Microeconomics Exam 1 HW Questions

In the circular flow model, labor is bought and sold in the

a. Product market
b. Resource/factor market
c. Financial market
d. Government market
e. Monetary flows

Which of the following is a normative statement?

a. An increase in the supply of computers has caused computer prices to fall
b. Hurricanes strike mainly Florida and North Carolina
c. When the price of kiwi fruit increases, fewer people eat kiwi fruit
d. Flood victims should pay for their own rebuilding
e. Recessions lead to increases in the unemployment rate

The human effort used to produce a good or service is called

a. Labor
b. Land or natural resources
c. Capital
d. Entrepreneurial skills and ability

A rational choice is one that

a. Uses the available resources to most effectively satisfy the wants of the person making the decision
b. Always turns out for the best for the decision maker
c. Is made in the social interest rather than the self-interest
d. Creates no cost for the decision maker
e. Must be made with perfect information

Which of the following is a topic studied in macroeconomics?

a. The effect on economic growth if the government raises taxes
b. How the wheat industry determines how much wheat to grow
c. The impact of labor unions on wages
d. The pricing decisions in the computer hardware industry
e. The impact of higher prices for gasoline on the number of SUV's people buy

The tools, skills, and equipment used to produce a good or service is called

a. Land or natural resources
b. Capital
c. Labor
d. Entrepreneurial skills and ability

Scarcity

a. Used to exist everywhere but has been eliminated in advanced economics
b. Applies only to people living in poverty
c. Is the inability to satisfy all our wants
d. Is not something that affects very rich people

In the circular flow model, goods and services are brought and sold in the

a. Resource/factor market
b. Government market
c. Monetary flows
d. Financial market
e. Product market

Scarcity requires that we

a. Make choices about what goods and services to produce
b. Have unlimited resources
c. Produce efficiently
d. Learn to limit our wants
e. Have the most rapid economic growth possible

Which branch of economics studies the decisions of individual consumers and individual firms?

a. Positive economics
b. Microeconomics
c. Macroeconomics
d. Marginal economics
e. Normative economics

Which of the following is a positive statement?

a. There should be a computer in every elementary school classroom
b. Our country needs to increase military spending
c. We need to spend less on luxury items for the wealthy, and more on necessities for the less fortunate
d. Too many people are unemployed
e. Online shopping increased by 50 percent this Christmas season

A statement that "All children should receive free health care" is an example of what kind of statement?

a. A positive statement
b. A statement on the margin
c. A fair statement
d. A normative statement
e. A natural experiment statement

The statement that "increases in the tax on gasoline increase the price of gasoline" is an example of a

a. Marginal statement
b. Macroeconomic statement
c. Positive statement
d. Ceteris paribus statement
e. Normative statement

If the production possibilities frontier between two goods were a straight line, then the opportunity cost of one good in terms of another would be

a. Zero
b. Decreasing
c. Increasing
d. Constant
e. Either constant, increasing, or decreasing but more information is needed to determine which

In order for Ireland to grow more potatoes, wool production must decrease. This situation is an example of

a. Opportunity cost
b. A free lunch
c. A trade-off
d. Zero opportunity cost
e. Producing at a point that lies beyond the PPF

Which of the following could lead the production possibilities frontier to shift inward?
a. The discovery of new sources of raw materials
b. A better educated labor force
c. An earthquake that destroys several major factories
d. An increase in protective resources
e. None of the above because the production possibilities can never shift inward

Why does a nation experience increasing opportunity cost?

a. Because the nation cannot produce at the attainable production points that lie beyond the PPF
b. Resources are not equally productive in producing different kinds of goods and services
c. As the nation moves from a production point within the PPF to one on the PPF, opportunity costs increase
d. As the nation moves from a production point within the PPF to another point also within the PPF, opportunity costs increase
e. When the amount of resources increases, the opportunity cost of all goods and services increases

As an economy grows its PPF

a. Becomes less steep
b. Becomes straighter
c. Becomes steeper
d. Shifts outward
e. Does not shift; instead, the production point moves from inside the PPF to be closer to the PPF

As population increases

a. The PPF shifts outward
b. The PPF shifts inward because unemployment occurs
c. A country moves toward the midpoint along its PPF and can produce more of both goods
d. All opportunity costs increase
e. All opportunity costs decrease

If there is unemployment in an economy, then the

a. Economy is operating at an unattainable point
b. Production possibilities frontier will shift upward
c. Economy is producing at a point inside the production possibilities frontier
d. Production possibilities frontier will shift outwards
e. Productions possibilities frontier will be bowed inward

When all of the available factors of production are being efficiently employed, the

a. Opportunity cost of changing production is infinite
b. Economy is producing at a point within its PPF
c. Economy is producing at a point on its PPF
d. PPF disappears
e. Economy is producing at a point beyond its PPF

A demand schedule

a. Shows how the demand changes when the supply changes
b. Is a growth showing a relationship between the quantity demanded and the price of a good
c. Shows the quantity demanded at one price
d. Shows that demand is on schedule
e. Is the list of quantities demanded at each different price when all other influences on buying plans remain the same

