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Which of the following is a subject that economists study? A. the growth in average income B. the fraction of the population that cannot find work C. the rate at which prices are rising D. All of the above are correct
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D. All of the above are correct (A. the growth in average income B. the fraction of the population that cannot find work C. the rate at which prices are rising)
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Efficiency means that A. society's goods and services are distributed equally among society's members. B. society is getting the maximum benefits from its scarce resources. C. society is conserving resources in order to save them for the future. D. society's goods and services are distributed fairly, though not necessarily equally, among society's members.
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B. society is getting the maximum benefits from its scarce resources.
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When the "invisible hand" guides economic activity, prices of products reflect A. only the costs to society of producing those products. B. both the values that society places on those products and the costs to society of producing those products. C. only the values that society places on those products. D. none of the above; when the "invisible hand" guides economic activity, prices of products are set by the government in a manner that is thought to be "fair."
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B. both the values that society places on those products and the costs to society of producing those products.
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In an economy in which decisions are guided by prices and individual self-interest, there is A. less efficiency than would be observed in a centrally-planned economy. B. more need for a strong legal system to control individual greed than would be needed in a centrally-planned economy. C. a strong need for government intervention in the market. D. the potential to achieve efficiency in production.
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D. the potential to achieve efficiency in production.
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A friend of yours asks you why market prices are better than government-determined prices. Because you understand economic principles, you say that market-determined prices are better because they generally reflect A. the value of a good to society, but not the cost of making it. B. neither the value of a good to society nor the cost of making it. C. the cost of making a good to society, but not its value. D. both the value of a good to society and the cost of making it
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D. both the value of a good to society and the cost of making it
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In 2011, the average American earned about $48,000 while the average Nigerian earned about $1,200. Which of the following statements is likely? A. The average American has a longer life expectancy than the average Nigerian. B. The average American purchases more televisions than the average Nigerian. C. The average American has better nutrition and healthcare than the average Nigerian. D. All of the above are correct.
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D. All of the above are correct.
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The income of a typical worker in a country is most closely linked to which of the following? A. government policies B. productivity C. market power D. population
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B. productivity
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An increase in the overall level of prices in an economy is referred to as A. the income effect. B. inflation. C. deflation. D. the substitution effect.
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B. inflation.
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Irregular fluctuations in economic activity are known as the A. ten principles of economics. B. tradeoff between inflation and unemployment. C. business cycle. D. broken window fallacy.
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C. business cycle.
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An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of that activity. a. TRUE b. FALSE
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b. FALSE
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Which of the following statements is (are) correct? A. Theory and observation are important in economics as well as in other sciences. B. Relative to some other scientists, economists find it more difficult to conduct experiments. C. To obtain data, economists often rely upon the natural experiments offered by history. D. All of the above are correct.
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D. All of the above are correct.
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Which of the following statements is correct? A. Economics is not a true science because economists are not usually allowed to conduct experiments to test their theories. B. Economists almost always find it easy to conduct experiments in order to test their theories. C. Economists are usually not able to conduct experiments, so they must rely on natural experiments offered by history. D. Economics is a social science rather than a true science because it cannot employ the scientific method.
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C. Economists are usually not able to conduct experiments, so they must rely on natural experiments offered by history.
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One thing economists do to help them understand how the real world works is A. try to capture every aspect of the real world in the models they construct. B. ignore the past. C. make assumptions. D. All of the above are correct.
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C. make assumptions.
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Economists build economic models by A. generating data. B. conducting controlled experiments in a lab. C. reviewing statistical forecasts. D. making assumptions.
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D. making assumptions.
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The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the A. market price of the additional amount produced. B. amount of the other good that must be given up. C. number of dollars that must be spent to produce it. D. amount of resources that must be devoted to its production.
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B. amount of the other good that must be given up
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A macroeconomist — as opposed to a microeconomist — might study the effect of A. an increase in the gas tax on fuel consumption. B. a technological advance on the natural gas industry. C. changes in the money supply on the inflation rate. D. a hurricane on prices in the orange industry.
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C. changes in the money supply on the inflation rate.
