question

Economics is best defined as the study of how individuals decide to use limited resources in an attempt to satisfy unlimited wants. a. True b. False

answer

a

question

Rent is the payment received by resource owners for the use of their natural resources. a. True b. False

answer

a

question

The problem of scarce resources a. means that in some cities there are not enough jobs b. could be solved if the unemployment rate fell c. is that there are not enough resources to satisfy people's unlimited wants d. is that resources are used inefficiently e. can be solved by lowering taxes

answer

c

question

Which of the following would an economist classify as capital? a. 100 shares of Microsoft stock b. a $50 bill c. a credit card d. a lawyer's computer e. a bauxite mine in Jamaica

answer

d

question

If a business produces and sells only one unit of a good, its profit would be the a. price received for the good b. price of the product minus the cost of the resources used to produce the product c. return paid to the firm's bank on its outstanding loans d. price of the product minus the wages paid for the labor used to produce it e. wages paid for the labor used to produce the product minus the price

answer

b

question

A market a. is often a physical place b. facilitates exchanges between buyers and sellers c. typically involves monetary transactions d. might not have well-defined geographical limits e. all of the above

answer

e

question

In economics, marginal means a. incremental or decremental b. unimportant c. level or size d. a border-line situation e. a bad alternative

answer

a

question

Which of the following is a normative statement? a. The U.S. rate of unemployment was lower in 2004 than it was in 1994. b. Savings accounts earn interest, whereas checking accounts do not. c. Congress must recognize that the growing national debt is the most serious problem that the country faces. d. The unemployment rate increases when the percentage of the labor force without jobs increases. e. The unemployment rate among teenagers is higher than the rate among adults.

answer

c

question

When labor is relatively expensive, as it is in Japan, a. manufacturers will employ lots of labor b. the unemployment rate will be high c. vending machines displace labor, causing unemployment d. businesses will substitute capital -- such as vending machines -- in place of labor e. alcohol and cigarettes must be sold through vending machines

answer

d

question

Opportunity cost exists because a. technology is fixed at any point in time b. the law of comparative advantage is working c. resources are scarce but wants are unlimited d. the value of lost opportunities varies from person to person e. efficiency is measured by the monetary cost of an activity

answer

c

question

Opportunity cost is the difference between the benefits and the costs of a choice. a. True b. False

answer

b

question

John takes 10 minutes to iron a shirt and 20 minutes to type a paper. Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct? a. Harry has a comparative advantage in ironing. b. Harry has a comparative advantage in typing. c. Harry has an absolute advantage in typing. d. Harry has an absolute advantage in ironing. e. Neither can gain from specialization and exchange.

answer

a

question

If Evan has an absolute advantage in cleaning and bookkeeping when compared to Gloria, then a. Evan must also have a comparative advantage in cleaning and bookkeeping b. Evan must have a comparative advantage in cleaning c. Evan must have a comparative advantage in bookkeeping d. Gloria has a comparative advantage in neither activity e. we can conclude nothing about comparative advantage

answer

e

question

Exhibit 2-2 Hans Maria Loads of laundry per hour 4 12 Pages typed per hour 6 8 According to Exhibit 2-2, Hans' opportunity cost of doing a load of laundry is a. 12 papers b. 8 papers c. 1 1/2 pages d. 2/3 of a page e. impossible to compute

answer

c

question

Any movement along the production possibilities frontier involves the production of a. more of both goods b. more of one good and less of the other c. less of both goods d. more resources e. better technology

answer

b

question

On a production possibilities frontier, the opportunity cost of one more unit of a commodity per time period is measured by the a. monetary price of the commodity b. amount of the other commodity that must be sacrificed c. amount of unemployed resources that must be used d. amount of satisfaction it gives consumers e. amount of tax paid to government for production, sale, and use of the commodity

answer

b

question

Which of the following would not shift the production possibilities frontier? a. an increase in worker training b. a war that destroyed many buildings c. a technological improvement that improved fuel efficiency in cars d. a decrease in the size of the labor force e. a change to a more inefficient production process