The law of supply states that, other things constant,

a. If the price of a good increases, firms buy less of it
b. Demand increases when supply increases
c. If the price of a good increases, the supply increases
d. If the price of a good increases, the quantity supplied increases
e. As people's income increases, the supply of goods increase

Consumers regard Dell computers and Apple computers as substitutes. If the price of a Dell computer decreases, the

a. Demand for Apple computers increases
b. Demand for Dell computers decreases
c. Demand for Apple computers decreases
d. Supply of Dell computers increases
e. Demand for Dell computers increases

Suppose the equilibrium price of oranges is $2.00 per pound. If the actual price is above the equilibrium price a

a. Shortage exist and the price would have to fall to restore equilibrium
b. Surplus exists and the price would have to fall to restore equilibrium
c. Shortage exists and the price would have to rise to restore equilibrium
d. Surplus exists but nothing happens until either the demand or supply changes

If the number of companies producing memory chips increases, then the

a. Supply of memory chips does not change
b. Demand for memory chips increase
c. Supply of memory chips decreases
d. Quantity of memory chips supplied decreases
e. Supply of memory chips increases

The American Dairy Association starts a highly successful advertising campaign that makes most people want to drink more milk. As a result,

a. The demand for milk is not affected
b. The demand for milk increases
c. The quantity demanded of milk increases
d. The price of milk falls to encourage people to drink more milk
e. The demand for milk decreases because the price of milk rises

Gasoline prices increase by 50 percent and other things remain the same. As a result, there is

a. No change in the quantity of gasoline demanded
b. An increase in the demand for gasoline
c. A decrease in the quantity of gasoline demanded
d. A decrease in the demand for gasoline
e. More information is needed to determine if the demand for gasoline increases or decreases

The "law of demand" refers to the fact that, other things remaining constant, when the price of a good rises,

a. The demand curve shifts rightward
b. The demand curve shifts leftward
c. The demand curve shifts rightward and there is a movement up along the demand curve to a smaller quantity demanded
d. There is a movement up along the demand curve to a smaller quantity demanded
e. There is a movement down along the demand curve to a larger quantity demanded

If macaroni and cheese is an inferior good, then a decrease in income results in

a. An increase in the demand for macaroni and cheese
b. A decrease in the demand for macaroni and cheese
c. An increase in the supply of macaroni and cheese
d. A decrease in the supply of macaroni and cheese
e. Both answers A and D are correct

Market equilibrium occurs when

a. Demand and supply move in opposite directions
b. The quantity demanded equals the quantity supplied
c. All markets become equal
d. Demand and supply change so they are equal at all possible prices
e. Opposing forces pull demand and supply aparts

Suppose that people decide riding scooters is no longer fun. The equilibrium price of a scooter _________ and the equilibrium quantity of scooters ___________.

a. Does not change; decreases
b. Rises; increases
c. Rises; decreases
d. Falls; decreases
e. Falls; increases

Oil refiners can refine a barrel of petroleum so that it yields either more home heating oil or more diesel fuel (i.e., they are related goods). If the price of diesel fuel falls, there is

a. An increase in the quantity of home heating oil supplied
b. An increase in the supply of home heating oil
c. An increase in the demand for home heating oil
d. A decrease in the quantity of home heating oil supplied
e. A decrease in the supply of home heating oil

A surplus of cardboard boxes means that

a. At the current price of a cardboard box, the quantity demanded is less than the quantity supplied
b. At the current price of a cardboard box, the quantity demanded equals the quantity supplied and the price will fall to restore the equilibrium
c. The current price of a cardboard box is less than the equilibrium price
d. At the current price of a cardboard box, the quantity demanded exceeds the quantity supplied
e. More information is needed to determine if the price of cardboard boxes is higher than, lower than, or equal to the equilibrium price

The "quantity demanded" of any good or service is __________ during a specified time period and at a specified price.

a. The amount of people are willing to buy because it is the amount sellers are willing to sell
b. The amount people are willing and able to buy
c. The amount people are able to buy
d. The amount people are willing and able to offer
e. The amount people are willing to buy

Which of the following is an example of the law of demand? When other things remain the same, as

a. More people decide to eat pizza, the demand for pizza increases
b. The price of gas falls, the quantity demanded of gas increases
c. The price of peanut increases, the quantity demanded of jelly decreases
d. The quantity demanded of bread increases, the price of bread falls
e. Your income increases, you'll buy more hamburgers

Computer chips are a normal good, suppose the economy slips into a recession so that income falls. As a result, the demand for computer chips __________ which causes the price of a computer chip to __________.

a. Increases; fall
b. Decreases; not change
c. Decreases; fall
d. Increases; rise
e. Decreases; rise

Suppose that the equilibrium price and quantity of new houses both increase. Which of the following could be a cause of this change?

a. More home buyers might have moved into the area
b. The rent for nearby apartments might have fallen
c. A technological advance in framing a new house might have occurred
d. The wage paid carpenters who build new houses might have risen
e. The cost of wood framing used to build houses might have fallen