question

organizer who seeks profitable opportunities and is willing to accept risks

answer

An entrepreneur

question

Which of the four types of decision makers in the U.S. economy plays the largest role?

answer

U.S. households, as buyers in product markets and sellers in resource markets

question

describe how individuals are expected to behave

answer

Behavioral assumptions

question

When economic choice involves an adjustment to an existing situation, marginal analysis

answer

involves comparing the additional costs and additional benefits of an activity before deciding

question

As a scientist, an economist's main professional objective is to

answer

understand how the economy works

question

Most of the disagreement among economists involves normative debates. True or False?

answer

True

question

Choices made by economic decision makers

answer

are the primary focus of economics

question

A good economic theory brings clarity to chaos. True or False?

answer

True

question

Economic theory allows us to predict the behavior of a specific person or firm. True or False?

answer

False

question

In a circular-flow model, households supply all of the following except

answer

goods and services

question

Someone who commits the fallacy of composition is likely to assume that

answer

what is true for the individual is also true for the group

question

The assumption of rational self-interest does not rule out the possibility of concern for other individuals. True or False?

answer

True

question

Which of the following is the best definition of economics?

answer

An analysis of how individuals and societies deal with the problem of scarcity.

question

is usually scarce and costly to acquire

answer

Economic information

question

Which of the following would be a topic considered in the field of macroeconomics?

answer

Studying the amazing recent growth of the Chinese economy.

question

Which of the following is a normative statement?

answer

Congress must recognize that the growing national debt is the most serious problem that the country faces.

question

involves some simplification of reality

answer

Theory in economics

question

An economic model is useful if it

answer

makes accurate predictions

question

Which of the following is an example of a positive statement?

answer

An increase in the price of gasoline will cause a reduction in the amount purchased.

question

The association-causation fallacy is the error of assuming that what is true for one member of a group must be true for the group. True or False?

answer

False

question

Rational choice by an individual implies

answer

making decisions aimed at achieving some predetermined goal

question

The economic behavior of individual decision makers and the determination of price and output in specific markets are both studied in

answer

microeconomics

question

a statement of what ought to be, not what is

answer

a normative economic statement

question

Which of the following is an example of a normative statement?

answer

The federal government's total spending should be reduced.

question

The basic purpose of economic models is to

answer

provide explanations for, and predictions of, economic events

question

diagram illustrating a relationship between variables

answer

a graph

question

Compare the slopes of the tangents at points a and b in Exhibit 1-11. Which of the following statements is true?

answer

The slope at a is positive, and the slope at b is negative.

question

Using the values in Exhibit 1-7, calculate the slope of a line graphed with x on the horizontal axis and y on the vertical axis.

answer

2

question

Refer to exhibit 1-16. Which of the graphs illustrates an inverse or negative relationship between variable X and variable Y?

answer

b

question

Any point on a graph represents a combination of particular values of two variables. True or False?

answer

True

question

The part of a graph that is most applicable to marginal analysis is the

answer

slope

question

In Exhibit 1-2, at x = 8, the

answer

value of y is smaller on curve A than on curve B

question

If the dependent variable Y is directly related to the independent variable X, this means that changes in X cause changes in Y. True or False?

answer

False.

question

In Exhibit 1-1, point c represents

answer

x = 60, y = 30

question

One economic application of the slope of a line is

answer

marginal analysis

question

should not be considered when making economic decisions

answer

sunk costs

question

Just as resources are scarce for the individual,

answer

they are also scarce for the economy as a whole

question

In Exhibit 2-3, if all the economy's resources are used efficiently to produce good B, then the economy is at point

answer

g

question

On a given production possibilities frontier, which of the following is not assumed to be fixed?

answer

production of each item

question

A mixed capitalist economy is one in which

answer

resources are both publicly and privately owned and some markets are regulated

question

The mixed economy is the dominant economic system in the world because

answer

there is private ownership of property but government regulation of individuals reduces some of the flaws of pure capitalism

question

A production possibilities frontier can shift outward for all of the following reasons except one. Which is the exception?

answer

a decrease in the unemployment rate

question

A production possibilities frontier will shift inward if there is more unemployment of labor. True or False?

answer

False

question

According to Exhibit 2-1, if Maria does one fewer load of laundry, how many pages can she type in the time saved on laundry?

answer

2/3 of a page

question

Every economy must answer each of the following questions except one. Which is the exception?

answer

Why are these particular goods produced?

question

the ability of an individual to produce a good at a lower opportunity cost than some other individual can

answer

Comparative advantage

question

Refer to Exhibit 2-9. Which of the graphs best illustrates the impact on the production possibilities frontier of a decrease in unemployment?

answer

d

question

Of the various types of economic systems, pure market capitalism involves the greatest government interference and control over the economy. True or False?

answer

False

question

According to Exhibit 2-1, Hans and Maria would be better off if

answer

Hans specialized in typing and Maria in doing laundry

question

According to Exhibit 2-1, in any given amount of time,

answer

Maria has an absolute and a comparative advantage in doing laundry

question

The law of comparative advantage does not apply to

answer

natural resources like air and sunshine

question

Current production at which labeled point in Exhibit 2-7 would lead to the largest outward shift in the production possibilities frontier in a later year?

answer

point c because this point represents greater production of capital than the other two points

question

Specialization can sometimes create problems such as boredom and repetitive motion injuries. True or False?

