Croxdale Microeconomics Spring 2016

question

Decisions must frequently be made by individuals, organizations, and even nations. Facilitating better decision-making is a fundamental goal of economics. The analytical framework advocated by economists that enables one to make informed decisions is called

answer

the economic way of thinking.

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A rational, self-interested student decides whether to purchase a textbook required for a particular class based on all of the following, except

answer

whether the textbook has an attractive dust jacket.

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Rational, self-interested government officials seeking more funding for mass transit through higher taxes should consider

answer

the fact that raising taxes is generally unpopular and may result in a potential loss in a future election.

question

A municipality taxing hotel guests to obtain funding for a new sports stadium should consider all of the following, except

answer

the winning potential of the sports team using the stadium.

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What is the relationship between wants and resources?

answer

Resources are used to produce things that satisfy people's wants

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Microeconomics focuses on

answer

decisions made by individual households and firms.

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Each country has a unique economic system to allocate its scarce resources. However, the economic system of most of the world's nations are a combination of the ________ _________ system and the ________ system.

answer

central planning; price

question

The three fundamental economic questions that a nation addresses in order to allocate society's scarce resources include all of the following:

answer

A. What and how much will be produced?
B. Why will the items be produced?
C. How will the items be produced?
(NOT For whom will the items be produced?)

question

Economics

answer

assumes individuals are rational and respond to different incentives.

question

Economists assume that an individual acts as if motivated by

answer

self-interest.

question

The assumption of bounded rationality suggests that people might use rules of thumb to guide their decision making because

answer

people can not examine every possible choice available to them.

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The notion that people do not intentionally make decisions that would leave them worse off is known as

answer

the rationality assumption.

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The hypothesis that people are nearly, but not fully, rational, so that they cannot examine every possible choice available to them but instead use simple rules of thumb to sort among the alternatives that happen to occur to them is known as

answer

bounded rationality.

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Economic goods are

answer

goods that are scarce.

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Why do economists avoid making the distinction between wants and needs?

answer

The term need is subjective making it difficult to distinguish between something someone wants and something they need.

question

Scarcity arises because

answer

resources are finite and are inadequate to meet all human wants.

question

"Wants" as an economic concept includes

answer

both material and non-material desires.

question

If you receive a free ticket to a concert, what, if anything, is your opportunity cost of attending the concert?

answer

The next best activity that can't be done while attending the concert.

question

The value of the best alternative sacrificed to obtain something you want is referred to as

answer

opportunity cost.

question

The production possibilities curve shows all possible combinations of

answer

two goods that can be efficiently produced with a given set of resources.

question

All of the following are assumptions of the production possibilities curve except

answer

there is a fixed demand for the products.

question

Which of the following is NOT an assumption used in deriving a production possibilities curve?

answer

The labor force is growing at a constant rate.

question

Current production of capital goods means that

answer

the production possibilities curve can be expected to shift outward in the future.

question

In order for an economy to increase its production possibilities, the economy must

answer

increase inputs.

question

A production possibilities curve will shift outward or to the right for all of the following reasons EXCEPT

answer

an increase in the unemployment rate.

question

The division of productive activities among persons and regions so that no one individual or region is totally self-sufficient is known as

answer

specialization.

question

Canada goes to considerable lengths to protect its television program and magazine producers from U.S. competitors. The United States often seeks protection from food imports from Canada. From an economywide viewpoint, these efforts are

answer

misguided because the enhanced output from specialization based upon comparative advantage is restricted.

question

Comparative advantage is always a _________ concept.

answer

relative

question

Buyers and sellers receive information about what should be bought and what should be produced

answer

from prices in a market system.

question

Which of the following is not an example of a transaction cost?

answer

The enjoyment of using the good.

question

What happens in the market with an upward sloping supply curve when there is a shift in the demand curve due to an external shock?

answer

A new equilibrium price will be achieved over some period of time.

question

People often complain about price gouging after a natural disaster. Suppose the government imposed limitations on price increases in the aftermath of a disaster. One would expect

answer

reconstruction to take longer because the quantity supplied of new materials would increase more slowly.

