question
If the state government allocates additional spending on education, the opportunity cost is:
answer
measured in terms of the best alternative uses for that money.
question
The Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think that if you had not purchased the taco, you would have purchased the burrito. The opportunity cost of the taco is:
answer
your enjoyment of the burrito.
question
The cost of leaving a championship soccer match before it ends is _____, while the cost of staying for the entire match is _____.
answer
the opportunity cost of not seeing the winning goal with two minutes to go; the opportunity cost of whatever else you could have done during that time
question
Thinking in economic terms, when Mary Sweet-Tooth is deciding whether to eat another brownie, she:
answer
compares the additional benefits with the additional costs of eating another brownie.
question
You are planning to study eight hours this week for your economics final and are considering studying a ninth hour. You should:
answer
make your decision based on the cost of the next best alternative use of your time compared to the benefit of one more hour of study.
question
Which of the following demonstrates how people respond to incentives to make themselves better off?
answer
More students major in economics when they hear that salaries for economists are rising.
question
Because people usually exploit opportunities to make themselves better off, which of the following methods of reducing pollution is likely to be most effective?
answer
imposing a tax per unit of pollution generated
question
Which of the following is NOT one of the four principles for understanding individual choice?
answer
Overall spending sometimes gets out of line with the economy's productive capacity.
question
Which of the following principles underlies the economics of individual choices?
answer
People usually exploit opportunities to make themselves better off.
question
A dozen friends got together to celebrate a birthday. If the birthday cake is cut into 12 pieces of the same size and each of the 12 partygoers gets a slice, this cake distribution is:
answer
equitable.
question
An economic model:
answer
is a simplified version of reality used to understand real-world economic conditions.
question
The production possibility frontier illustrates that:
answer
if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.
question
The economy's factors of production are not equally suitable for producing different types of goods. This principle generates:
answer
the law of increasing opportunity cost.
question
A production possibility frontier illustrates the _____ facing an economy that _____ only two goods.
answer
trade-offs; produces
question
The effect of a natural disaster can be shown by _____ the production possibility frontier.
answer
an inward shift of
question
If they spend all night writing computer programs, Laurence can write 10 programs, and Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 pairs, and Carrie Anne can make 4. We know that:
answer
Laurence's opportunity cost of writing programs is less than Carrie Anne's.
question
In one day, Kessy can bake 10 cookies or mix 15 glasses of lemonade. His friend Ava can make 10 cookies or 10 glasses of lemonade. His other friend, Ian, can make 10 cookies or 20 glasses of lemonade. Who has the lowest opportunity cost in cookie production?
answer
Ava
question
Mark and Julie are going to sell brownies and cookies for their third annual fundraiser bake sale. In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15 brownies or 15 cookies. Based on this information, _____ has the comparative advantage in making brownies and _____ has the comparative advantage in making cookies.
answer
Mark; Julie
question
A decrease in the price of eggs will result in an increase in the:
answer
quantity of eggs demanded.
question
Which of the following best exemplifies the law of demand?
answer
As the price of a car rental rises, fewer cars are rented.
question
Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette cheese over boiled new potatoes. If the price of Raclette cheese decreased, we would expect to see:
answer
an increase in demand for new potatoes.
question
The demand curve for videos has shifted to the right. What could have caused it?
answer
an increase in the incomes of buyers
question
Which of the following would shift the demand curve for new textbooks to the right?
answer
an increase in college enrollment
question
If tortilla chips are a normal good, when there is an increase in income, equilibrium price _____ and equilibrium quantity _____.
answer
increases; increases.
question
The market for milk is initially in equilibrium. Milk producers successfully advertise to encourage milk drinking. At the same time, more milk producers enter the market. Standard demand and supply analysis tells us that:
answer
the equilibrium quantity of milk will rise, but we can't determine how the equilibrium price will be affected.
