Exam 1 Practice Q&A – Flashcards
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An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier.
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Which of the following is a correct statement about production possibilities frontiers?
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there is no way to produce more of one good without producing less of another good.
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If an economy is producing efficiently, then
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Kelly has a comparative advantage in repairing cars and in cooking meals.
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Kelly and David are both capable of repairing cars and cooking meals. Which of the following scenarios is not possible?
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340 bushels of corn and 500 bushels of oats.
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Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. If the two countries do not trade, Cornland will produce and consume 400 bushels of corn and 100 bushels of oats, while Oatland will produce and consume 60 bushels of corn and 400 bushels of oats. If each country made the decision to specialize in producing the good in which it has a comparative advantage, then the combined yearly output of the two countries would increase by
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- play a critical role in the allocation of the economy's scarce resources. - determine how much of each good gets produced. - can be used to predict the impact on the economy of various events and policies.
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In a market economy, supply and demand are important because they
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numerous buyers and numerous sellers.
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All market participants are price takers that have no influence over prices in markets that feature
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the price of pork does not change.
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Assume the market for pork is perfectly competitive. When one pork buyer exits the market,
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when the price of a good falls, the quantity demanded of the good rises.
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The law of demand states that, other things equal,
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the demand for pizza rises when income rises.
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Pizza is a normal good if
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increase the demand for education.
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An increase in the number of college scholarships issued by private foundations would
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when the price of a good rises, the quantity supplied of the good rises.
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The law of supply states that, other things equal,
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an increase in the price of mp3 players
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Which of the following would not shift the supply curve for mp3 players?
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supply of bicycles will shift to the left.
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Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the
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to shift leftward.
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Suppose there is an increase in the price of steel. We would expect the supply curve for steel beams
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supply of flour to increase.
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Wheat is the main input in the production of flour. If the price of wheat decreases, then we would expect the
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sellers are producing more than buyers wish to buy.
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If, at the current price, there is a surplus of a good, then
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raise price, which decreases quantity demanded and increases quantity supplied, until the shortage is eliminated.
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When a shortage exists in a market, sellers
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Price would fall and the effect on quantity would be ambiguous.
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What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell?
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demand and supply both increase
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Which of the following events will definitely cause equilibrium quantity to rise?
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demand tends to be inelastic.
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For a good that is a necessity,
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other flavors of ice cream are good substitutes for this particular flavor.
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The demand for Neapolitan ice cream is likely quite elastic because
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1.63.
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A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is
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The elasticity of supply approaches infinity.
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Which of the following statements is valid when supply is perfectly elastic at a price of $4?
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a legal maximum on the price at which a good can be sold.
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A price ceiling is
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The short-run effect of rent control is a relatively small shortage of apartments, and the long-run effect of rent control is a larger shortage of apartments.
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Which of the following statements about the effects of rent control is correct?
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causes quantity supplied to exceed quantity demanded.
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To say that a price floor is binding is to say that the price floor
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the distribution of the tax burden between buyers and sellers.
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The term tax incidence refers to
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less than $0.50.
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Suppose that the demand for picture frames is inelastic and the supply of picture frames is elastic. A tax of $1 per frame levied on picture frames will decrease the effective price received by sellers of picture frames by
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the supply is more elastic than the demand.
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Buyers of a good bear the larger share of the tax burden when a tax is placed on a product for which
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supply is more inelastic than the demand.
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Suppose that a tax is placed on books. If the sellers bear most of the burden of the tax, then we know that the
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inelastic
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You can increase your revenue by raising the price of your product only if the demand for your product is
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those workers who cannot find jobs.
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The minimum wage, if it is binding, lowers the incomes of
