Chapter 1 & 2 & 3 & 4

question

Some economic studies have shown that mandatory seat belt laws do not lead to a reduction in traffic fatalities.

answer

True.

question

The slope of a straight line is always equal to either 1.0 or -1.0.

answer

False.

question

In the textbook, economics is defined as the science of scarcity.

answer

True.

question

The branch of economics that studies the decisions made by individuals and firms is called macroeconomics.

answer

False.

question

Macroeconomics deals with issues involving large corporations, while microeconomics exclusively deals with issues involving small businesses.

answer

False.

question

Economists sometimes refer to the resource category land as natural resources.

answer

True.

question

If variable X rises as a result of variable Y falling, then X and Y have an inverse relationship.

answer

True.

question

If someone gives you a free ticket to the movies, then there is no opportunity cost involved with going to the movies.

answer

False.

question

To an economist, the terms factor and resource are synonyms.

answer

True.

question

Scarcity occurs in both wealthy societies and poor societies.

answer

True.

question

The effect of a decrease in interest rates upon economic growth is an example of positive economics.

answer

True.

question

According to economists, money is a resource.

answer

False.

question

Price is the only rationing device that can be used in a modern economy.

answer

False.

question

Economists use the terms resource and input as synonyms

answer

True.

question

A rationing device is a method used to resolve who gets what of available goods and resources.

answer

True.

question

Economists use the word utility to describe the satisfaction one receives from a good.

answer

True.

question

The higher the opportunity cost of doing something, the more likely it will be done.

answer

False.

question

In economics, capital is defined as a financial asset such as stocks and bonds.

answer

False.

question

The higher the opportunity cost of making a new friend, the more likely one is to make a new friend, ceteris paribus.

answer

False.

question

Production possibilities curves can shift outward but they do not shift inward.

answer

False.

question

If the PPF for two goods is a downward-sloping straight line, the resources used to produce those goods are equally well suited to the production of both goods.

answer

True.

question

When an economy is not using all of its resources, it is producing at a point below its production possibilities frontier.

answer

True.

question

A production possibilities frontier separates an attainable region from an unattainable region.

answer

True.

question

The law of increasing opportunity cost results from the varying ability of resources to adapt to the production of different goods and it helps to explain why production possibilities curves are typically bowed outward.

answer

True.

question

A decrease in unemployment causes the PPF to shift outward (to the right).

answer

False.

question

In a situation where two goods can be produced by two different people, it is possible for one person to have a comparative advantage in the production of both goods and the other person to have the comparative advantage in the production of neither good.

answer

False.

question

In a PPF graph of goods X and Y, points that lie beyond (to the right of) the PPF represent combinations of the two goods that are currently unattainable.

answer

True.

question

The law of increasing opportunity cost results from the varying ability of resources to adapt to the production of different goods and it helps to explain why production possibilities curves are typically bowed outward.

answer

True.

question

It is possible through trade for a country to consume a combination of goods that lies beyond its production possibilities frontier.

answer

True.

question

The law of increasing opportunity cost helps to explain why PPF's are typically bowed-outward.

answer

True.

question

A decrease in the quantity of resources available causes a movement down along a given PPF.

answer

False.

question

As long as the maximum buying price of a good is less than the minimum selling price of that good, an exchange will occur.

answer

False.

question

The law of diminishing marginal utility helps to explain the direct relationship between price and quantity supplied.

answer

False.

question

To an economist, an increase in demand means the same thing as an increase in quantity demanded.

answer

False.

question

When a market is in disequilibrium, such as when the quantity supplied of a good is greater than the quantity demanded of that good, the price of the good will rise, ceteris paribus.

answer

False.

question

In general, all markets equilibrate at the same speed.

answer

False.

question

If the government increased licensing requirements for beauty salons, the supply curve for salon services would shift to the left.

answer

True.

question

Consumers' surplus is the difference between the maximum price the buyer is willing and able to pay for a good and the actual price paid.

answer

True.

question

A surplus will occur in a market when the price of the product is above the equilibrium price.

answer

True.

question

A simultaneous decrease in the demand and the supply of good X always leads to a decrease in the price of good X.

answer

False.

question

An increase in supply is graphically represented by a leftward shift of the supply curve.

answer

False.

question

The sum of consumers' surplus and producers' surplus is maximized at equilibrium.

answer

True.

question

The law of diminishing marginal utility helps to explain why supply curves are generally upward sloping.

answer

False.

question

A demand curve is the graphical representation of the law of demand.

answer

True.

question

If the quantity demanded of good X is greater than the quantity supplied of good X, then the market for good X is in disequilibrium.

answer

True.

question

Supply curves are usually upward sloping.

answer

True.

