Econ 110 Practice Problems Aplia – Flashcards
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Economics is best defined as the study of how society manages its scarce resources. how to run a business most profitably. how to predict inflation, unemployment, and stock prices. how the government can stop the harm from unchecked self-interest.
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a
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Your opportunity cost of going to a movie is the price of the ticket. the price of the ticket plus the cost of any soda and popcorn you buy at the theater. the total cash expenditure needed to go to the movie plus the value of your time. zero, as long as you enjoy the movie and consider it a worthwhile use of time and money.
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c
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A marginal change is one that is not important for public policy. incrementally alters an existing plan. makes an outcome inefficient. does not influence incentives.
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b
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Adam Smith's "invisible hand" refers to a. the subtle and often hidden methods that businesses use to profit at consumers' expense. b. the ability of free markets to reach desirable outcomes, despite the self-interest of market participants. c. the ability of government regulation to benefit consumers, even if the consumers are unaware of the regulations. d. the way in which producers or consumers in unregulated markets impose costs on innocent bystanders.
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b
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Governments may intervene in a market economy in order to protect property rights. correct a market failure due to externalities. achieve a more equal distribution of income. All of the above.
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d
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If a nation has high and persistent inflation, the most likely explanation is the central bank creating excessive amounts of money. unions bargaining for excessively high wages. the government imposing excessive levels of taxation. firms using their monopoly power to enforce excessive price hikes.
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a
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An economic model is a mechanical machine that replicates the functioning of the economy. a fully detailed, realistic description of the economy. a simplified representation of some aspect of the economy. a computer program that predicts the future of the economy.
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c
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The circular-flow diagram illustrates that, in markets for the factors of production, households are sellers, and firms are buyers. households are buyers, and firms are sellers. households and firms are both buyers. households and firms are both sellers.
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a
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A point inside the production possibilities frontier is efficient, but not feasible. feasible, but not efficient. both efficient and feasible. neither efficient nor feasible.
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b
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An economy produces hot dogs and hamburgers. If a discovery of the remarkable health benefits of hot dogs were to change consumers' preferences, it would expand the production possibilities frontier. contract the production possibilities frontier. move the economy along the production possibilities frontier. move the economy inside the production possibilities frontier.
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c
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All of the following topics fall within the study of microeconomics EXCEPT the impact of cigarette taxes on the smoking behavior of teenagers. the role of Microsoft's market power in the pricing of software. the effectiveness of antipoverty programs in reducing homelessness. the influence of the government budget deficit on economic growth.
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d
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In an hour, David can wash cars or mow lawn, and Ron can wash cars or mow lawn. Who has the absolute advantage in car washing, and who has the absolute advantage in lawn mowing? David in washing, Ron in mowing. Ron in washing, David in mowing. David in washing, neither in mowing. Ron in washing, neither in mowing.
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b
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Once again, in an hour, David can wash cars or mow lawn, and Ron can wash cars or mow lawn. Who has the comparative advantage in car washing, and who has the comparative advantage in lawn mowing? David in washing, Ron in mowing. Ron in washing, David in mowing. David in washing, neither in mowing. Ron in washing, neither in mowing.
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d
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When two individuals produce efficiently and then make a mutually beneficial trade based on comparative advantage, they both obtain consumption outside their production possibilities frontier. they both obtain consumption inside their production possibilities frontier. one individual consumes inside her production possibilities frontier, while the other consumes outside hers. each individual consumes a point on her own production possibilities frontier.
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a
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Which goods will a nation typically import? those goods in which the nation has an absolute advantage those goods in which the nation has a comparative advantage those goods in which other nations have an absolute advantage those goods in which other nations have a comparative advantage
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d
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Suppose that in the United States, producing an aircraft takes 10,000 hours of labor and producing a shirt takes 2 hours of labor. In China, producing an aircraft takes 40,000 hours of labor and producing a shirt takes 4 hours of labor. What will these nations trade? China will export aircraft, and the United States will export shirts. China will export shirts, and the United States will export aircraft. Both nations will export shirts. There are no gains from trade in this situation.
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b
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Mark can cook dinner in 30 minutes and wash the laundry in 20 minutes. His roommate takes half as long to do each task. How should the roommates allocate the work? Mark should do more of the cooking based on his comparative advantage. Mark should do more of the washing based on his comparative advantage. Mark should do more of the washing based on his absolute advantage. There are no gains from trade in this situation.
