Test Answers on Quizes – Flashcard

Unlock all answers in this set

Unlock answers
question
Economics is a social science rather than a "hard" science like physics because
answer
Economists study human behavior, which is affected by an unpredictable and vast range of influences.
question
Suppose Tammy grew up on a farm and is very good at plowing. In addition suppose she is a popular country singer who earns $4,000 per performance. If her husband Bob can plow (but not as well as Tammy) but he can'' carry a tune, then it would be most efficient if
answer
Tammy specialized in singing and Bob in plowing
question
Which of the following statements is correct?
answer
A theory may result from a tested and confirmed hypothesis
question
Economists make assumptions because
answer
Analysis without assumptions would be impossibly complex
question
During a war, a government will often draft people, most of who are presently employed, into the army. An economist, computing the real cost of the war, would be sure to include which of the following items?
answer
The value of civilian goods no longer produced by the new soldiers
question
Abstraction can be thought of as
answer
Omitting unimportant details in order to understand complex phenomenon
question
Tools used by economists include
answer
All of the above are correct
question
During one winter quarter at Frozen University, snow falls every Friday night. Students assume that, on their campus, Fridays cause snow. This hypothesis
answer
Assumes that correlation implies causation
question
Economists use models in order to
answer
Economists use models in order to
question
"The hotter it gets, the more water people drink." This statement implies the relationship between temperature and water consumption must have a
answer
Positive slope
question
In a mixed economy
answer
there is some government influence over the workings of the free market.
question
Comparing the United States to other economies, the United States is one of the ____ economy in the world.
answer
most privatized
question
In the United States, the smallest percentage of workers
answer
Work in agriculture and farming
question
The largest single source of tax revenue for the federal government is the
answer
personal income tax
question
How does the United States compare to other advanced, industrialized economies on the issue of openness?
answer
It is one of the less open of them.
question
Most American workers
answer
are employed in the service-producing sector.
question
From which country does the U.S. import most of its goods and services?
answer
Canada
question
The statement "resources employed in producing X are better suited to making Y is another way of saying resources
answer
are specialized
question
Workers in Adam Smith's famous pin factory example, who were proficient in pin production, then faced the problem of
answer
having to exchange pins for other goods and services.
question
The most important way in which inefficiency occurs is
answer
unemployment of labor and other resources.
question
Hutch Technology makes computer monitors, which sell for $500 each. What is the opportunity cost of ten monitors?
answer
the other goods that could be produced with the resources that produce the ten monitors.
question
One popular definition of economics is the study of
answer
how to use limited means to meet unlimited wants.
question
Scarcity is a concept which applies to all of the following EXCEPT
answer
human wants
question
When an economy is operating efficiently, it is operating
answer
on the PPF
question
The economic problem of scarcity
answer
requires that choices be made among alternatives
question
According to the law of comparative advantage, a doctor who is also a talented auto mechanic should
answer
hire a professional mechanic to repair her car
question
A PPF curve always slopes down and to the right (has a negative slope) because resources
answer
are limited
question
For a given PPF, which points are attainable?
answer
points inside or on the frontier.
question
The fact that resources tend to be specialized is the reason the PPF is drawn
answer
bowed outward
question
If price rises, what happens to supply for a product?
answer
It does not change.
question
If price rises, what happens to demand for a product?
answer
It does not change
question
The price for labor is the wage rate. What happens to the supply of labor if wages increase?
answer
It does not change.
question
The demand curve for a good connects points describing how much consumers
answer
would have been willing and able to buy at different prices during a particular period
question
An upward-sloping supply curve shows that
answer
suppliers are willing to increase production of their goods if they can receive higher prices for them.
question
A shift in the supply curve of bicycles resulting from higher steel prices will lead to
answer
higher prices of bicycles.
question
Ticket "scalping" is an example of
answer
the development of a black market
question
Which of the following would be most likely to cause an outward shift of the demand curve for electricity?