question

Mutually beneficial trade between buyers and sellers drives a market to equilibrium.

answer

True.

question

Economists use the terms neutral good and normal good interchangeably.

answer

False.

question

In moving along a demand curve, everything is held constant except buyers' income.

answer

False.

question

The terms scarcity and shortage are synonyms.

answer

False.

question

The market demand curve for a given product may be downward sloping even if no person in that market has a downward sloping demand curve.

answer

True.

question

Buyers always prefer lower prices to higher prices.

answer

False.

question

In 1973 and 1979, the U.S. federal government imposed price ceilings on gasoline which resulted in surpluses of gasoline.

answer

False.

question

There is currently a price ceiling in the market for transplanted kidneys, which has helped to create a shortage of transplanted kidneys.

answer

True.

question

It is possible for the absolute price of a good to rise at the same time that the good's relative price is falling

answer

True.

question

A deadweight loss is the loss to society of not producing the supply-and-demand determined level of output.

answer

True.

question

The need for a rationing device results from scarcity.

answer

True.

question

If the minimum wage law sets a price floor that is below the equilibrium wage in the unskilled labor market, the minimum wage will create a shortage of unskilled labor.

answer

False.

question

The minimum wage is a good example of a price floor.

answer

True.

question

The absolute price of a good is the price of that good in terms of another good.

answer

False.

question

Price ceilings sometimes result in some buyers and sellers purchasing the good at prohibited prices.

answer

True.

question

A tax placed on a good can make that good relatively more expensive and its substitutes relatively less expensive.

answer

True.

question

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

answer

If you drop a ball from the top of a building, it will fall to the ground.

question

The condition in an economy that makes a \"rationing device\" a necessity is:

answer

scarcity exists.

question

The reason people can't have everything they want is because

answer

scarcity exists.

question

When economists speak of scarcity, they are referring to the

answer

condition in which people's wants outstrip the limited resources available to satisfy those wants.

question

The student whose study habits are illustrated here will maximize the net benefits of studying when she has studied

answer

6 hours

question

Prior to attending college, Marvin is offered a lucrative four-year contract as an actor in a daytime soap opera. Assuming that acting and attending college are Marvin's preferred alternatives and that he must choose between the two, his opportunity cost of attending college after receiving the offer ________________, making him ____________ likely to attend college than before he received the offer.

answer

increases; less

question

According to economists, competition exists because of

answer

scarcity.

question

What does it mean if a person makes a \"decision at the margin\"?

answer

The person compares additional benefits and additional costs when deciding what to do.

question

The __________ the opportunity cost of doing something, the __________ likely a person will do that something.

answer

b and d b. lower; more d. higher; less

question

XOX Making a decision at the margin is __________ an all-or-nothing decision.

answer

inconsistent with

question

If the student whose marginal benefits and costs of good health are noted in this table, how many units of good health should the student obtain in order to maximize her net benefits of good health?

answer

5 units

question

Why do societies need rationing devices?

answer

Because scarcity exists.

question

Which of the following is a normative macroeconomics statement?

answer

The central bank should increase the nation's money supply.

question

Which of the following is not one of the four broad categories of resources?

answer

money

question

Many people buy one newspaper per day, but rarely do they buy two of the same newspapers on the same day. What is the economic justification for this behavior?

answer

The marginal cost of purchasing the second newspaper exceeds the marginal benefit of purchasing that paper.

question

If it is discovered that using drugs enhances a person's chance of contracting a lethal disease, the cost of using drugs

answer

increases.

question

Which of the following statements is false?

answer

Elementary education at public schools is free.

question

Which of the following statements is true?

answer

Oil is classified as part of the resource category land.

question

The opportunity cost of attending college

answer

Varies from person to person.

question

In an interview an economist states, \"This problem should be of greater concern to the federal government.\" We can explicitly put this statement in the category of

answer

normative economics.

question

Which of the following is a positive economic statement?

answer

Consumers bought fewer cars when the relative price of cars increased. The budget deficit has been rising in recent years.

question

Scarcity exists (graph)

answer

at both point C and at point A

question

Refer to Exhibit 2-2. If PPF2 is the relevant production possibilities frontier, then point __________ is productive efficient.

answer

both b and d b. D d. F

question

XOX The economy was at point A producing 100X and 200Y. It moved to point B where it produces 200X and 300Y. It follows that

answer

point A may have been a point below the economy's PPF, while point B may lie on the PPF. OR the economy's PPF could have shifted outward and point A was a point on the economy's old PPF.

question

Suppose Andrea is taking just two courses and is at a point inside her PPF of grades for those two courses. If Andrea changes her work habits then it is impossible for

answer

none of the above is impossible in this situation

question

Which of the following is an illustration of the law of increasing opportunity costs?

