question

Which of the following represents the problem of scarcity? Poverty Hunger The pursuit of higher education All of the above

answer

d. All of the above

question

If Sarah decides to spend the day windsurfing instead of studying for her economics exam the opportunity cost of windsurfing is: The cost of renting the windsurfing equipment. The cost of gas, tolls, food, and all other monetary costs of windsurfing. The amount of time spent windsurfing. The value of studying for the exam, measured by the points lost on the exam.

answer

d. The value of studying for the exam, measured by the points lost on the exam.

question

Which of the following is an example of land, as an economic input? The number of doctors in a nation Copper The amount of investment a nation has The amount of risk takers in the health care industry

answer

b. Copper

question

Which of the following is an example of physical capital? Money The level of education in a society The supply of oil Computer software

answer

d. Computer software

question

Hong Kong has virtually no natural resources to speak of but is amazingly rich. What resource does Hong Kong most likely have in abundance in order to be so rich? Labor Capital Entrepreneurship Governmental Oversight

answer

c. Entrepreneurship

question

A good system that demonstrates how incentives lead to efficiency in a market economy is Government oversight Poverty Gross national product Individual property rights

answer

d. Individual property rights

question

At what point are you operating inefficiently in your daily pursuits? a. Point A b. Point B c. Point D d. Point F

answer

a. Point A - This point lies within your initial production possibilities curve. By working a little harder you could have more fish and more coconuts.

question

If during the first month on the island you are operating on PPC1, and at point B, what is the opportunity cost of moving to point D? a. 25 coconuts b. 9 fish c. 16 fish d. 38 coconuts

answer

a. 25 coconuts - By moving from 38 coconuts and 7 fish to 16 fish you must pick only 13 coconuts, a loss of 25 per day.

question

If you have the skills to operate on PPC1 during his first month on the island, how can you get to point C? a. By reducing the time he spends fishing. b. By increasing his coconut gathering time. c. By increasing his time spent fishing. d. You cannot reach point C given your skills and resources.

answer

a. 25 coconuts - By moving from 38 coconuts and 7 fish to 16 fish you must pick only 13 coconuts, a loss of 25 per day.

question

Suppose after six months on the island you have developed a new and improved fishing spear, and are able to climb trees much faster than before. If this pushes you to PPC 2 then where is the inefficient point for your daily pursuits? a. To the right of point F b. Point C c. Point G d. Point E

answer

b. Point C - This point now lies within his new PPC.

question

If you are now at PPC2, what is the opportunity cost of moving from point E to point G? a. 9 coconuts b. 19 coconuts c. 21 fishd. 12 fish

answer

d. 12 fish - He was catching 21 fish per day and now has to drop down to 9 per day in order to pick 47 coconuts at point G.

question

In which type of economy do we see the supply of food, electricity, housing, and other goods and services provided by the government?

answer

command economy

question

In which type of economy do we see a plentiful supply of clothing, movies, houses, and other goods and services provided primarily by entrepreneurs?

answer

market economy

question

In which type of economy do we typically see very poor people living subsistence lifestyles where the gathering of food and fuel takes place on a daily basis?

answer

traditional economy

question

In which type of economy do we see a great deal of government involvement in the provision of social welfare benefits combined with relatively free markets where buyers and sellers are allowed to interact with one another?

answer

mixed economy

question

France is considered a socialist economy. This means that France would have ________ taxes than (as) economies like Ireland that is more of a market economy.

answer

Higher

question

In which type of economy would we see governments taking away private property without providing any compensation to the owner?

answer

command economy

question

In which type of economy would we be more likely to see health care prices determined solely by the interaction of supply and demand?

answer

market economy

question

Hong Kong ranked number one in the world in 2007 for overall economic freedom. This means that Hong Kong is a ________ economy.

answer

market economy

question

In 2007 North Korea ranked last in the economic freedom rankings. North Korea is a ________ economy.

answer

command

question

The United States is a ________ economy but also has components similar to a ________ economy.

answer

market; mixed

question

The universal economic problem is:

answer

allocating scarce resources

question

Scarcity forces people to:

answer

makes choices

question

Every economy is faced with three basic questions. Which one of the following is not one of these basic questions?

answer

How to fairly tax the production and possession of products?

question

Economists classify the productive resources into four categories:

answer

land, labor, capital, and entrepreneurship.

question

Another term for "factors of production" is:

answer

productive resources

question

An economist's definition of capital would include: a. tools and equipment b. factories and machinery c. shares of stock d. borrowed money

answer

both A and B but not C or D

question

To the economist, "labor" involves:

answer

any human effort in the production process

question

The author of Wealth of Nations and the generally referred to as "the father of economics" was:

answer

Adam Smith

question

Countries like China, Cuba, and India have economies that are carefully managed by the government. These types of economies are called

answer

command economies

question

The phrase "market failure" means that:

answer

sometimes individuals, following the dictates of the market, produce results that are harmful to the interests of society

question

The best explanation for the bowed out shape of the PPF is:

answer

as more and more resources are shifted into making the second good, the opportunity cost in terms of the first good become smaller and smaller.