answer

e

question

Households act as suppliers when they provide a. goods and services to firms and governments b. resources to firms and governments c. tax payments to governments d. the demand for only what firms supply or make available e. money to firms in exchange for goods and services

answer

b

question

The term "utility" means a. satisfaction b. a low-valued good c. productivity d. adaptability e. efficiency

answer

a

question

Household income is spent on all of the following except one. Which is the exception? a. services b. tax payments c. durable goods d. nondurable goods e. dividends

answer

e

question

A major disadvantage of the corporate form of business is limited liability. a. True b. False

answer

b

question

Brian is the sole proprietor owner of Long Voyage Software, which generates maps for wilderness trips. He started the business with an initial investment of $80,000. A faulty map caused one customer to get hopelessly lost. After her rescue and recuperation, she sued Long Voyage for $5,000,000. Which of the following is true? a. The customer can be awarded only $80,000--what the firm has available to pay. b. The customer can be awarded $5,000,000, but can get only $80,000. c. The customer can be awarded $5,000,000, but Brian personally won't have to pay more than $80,000. d. If $5,000,000 is awarded, Brian will have to pay none of it. e. If $5,000,000 is awarded, Brian is personally responsible for paying all of it.

answer

e

question

Which of the following have their profits taxed twice? a. sole proprietorships b. partnerships c. corporations d. nonprofit institutions e. S-corporations

answer

c

question

Household production is more likely to occur when a. it requires many specialized resources b. technology makes it more costly than market production c. tax avoidance is undesirable d. less control over the final product is desirable e. the opportunity cost of household work is relatively small

answer

e

question

Which of the following is a reason why government is a participant in a market-oriented economy? a. to enforce contracts and protect private property b. to promote collusion c. to promote the growth of natural monopolies d. to provide more inequality in the distribution of income e. all of the above

answer

a

question

The law of demand says that as the price of a good rises, a. buyers recognize that price may be even higher in the future, and so they buy now b. buyers purchase less in hopes that the price will fall in the future c. buyers purchase less, in part because their real income has fallen d. buyers purchase more, in part because the price of a substitute has risen e. buyers purchase more, in part because it has higher status at a higher price

answer

c

question

Movements along a demand curve are called changes in a. Demand b. opportunity costs c. quantity demanded d. the substitution effect e. preferences

answer

c

question

The law of demand is illustrated by a demand curve that is a. horizontal b. vertical c. upward sloping d. constant e. downward sloping

answer

e

question

Suppose there are only two goods, apples and oranges. What happens if the price of each good increases by 15 percent? a. The consumer will substitute apples for oranges. b. The consumer will substitute oranges for apples. c. There is no substitution effect because relative prices have remained constant. d. Demand for both goods increases. e. Demand for both goods decreases.

answer

c

question

The income effect refers to the impact of a change in a. income on the price of a good b. the general price level caused by a change in the price of another good c. the price of a good on real income d. the price of a substitute for the good under consideration e. demand when income changes

answer

c

question

If we say that demand has increased, we mean that there has been a. a leftward movement along the demand curve b. a rightward movement along the demand curve c. a leftward shift of the demand curve d. a rightward shift of the demand curve e. an increase in the slope of the demand curve

answer

d

question

Which of the following is most likely to be an inferior good? a. airline travel b. restaurant meals c. a subscription to the Wall Street Journal d. soft drinks e. used clothing

answer

e

question

Two goods are considered substitutes only if a(n) a. decrease in the demand for one leads to a decrease in the supply of the other b. increase in the demand for one leads to a decrease in the supply of the other c. increase in the price of one leads to an increase in the demand for the other d. decrease in the price of one leads to an increase in the demand for the other e. decrease in the supply of one leads producers to switch to production of the other

answer

c

question

Supply and demand curves both a. have negative slopes b. have positive slopes c. relate quantities to prices d. reflect the actions of producers e. reflect the actions of consumers