question

Scarcity implies that

answer

a way of rationing supplies of goods must be found.

question

Given the existence of relative scarcity, resources can be rationed by

answer

A. queuing, or standing in line
B. a system of prices
C. political mandate

question

Import quotas are an example of government-imposed

answer

quantity restrictions.

question

Ron advertised his car for sale for $6000, although he was willing to accept $4000. When he finally sells his car for $5500, his producer surplus from the sale is

answer

$1500.

question

The publication Car and Driver reduces transactions costs for high-performance car buyers

answer

by providing reliable information so that car buyers do not have to spend as much time doing their own research.

question

Buyers and sellers receive signals from markets

answer

through the price system.

question

When supply increases and the (downward-sloping) demand curve remains in the same position,

answer

price falls and equilibrium quantity rises.

question

People often complain about price gouging after a disaster such as a hurricane. Suppose the government successfully prevented price increases due to the disaster. We would expect

answer

reconstruction to take longer because the quantity supplied of new materials would increase more slowly.

question

Prices perform a rationing function by

answer

allocating goods to the buyers who are willing and able to pay the highest price.

question

In economic terms, the total price of a pound of meat for an individual who has waited in line is

answer

the money price of the meat plus the opportunity cost of time spent waiting in line.

question

What is the economic effect of price ceilings?

answer

An effective price ceiling will lead to a shortage.

question

Price ceilings are adopted in most cases because

answer

the government views the current equilibrium price as too high for consumers.

question

Which of the following is a possible outcome of setting a legal maximum rental rate below the market clearing rental rate?

answer

a black market in rental housing

question

Labor is a key input at fast-food restaurants. Suppose that the government boosts the minimum wage above the equilibrium wage of fast-food workers. Which of the following best describes the response of the quantity of labor employed at restaurants?

answer

Fewer workers will be employed since the wage increase will induce managers to seek to substitute other inputs for the now relatively more expensive labor.

question

An import quota is an example of a

answer

quantity restriction.

question

Restricting the quantity of a good that can be imported is likely to mean that the price of that good will

answer

rise.

question

In the United States, the minimum wage is defined as

answer

the lowest hourly wage rate a firm may legally pay its workers, as legislated by the U.S. government.

question

An import quota for sugar results in an increase in

answer

the domestic market price of sugar.

question

The gains from consumer surplus and producer surplus occur when

answer

both consumers and producers engage in voluntary exchange.

1 of 51

question

answer

the economic way of thinking.

question

A rational, self-interested student decides whether to purchase a textbook required for a particular class based on all of the following, except

answer

whether the textbook has an attractive dust jacket.

question

Rational, self-interested government officials seeking more funding for mass transit through higher taxes should consider

answer

the fact that raising taxes is generally unpopular and may result in a potential loss in a future election.

question

A municipality taxing hotel guests to obtain funding for a new sports stadium should consider all of the following, except

answer

the winning potential of the sports team using the stadium.

question

What is the relationship between wants and resources?

answer

Resources are used to produce things that satisfy people's wants

question

Microeconomics focuses on

answer

decisions made by individual households and firms.

question

answer

central planning; price

question

The three fundamental economic questions that a nation addresses in order to allocate society's scarce resources include all of the following:

answer

A. What and how much will be produced?
B. Why will the items be produced?
C. How will the items be produced?
(NOT For whom will the items be produced?)

question

Economics

answer

assumes individuals are rational and respond to different incentives.

question

Economists assume that an individual acts as if motivated by

answer

self-interest.

question

The assumption of bounded rationality suggests that people might use rules of thumb to guide their decision making because

answer

people can not examine every possible choice available to them.

question

The notion that people do not intentionally make decisions that would leave them worse off is known as

answer

the rationality assumption.

question

answer

bounded rationality.

question

Economic goods are

answer

goods that are scarce.

question

Why do economists avoid making the distinction between wants and needs?

answer

The term need is subjective making it difficult to distinguish between something someone wants and something they need.