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How did the influential economist John Maynard Keynes explain his remark that though economics is an easy subject compared with the higher branches of philosophy or pure science, it is a subject at which few excel? A. Economics is quite boring; hence, people tend to lose interest in it before mastering it. B. Good thinkers become frustrated with economics because it does not make use of the scientific method. C. Good economists must possess a rare combination of gifts. D. Most people who study economics are not very bright.
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C. Good economists must possess a rare combination of gifts.
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Graphs such as bar graphs and pie charts are limited in that they A. provide information on only one variable. B. can only show variables that are positively related. C. can only show variables that have a negative correlation. D. provide information on no more than two variables.
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A. provide information on only one variable.
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The y-coordinate of an ordered pair specifies the A. quadrant location in which the point is located. B. horizontal location of the point. C. vertical location of the point. D. diagonal location of the point.
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C. vertical location of the point.
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Economists use one standard set of assumptions to answer all economic questions. a. TRUE b. FALSE
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b. FALSE
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All scientific models, including economic models, simplify reality in order to improve our understanding of it. a. TRUE b. FALSE
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a. TRUE
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A circular-flow diagram is a visual model of the economy. a. TRUE b. FALSE
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a. TRUE
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The production possibilities frontier is a graph that shows the various combinations of outputs that the economy can possibly produce given the available factors of production and the available production technology. a. TRUE b. FALSE
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a. TRUE
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Points on the production possibilities frontier represent efficient levels of production. a. TRUE b. FALSE
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a. TRUE
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A technological advance in the production of the first good increases the opportunity cost of the first good in terms of the second good. a. TRUE b. FALSE
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a. TRUE
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Economic growth causes a production possibilities frontier to shift outward. a. TRUE b. FALSE
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a. TRUE
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Because almost all economists oppose policies that restrict trade among nations, policymakers do not restrict imports of certain goods. a. TRUE b. FALSE
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b. FALSE
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When a variable that is not named on either axis of a graph changes, we read the change as a movement along the curve. a. TRUE b. FALSE
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b. FALSE
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The slope of a horizontal line is infinite, and the slope of a vertical line is zero. a. TRUE b. FALSE
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b. FALSE
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A production possibilities frontier is bowed outward when A. an economy is self-sufficient instead of interdependent and engaged in trade. B. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced. C. the rate of tradeoff between the two goods being produced is constant. D. the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good.
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B. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.
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If a country has the comparative advantage in producing a product, then that country must also have the absolute advantage in producing that product. a. TRUE b. FALSE
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b. FALSE
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Two countries can achieve gains from trade even if one country has an absolute advantage in the production of both goods. a. TRUE b. FALSE
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a. TRUE
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For both parties to gain from trade, the price at which they trade must lie exactly in the middle of the two opportunity costs. a. TRUE b. FALSE
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b. FALSE
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Which of the following statements is correct? A. Buyers determine both demand and supply. B. Sellers determine both demand and supply. C. Buyers determine supply, and sellers determine demand. D. Buyers determine demand, and sellers determine supply.
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D. Buyers determine demand, and sellers determine supply.
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Kari downloads 7 songs per month when the price is $1.29 per song and 10 songs per month when the price is $0.99 per song. Kari's behavior demonstrates the law of A. income. B. demand. C. price. D. supply.
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B. demand.
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If Max experiences a decrease in his income, then we would expect Max's demand for A. each good he purchases to remain unchanged. B. luxury goods to increase. C. inferior goods to decrease. D. normal goods to decrease.
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D. normal goods to decrease.
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If a increase in income decreases the demand for a good, then the good is a(n) A. normal good. B. inferior good. C. substitute good. D. complementary good
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B. inferior good.
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You love peanut butter. You hear on the news that 50 percent of the peanut crop in the South has been wiped out by drought and that this will cause the price of peanuts to double by the end of the year. As a result, your demand for peanut butter A. increases today. B. decreases as you look for a substitute good. C. will increase but not until the end of the year. D. shifts left today.
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A. increases today.
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Which of the following would cause a movement along the supply curve for cupcakes? A. an increase in the price of cake flour B. a decrease in the price of cupcakes C. an improvement in technology for commercial mixers D. All of the above are correct.