answer

c

question

If the price of labor increases, employers will hire more labor because it is more valuable. a. True b. False

answer

b

question

Which of the following will not shift the market supply curve for corn? a. a change in the price of corn b. a change in the price of soybeans c. a change in the price of herbicides and pesticides d. a change in storage technology e. a change in the number of acres planted in corn

answer

a

question

The general term elasticity refers to a relationship between a. quantity demanded and price only b. quantity supplied and price only c. quantity supplied or demanded and price only d. quantity supplied or demanded and anything other than price e. percentage changes in any two variables

answer

e

question

When quantity is measured in gallons, the price elasticity of demand for milk will be __________ the price elasticity when quantity is measured in quarts. a. the same as b. four times c. one quarter d. two times e. less than

answer

a

question

Exhibit 5-2 Quantity Price Old 20 $40 New 10 $60 Use the information in Exhibit 5-2 to calculate the [absolute] value of price elasticity of demand. a. 2/3 b. 1/3 c. 3/5 d. 5/3 e. 0

answer

d

question

If a 5% increase in price leads to an 8% decrease in quantity demanded, demand is a. perfectly elastic b. elastic c. unit elastic d. inelastic e. perfectly inelastic

answer

b

question

If city officials expect that an increase in bus fares will raise mass transit revenues, they must think that the demand for bus travel is a. elastic b. unit elastic c. inelastic d. perfectly inelastic e. -10

answer

c

question

The price elasticity of today's supply curve of classrooms on campus is likely to a. be greater than 1 b. be less than 1 c. be equal to 1 d. approach zero e. be infinity

answer

d

question

Exhibit 5-22 Quantity Income Good A 100 $1,000 120 $2,000 Good B 200 $20 140 $35 Use the information in Exhibit 5-22 to calculate the value of income elasticity of demand for Good A. a. 1 b. 2/9 c. 3/11 d. 11/3 e. 9/2

answer

c

question

As the economy recovers from a recession, we should expect that a. demand for inferior goods will fall and demand for normal goods will rise b. demand for both inferior and normal goods will rise c. demand for inferior goods will rise and demand for normal goods will fall d. demand for both inferior and normal goods will fall e. demand for complements will fall

answer

a

question

Cross-price elasticity measures the responsiveness of the price of good A to a change in the price of good B. a. True b. False

answer

b

question

Quantity Marginal Benefit Marginal Cost 1 50 14 2 45 18 3 35 22 4 27 26 5 18 30 6 10 34 7 0 38 A) What is the net benefit of the sixth unit? B) What is the cost of producing the third unit? C) What is the cost of producing three units? D) What is the total benefit of seven units? E) What is the total net benefit of seven units? F) What quantity will maximize your net benefits?

answer

A) -24 B) 22 C) 14+18+22=54 D) 50+45+35+27+18+10=185 E) Total Cost=14+18+22+26+30+34+38=182 TNB=185-182=3 F) 4

question

Security Measure Marginal Benefit Marginal Cost Metal Detectors 250 570 Airport Guards 400 390 Parachutes for passengers 40 30 Breathalyzer for pilots (testing for intoxication) 500 10 Hunting Dogs in airports 30 60 Increased emergency exits on planes 10 100 Lining all airline routes with haystacks 150 120 A) Which projects should you implement? B) What is the maximum net benefit?

answer

A) Airport guards, parachutes for passengers, breathalyzer for pilots, lining all airline routes with haystacks B) Total benefit= 400+40+500+150=1090 Total Cost=390+30+10+120=550 Net Benefit (max)=540

question

The cost of each scoop of ice cream is $1.00. The benefit of: the first scoop is $5.00, the second scoop is $4.00, the third scoop is $3.00, the fourth scoop is $0.50, the fifth scoop is -$0.50. 1. How many scoops should you buy? 2. You are given a choice between purchasing 1 scoop OR 5 scoops. If you were choosing in order to maximize your total net benefit, which option would you choose?

