

Equality is improved, but efficiency is not

question

What is true?

answer

Efficiency refers to size of pie, equality equals the size of the slice

question

As a result of a successful attempt by government to cut the economic pie into more equal slices

answer

the pie gets smaller, and there will be less pie overall

question

When the government implements programs such as progressive income tax rates, which of the following is likely to occur?

answer

Equality in increased and efficiency is decreased

question

Government policies designed to equalize the distribution of economic well-being include

answer

The welfare system, unemployment insurance, progressive income tax only

question

Government policies resulting in reduced efficiency include

answer

The welfare system, unemployment insurance, progressive income tax only

question

When government policies are enacted a. Equality can usually be enhanced without an efficiency loss, but efficiency can never be enhanced without a reduction in equality b. Efficiency can usually be enhanced without a reduction in equality, but equality can never be enhanced without an efficiency loss c. It is always the case that either efficiency and equality are both enhanced, or efficiency and equality are both diminished d. none of the above

answer

d. none of the above are correct

question

Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor Senator Johnson argues that such a tax will discourage successful people from working and will therefor make society sores off. An economist would say that

answer

A good decision required that we recognize both viewpoints

question

Suppose that you have received $300 as a birthday gift. You can spend it today or you can put the money in a bank account for a year and earn 5 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is

answer

315

question

When computing the opportunity cost of attending a basketball game you should include,

answer

The price you pay for the ticket and the value of your time

question

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

answer

The enjoyment she would have received had she gone to the park

question

Ramona decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is

answer

The value of knowledge she would have received if she had attended class

question

Hamid spends an hour studying instead of watching tv with his friends. The opportunity cost to him of studying is

answer

The enjoyment he would have received if he had watched tv with his friends

question

The opportunity coast of college is

answer

Wages given up to attend school

question

The opportunity cost of going to college is

answer

The value of the best opportunity a student gives up to attend college

question

Which of the following is not an example of the opportunity cost of going to school?

answer

The money a student spends on rent for his apartment while attending school

question

For a college student who wishes to calculate the true costs of going to college, the cost of room and board

answer

should be counted only to the extent that they are more expensive at college than elsewhere

question

Consider Frank's decision to go to college. If he goes to college, he will spend $21,000 on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to college, he will earn $16,000 working in a store and spend $7,200 on room and board. Frank's cost of going to college is

answer

$42,600 21,000+ 11,000-7,200+ 1,800+ 1,600

question

Suppose after graduating from college you get a job working at a bank earning $30,000 per year. After two years of working at the same bank earning the same salary, you have the opportunity to enroll in a one-year graduate program that would require you to quit your job at the bank. Which of the following should not be included in a calculation of your opportunity cost?

answer

The $45,000 that you will be able to earn after having completed your graduate program

question

If Faith attends college, it will take her four years, during which time she will earn no income. She will pay $50,000 for tuition, $12,000 for room and board, and $5,000 for books. If she spends the four years working rather than attending college, she will pay $18,000 for room and board, pay no tuition, and buy no books. Based on this information, Faith's economic cost of attending college would be $67,000 if over the four years she earns

answer

$18,000 50,000+ 12,000+ 5,000- 18,000+ w= 67,000

question

Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot

answer

The cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise

question

Ashley eats two bananas during a particular day. The marginal benefit she enjoys from eating the second banana

answer

Can be thought of as the total benefit Ashley enjoys by eating two bananas minus the total benefit she would have enjoyed by eating just the first banana

question

After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring Break destination this year. However, Spring Break is still months away, and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

answer

The marginal cost of going to Ft. Lauderdale decreases

question

Stephen is restoring a car and has already sent $4,000 on the restoration. He expects to be able to sell the car for $5,800. Stephen discovers that he needs to do an additional $2,400 of work to make the car worth $5,800 to potential buyers. He could also sell the car now, without completing the additional work for $3,800. What should he do?