question

What is the importance of the production possibilities frontier?

answer

All of the above.

question

Which of the following statements about the production possibilities frontier is true? 1. If the PPF is bowed outward (from the origin), producing more of one product results in greater and greater opportunity costs in the output of the second product. 2. If the economy is operating at full and efficient employment, the output combinations will be on the PPF. 3. Unattainable combinations of goods are shown by points inside the PPF. 4. Economic growth may be illustrated by shifting the PPF outward, away from the origin.

answer

Statements I, II, and IV are true.

question

In a day Susan can write 4 sonnets or 200 lines of computer code. Tom can write 1 sonnet or 100 lines of computer code in a day. Which is the following statements is true? 1. Susan has an absolute advantage in both products. 2. Susan has an absolute advantage in both products and should produce both. 3. Susan has a comparative advantage in both products. 4. Tom has no absolute advantage but does have a comparative advantage in writing computer code. 5. Tom has no absolute advantage but does have a comparative advantage in writing sonnets.

answer

Only I and IV are correct.

question

Shirley Macuga is the world's fastest typist and is also a world famous brain surgeon. She earns $5,000/hour operating on brains. Shirley can type her bills for a whole month's worth of surgery in 30 minutes and yet Shirley hires a billing clerk to complete the surgery bills. The clerk requires all month to type the bills. The clerk is paid $2,000 per month. Is Shirley smart to hire the billing clerk? Why or why not?

answer

Yes, because Shirley has a comparative advantage in surgery and so gains by specializing in surgery and hiring the clerk.

question

Very few people in the United States today attempt to follow the example of Henry David Thoreau in On Walden Pond and "go into the woods to live simply, producing by my own hands all that is necessary for life." Economists explain this by saying:

answer

Being self-sufficient dramatically reduces one's standard of living.

question

Which of the following statements about factors of production are true? 1. Some nations have many resources and yet remain poor. 2. Only those resources that are privately owned can be used efficiently. 3. If a nation is classified as efficient, we know it possesses abundant resources of all types. 4. A nation can have relatively few resources and still have an efficient economy.

answer

Only statements I and IV are correct.

question

An economic model is:

answer

a simplified representation of an economic concept or institution.

question

In elementary school, your second grade teacher probably led his students from the classroom to the lunch room or the library by forming two lines of students and marching them to the destination. The second grade teacher's approach to moving students through the hallway closely approximates a:

answer

traditional economy

question

In many high schools student lockers in prime locations are a highly sought after commodity. If the administration assigns those lockers alphabetically and doesn't allow students to switch lockers with their friends, the allocation system for lockers could be similar to what type of economic system?

answer

command economy

question

One of the strengths of the market economy is that it depends on:

answer

voluntary cooperation and exchange in which both sides gain.

question

The term "consumer sovereignty" refers to what and is used in what type of economy?

answer

It is used in the market economy and means "The consumer decides!"

question

Property rights are established by the government in the free market economy to

answer

ensure efficiency

question

When the federal government established copyright laws, it was ensuring

answer

property rights for entrepreneurs

question

One of the economic factors that allows the free market to achieve efficiency is

answer

incentives

question

Which of the following is not considered an incentive?

answer

taxes

question

In economics the term "marginal" is best defined as:

answer

additional

question

In economics the verb "allocate" is best defined as:

answer

distribute

question

The Law of Increasing Opportunity Costs tells us that:

answer

if we are on the PPF, as we produce more of product #1 we have to give up increasing amounts of product #2.

question

The demand for toothpaste is the relationship between ________ of toothpaste and the ________.

answer

price; quantity demanded

question

Which of the following is NOT a determinant of demand in the market for canoes in Minnesota?

answer

The number of sellers of canoes in Minnesota.

question

If the price of lettuce increases in Tulsa, the quantity of lettuce demanded will most likely:

answer

Decrease.

question

If consumers in Georgia expect the price of new homes to decrease next year, it could lead to ________ this year.

answer

A decrease in demand.

question

The demand curve for lawn fertilizer has a ________ slope because of ________.

answer

negative; the law of demand.

question

If the U.S. economy went into a recession next year (where incomes and wealth falls), there would be a(n) ________ in the ________.

answer

Decrease; demand for cars.

question

Which of the following products would most likely have a demand curve with a very steep slope - one where price changes bring about relatively small changes in quantity demanded?

