MICRO PRACTICE 1 – Flashcards

1. The study of economics is primarily concerned with: A. keeping private businesses from losing money. B. demonstrating that capitalistic economies are superior to socialistic economies. C. choices that are made in seeking the best use of resources. D. determining the most equitable distribution of society's output.

2. According to economists, economic self-interest: A. is a reality that underlies economic behavior. B. has the same meaning as selfishness. C. is more characteristic of men than of women. D. is usually self-defeating.

3. Macroeconomics approaches the study of economics from the viewpoint of: A. the entire economy. B. governmental units. C. the operation of specific product and resource markets. D. individual firms.

4. A normative statement is one that: A. is based on the law of averages. B. applies only to microeconomics. C. applies only to macroeconomics. D. is based on value judgments.

5. Which of the following would not be classified as an economic resource by economists? A. a professional soccer player B. water in a town's reservoir C. money in a business checking account D. the manager of the local hamburger restaurant

6. When an economy is operating under conditions of full employment, the production of more of commodity A will mean the production of less of commodity B because: A. of the law of increasing opportunity costs. B. economic wants are insatiable. C. resources are limited. D. resources are specialized and only imperfectly substitutable.

7. Assume that a change in government policy results in greater production of both consumer goods and investment goods. We can conclude that: A. the economy was not employing all of its resources before the policy change. B. the economy's production possibilities curve has been shifted to the left as a result of the policy decision. C. this economy's production possibilities curve is convex (bowed inward) to the origin. D. the law of increasing opportunity costs does not apply in this society.

14. Which of the following is a fundamental characteristic of the market system? A. property rights. B. central planning by government. C. unselfish behavior. D. government-set wages and prices

15. In a market economy a significant change in consumers' desire for product X will: A. alter the profits or losses received by suppliers of product X. B. cause a reallocation of scarce resources. C. cause some industries to expand and others to contract. D. do all of these.

16. Firms are motivated to minimize production costs because: A. it is the most environmentally friendly way to produce goods. B. least-cost production techniques use the smallest total quantity of resources. C. competitive pressures in the market will drive out higher-cost producers. D. the government provides tax credits and subsidies to low-cost producers.

17. Households and businesses are: A. both buyers in the resource market. B. both sellers in the product market. C. sellers in the resource and product markets respectively. D. sellers in the product and resource markets respectively.

18. The demand curve shows the relationship between: A. money income and quantity demanded. B. price and production costs. C. price and quantity demanded. D. consumer tastes and quantity demanded.

19. Which of the following would not shift the demand curve for beef? A. a widely publicized study that indicates beef increases one's cholesterol B. a reduction in the price of cattle feed C. an effective advertising campaign by pork producers D. a change in the incomes of beef consumers

20. In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by: A. an increase in the cost of making donuts. B. an increase in the price of coffee. C. consumers expecting donut prices to fall. D. a change in buyer tastes.

21. If X is a normal good, a rise in money income will shift the: A. supply curve for X to the left. B. supply curve for X to the right. C. demand curve for X to the left. D. demand curve for X to the right.

22. An increase in product price will cause: A. quantity demanded to decrease. B. quantity supplied to decrease. C. quantity demanded to increase. D. the supply curve to shift to the left.

23. The law of supply indicates that, other things equal: A. producers will offer more of a product at high prices than at low prices. B. the product supply curve is downsloping. C. consumers will purchase less of a good at high prices than at low prices. D. producers will offer more of a product at low prices than at high prices.

24. Assume product A is an input in the production of product B. In turn product B is a complement to product C. We can expect a decrease in the price of A to: A. increase the supply of B and increase the demand for C. B. decrease the supply of B and increase the demand for C. C. decrease the supply of B and decrease the demand for C. D. increase the supply of B and decrease the demand for C.

In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X. 28. Refer to the above. An increase in the price of a product that is a complement to X will: A. decrease S, decrease P, and decrease Q. B. decrease D, decrease P, and decrease Q. C. increase D, increase P, and increase Q. D. increase D, increase P, and decrease Q.