answer

He should sell the car now for $3,800. 5,800-2400=3400 or 3,800

question

Bill is restoring a car and has already spent $4,000 on the restoration. He expects to be able to sell the car for $6,200. Bill discovers that he needs to do an additional $2,400 of work to make the car worth $6,200 to potential buyers. He could also sell the car now, without completing the additional work, for $3,800. What should he do?

answer

It does not matter if Bill sells the car now or completes the work and then sells it at the higher price because the outcome will be the same.

question

Cole is refinishing an antique china cabinet and has already spent $180 on the restoration. He expects to be able to sell the cabinet for $360. Cole discovers that he needs to do an additional $200 worth of work to make the cabinet worth $360 to buyers. He could aslo sell the cabinet now, without completing the additional work, for $100. What should Cole do?

answer

He should complete the additional work and sell the cabinet for $360

question

40. Bridget drinks three sodas during a particular day. The marginal benefit she enjoys from drinking the third soda

answer

Can be thought of as the total benefit Bridget enjoys by drinking three sodas minus the total benefit she would have enjoyed by drinking just two sodas, determines Bridget's willingness to pay for the third soda, is likely different from the marginal benefit provided to Bridget by the second soda

question

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million. If the company builds a 31st house, its total cost will increase to $7.76 million. Which of the following statements is true?

answer

For the first 30 houses, the averge cost per house was $250,000; the marginal cost of the 31st house, if it is built, will be $260,000; if the company can experience a marginal benefit of $275,000 by building the 31st house, then the company should build it

question

It costs a furniture company $8750 to produce 25 tables. Total cost will be $9125 if it produces the 26th table. If the company produces 26 tables then

answer

Average cost is less than marginal cost

question

Economics face an obstacle that many other scientists do not face. What is that obstacle?

answer

It is often impractical to perform experiments in economics.

question

Instead of conducting laboratory experiments to generate data to test their theories, economists often

answer

gather data from historical episodes of economic change

question

Because it is difficult for economists to use experiments to generate data, they generally must

answer

use whatever data the world gives them

question

A circular-flow and production possibilities frontier are similar in that

answer

both make use of assumptions

question

Which of the following transaction takes place in the markets for the factors of production in the circular-flow diagram?

answer

Dylan receives a salary for his work as a financial analyst for an investment firm.

question

According to the circular flow diagram, if Suzy is a worker who delivers flowers for Happy Day Flower Company, she participates

answer

in the markets for factors of production exchanging labor for income

question

Production Possibilities frontiers are usually bowed outward. This is because

answer

resources are specialized; that is, some are better at producing particular goods rather than other goods

question

Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilites frontier. Last year, it produced 1000 units of food and 47 machines. This year it experienced a technologial advance in its machine-making industry. As a result, this year the society wants to produce 1050 units of food and 47 machines. Which of the following statements is correct?

answer

The technological advance reduced the amount of resources needed to produce 47 machines, so these resources could be used to produce more food.

question

Positive statements are not a. descriptive b. prescriptive c. claims about how the world is d. made by economists speaking as policy advisors

answer

b. prescriptive

question

Normative statements are not a. descriptive b. prescriptive c. claims about how the world should be d. made by economists speaking as policy advisers

answer

a. descriptive

question

One way to characterize the difference between positive statements and normative statements is as follows

answer

positive statements offer descriptions of the way things are, whereas, normative statements offer opinions on how things ought to be

question

Economists speaking like scientists make

answer

claims about how the world is

question

Economists speaking like policy advisers make

answer

claims about how the world should be

question

"Ensuring that Social Security is financially sound for future generations is an important use of taxpayer dollars" is an example of a

answer

normative economic statement

question

"Prices rise when the quantity of money rises rapidly" is an example of a

answer

positive economic statement

question

Which of the following statements is an example of a positive, as opposed to normative statement?