answer

College textbooks.

question

If the price of shampoo increased by 44%, there would be a ________ in the ________.

answer

Decrease; demand for conditioner.

question

If consumer tastes for home school education increases over time there will be:

answer

An increase in the demand for home school curricula.

question

On the graph above, if the price of gasoline increases from $2.11 to $2.33 per gallon, quantity demanded will ________ from ________ to ________.

answer

decrease; 57; 44

question

The supply of avocado's in Texas is determined by all of the following EXCEPT:

answer

The population of Texas.

question

The largest cost of doing business for the average American firm is:

answer

Labor

question

The supply of alligator meat slopes ________ and to the ________, according to the ________ of supply.

answer

Upward; right; law.

question

According to the law of supply if the price of bird seed falls, the ________ of bird seed ________ will ________.

answer

quantity; supplied; fall.

question

If the technology associated with making heart medication increases over time, the ________ of (for) heart medication will ________.

answer

supply; increase.

question

Which of the following is a determinant of supply in the market for car rentals?

answer

Expectations concerning future prices.

question

The supply curve below depicts the decisions of a windshield supplier. At what price will this supplied be most willing and able to supply?

answer

$298

question

At what price will the windshield supplier be least willing and able to sell?

answer

$196

question

One reason why the windshield supplier increases quantity supplied as price increases is because input costs tend to ________ as quantity supplied ________.

answer

Increase, Increase

question

If the supply curve for a rare piece of art is vertical that means that as price increases, quantity ________ will ________.

answer

supplied, not change.

question

Which of the following would most likely have an inelastic demand?

answer

insulin for diabetics

question

When the demand for a good is elastic, the demand curve for that good tends to be:

answer

Relatively flat

question

The overall supply of scissors is elastic because:

answer

The input costs of production are relatively low

question

The cross-price elasticity of demand between fishing line and fishing lures tend to be negative. This means that:

answer

Lines and lures are complements of one another.

question

Which of the following is most likely an example of an inferior good?

answer

Used cars

question

The basic shape and slope of the demand curve is:

answer

falling from left to right

question

Using Figure 2A above and assuming that we are starting with demand curve "D" and supply curve "S", which of the other curves shows the result of a increase in buyers' incomes?

answer

D3

question

Assume that we violate ceteris paribus and increase both supply and demand at the same time for a product. Which of the following statements about the results is correct?

answer

Quantity will increase but the effect on price is indeterminate.

question

For several years in a row, the east coast cities of the nation suffered extremely cold winters. Demand for home heating oil was very inelastic. How did the elasticity of supply impact the changes in price that resulted from the increased demand?

answer

Supply is inelastic, therefore, the price increased more than it otherwise would have.

question

Using Figure 2A above and assuming that we are starting with demand curve "D" and supply curve "S," which of the other curves shows the impact of an increased cost of steak sauce, a complement for ribeye steak?

answer

D2

question

Demand graphs are typically drawn in two dimensions. That means the graph can only show one independent variable and one dependent variable. In the common demand graph, which variable is independent and which is dependent?

answer

Price is the independent variable and quantity is the dependent variable.

question

Exceptionally large harvests of wheat or corn often result in farmers having lower total incomes for that season despite the increased production. Economists explain this fact by saying that:

answer

the demand of wheat and corn is basically inelastic and so increases in output drastically reduce price and income to the farmers.

question

Ashley is a typical consumer, and as her income rises, she buys less ground beef and more steak. This means that ground beef is classified by economists as a (an)

answer

inferior product

question

Assume that new technology develops a substitute for DVDs. How will the price elasticity of demand for DVDs be impacted?

answer

The appearance of a substitute for DVDs with increase the elasticity coefficient for DVDs.

question

Harold is the new manager of Jan's Pizza Parlor. He has been told that the price elasticity of demand for his product is 1.10. Which of the following statements are correct? 1. The demand for his pizza is elastic. 2. If Harold raises the price of pizza, the total revenue for the operation will increase 3. A decrease in the pizza price will increase the total revenue of the business. 4. A $1.00 increase in quantity will cause an increase in sales of 110 pizzas. 5. A 10% increase in price of pizzas will cause an 11% decrease in quantity of pizzas demanded.

answer

I, III, and V are the only correct responses.

question

How are products with inferior demand defined by economists?

answer

A product that consumers demand less of as their income increases.

question

Income elasticity is used to discover if products are:

answer

normal or inferior goods

question

Jeffery Brooks has just landed a job as the produce manager for a large grocery store. The store manager mentioned that last summer a group of students had calculated that the cross elasticity of demand between two vegetables to be 1.50. Jeffery should know that this means:

answer

consumers view these two products as substitutes

question

Price elasticity of demand refers to the ratio of the:

answer

percentage change in quantity demanded of a product in response to the percentage change in the price of the good.