answer

True

question

If Evan has an absolute advantage in cleaning and bookkeeping when compared to Gloria, then

answer

we can conclude nothing about comparative advantage

question

If you enjoy playing golf, the opportunity cost of cleaning your room

answer

is greater on sunny days than it is on rainy days

question

Refer to Exhibit 2-9. Which of the graphs best illustrates the impact on the production possibilities frontier of a dramatic increase in the rate of immigration into a country?

answer

a

question

The opportunity cost of going to college includes the costs of tuition, books, fees, and

answer

earnings forgone by not working full-time

question

The opportunity cost of an activity is

answer

the value of the best alternative not chosen

question

Points outside the production possibilities frontier represent

answer

currently unattainable combinations of outputs

question

Refer to Exhibit 2-9. Which of the graphs best illustrates the impact on the production possibilities frontier of a technological improvement that will make the resources used to produce consumer goods more efficient?

answer

c

question

According to Exhibit 2-1, if Hans types one fewer page, how many loads of laundry can he do in the time saved on typing?

answer

2/3 of a load

question

According to Exhibit 2-1, if Maria types one fewer page, how many loads of laundry can she do in the time saved on typing?

answer

2/3 of a load

question

Which of the following is most appropriately measured along one axis of the production possibilities frontier diagram?

answer

the quantity of a produced good

question

In Exhibit 2-5, the opportunity cost of moving from point b to d is

answer

100 socks

question

Helen gives up the opportunity to bake 40 cakes for each room she paints; Josh can paint one room in the time it takes him to bake 60 cakes. The opportunity cost of a cake for Helen is

answer

painting 1/40 of a room

question

The bowed-out shape of the production possibilities frontier indicates increasing opportunity costs. True or False?

answer

True

question

If all resources are used efficiently to produce goods and services, a nation will find itself producing

answer

somewhere on its production possibilities frontier

question

The opportunity cost of college is the same for all students who are receiving full-tuition scholarships. True or False?

answer

False

question

If the production possibilities curve is a downward-sloping straight line, that would indicate

answer

constant opportunity cost

question

Which economic concept does the expression "time is money" reflect?

answer

opportunity cost

question

Refer to exhibit 4-12. An increase in the birth rate would cause which of the following to happen?

answer

demand shift from D1 to D2

question

If suppliers expect an increase in price, they will reduce the current supply of a good. True or False?

answer

True

question

If the price of the good described in Exhibit 4-1 is $1.60, then an economist would expect the

answer

price to decrease to $1.50

question

The difference between normal and inferior goods is that

answer

an increase in income will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward

question

Tickets to the Michigan-Notre Dame football game are usually sold out in advance of game day. This suggests that

answer

the price is set below the equilibrium level

question

The income effect of an increase in the price of hominy grits (an inferior good) is a(n)

answer

increase in the quantity demanded of hominy grits

question

Which of the following is true of an increase in quantity supplied of a given good?

answer

It is caused by an increase in the price of the good.

question

If there is a shortage in the market for automobiles, then

answer

the price should begin to rise

question

Refer to Exhibit 4-10. A shift from supply curve S to supply curve S' could be caused by a(n)

answer

supplier expecting higher product prices in the future

question

The income effect of a decrease in the price of legal services (a normal good) is a(n)

answer

increase in the quantity demanded of legal services

question

The demand curve for spinach shows the quantity demanded of spinach

answer

at each possible price of spinach

question

Rent controls can result in

answer

deteriorating or abandoned buildings

question

Which of the following would shift the supply curve for a good to the left?

answer

an increase in the cost of an important resource used to make that good

question

Which of the following is not likely to cause a change in the supply of wheat?

answer

a fall in the price of wheat

question

A decrease in demand will cause a(n)

answer

decrease in equilibrium price

question

An increase in professors' salaries increases the supply of college education. True or False?

answer

False

question

A decrease in the price of peanut butter will cause a leftward shift of the supply curve of peanut butter. True or False?

answer

False

question

Markets reduce transactions costs

answer

by decreasing the time spent searching for information about goods and services

question

Which of the following would shift the supply curve for a product to the right?

answer

an improvement in the technology for producing the good

question

Suppose a market is in equilibrium and then a price floor is established below the equilibrium price. Which of the following will happen?

answer

the market will remain in equilibrium

question

For a renter, the income effect of an increase in apartment rents will

answer

have a greater effect than the income effect of an increase in the price of chewing gum

question

Two goods are considered substitutes only if a(n)

answer

increase in the price of one leads to an increase in the demand for the other

question

Suppliers recognize there is a shortage in the market for their product when they notice that

answer

inventories are falling

question

A change in the composition of the population will generally

answer

change demand even if there is no change in the size of the population

question

If demand decreases and supply increases, price will

answer

always decrease

question

Along a given demand curve, a decrease in supply will typically

answer

increase price and decrease the quantity

question

The law of demand states that

answer

price and quantity demanded are inversely related

question

A decrease in the supply of chocolate chips would usually result in a

answer

higher equilibrium price and a lower equilibrium quantity

question

As the price of milk increases, producers are normally willing to supply greater quantities. This is known as the law of

answer

supply

question

If the supply of a product increases, then

answer

producers are willing to accept a lower price for each unit sold

Exam One – Micro

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