answer

Reducing emissions reduces days missed from school due to asthma

question

Which of the following is an example of a normative, as opposed to positive statement?

answer

Universal health care would be good for U.S. citizens

question

A technological advance in the production of the first good increases the opportunity cost of the second good. True or False?

answer

True

question

Assume for the United States that the opportunity cost of each airplane is 50 cars. Which of these pairs of points could be on the United States' ppf? a) (200 airplanes, 5,000 cars) and (150 airplanes, 4,000 cars) b) (200 airplanes, 12,500 cars) and (150 airplanes, 15,000 cars) c) (300 airplanes, 15,000 cars) and (200 airplanes, 25,000 cars) d) (300 airplanes, 25,000 cars) and (200 airplanes, 40,000 cars)

answer

b) (200 airplanes, 12,500 cars) and (150 airplanes, 15,000 cars)

question

Assume for Brazil that the opportunity cost of each cashew is 100 peanuts. Which of these pairs of points could be on Brazil's ppf? a) (200 cashews, 30,000 peanuts) and (150 cashews, 35,000 peanuts) b) (200 cashews, 40,000 peanuts) and (150 cashews, 30,000 peanuts) c) (300 cashews, 60,000 peanuts) and (200 cashews, 50,000 peanuts) d) (300 cashews, 60,000 peanuts) and (200 cashews, 80,000 peanuts)

answer

a) (200 cashews, 30,000 peanuts) and (150 cashews, 35,000 peanuts)

question

Suppose that a worker in Cornland can grow either 40 bushes of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 20 bushes of corn or 5 bushels of oats per year. There are 20 workers in Cornland and 20 workes in Oatland. Which of the following statements is true? a) Both countries could gain from trade with each other b) Neither country could gain from trade with each other because Cornland has an absolute advantage in both goods c)Neither country could gain from trade with each other because neither one has a comparative advantage d) Oatland could gain from trade between the two countries, but Cornland definitely would lose

answer

c) Neither country could gain from trade with each other because neither one has a comparative advantage

question

Suppose that a worker in Radioland can produce either 4 radios or 1 television per year and a worker in Teveeland can produce either 2 radios or 5 televisions per year. Each nation has 100 workers, and each country specializes according to the principle of comparative advantage. If Radioland trades 100 televisions to Teeveeland in exchange for 100 radios each year, then each country's maximum consumption off new radios and televisions per year will be a)higher than it would be in the absence of trade because of the gains from trade b)the same as it would be in the absence of trade c)less than it would be in the absence of trade because neither country is specializing in the product in which it has a comparative advantage d) less than it would be in the absence of trade because Teeveeland has an absolute advantage in both goods and so it cannot benefit by trading with Radioland

answer

c) less than it would be in the absence of trade because neither country is specializing in the product in which it has a comparative advantage

question

Suppose that a worker in Radioland can produce either 4 radios or 1 television per year, and a worker in Teeveeland can produce either 2 radios or 4 televisions per year. Each nation has 100 workers. Also suppose that each country completely specialized in producing the good in which it has comparative advantage. If Radioland trades 100 radios to Teeveeland in exchange for 100 televisions each year, then each country's maximum consumption of new radios and televisions per year will be a) 100 radios, 300 televisions in Radioland and 300 radios, 100 televions in Teeveeland b)300 radios, 100 televisions in Radioland and 100 radios, 300 televisions in Teeveeland c) 200 radios, 100 televisions in Radioland and 100 radios, 200 televisions in Teeveeland d) 300 radios, 100 televisions in Radioland and 100 radios, 400 televisions in Teeveeland

answer

b) 300 radios, 100 televisions in Radioland and 100 radios, 300 televisions in Teeveeland

question

Which of the following might cause the demand curve for an inferior good to shift to the left? a) a decrease in income b) an increase in the price of a substitute c)an increase in the price of a compliment d)none of the above is correct