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d
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Mark can cook dinner in 30 minutes and wash the laundry in 20 minutes. His roommate takes half as long to do each task. How should the roommates allocate the work? Mark should do more of the cooking based on his comparative advantage. Mark should do more of the washing based on his comparative advantage. Mark should do more of the washing based on his absolute advantage. There are no gains from trade in this situation.
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b
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An increase in will cause a movement along a given demand curve, which is called a change in . supply, demand supply, quantity demanded demand, supply demand, quantity supplied
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b
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Movie tickets and DVDs are substitutes. If the price of DVDs increases, what happens in the market for movie tickets? The supply curve shifts to the left. The supply curve shifts to the right. The demand curve shifts to the left. The demand curve shifts to the right.
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b
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The discovery of a large new reserve of crude oil will shift the curve for gasoline, leading to a equilibrium price. supply, higher supply, lower demand, higher demand, lower
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d
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If the economy goes into a recession and incomes fall, what happens in the markets for inferior goods? Prices and quantities both rise. Prices and quantities both fall. Prices rise, quantities fall. Prices fall, quantities rise.
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a
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Which of the following might lead to an increase in the equilibrium price of jelly and a decrease in the equilibrium quantity of jelly sold? an increase in the price of peanut better, a complement to jelly an increase in the price of Marshmallow Fluff, a substitute for jelly an increase in the price of grapes, an input into jelly an increase in consumers' incomes, as long as jelly is a normal good
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c
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A life-saving medicine without any close substitutes will tend to have a small elasticity of demand. a large elasticity of demand. a small elasticity of supply. a large elasticity of supply.
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a
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The price of a good rises from $8 to $12, and the quantity demanded falls from 90 to 110 units. Calculated with the midpoint method, the elasticity is 1/5 1/2 2 5
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b
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A linear, downward-sloping demand curve is inelastic. unit elastic. elastic. inelastic at some points, and elastic at others.
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d
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The ability of firms to enter and exit a market over time means that, in the long run, the demand curve is more elastic. the demand curve is less elastic. the supply curve is more elastic. the supply curve is less elastic.
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c
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An increase in the supply of a good will decrease the total revenue producers receive if the demand curve is inelastic. the demand curve is elastic. the supply curve is inelastic. the supply curve is elastic.
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a
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The price of coffee rose sharply last month, while the quantity sold remained the same. Each of five people suggests an explanation: Tom: Demand increased, but supply was perfectly inelastic. Dick: Demand increased, but it was perfectly inelastic. Harry: Demand increased, but supply decreased at the same time. Larry: Supply decreased, but demand was unit elastic. Mary: Supply decreased, but demand was perfectly inelastic. Who could possibly be right? Tom, Dick, and Harry Tom, Dick, and Mary Tom, Harry, and Mary Dick, Harry, and Larry Dick, Harry, and Mary
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c
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When the government imposes a binding price floor, it causes the supply curve to shift to the left. the demand curve to shift to the right. a shortage of the good to develop. a surplus of the good to develop.
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d
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In a market with a binding price ceiling, an increase in the ceiling will_________ the quantity supplied, _______ the quantity demanded, and reduce the _________. increase, decrease, surplus decrease, increase, surplus increase, decrease, shortage decrease, increase, shortage
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c
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A $1per unit tax levied on consumers of a good is equivalent to a $1 per unit tax levied on producers of the good. a $1 per unit subsidy paid to producers of the good. a price floor that raises the good's price by $1 per unit. a price ceiling that raises the good's price by $1 per unit.
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a
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Which of the following would increase quantity supplied, decrease quantity demanded, and increase the price that consumers pay? the imposition of a binding price floor the removal of a binding price floor the passage of a tax levied on producers the repeal of a tax levied on producers
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a
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Which of the following would increase quantity supplied, increase quantity demanded, and decrease the price that consumers pay? the imposition of a binding price floor the removal of a binding price floor the passage of a tax levied on producers the repeal of a tax levied on producers
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d
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When a good is taxed, the burden of the tax falls mainly on consumers if the tax is levied on consumers. the tax is levied on producers. supply is inelastic, and demand is elastic. supply is elastic, and demand is inelastic.
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d
