Test Answers on eco – Flashcard
Unlock all answers in this set
Unlock answersquestion
Opportunity cost is defined
answer
as the value of the best alternative not chosen
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 law of comparative advantage says that a person should produce a good if she
answer
has the lowest opportunity cost of producing that good
question
Which of the following is NOT a gain from division of labor? - Workers gain experience from the repetition of the tasks. - Workers save time by not moving to different tasks. Correct! -Workers' morale increases as tasks become more specialized. - Workers' abilities are matched to tasks.
answer
Workers' morale increases as tasks become more specialized.
question
A point outside the production possibilities frontier
answer
cannot be reached using the available technology
question
A production possibilities frontier can shift outward for all of the following reasons except one. Which is the exception? -an improvement in technology -a larger work force -an improvement in labor skills Correct! - a decrease in the unemployment rate
answer
a decrease in the unemployment rate
question
Every economy must answer each of the following questions except one. Which is the exception? -Why are these particular goods produced? -Which goods will be produced? - Who will actually consume the goods produced? -Which resources should be used?
answer
Why are these particular goods produced?
question
In a command economy
answer
in theory, individual choices are reflected in collective decisions, and decisions are made by central planners
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
Attending college can be viewed as a form of
answer
investment in which costs are borne today and benefits are received in the future
question
Sunk costs
answer
should not be considered when making economic decisions
question
If one person has the absolute advantage in producing both of two goods, then that person
answer
will have the comparative advantage in only one good
question
Barter occurs when
answer
one product is exchanged directly for another product
question
When drawing a production possibilities frontier, all of the following are usually assumed except one. Which is the exception? - The production possibilities frontier is drawn for a particular time period. -Resources can be shifted between production of the two goods. -The quantity of resources is rapidly growing. - Technology is fixed.
answer
The quantity of resources is rapidly growing.
question
The bowed-out shape of the production possibilities frontier indicates increasing opportunity costs.
answer
true
question
A production possibilities frontier can shift inward if there is
answer
mandatory retirement at age 55
question
Which of the following is NOT a characteristic of pure capitalism? -a reliance on prices to direct resources to their best uses - private property rights - central planning - laissez-faire policies
answer
central planning
question
The U.S. economy is best characterized as
answer
a mixed economy
question
A PPF will not shift because of an increase in
answer
unemployment
question
Households act as suppliers when they provide
answer
resources to firms and governments
question
Which of the following represents the largest source of income for U.S. households? -proprietor's income -wages and salaries -rental income -transfer payments
answer
wages and salaries
question
A cottage industry is one that
answer
carries out production in workers' homes
question
Owners of corporations are referred to most frequently as
answer
stockholders
question
Nonprofit, or not-for-profit, firms
answer
often pursue goals other than profit maximization
question
Natural monopolies occur when
answer
one firm can service the market more cheaply than two or more firms can
question
Which of the following is NOT a government transfer program? - food stamps -movement of soldiers to a different military base - unemployment compensation - Social Security
answer
movement of soldiers to a different military base
question
Which of the following taxes is most clearly based on the benefits-received principle of taxation?
answer
gasoline tax
question
International trade occurs because the opportunity cost of producing specific goods differs across
answer
countries
question
f one dollar is initially equal in value to one euro and demand for euros increases, then each dollar will be worth
answer
less than one euro, and European imports will be more expensive in the U.S.
question
If the real wage decreases, the opportunity cost of working in the home will
answer
decrease
question
Joe teaches mathematics at Camford University and receives $40,000 per year. His spouse, Kathleen, works as a self-employed computer programmer and charges $40 per hour. Which of the following is true?
answer
Joe's income is a salary, and Kathleen's income is a proprietor's income
question
Which of the following is a major advantage of the sole proprietorship?
answer
ease of start-up
question
In terms of total sales, the dominant form of business firm in the U.S. economy is the
answer
corporation
question
Despite specialization and comparative advantage, household production still exists because for some households
answer
production at home is less costly than purchasing the good in the market
question
What is the rationale for government provision of education?
answer
Potential students consider only their personal benefits gained from education, but the rest of society benefits, too
question
Gross Domestic Product is the market value of
answer
all final goods produced during the course of a year
question
Trade restrictions result in all of the following except one. Which is the exception?
answer
improved quality
question
The overall U.S. balance of payments
answer
shows how deficits in one account are exactly offset by surpluses in other accounts.
question
Which of the following is true of import tariffs and quotas?
answer
They benefit domestic producers at the expense of domestic consumers.
question
The law of demand says that the lower the price of a good, other things constant,
answer
the larger the quantity demanded of that good
question
Which of the following will NOT shift the demand curve for movie tickets?
answer
a change in the price of movie tickets
question
Assume that black beans and rice are staples in the diet of one particular family. How could you tell if these goods were complements, substitutes, or unrelated goods?
answer
If the price of black beans rose and the consumption of rice increased, they would be substitutes.
question
If a certain type of clothing becomes more fashionable, we would expect that its price
answer
and quantity will both increase
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
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
Recently it has been discovered that lobsters grown on lobster farms can feed on algae, which is a cheaper lobster food. As a result of this discovery,
answer
the supply curve for lobster will shift to the right
question
When quantity demanded of a good is less than the quantity supplied at the prevailing market price,
answer
the price of the good tends to fall
question
Economists emphasize the importance of equilibrium in markets because
answer
the behavior of buyers and sellers will automatically guide the market toward the equilibrium price and quantity`
question
If the government imposes a ceiling price on apartment rents, we would expect to observe all of the following except one. Which is the exception?
answer
an increase in the number of new apartment complexes being built
question
The law of demand states that
answer
price and quantity demanded are inversely related
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
Jennifer learns that the price of CDs will be going up 10 percent next week. She usually buys three CDs per week. What happens to Jennifer's demand for CDs this week?
answer
It increases because the price will be higher next week.
question
Which of the following best defines supply?
answer
the amount of a good that producers are willing and able to sell at each possible price, other things constant
question
Larger quantities of any good will be supplied at higher prices because
answer
higher prices attract resources from other uses
question
An improvement in technology would shift
answer
the supply curve rightward
question
An increase in the number of producers of a good will
answer
increase the market supply because market supply is the sum of all individual supply curves
question
If there is a shortage in the market for athletic shoes,
answer
the price should rise to eliminate the shortage
question
ickets 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
Some people argue against increasing the minimum wage because they believe the result would be increased unemployment. Which of the following best summarizes this argument? A higher minimum wage would
answer
increase the quantity supplied of labor while decreasing the quantity demanded of labor.
