question

When GM advertises its cars, the company is trying to cause a

answer

rightward shift in the demand. rightward shift in the supply.

question

In Figure 2, an increase in population will change demand from

answer

D1 to D2

question

The demand for computers has risen dramatically at the same time that the unit cost of production has decreased. As a result, we can expect

answer

an increase in output with no predictable change in price

question

If the government has stated that it will pay whatever it must to obtain 1,000 units of good X, which demand curve in Figure 1 is appropriate?

answer

2

question

In Figure 8, a point such as D

answer

Can never be obtained.

question

Why does quantity demanded decrease when price increases?

answer

People choose to reduce consumption of the item. People "drop out" of the market for the item. People find substitutes for the item.

question

Which of the following is likely to affect the position and shape of society's production possibilities frontier?

answer

volume of physical resources level of labor skills level of technology

question

At present, faculty in the Economics Department teach introductory and upper-level courses. Which graph in Figure 9 represents the change in the production possibilities of the Economics Department after a policy of using graduate students in addition to faculty to teach introductory sections was implemented?

answer

3

question

A shift in the supply curve of bicycles resulting from higher steel prices will lead to

answer

higher prices of bicycles.

question

ecycling of newspapers has been undermined by its success. The supply of old papers, gathered diligently by those concerned with the environment, has increased dramatically, as has the number of firms that convert the material into recycled newsprint. The quantity demanded has not changed much despite falling prices because newspapers consider recycled newsprint an inferior substitute for regular newsprint. Consequently, the price of recycled newsprint has fallen below the cost of production; recycling firms are going out of business; mountains of old newspapers are left behind. Which graph in Figure 4 best illustrates this situation?

answer

1

question

A shift in the demand curve for sailboats resulting from an increase in incomes will lead to

answer

higher prices of sailboats.

question

Ex-London School of Economics student Mick Jagger sang, "You can't always get what you want, but if you try sometimes you just might find you can get what you need." Another statement of the basic economic principle expressed in this lyric is that

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you can allocate your resources to what gives you the highest value.

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"Moonshine" is illegal home brew made by adding sugar to accelerate corn fermentation. Ten pounds of sugar are necessary to make a gallon of moonshine. In the mid-1970s, the price of sugar tripled and the price of moonshine skyrocketed from $6 to $15 a gallon. Which graph in Figure 3 best illustrates this?

answer

4

question

The quantity of newspapers sold will decline if

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newsprint becomes more expensive.

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The total amount of consumption of a society can be increased if

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individuals engage in specialization and voluntary trade

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If consumers is sensitive to changes in the price of a good, the good's

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elasticity is less than -1

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We observed that the price of a good rises and the quantity purchased also rises. Everything else being equal, it is consistent that

answer

income rose.

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Firms often seek to borrow money to expand their capital stock, and the price they pay for that money is the interest rate. What happens to quantity of money demanded if the interest rate increases?

answer

It decreases.

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If orange juice prices double next year, there will be a...

answer

rightward shift in the demand for grapefruit juice

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The curvature of the production possibilities frontier in Figure 7 implies that

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some resources are better suited for producing wheat than for producing barley.

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The economic benefits of owning a home are greater when home prices are

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rising and interest rates are low.

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Older people often reminisce about the "good old days" when prices were much lower. This is misplaced nostalgia primarily because in the "good old days,"

answer

wages were much lower also.

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If a Florida strawberry wholesaler operates in a perfectly competitive market, that wholesaler will have a ________ share of the market, and consumers will consider her strawberries to be ________. Therefore, ________ advertising will take place in this market.

answer

Small; standardized (commodity); little, if any

question

Which of the following services have experienced declines in relative prices due to productivity increases?

answer

Internet access services

question

Perfect competition is characterized by:

answer

the inability of any one firm to influence price.

question

The growth rate of potential GDP is the sum of two other growth rates. These other growth rates are

answer

Labor input and labor productivity.

question

If the population increase in India is smaller than the increase in Indian real GDP, then GDP per capita will

answer

increase.

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Which of the following groups would most likely be harmed by inflation?

answer

retirees

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If Marie Marionettes is operating under conditions of diminishing marginal product, the marginal costs will be:

answer

increasing.

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Americans viewed the 12 percent mortgage interest rates of the 1980s as exorbitantly high while they considered the 7 percent mortgage interest rates of the late 1990s as reasonable. This represents a confusion of

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real versus nominal interest rates.

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If aggregate demand shifts inward, with aggregate supply held constant, the economy should experience

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Recession.

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In the 60 Minutes Story The Price of Oil Steve Croft argues that the sudden rise in the price of oil was not due to supply and demand. This statement is . . .

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False, because the opportunity to profit by re-selling the oil at a later time increased buyers demand for it.

question

The growth rate of potential GDP is the sum of the growth rates of

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labor force and labor productivity.

question

For the purpose of our class, "scarcity rent" can be defined as:

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The amount a seller can charge for a good, over and above his cost of producing it.

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In economics, aggregation refers to

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Combining many markets into one overall economy.

question

GDP per capita is the best measure of an economy's

answer

standard of living

question

Which retail operation would have the highest costs per book sold?

answer

a small independent bookstore

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Potential GDP is an estimate of the economy's ability to produce goods and services if the

answer

labor force is fully employed.

question

If the price of pizzas has risen from $4 to $5 at the same time that the price of an hour of spinning class has risen from $20 to $30, then

answer

aerobics' classes have become relatively more expensive

question

Last year your job at the university cafeteria paid you $9 an hour and the price of a ten-minute long distance call to your girlfriend in California was $4. This year your cafeteria job pays $9.90 per hour and the ten-minute phone call now costs $4.10. You are clearly

answer

better off because the phone call now costs less work

question

GDP equals hours of work times

answer

output per hour.

question

Combining various goods and services into a convenient grouping is called

answer

aggregation.

question

The idea of diminishing returns to an input in production suggests that if a local college adds more custodians, the marginal product of labor for the custodial staff will ________.

answer

decrease

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If the capital stock increases, then the economy can produce _____output with the _____amount of labor.

answer

more, same

question

The rate of interest written on a contract between a borrower and a lender is the

answer

nominal interest rate.

question

If two firms are identical in all respects except that one has more capital than another, the marginal product curve for the firm with more capital:

answer

will lie above the marginal product curve for the firm with less capital.

question

Rachel agrees to lend Phoebe $100 for six months and charges her interest of 2 percent. At the end of the six-month period, prices have risen by 4 percent.

answer

Purchasing power has been redistributed to Phoebe.

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