answer
an increase in the price of heating oil
question
The demand curve for a typical good has
answer
a negative slope because some consumers switch to other goods as the price of the good rises.
question
An important assumption that is made when constructing a demand schedule is that
answer
all other determinants of demand are held constant
question
Which of the following is not a symptom associated with a price floor?
answer
Excess of quantity demanded over quantity supplied
question
The supply curve shows
answer
the quantity produced as a function of the price.
question
Assume the demand schedule for cookies is downward sloping. If the price of cookies falls from $1.50 to $1.25 per dozen,
answer
a larger quantity of cookies will be demanded
question
Which of the following is the correct way to describe equilibrium in a market?
answer
At equilibrium, quantity demanded equals quantity supplied.
question
For most goods and most people, marginal utility probably
answer
declines as consumption increases.
question
Market demand curves are found by
answer
horizontally summing individual demand curves.
question
Consumer's surplus is a measure of how much
answer
more utility a consumer receives from his purchases than he has to pay for them.
question
An inferior good is one
answer
whose quantity demanded falls when the purchaser's income rises.
question
The theory of consumer choice is based on the hypothesis that each consumer wants to
answer
maximize her total utility.
question
If the marginal utility to Juan of sleeping an extra hour (from 8 a.m. to 9 a.m.) is negative,
answer
Juan is better off getting up at 8 a.m.
question
The optimal purchase rule is stated as
answer
MU = P
question
A bottle of wine costs $8 and a quiche, $5. At Robert's present levels of consumption, he spends all his income and receives marginal utility of $10 from the last bottle of wine and marginal utility of $4 from the last quiche. To maximize his total utility, Robert should
answer
buy more wine and less quiche
question
Total utility can be thought of as the Selected Answer: a. total satisfaction derived from a bundle of goods. Correct Answer: a. total satisfaction derived from a bundle of goods.
answer
total satisfaction derived from a bundle of goods.
question
Which of the following factors is always present in consumer decision making?
answer
scarcity
question
A good will tend to be more price elastic if it
answer
is a luxury good.
question
A price cut will decrease the revenue a firm receives if the demand for its product is
answer
inelastic
question
Chicken and fish are substitutes. Therefore, the cross elasticity of demand between chicken and fish is
answer
positive
question
Tele-Com, Inc., the nation's largest cable TV company, tested the effect of a price reduction for the Disney Channel. It lowered prices from $10.75 to $7.95 and found that the number of customers more than doubled. This means the
answer
demand for the Disney Channel is elastic in this price range.
question
A demand curve is described as perfectly inelastic if
answer
the same quantity is purchased regardless of price.
question
The demand for a new effective drug for the cure of AIDS would most likely be
answer
highly inelastic
question
At $6 per steak, consumers are willing to buy two steaks. At a price of $2, consumers are willing to buy six steaks. The elasticity of the market demand curve between P = $6 and P = $2 (dropping all minus signs) is
answer
1
question
Price elasticity of demand is defined as
answer
percentage change in quantity demanded divided by percentage change in price.
question
The price elasticity of a vertical demand curve is always
answer
zero
question
The optimal level of resource use comes when
answer
MRP equals input price
question
Economies of scale is another term for
answer
increasing returns to scale.
question
At a given level of wheat output, one more unit of labor would produce 10 extra bushels, and one more unit of seed would produce 30 extra bushels. A unit of labor costs $6, and a unit of seed costs $12. The farmer should
answer
buy more seed and less labor
question
A factory produces 1,000 radios a year, AVC = $10 and TFC = $5,000. The factory's TC
answer
equals $15,000
question
A total product curve shows the
answer
relationship between units of inputs and total product or total output
question
Which of the following equations defines marginal revenue product?
answer
MRP = MPP times price of the product.
question
Average cost curves have the same shape as
answer
marginal cost curves.
question
If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing
answer
increasing returns to scale
question
The "law" of diminishing returns
answer
is based on regular observations of input-output relationships over the last two centuries.