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B. a decrease in the price of cupcakes
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The line that relates the price of a good and the quantity supplied of that good is called the supply A. curve, and it usually slopes downward. B. schedule, and it usually slopes upward. C. schedule, and it usually slopes downward. D. curve, and it usually slopes upward
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D. curve, and it usually slopes upward
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Today's supply curve for gasoline could shift in response to a change in A. the expected future price of gasoline. B. today's price of gasoline. C. the number of buyers of gasoline. D. All of the above are correct.
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A. the expected future price of gasoline.
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You have been asked by your economics professor to graph the market for lumber and then to analyze the change that would occur in equilibrium price as a result of recent forest fires in the west. Your first step would be to A. graph the shift to see the effect on equilibrium. B. decide whether the fires affected demand or supply. C. decide which direction to shift the curve. D. None of the above is correct.
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B. decide whether the fires affected demand or supply.
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If consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would happen to the equilibrium price and quantity of lattés if the price of muffins falls? A. Both the equilibrium price and quantity would decrease. B. Both the equilibrium price and quantity would increase. C. The equilibrium price would decrease, and the equilibrium quantity would increase. D. The equilibrium price would increase, and the equilibrium quantity would decrease.
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B. Both the equilibrium price and quantity would increase.
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What will happen to the equilibrium price and quantity of traditional camera film if traditional cameras become more expensive, digital cameras become cheaper, the cost of the resources needed to manufacture traditional film falls, and more firms decide to manufacture traditional film? A. Quantity will fall, and the effect on price is ambiguous. B. Quantity will rise, and the effect on price is ambiguous. C. Price will rise, and the effect on quantity is ambiguous. D. Price will fall, and the effect on quantity is ambiguous.
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D. Price will fall, and the effect on quantity is ambiguous.
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A market is a group of buyers and sellers of a particular good or service. a. TRUE b. FALSE
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a. TRUE
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If something happens to alter the quantity demanded at any given price, then the demand curve shifts. a. TRUE b. FALSE
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a. TRUE
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An increase in demand shifts the demand curve to the left. a. TRUE b. FALSE
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b. FALSE
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A decrease in the price of sugar will shift the supply curve for cookies to the right. a. TRUE b. FALSE
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a. TRUE
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An increase in the price of ink will shift the supply curve for pens to the left. a. TRUE b. FALSE
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a. TRUE
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When the market price is above the equilibrium price, the quantity of the good demanded exceeds the quantity supplied. a. TRUE b. FALSE
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b. FALSE
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Price will rise to eliminate a shortage. a. TRUE b. FALSE
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a. TRUE
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When a supply curve or a demand curve shifts, the equilibrium price and equilibrium quantity change. a. TRUE b. FALSE
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a. TRUE
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A decrease in supply will cause an increase in price, which will cause a decrease in quantity demanded. a. TRUE b. FALSE
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a. TRUE
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Suppose the demand for calendars increases in November. At the same time, the price of the ink used in the production of calendars increases. In the market for calendars, if the size of the shift of the demand curve is larger than the size of the shift of the supply curve, then the equilibrium quantity rises. a. TRUE b. FALSE
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a. TRUE
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If the U.S. could produce 5 televisions per hour of labor and China could produce 3 televisions per hour of labor, would it necessarily follow that the U.S. should specialize in television production? Explain your answer using the concepts of comparative and or absolute advantage. a. yes b. no
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b. no
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It takes Ross 6 hours to produce a bushel of corn and 2 hours to wash and polish a car. It takes Courtney 6 hours to produce a bushel of corn and 1 hour to wash and polish a car. Courtney and Ross cannot gain from specialization and trade, since it takes each of them 6 hours to produce 1 bushel of corn. a. TRUE b. FALSE
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b. FALSE
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For both parties to gain from trade, the price at which they trade must lie exactly in the middle of the two opportunity costs. a. TRUE b. FALSE
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b. FALSE
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Which of the following would cause the demand curve to shift from Demand C to Demand A in the market for DVDs? A. a change in consumer preferences toward watching movies in movie theaters rather than at home B. an expectation by buyers that their incomes will increase in the very near future C. a decrease in the price of DVD players D. an increase in the price of DVDs
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A. a change in consumer preferences toward watching movies in movie theaters rather than at home