answer

c) an increase in the price of a compliment

question

Suppose an increase 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)non of the above is necessarily true

answer

d) none of the above is necessarily true

question

Which of the following might cause the supply curve for an inferior good to shift to the right? a) an increase in input prices b)a decrease in consumer income c) an improvement in production technology that makes production of the good more profitable d) a decrease in the number of sellers in the market

answer

c) an improvement in production technology that makes production of the good more profitable

question

Equilibrium quantity must decrease when demand a)increases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease b) increases and supply does not change, wen demand does not change and supply increase, and when both demand and supply decreaseses c) decreases and supply does not change, when demand does not change and supply increase, and when both demand and supply decrease d) decreases and supply does not change, when demand does not change and supply decrease, and when both demand and supply decrease

answer

d) decrease and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease

question

Equilibrium price must decrease when demand a)increases and supply does not change, when demand does not change and supply decreases, and when demand decreases and supply increases b) increases and supply does not change, when demand does not change and supply decreases, and when demand increases and supply decreases c) decreases and supply does not change, when demand does not change and supply increase, and when demand decreases and supply increases d) decreases and supply does not change, when demand does not change and supply increase, and when demand increases and supply decrease

answer

c) decreases and supply does not change, when demand does not change and supply increase, and when demand decreases and supply increases

question

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately .75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded? a)7.5 increase in the price of the good b)13.33 percent increase in the price of the good c)an increase in the price of the good from $7.50 to $10 d)an increase in the price of the good from $10 to $17.50

answer

b) 13.33 percent increase in the price of the good

question

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a .1 percent increase in the price of the good? a)The quantity of the good demanded decreases from 250 to 150 b)The quantity of the good demanded decreases from 200 to 100 c)The quantity of the good demanded decreases by .05 percent d)The quantity of the good demanded decreases by .2 percent

answer

d) The quantity of the good demanded decreases by .2 percent

question

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? a) There are no close substitutes for this good b)The good is a luxury c)The market for the good is broadly defined d)The relevant time horizon is short

answer

b) the good is a luxury

question

For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? a)There are many substitutes for this good b)The good is a necessity c)The market for the good is broadly defined d)The relevant time horizon is short

answer

a) There are many substitutes for this good

question

For a particular good, an 8 percent increase in price causes a 4 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 good is a luxury c)The market for the good is broadly defined d)The relevant time horizon is long

answer

c) The market for the good is broadly defined

question

Students indicate the price elasticity of demand for cigarettes is about .4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by a) 30% b) 40% c) 80% d) 250%

answer

b) 40%

question

Studies indicae that the price elasticity of demand for beer is about .9. A government policy aimed at reducing beer consumption changed thre price of a case of beer for $10 to $20. According to the midpoint method, the government policy should have reduced beer consumption by a) 30% b) 40% c) 60% d) 74%

answer

c) 60%

question

The flatter the demand curve through a given point, the a) greater the price elasticity of demand at that point b)smaller the price elasticity of demand at that point c) closer the price elasticity of demand will be to the slope of the curve d) greater the absolute value of the change in total revenue when there is a movement from that point upward and to the left along the demand curve

answer

a) greater the price elasticity of demand at that point

question

The smaller the price elasticity of demand the, a) steeper the demand curve will be through a given point b)flatter the demand curve will be through a given point c)more strongly buyers respond to a change in price between any two prices d)smaller the decrease in equilibrium price when the suppy curve shifts rightward from S1 to S2

answer

a) steeper the demand curve will be through a given point

question

If the price elasticity of demand for apples is .8, then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by a) 1.92% and apple sellers total revenue will increase as a result b)1.92% and apple sellers total revenue will decrease as a result c)3% and apple sellers total revenue will increase as a result d)3% and apple sellers total revenue will decrease as a result