question
Where marginal cost is less than average cost,
answer
marginal cost may be rising, falling, or constant.
question
When economies of scale exist,
answer
production costs per unit decline as output expands.
question
Total fixed cost
answer
is constant at all levels of output.
question
Average cost curves decline because
answer
fixed cost is spread out over larger amounts of production
question
The marginal revenue product of an hour of labor used in steel production is equal to
answer
its marginal physical product times the price of steel
question
Which of the following is a fixed cost to farmer McDonald?
answer
insurance
question
In the typical AC curve, the downward-sloping part is attributable to
answer
spreading fixed costs over larger outputs and increasing returns to the variable inputs.
question
Which of the following is a fixed cost?
answer
mortgage on the building
question
Marginal cost is the
answer
change in total cost resulting from the production of one more unit of output.
question
One reason why critics argue that large firms should not be broken up is that in some cases
answer
many smaller firms would be less-efficient producers
question
If a firm has a U-shaped long-run average cost curve
answer
it must have increasing returns to scale at low levels of production and decreasing returns to scale at high levels of production.
question
Which of the following is a variable cost for an airline?
answer
jet fuel
question
A roller coaster operator produces thrill-packed rides using electricity and a roller coaster. For the roller coaster operator, electricity is
answer
a variable cost.
question
When economies of scale are present,
answer
costs per unit decline as output expands
question
To determine total cost, the businessperson must know
answer
input quantity and input price
question
Marginal physical product can tell a producer
answer
how much the last input added to the total amount of production
question
A firm practices input substitution when it
answer
replaces unskilled labor with automated machinery
question
The total physical product of an input is the same thing as its
answer
output
question
By definition, a firm that practices satisficing
answer
makes acceptable decisions, though not necessarily optimal ones.
question
Average cost
answer
generally declines for some range of output, hits a minimum, and then increases.
question
A grocery store sells soup for $1.50 a can, or $2.50 for two cans. To a customer, the marginal cost of buying the second can of soup is
answer
$1
question
When a firm's fixed cost rises, its total profit curve shifts
answer
down at every output level.
question
The difference between economic profit and accountant's definition of profit is that an economist's total cost counts the ____ of inputs.
answer
opportunity cost
question
Marginal revenue is the addition to a firm's revenue from
answer
a one-unit change in output
question
If MC > MR
answer
output should be reduced
question
The goal of the business firm is maximization of ____, and the goal of the consumer is maximization of ____.
answer
total profit; utility
question
Total profit is maximized
answer
where the difference between total revenue and total cost is greatest
question
The competitive firm has no influence over price because
answer
its output is so insignificant relative to the market as a whole
question
A firm can stay in business while taking a loss in the short run as long as it covers its
answer
variable costs
question
We expect the demand curve in the perfectly competitive industry to be
answer
negatively sloped
question
A perfectly competitive firm would be willing to remain in the industry in the long run at zero economic profit because
answer
revenue is equal to all costs, including the opportunity cost of capital and labor
question
The supply curve for a perfectly competitive industry is obtained by
answer
horizontally summing the supply curves of firms in the industry
question
One of the following is not a characteristic of perfect competition. Which is it?
answer
Firms advertise to increase their market share.
question
A perfectly competitive firm should continue to expand output until
answer
c. marginal revenue equals marginal costs.
question
If the objective of economic policy is to decrease the amount of pollution by an industry in the long run, the
answer
most effective policy action would be a tax on polluting firms
question
The result that perfectly competitive firms produce at the lowest per-unit cost is derived from the assumptions of
answer
free entry and exit
question
The entry of firms into a perfectly competitive industry causes the supply curve to
answer
move farther toward the right
question
A firm earns a profit of exactly zero at its optimal output level only if
answer
P = AC
question
The market for a perfectly competitive industry clears at a price of $3, and the minimum average cost for all firms is $2.50. In the long run, we would expect an increase in
answer
the number of firms
question
Pure monopoly is defined as a
answer
one-firm industry
question
To be a natural monopoly, a firm must
answer
have falling average costs over a substantial range of total market demand.