answer

As more cars are produced, the opportunity cost of each additional car is greater than for the preceding unit.

question

Which of the following statements is true? (graph)

answer

There would be no gains from trade between person A and person B because they have the opportunity cost of producing one unit of good X (or one unit of good Y) is the same for both persons.

question

Which graph depicts the result of a decrease in the unemployment rate?

answer

none of the above

question

Consider two points on the PPF: point A, at which there are 50 oranges and 100 apricots, and point B, at which there are 51 oranges and 98 apricots. If the economy is currently at point B, the opportunity cost of moving to point A is

answer

1 orange.

question

Some of our farm fields are being left unused. Does this have any implications for the economy's PPF diagram (with agricultural products on one axis and all other products on the other axis)?

answer

With unemployed resources, we are at a point below the PPF.

question

Refer to Exhibit 2-9. Who has the comparative advantage in the production of good B?

answer

Alex

question

Refer to Exhibit 2-3. If PPF1 is the relevant production possibilities frontier, society can choose points that lie only

answer

below or on PPF1

question

Refer to Exhibit 2-5. Given available resources and technology, this economy can produce 50,000 television sets and 50,000 fax machines only if it chooses to

answer

none of the above

question

A PPF is more likely to be a downward-sloping curve that is bowed outward than a downward-sloping straight line because most resources are

answer

better suited for the production of some goods than others.

question

Refer to Exhibit 2-5. The economy is currently operating at point F. The opportunity cost of moving to point E is approximately

answer

zero televisions.

question

Refer to Exhibit 2-3. If PPF1 is the relevant production possibilities frontier, society may move to PPF2 as a result of

answer

an increase in resources. an increase in technology.

question

XOX Suppose Andrea is taking just two courses and is at a point on her PPF of grades for those two courses. Now this PPF shifts inward and Andrea moves to a point on the new PPF. Which of the following would be impossible after her PPF has shifted inward compared to before the PPF shifted?

answer

both of her grades to rise

question

For each additional lamp produced, a constant opportunity cost is incurred in terms of bookshelves. This means

answer

that for every lamp produced, a constant number of bookshelves is forfeited.

question

Refer to Exhibit 2-8. Who has the comparative advantage in the production of good Y?

answer

Maria

question

Consider two points on the PPF: point A, at which there are 10 apples and 20 pears, and point B, at which there are 7 apples and 21 pears. If the economy is currently at point A, the opportunity cost of moving to point B is

answer

3 apples.

question

If there is always a three-for-one tradeoff between goods X and Y, then the PPF between X and Y is

answer

a downward-sloping straight line.

question

Country X has a high unemployment rate. It follows that country X is operating

answer

inside (below) its PPF.

question

Refer to Exhibit 2-8. Who has the comparative advantage in the production of good X?

answer

Maya

question

If the law of increasing opportunity costs is operable, and currently the opportunity cost of producing the 101st unit of good X is 5Y, then the opportunity cost of producing the 201st unit of good is X is most likely to be

answer

more than 5Y

question

Refer to Exhibit 2-6. Which graph depicts society's choice to produce more of good X and less of good Y?

answer

none of the above

question

In the supply-and-demand diagram of the market for peanut butter, the equilibrium point has moved down and to the right. What could have caused this?

answer

a fall in the price of peanuts

question

Refer to Exhibit 3-7. If S1 is the relevant supply curve, a decline in technology in the production of good X causes

answer

the supply of good X to shift from S1 to S3.

question

__________ is the number of units that individuals are __________ to buy at a particular price during some time period.

answer

Quantity demanded; willing and able

question

Refer to Exhibit 3-5. In the market shown, a rightward shift in demand from D1 to D2 could have been caused by

answer

a decrease in buyers' income (assuming the good is an inferior good).

question

If the producers' surplus is $50, and the consumers' surplus is $40, then what is the minimum selling price of the good?

answer

There is not enough information to answer the question.

question

An \"increase in demand\" means that

answer

the demand curve has shifted to the right.

question

Refer to Exhibit 3-7. If S1 is the relevant supply curve, an increase in the price of good X may cause

answer

a movement along S1 perhaps from point A to point C.

question

Resource X is necessary to the production of good Y. If the price of resource X rises, the _____________ curve for good Y will shift ____________ resulting in a(n) _____________ in the equilibrium price of Y and a(n) ____________ in the equilibrium quantity of Y.

answer

supply; leftward; increase; decrease

question

Refer to Exhibit 3-4. At a price of $6 _______________ units will be exchanged.

answer

10

question

An increase in the number of buyers in a particular market for a good will result in a ___________________ for that good.