answer

a) 1.92% and apple sellers total revenue will increase as a result

question

Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have elastic demand. If the airlines objective to increase total revenue, it should a)increase the price charged to vacationers and decrease the price charged to business travelers b) decrease the price charged to vacationers and increase the price charged to business travelers c) decrease the price to both groups of customers d) increase the price for both groups of customers

answer

a) increase the price charged to vacationers and decrease the price charged to business travelers

question

For a particular good, an 8% increase in price causes a 4% 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)This good is a luxury c)The market for this good is broadly defined d)The relevant time horizon is long

answer

b) this good is a luxury

question

Suppose the government has imposed a price ceiling on sliced sandwich bread. Which of the following events could transform the price ceiling from one that is binding to one that is not binding? a) an increase in the price of flour, which is used to make bread b) A decrease in the price of lunch meat c) A decrease in the price of unsliced bread, which people consider as a substitute for sliced bread d) A decrease in the price of peanut butter and jelly

answer

c) A decrease in the price of unsliced bread, which people consider as a substitute for sliced bread

question

If the government removes a binding price ceiling from a market, then the price paid by buyers will a) increase, and the quantity sold in the market will increase b) increase, and the quantity sold in the market will decrease c) decrease, and the quantity sold in the market will increase d) decrease, and the quantity sold in the market will decrease

answer

a) increase, and the quantity sold in the market will increase

question

If the government removes a binding price ceiling from a market, then the price received by sellers will a) decrease, and the quantity sold in the market will decrease b) decrease, and the quantity sold in the market will increase c)increase, and the quantity sold in the market will decrease d) increase, and the quantity sold in the market will increase

answer

d) increase, and the quantity sold in the market will increase

question

Suppose the government has imposed a price floor on the market for soybeans. Which of the following events could transform the price floor from one that is not binding into one that is binding? a) farmers use improved, draught-resistant seeds, which lowers the cost of growing soybeans b) the number of farmers selling soybeans decreases c) consumers' income increases, and soybeans are a normal good d) the number of consumers buying soybeans increases

answer

a) farmers use improved, draught-resistant seeds, which lowers the cost of growing soybeans

question

Suppose the government has imposed a price floor on cellular phones. Which of the following events could transform the price floor from one that is binding to one that is not binding? a) Cellular phones become less popular b) traditional land line phones become more expensive c) The components used to produce cellular phones become less expensive d) Firms expect the price of cellular phones to fall in the future

answer

b) traditional land line phones become more expensive

question

If the government removes a binding price floor form a market, ten the price paid by buyers will a) increase, and the quantity sold in the market will increase b)increase, and the quantity sold in the market will decrease c) decrease, and the quantity sold in the market will increase d)decrease, and the quantity sold in the market will decrease

answer

c) decrease, and the quantity sold in the market will increase

question

A binding price floor will reduce a firm's total revenue a)always b) when demand is elastic c) when demand is inelastic d) never

answer

b) when demand is elastic

question

If a tax is levied on the sellers of a product, then there will be a(n) a) downward shift of the demand curve b) upward shift of the demand curve c) decrease in quantity demanded d) increase in quantity demanded

answer

c) decrease in quantity demanded

question

A tax levied on the sellers of blueberries a) increases sellers' costs, reduced profits, and shifts the supply curve up b) increases sellers' costs, reduces profits, and shifts the supply curve down c) decreases sellers' costs, increases profits, and shifts the supply curve up d) decreases sellers' costs, increases profits, and sifts the supply curve down

answer

a) increases sellers' costs, reduced profits, and shifts the supply curve up

question

Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the a) demand curve will shift upward by $20, and the effective price received by sellers will increase by $20 b) demand curve will shift upward by $20, and the effective price received by sellers will increase by less than $20 c) supply curve will shift downward by $20, and the price paid by buyers will decrease by $20 d) supply curve will shift downward by $20, and the price paid by buyers will decrease by less than $20

answer

d) supply curve will shift downward by $20, and the price paid by buyers will decrease by less than $20

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