question
Egg producers know that the elasticity of demand for eggs is 0.1. If they want to increase sales by 5%, they will have to lower price by:
answer
50%
question
The only producer of chocolate bunnies in the world, Choco's Bunny Company, recently expanded its production capacity from 1,000 to 2,000 bunnies per day. If the price elasticity of demand for bunnies is 3.33, by how much will the company have to reduce its price to sell the additional 1,000 bunnies (by the midpoint method)?
answer
20%
question
The publisher of an economics textbook finds that when the book's price is lowered from $70 to $60, sales rise from 10,000 to 15,000. By the midpoint method, the price elasticity of demand is:
answer
2.6
question
A rancher in Oklahoma decides to raise the price of her beef by 19% over the prevailing market price. If the demand for beef is perfectly elastic, this rancher's quantity demanded will:
answer
fall to 0
question
Suppose the price of barley increases by 16.53%. If breweries buy 3.28% less barley after the price increase, the total revenue for barley producers will _____ because the _____ effect is greater than the _____ effect.
answer
increase; price; quantity
question
There is one gas station in a small rural town. The owner of the station claims that he will sell the same quantity of gas no matter how high or low the price. If he is correct in this assertion, the demand curve for gas at his station must be _____, with a price elasticity of _____.
answer
vertical; zero
question
Yovanka has diabetes, and she will pay any amount of money for insulin. What is likely the best characterization of Yovanka's demand for insulin?
answer
perfectly price-inelastic
question
Suppose the cross-price elasticity between demand for Burger King burgers and the price of McDonald's burgers is 0.8. If McDonald's increases the price of its burgers by 10%:
answer
Burger King will sell 8% more burgers.
question
The income elasticity of demand for eggs has been estimated to be 0.57. If income grows by 5% in a period, all other things unchanged, demand will:
answer
increase by about 2.9%.
question
An attorney supplies 40 hours of work per week when her fee is $100 per hour but supplies 60 hours of work per week when her fee rises to $120 per hour. Using the midpoint formula, her elasticity of supply is equal to:
answer
2.2
question
Which of the following will raise the price of milk?
answer
a shift to the right of the demand curve for milk
question
The _____ curve shows the quantities of output that can be obtained from different quantities of a variable input, assuming other inputs are fixed.
answer
total product
question
The marginal product of labor is:
answer
the slope of the total product of labor curve.
question
When Caroline's dress factory hires two workers, the total product is 50 dresses. When she hires three workers, total product is 60, and when she hires four workers, total product is 65. The slope of the marginal product curve when two to four workers are hired is:
answer
downward
question
The marginal product of labor is the change in _____ divided by the change in _____.
answer
total output; the quantity of labor
question
Suppose that when a coal-mining firm hires one, two, three, four, and five workers, the corresponding total outputs are 10, 15, 19, 22, and 24 tons, respectively. The marginal product of the third worker is _____ tons.
answer
4
question
Austin's total fixed cost at the bakery is $3,600 a month. Austin employs 20 workers and pays each worker $8 an hour. The marginal product of the twentieth worker is 12 iced cupcakes an hour. What is the marginal cost of the last cupcake produced by the last worker Austin hired?
answer
$0.66
question
Darren runs a barbershop with average fixed costs of $60 per day and a total output of 50 haircuts per day. Darren shuts down every year during the last week of July and the first week of August. What is his annual fixed cost if he is open six days per week?
answer
$18,000
question
You run a business producing picture frames. This month your total cost of production is $10,000, your variable cost of production is $6,000, and you produce 3,000 picture frames. It follows that average _____ cost is _____.
answer
variable; $2
question
A business produces 10 pairs of eyeglasses. It incurs $30 in average variable cost and $5 in average fixed cost. The total cost of producing 10 pairs of eyeglasses is:
answer
$350
question
In a perfectly competitive industry, the market demand curve is usually:
answer
downward-sloping
question
Marginal revenue:
answer
equals the market price in perfect competition.
question
For a firm producing at any level of output LOWER THAN the most profitable one, an increase in output adds:
answer
more to total revenue than to total cost.
question
If a perfectly competitive firm is producing a quantity where MC > MR, then profit:
answer
can be increased by decreasing production.