question

The airlines have different rules on discounts for different types of travelers. The airlines do this because:

answer

different types of travelers have different elasticities of demand

question

Hotels and resorts often have different rules on discounts for different types of travelers. The hotels do this because:

answer

different types of travelers have different elasticities of demand.

question

In a supply and demand graph, the consumer surplus is represented by the

answer

area under the demand curve and above the market price

question

If the price of soda increases from $1.00 to $1.50 when the government places a tax on soda, which of the following is true?

answer

Producer and consumer surplus decreased.

question

If Jenny really likes to eat hot dogs for lunch and the price of them increases, the following will more likely happen

answer

consumer surplus will decrease

question

When the government implements a sales tax on cars, the following will most likely happen

answer

both a and c

question

Dead weight loss represents

answer

both a and b

question

In the following graph, which represents the deadweight loss as a result of moving supply from S1 to S2?

answer

c,e

question

When price decreases in a perfect competitive market

answer

consumers benefit

question

Jose enjoys drinking a particular brand of soda pop. His utility function is shown below.

answer

6th

question

The Law of Diminishing Marginal Utility is best shown by which of the following examples? 1. Mary is happier after buying her fifth pair of shoes than she was after only four pairs. 2. Fat Albert gets sick after eating too many Twinkies. 3. Big Bill loves cheeseburgers but finds that the third burger did less to increase his happiness than the second burger did.

answer

III only

question

To an economist, the word "marginal" is best defined as:

answer

"additional."

question

For the wheat farmer and the t-shirt supplier the price that corresponds to the shut down point equals _______ for the farmer and _______ for the shirt monopolist.

answer

$15, $9

question

The monopoly firm will produce ________ t-shirts and charge _________. While the farmer will produce _________ bushels of wheat and charge _______ in the long run equilibrium position.

answer

80, $19, 250, $18

question

At what price are both the farmer and t-shirt monopolist earning economic profit?

answer

the answer is NOT $18

question

At what price are both the farmer and the t-shirt monopolist incurring losses, but not contemplating shutting down?

answer

None of the above

question

For the purely competitive firm: I. The supply curve is the marginal cost curve above the shutdown point. II. The shutdown price is lower than $15. III. The supply curve is the average variable cost curve above $15. IV. The supply curve is the average total cost curve above $10. V. The shut down price is just below $10.

answer

I and II

question

Scott owns a welding business in Alabama. Every year, when he meets with his accountant to file his tax returns, he claims that he should be able to show a loss on his tax returns. His accountant always shows a profit on his tax returns. Fully explain what Scott's claim is based on.

answer

Scott's claim is based on the fact that the tools he buys to weld would be losing value as a result of deprecation. Since his welding business spends money in order to maintain itself and keep running with new and working machinery, he wants the money back from replacing these resources. Because of this, he claims deprecation - which is an explicit cost of doing a business like Scott's.

question

Which of the following is a true statement? I. The calculation of economic profit includes explicit and implicit costs of production. II. Accounting profit is usually greater than economic profit. III. Economic profit is usually greater than accounting profit. IV. The calculation of accounting profit includes total revenue.

answer

I, II, and IV only

question

Timmy owns a shoe store that generates monthly revenue of $47,000. Timmy's costs associated with rent, materials and labor equals $39,055 per month. Timmy could work as a turkey farmer instead of owning a shoe store which would generate $11,039 in total revenue per month. Timmy's accounting profit equals _____________ while his economic profit equals ___________.

answer

$7,945, - $3,094

question

Which of the following is an example of an explicit cost? I. Gasoline and computer software II. Rent, interest and taxes III. Foregone income from working as an independent contractor IV. Materials and insurance

answer

I, II, and IV only

question

In the production of trash cans a good example of a fixed cost is:

answer

Rent on the factory and managerial salaries

question

Emma owns a flower shop in Tampa. She pays $3,091 per month to lease her building, $2,208 in wages, $1,887 for flowers and other supplies and she produces 662 flower arrangements per month. Emma's average fixed cost of production equals:

answer

$4.67

question

Emma owns a flower shop in Tampa. She pays $3,091 per month to lease her building, $2,208 in wages, $1,887 for flowers and other supplies and she produces 662 flower arrangements per month. Emma's average variable cost of production equals:

answer

$6.18

question

Emma owns a flower shop in Tampa. She pays $3,091 per month to lease her building, $2,208 in wages, $1,887 for flowers and other supplies and she produces 662 flower arrangements per month. Suppose Emma sells her flower arrangements for $39 each and sells 611 per month. Given the information available we know that her total revenue equals ________ while her average total cost equals ____________.

answer

$23,829, $10.85

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