question

Scarcity arises because

answer

resources are finite and are inadequate to meet all human wants.

question

"Wants" as an economic concept includes

answer

both material and non-material desires.

question

If you receive a free ticket to a concert, what, if anything, is your opportunity cost of attending the concert?

answer

The next best activity that can't be done while attending the concert.

question

The value of the best alternative sacrificed to obtain something you want is referred to as

answer

opportunity cost.

question

The production possibilities curve shows all possible combinations of

answer

two goods that can be efficiently produced with a given set of resources.

question

All of the following are assumptions of the production possibilities curve except

answer

there is a fixed demand for the products.

question

Which of the following is NOT an assumption used in deriving a production possibilities curve?

answer

The labor force is growing at a constant rate.

question

Current production of capital goods means that

answer

the production possibilities curve can be expected to shift outward in the future.

question

In order for an economy to increase its production possibilities, the economy must

answer

increase inputs.

question

A production possibilities curve will shift outward or to the right for all of the following reasons EXCEPT

answer

an increase in the unemployment rate.

question

The division of productive activities among persons and regions so that no one individual or region is totally self-sufficient is known as

answer

specialization.

question

answer

misguided because the enhanced output from specialization based upon comparative advantage is restricted.

question

Comparative advantage is always a _________ concept.

answer

relative

question

Buyers and sellers receive information about what should be bought and what should be produced

answer

from prices in a market system.

question

Which of the following is not an example of a transaction cost?

answer

The enjoyment of using the good.

question

What happens in the market with an upward sloping supply curve when there is a shift in the demand curve due to an external shock?

answer

A new equilibrium price will be achieved over some period of time.

question

People often complain about price gouging after a natural disaster. Suppose the government imposed limitations on price increases in the aftermath of a disaster. One would expect

answer

reconstruction to take longer because the quantity supplied of new materials would increase more slowly.

question

Scarcity implies that

answer

a way of rationing supplies of goods must be found.

question

Given the existence of relative scarcity, resources can be rationed by

answer

A. queuing, or standing in line
B. a system of prices
C. political mandate

question

Import quotas are an example of government-imposed

answer

quantity restrictions.

question

Ron advertised his car for sale for $6000, although he was willing to accept $4000. When he finally sells his car for $5500, his producer surplus from the sale is

answer

$1500.

question

The publication Car and Driver reduces transactions costs for high-performance car buyers

answer

by providing reliable information so that car buyers do not have to spend as much time doing their own research.

question

Buyers and sellers receive signals from markets

answer

through the price system.

question

When supply increases and the (downward-sloping) demand curve remains in the same position,

answer

price falls and equilibrium quantity rises.

question

People often complain about price gouging after a disaster such as a hurricane. Suppose the government successfully prevented price increases due to the disaster. We would expect

answer

reconstruction to take longer because the quantity supplied of new materials would increase more slowly.

question

Prices perform a rationing function by

answer

allocating goods to the buyers who are willing and able to pay the highest price.

question

In economic terms, the total price of a pound of meat for an individual who has waited in line is

answer

the money price of the meat plus the opportunity cost of time spent waiting in line.

question

What is the economic effect of price ceilings?

answer

An effective price ceiling will lead to a shortage.

question

Price ceilings are adopted in most cases because

answer

the government views the current equilibrium price as too high for consumers.

question

Which of the following is a possible outcome of setting a legal maximum rental rate below the market clearing rental rate?

answer

a black market in rental housing

question

answer

Fewer workers will be employed since the wage increase will induce managers to seek to substitute other inputs for the now relatively more expensive labor.

question

An import quota is an example of a

answer

quantity restriction.

question

Restricting the quantity of a good that can be imported is likely to mean that the price of that good will

answer

rise.

question

In the United States, the minimum wage is defined as

answer

the lowest hourly wage rate a firm may legally pay its workers, as legislated by the U.S. government.

question

An import quota for sugar results in an increase in

answer

the domestic market price of sugar.

question

The gains from consumer surplus and producer surplus occur when

answer

both consumers and producers engage in voluntary exchange.

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