question
A perfectly competitive small organic farm produces 1,000 cauliflower heads in the short run. Its ATC = $6 and AFC = $2. The market price is $3 per head and is equal to MC. To maximize profits or minimize losses, this farm should:
answer
shut down
question
Lilly is the price-taking owner of an apple orchard. The price of apples is high enough that Lilly is earning positive economic profits. In the long run, Lilly should expect _____ apple prices due to the _____ firms.
answer
lower; entry of new
question
A perfectly competitive industry is said to be efficient because the:
answer
average total cost of production of the industry's output is minimized.
question
De Beers became a monopoly by:
answer
establishing control over diamond mines.
question
Suppose that you build a high-speed, magnetically powered transportation system from New York to Los Angeles, and you are the only firm providing this service. High fixed costs resulting from the enormous quantity of capital used in this system enable decreasing average cost for any conceivable level of demand. Your monopoly would result from:
answer
increasing returns to scale.
question
After the first unit sold, the marginal revenue a monopolist receives from selling one more unit of a good is less than the price of that unit because of:
answer
a downward-sloping demand curve.
question
Mr. Porter sells 10 bottles of champagne per week at $50 per bottle. He can sell 11 bottles per week if he lowers the price to $45 per bottle. The quantity and the price effects on total revenue would be, respectively, an increase of _____ and a decrease of _____.
answer
$45; $50
question
If a firm faces a downward-sloping demand curve, it will ensure that:
answer
P>MR
question
Suppose that a monopoly firm is required to pay a new annual license fee to do business in its city and that the fee is somewhat less than the economic profit the firm is now earning. In response to the increase in fees, the firm will:
answer
not change its price
question
Suppose a perfectly competitive industry is suddenly transformed into a monopoly industry. We can assume that monopoly output will be _____ than the competitive output and that _____.
answer
lower; deadweight loss will emerge
question
One government policy for dealing with natural monopoly is to:
answer
impose a price ceiling to reduce economic profit.
question
In 2014, _____ of the U.S. population was living in poverty.
answer
approximately 15%
question
America's Gini coefficient is _____ than that of most _____.
answer
higher; other wealthy nations
question
There are six households in a rural community. Each household earns $40,000 per year. Suppose that a new resident builds a mansion in the community and that the income in the new household is $4 million per year. After the new resident arrives, the median household income has _____ and the mean household income has _____.
answer
not changed; increased
question
Among the following, which factor has been associated with the increase in income inequality in the United States?
answer
the way technological change has affected labor demand
question
In 2012, health care expenditures in the United States accounted for _____ of GDP.
answer
15-20%
question
The means-tested U.S. government health insurance program is:
answer
Medicaid
question
Some nations, including Canada, have adopted a health care system in which the government pays the medical bills. This is known as a(n) _____ system.
answer
single-payer
question
In the United States, the government pays _____ of medical costs.
answer
approximately 50%
question
In the United States, individuals pay directly (out of pocket) _____ of medical costs.
answer
less than 15%
question
"Macroeconomics is nothing but a simple aggregation of all the microeconomic parts." Do you agree or disagree with this statement?
answer
Don't agree; there is a lot more to the study of macroeconomics than the sum of its microeconomic parts.
question
In the paradox of thrift:
answer
increased saving by individuals increases their chances of becoming unemployed.
question
An independent panel of economic experts at the _____ analyzes the macroeconomy and determines when recessions begin and end.
answer
National Bureau of Economic Research
question
Historical evidence shows that for determining a country's living standards, over:
answer
an extended period, long-run growth is much more important than the business cycle.
question
In the long run the overall price level is mainly determined by:
answer
changes in the money supply.
question
If a country has a trade deficit, does it indicate that the country has a serious problem?
answer
No. Trade deficits occur when a country's investment spending is higher than its level of saving.
question
If workers' nominal wages have risen by 50% over a 10 years and prices have increased by 40% in that same period, then we can safely conclude that the amount of goods and services workers can buy has:
answer
increased
question
Which of the following is the best definition of GDP?
