Test Answers on eco – Flashcard

question

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.

Get instant access to
all materials

Become a Member