answer

1) 3 scoops (where MB>MC) 2) TNB (total net benefit) for one scoop=$5-$1=$4 TNB for five scoops= ($5+$4+$3+$.5-$.5 benefit)-($5 cost)=$7 You should buy 5 scoops instead of 1 scoop since $7 is greater than $4.

question

output Team A Team B Cake 2 4 Bread 50 65 i. Who has the absolute advantage in producing bread? Cake? ii. For Team A, what is the opportunity cost of producing 1 bread? iii. For Team B, what is the opportunity cost of producing 1 bread? iv. Who has the comparative advantage in producing bread? Cake? v. What is an appropriate trade ratio so that both countries can be better off?

answer

i) Team B, Team B ii) (1/2 of a cake) or (.04 of a cake) iii) (4/65 of a cake) or (.0615 of a cake) iv) It costs less for Team A to produce bread. It costs less for Team B to produce cake. Team A has CA in bread and Team B has CA in cake. v) 1 cake for anywhere between 16.3 and 25 breads

question

output Group A Group B Snails 2000 340 Grails 50 340 i. Who has the absolute advantage in producing bread? Cake? ii. For Team A, what is the opportunity cost of producing 1 bread? iii. For Team B, what is the opportunity cost of producing 1 bread? iv. Who has the comparative advantage in producing bread? Cake? v. What is an appropriate trade ratio so that both countries can be better off?

answer

i) Group A, Group B ii) 40 snails iii)1 snail iv) Group A has CA in snails and Group B has a CA in grails v) 1 grail for anywhere between 1 snail and 40 snails

question

It takes Tommy 2 hours of labor to mow 1 lawn and 5 hours of labor to paint 1 house. It takes Cheryl 1 hour of labor to mow 1 lawn and 4 hours of labor to paint 1 house. 1) Who has the absolute advantage in lawn mowing? House painting? 2) Who has the comparative advantage in mowing? Painting?

answer

1) Cheryl, Cheryl 2) Tommy can use 1 hour to mow 0.5 of a lawn or paint 0.2 of a house (the O.C. of 1 lawn is 0.4 of a painted house) Cheryl can use 1 hour to mow 1 lawn or paint 0.25 of a house (the O.C. of 1 lawn is 0.25 of a painted house) Tommy has C.A. in painting, Cheryl has C.A. in mowing the lawn.

question

Find equilibrium Y = 4x + 8 Y = 12 - x

answer

X = 4 Y = 24

question

Find equilibrium Y = X Y = 50 - X

answer

X = 25 Y = 25

question

Find equilibrium Y = 10x - 20 Y = 40 - 2x

answer

X = 5 Y = 30

question

Find equilibrium Y - 11 = X -2X + 100 = Y

answer

X = 33 Y = 44

question

You have $10 and someone gives you $1. What is the percentage increase in money? (use usual formula then midpoint formula)

answer

10% increase in money; 9.52% increase in money

question

You have $10 and someone gives you $10. What is the percentage increase in money? (use usual formula then midpoint formula)

answer

100% increase in money (doubling something is always a 100% increase) 66% increase in money

question

You have a business where you buy and sell jewelry. You recently purchased a silver necklace for $80 and you sold it for $120. What is your percentage profit? (use usual formula then midpoint formula)

answer

50% profit 40% profit

question

You have been looking for a good pair of shoes for work, and the pair you were looking for went on sale from $120 to $80. What percent off do you get from this sale? (use usual formula then midpoint formula)

answer

33.3% discount. 40% discount.

question

You had 15 marbles and found 2 marbles. What is the percentage increase in your marbles? (use usual formula then midpoint formula)

answer

13.3% increase in marbles 12.5% increase in marbles

question

You now have 17 marbles but then you lost the two that you had found. What is the percentage decrease in your marbles? (use usual formula then midpoint formula)

answer

11.7% decrease in marbles 12.5% decrease in marbles

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