answer
the total value of all final goods and services produced in the economy during a given year
question
The total volume of business sales in the economy is much larger than GDP because:
answer
the output approach to measuring GDP excludes intermediate transactions.
question
Suppose that Mr. Green Jeans sells $5,000 of wheat to Big Ben Bakery. Big Ben uses the wheat to make flour and then hamburger buns, which it sells to Hamburger Heaven for $11,000. Hamburger Heaven also buys $20,000 of beef from a rancher. Hamburger Heaven uses the beef and buns to make 10,000 hamburgers, which are sold for $5 each. How much do these transactions add to GDP?
answer
$50,000
question
The person who is usually credited with developing national income accounts is:
answer
Simon Kuznet
question
Suppose that nominal GDP is $1,000 in 2009 and $1,500 in 2010. If the overall price level _____ between 2009 and 2010, we could say that real GDP _____.
answer
increased by 50%; stayed constant
question
Government economists have adopted the _____ method of calculating the change in real GDP, which averages the GDP growth rate according to both an early base year and a late base year.
answer
chain-linking
question
If the consumer price index is 180 in year 1 and 190 in year 2, the inflation rate between year 1 and year 2 is about:
answer
5.56%
question
A survey reveals that on a small island initially 1,000 people have jobs, 250 people are not working but are looking for jobs, and 450 people are neither working nor looking for work. Suppose that 150 of the 450 people who weren't looking for work now begin looking for work. There are now 400 people looking for work and 1,000 people working. The unemployment rate:
answer
rises to 28.6%.
question
In general, for the U.S. economy, the relation between unemployment and economic growth is:
answer
negative
question
Last week Stephanie quit her job as a copywriter at an advertising agency. She has spent the past few days browsing the help wanted ads but hasn't found anything that matches her skills. Stephanie is best classified as:
answer
frictionally unemployed
question
Last month Brent lost his job at the auto parts factory because the factory relocated to Asia. Brent and his former coworkers have been looking for similar jobs, but they have found no openings. In Brent's town the _____ labor has _____.
answer
demand for; fallen
question
Causes of structural employment:
answer
a government-mandated floor on the price of labor set above the equilibrium wage; collective bargaining efforts that secure higher wages for unionized workers than for nonunionized workers; offering high wages to attract high-quality workers
question
According to the interest rate effect, an increase in the price level causes people to _____ their money holdings, which _____ interest rates and _____ investment spending.:
answer
increase; increases; decreases
question
As a result of a decrease in the value of the dollar in relation to other currencies, U.S. imports decrease and exports increase. Consequently, there is a(n):
answer
increase in aggregate demand.
question
Assuming that prices remain constant, suppose that consumer assets and wealth lose value. The aggregate demand curve will undergo a:
answer
shift to the left.
question
The only government policy that has a DIRECT effect on the aggregate demand curve is:
answer
changing the level of government purchases of final goods and services.
question
During the Great Depression, the United States moved to the _____ along its _____ curve.
answer
left; short-run aggregate supply
question
The short-run aggregate supply curve is positively sloped because:
answer
wages are sticky
question
Suppose that productivity increases as workers' health improves. This increase in productivity will:
answer
shift the short-run aggregate supply curve to the right.
question
Suppose the economy is in a recessionary gap. To move equilibrium aggregate output closer to the level of potential output, the best fiscal policy option is to:
answer
decrease taxes
question
Government spending will NOT crowd out private spending if:
answer
there is a recessionary gap.
question
Assume that marginal propensity to consume is 0.8 and potential output is $800 billion. If the actual real GDP is $700 billion, _____ government spending by _____ would bring the economy to potential output.
answer
increasing; $20 billion
question
A change in government transfers shifts the aggregate demand curve by _____ than a change in government spending for goods and services and has a _____ effect on real GDP.
answer
less; smaller
question
If the marginal propensity to consume is 0.75, the multiplier for taxes and transfer payments is:
answer
less than 4
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