question
The demand curve facing a monopolist is
answer
identical to the market demand curve for the good.
question
Which of the following is not potentially a barrier to entry into the widget market?
answer
high prices for widgets
question
A monopolist is best described as a price
answer
maker
question
The key element in preserving a monopoly is
answer
keeping potential rivals out of the market
question
Compared to a perfectly competitive firm, a monopolist
answer
usually produces an inefficiently small level of output
question
Monopolistic competition is common in
answer
retail selling
question
Contestable markets improve the performance of imperfect markets with
answer
the threat of entry
question
A situation in which both players can adopt moves such that each player's move is its most profitable response to the move of the other is the
answer
A situation in which both players can adopt moves such that each player's move is its most profitable response to the move of the other is the
question
Oligopolists
answer
must take rivals' reactions into account
question
Monopolistic competitors and perfect competitors are alike in
answer
zero economic profit in the long run
question
In the cigarette industry either R. J. Reynolds or Phillip Morris, for a time, raised prices twice a year by about 50 cents per carton. The other firms in the industry raised their prices by the same amount. Economists call this
answer
price leadership
question
Monopolistic competition is characterized by
answer
many firms selling slightly different products
question
To maximize its profit, a monopolistically competitive firm produces at the output level at which
answer
MR = MC
question
An article in The Economist reported that prices of CDs in Britain is much higher than prices in the United States or other European countries. There are only a few major companies, and a report from a Parliament committee said there is no serious price competition. The best explanation for this is that
answer
there are entry barriers in production and distribution of CDs.
question
The distribution of income in the United States
answer
became significantly more unequal during the 1980s
question
The basic problem with the government setting an absolute poverty line is that it is
answer
somewhat arbitrary
question
An example of an in-kind benefit is
answer
public housing
question
The poor are those who fall too far behind the average income. This refers to the ____ definition of poverty
answer
relative
question
Most prophecies of the imminent exhaustion of many natural resources have not come true because
answer
rising prices for resources have stimulated supply and encouraged innovation
question
The "greenhouse effect" is predicted to
answer
raise global temperatures
question
Many states charge a 10-cent deposit on every can of soda sold. A purchaser pays an extra 10 cents per can and will get his money back by returning the empty can to a store. This policy encourages recycling by
answer
raising the opportunity cost of discarding empty cans
question
If income is distributed equally in a society, the poorest fifth of the population receives
answer
20 percent of society's total income
question
Which of the following is NOT a public good
answer
the latest Walt Disney movie
question
An example of a positive externality is
answer
a blooming curbside bed of violets
question
The cable and subscription TV business is plagued with the problem of "signal theft." People use illegal receivers to capture the company's signal without paying. Enforcement of the company's property right is very expensive. This problem emerges because TV signals are basically
answer
public goods
question
One of the reasons why firms pollute air and water is that
answer
air and water are often not priced.
question
Roughly what percentage of Americans are officially considered poor?
answer
11 percent
question
David Ricardo discovered that two countries can still gain by trading even if one country is more efficient in the production of every commodity. Ricardo's discovery is called the law of
answer
comparative advantage
question
In the United States, most workers
answer
Produce services rather than goods
question
A Tariff
answer
is a tax on imported goods
question
Which of the following countries is NOT a major trading partner with the United States?
answer
Brazil
question
Colombia produces coffee with less labor and land than any other country; it therefore surely has
answer
an absolute advantage in coffee production
question
If a nation imposes a tariff on imports, the portion of the tax paid by citizens depends upon
answer
elasticity of demand
question
Suppose that in the U.S. domestic market for wheat the price is lower than the International price for wheat, the U.S. would most likely:
answer
Export Wheat
Get an explanation on any task
Get unstuck with the help of our AI assistant in seconds
New