answer

rightward shift in the demand curve

question

A \"decrease in demand\" means that

answer

the demand curve has shifted to the left.

question

Which of the following is consistent with the law of demand?

answer

People substitute lower-priced goods for higher-priced goods.

question

Which of the following is descriptive of the law of diminishing marginal utility?

answer

The third hamburger consumed provides less utility than the second hamburger consumed

question

Refer to Exhibit 3-7. If S1 is the relevant supply curve, a decrease in the price of a resource that is necessary for the production of good X causes

answer

the supply of good X to shift from S1 to S2

question

Which of the following will not shift a supply curve?

answer

a change in the good's own price

question

Refer to Exhibit 3-5. In the market shown, if equilibrium was originally at point V and is now at point Z, the new equilibrium price is __________ it was originally and the new equilibrium quantity is ____________ it was originally.

answer

less than; less than

question

Refer to Exhibit 3-10. At a price of $10, __________ units of the good will be exchanged.

answer

100

question

Refer to Exhibit 3-4. If this is a competitive market, price and quantity will gravitate toward

answer

$4 and 15 units, respectively.

question

Refer to Exhibit 3-6. If a decrease in income causes the demand for good X to shift from D1 to D2, then good X is

answer

an inferior good.

question

If the U.S. government imposes a more restrictive import quota on Japanese video gaming systems, the ____________ curve for Japanese video gaming systems in the U.S. will shift ___________.

answer

supply; leftward

question

If people begin to favor science fiction novels to a greater degree than previously, the demand curve for science fiction novels

answer

shifts rightward.

question

If a market is in disequilibrium, economists would predict that the product's price would __________ to reach equilibrium when the quantity demanded is __________ than the quantity supplied.

answer

a. rise; greater b. fall; less

question

Refer to Exhibit 4-7. How many unskilled workers do firms want to employ at the minimum wage?

answer

N3

question

Refer to Exhibit 4-3. If price P3 is a price ceiling, then

answer

a. the price ceiling does not have an effect on the market for good X. c. the price at which exchange takes place is P2.

question

Price serves as a

answer

a. rationing device. b. transmitter of information. c. means of determining who gets what of the available limited resources and goods. d. a and b

question

There are two goods in the economy, apples and bread. The relative price of apples has increased. This could be due to

answer

a. an increase in the absolute price of apples, ceteris paribus. b. a decrease in the absolute price of bread, ceteris paribus.

question

In the market for a given product, when a price floor is set above the equilibrium price the result will be

answer

deadweight loss.

question

If the minimum wage law sets a wage floor below the equilibrium wage in the market for unskilled labor, then the

answer

minimum wage will not impact the unskilled labor market.

question

Which of the following would not result from a price ceiling (set below the equilibrium price)?

answer

an increase in supply

question

If the absolute price of a new car is $40,000 and the relative price of a laptop computer in terms of cars is 1/40 of a car, it follows that the absolute price of the laptop is

answer

$1,000

question

A price floor (set above the equilibrium price) on rice will

answer

result in a surplus of rice.

question

Suppose you live in New York City and the government has imposed price ceilings on apartment rental rates. You want to rent an apartment from Smith, who says that unless you buy the furniture in the apartment for $4,000, he cannot rent the apartment to you. The condition of buying the furniture could be considered

answer

a tie-in sale.

question

A price ceiling is a government-mandated

answer

maximum price above which legal trades cannot be made.

question

Exhibit 4-2 represents the orange juice market. The horizontal line at $2 shows a price ceiling imposed by the government. Which of the following statements is true at this price?

answer

At the price ceiling the shortage equals 400 units.

question

When the price of a good rises, the price is transmitting information indicating that the good has become relatively

answer

scarcer.

question

If the price of good X is $50 and the price of good Y is $25, it follows that the relative price of one unit of good X is _____________ unit(s) of good Y.

answer

2.00

question

Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. How many fewer units of wheat will be sold at the price floor than at the equilibrium price?

answer

Q2 - Q1

question

Exhibit 4-2 represents the orange juice market. The horizontal line represents a price ceiling imposed by the government. Which of the following is true?

answer

The quantity supplied at the price ceiling will equal the quantity exchanged.

question

Refer to Exhibit 4-7. How many fewer persons work in the unskilled labor market at the minimum wage (WM) than at the equilibrium wage (W1)?

answer

(N1 - N3) persons

question

Suppose that the price of peanut butter is $3 per pound and the price of almond butter is $5 per pound. If the price of peanut butter rises to $3.60 and the price of almond butter rises to $5.50, then the absolute price of peanut butter has _______________ and the relative price of peanut butter has _______________.

answer

risen; risen

question

Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium, the consumers' surplus will equal

answer

area 1 + 2 + 4

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