Microeconomics Final Exam Review 1

An increase in the price of a good will
a) decrease demand
b) decrease quantity demanded
c) increase demand
d) increase quantity demanded

the producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers the same amount of that good,
a) has an absolute advantage in the production of that good
b) has a comparative advantage in the production of that good
c) should be the only producer of that good
d) has a low opportunity cost of producing that good, relative to the opportunity costs of other producers

trade makes costs
a) lower and raises the variety of goods and services available
b) higher but raises the variety of goods and services available
c) lower but reduces the variety of goods and services available
d) higher and reduces the variety of goods and services available

the most obvious benefit os specialization and trade is that they allow us to
a) consume more goods by forcing people in other countries to consume fewer goods
b) work more hours per week than we otherwise would be able to work
c) spend more money on goods that are beneficial to society, and less money on goods that are harmful to society
d) consume more goods than we otherwise would be able to consume

which of the following events must cause equilibrium price to fall?
a) demand increases and supply decreases
b) demand and supply both decrease
c) demand and supply both increase
d) demand decreases and supply increases

efficiency
a) and equity both refer to how much a society can produce with its resources
b) refers to how evenly the benefits from using resources are distributed between members of society. Equality refers to how much a society can produce with its resources
c) and equality both refer to how fairly the benefits from using resources are distributed between members of a society
d) refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society

Senator Bright, who understand economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright should argue that trade can be beneficial
a) because it allows specialization, which increases total output
b) only if it allows us to obtain things that we couldn't make for ourselves
c) to us if we can gain and the others involved in the trade lose
d) in only a limited number of circumstances because others are typically self-interested

the overriding reason why households and societies face many decisions is that
a) resources are scarce
b) goods and services are not scarce
c) people, by nature, tend to disagree
d) incomes fluctuate with business cycles

an increase in supply is represented by a
a) rightward shift of a supply curve
b) leftward shift of a supply curve
c) movement upward and to the right along a supply curve
d) movement downward and to the left along a supply curve

suppose that amanda receives a pay increase. we would expect
a) amandas demand for each of two goods that are complements to increase
b) amandas demand for inferior goods to decrease
c) to observe amanda moving down and to the right along her given demand curve
d) amanda's demand for normal goods to increase

if the demand for a product increases, then we would expect equilibrium price
a) to increase and equilibrium quantity to decrease
b) and equilibrium quantity both to decrease
c) and equilibrium quantity both to increase
d) to decrease and equilibrium quantity to increase

the unique point at which the supply and demand curves intersect is called
a) equilibrium
b) coincidence
c) equivalence
d) market harmony

the production possibilities frontier illustrates
a) the combinations of output that an economy should produce
b) the combinations of output that an economy should consume
c) the combinations of output that an economy can produce
d) all off the above are correct

suppose a gardener produces both green beans and corn in her garden. if she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is
a) 70 bushles of corn
b) 0.36 bushels of corn
c) 14 bushels of corn
d) 2.8 bushels of corn

the quantity supplied of a good is the amount that
a) buyers are willing and able to purchase
b) buyers and sellers agree will be brought to market
c) sellers are able to produce
d) sellers are willing and able to sell

the quantity demanded of a good is the amount that buyers are
a) willing, able, and need to purchase
b) able to purchase
c) willing to purchase
d) willing and able to purchase

the demand for a good or service is determined by
a) those who buy the good or service
b) those who sell the good or service
c) the government
d) both those who buy and those who sell the good or service

Regan grows flowers and makes ceramic vases. Jayson also grows flowers and makes ceramic vases, but Regan is better at producing both goods. In this case, trade could
a) benefit both
b) benefit Jayson, but not Regan
c) benefit Regan, but not Jayson
d) benefit neither Jayson nor regan

when the government redistributes income from the wealthy to the poor
a) both wealthy people and poor people benefit directly
b) efficiency is improved, but equality is not
c) the government collects more revenue in total
d) people work less and produce fewer goods and services

approximately what percentage of the world's economies experience scarcity?
a) 100%
b) 40%
c) 85%
d) 10%

an increase in the price of a good will
a) decrease supply
b) decrease quantity supplied
c) increase supply
d) increase quantity supplied

mike and sandy are two woodworkers who both make tables and chairs. in one month, mike can make 4 tables or 20 chairs, where sandy can make 6 tables or 18 chairs. given this, we know that the opportunity cost of 1 table is
a) 1/5 chair for mike and 1/3 chair for sandy
b) 5 chairs for mike and 3 chairs for sandy
c) 5 chairs for mike and 1/3 chair for sandy
d) 1/5 chair for mike and 3 chairs for sandy

pizza is a normal good if the demand
a) curve for pizza slopes upward
b) curve for pizza shifts to the right when the price of burritos rises, assuming pizza and burritos are substitutes
c) for pizza rises when income rises
d) for pizza rises when the price of pizza falls

the forces that make market economies work are
a) politics and religion
b) work and leisure
c) taxes and government spending
d) supply and demand

for economists, statements about the world are of two types:
a) positive statements and normative statements
b) assumptions and theories
c) true statements and false statements
d) specific statements and general statements

which of the following statements best represents the principles represented by the adage, "there is no such thing as a free lunch"?
a) kendra must decide between going to colorado to cancun for spring break
b) greg is hungry and homeless
c) melissa can attend the concert only if she takes her sister with her
d) brian must repair the tire on his bike before he can ride it to class

economists view normative statements as
a) statements about the normal condition of the world
b) prescriptive, making a claim about how the world ought to be
c) pessimistic, putting the worst possible interpretation on things
d) descriptive, making a claim about how the world is

when an economist is asked a question like "why is unemployment higher for teenagers than for older workers?" the economist
a) is asked to explain the cause of an economic event
b) does not have enough information to respond
c) is asked to recommend a policy to improve economic outcomes
d) is asked as a policy advisor

at the equilibrium price, the quantity of the good that buyers are willing and able to buy
a) is greater than the quantity that sellers are willing and able to sell
b) exactly equals the quantity that sellers are willing and able to sell
c) is less than the quantity that sellers are willing and able to sell
d) either a or c would be correct

the income of a typical worker in a country is most closely linked to which of the following?
a) population
b) market power
c) productivity
d) government policies

Good X and good Y are substitutes. if the price of good y increases, then the
a) quantity demanded of good X will increase
b) demand for good X will increase
c) demand for good X will decrease
d) quantity demanded of good X will decrease

if the united states decides to trade with mexico, we know that
a) it will not benefit Mexico because workers in the united states are more productive
b) mexico and the US can both benefit
c) it will not benefit either country because their cultural differences are too vast
d) mexico will benefit, but trade with a less developed country could not benefit the US

an increase in quantity demanded
a) results in a movement downward and to the right along a demand curve
b) results in a movement upward and to the left along a demand curve
c) shifts the demand curve to the left
d) shifts the demand curve to the right

normative statements are
a) backward-looking, whereas positive statements are forward-looking
b) prescriptive, whereas positive statements are descriptive
c) forward-looking, whereas positive statements are backward-looking
d) descriptive, whereas positive statements are prescriptive

kelly and david are both capable of repairing cars and cooking meals. which of the following scenarios is not possible?
a) kelly has a comparative advantage in repairing cars and david has a comparative advantage in cooking meals
b) kelly has a comparative advantage in repairing cars and in cooking meals
c) david has an absolute advantage in repairing cars and in cooking meals
d) kelly has an absolute advantage in repairing cars and and david has an absolute advantage in cooking meals

suppose susan can wash three windows per hour or she can iron six shirts per hour. paul can was 2 windows per hour to he can iron 5 shirts per hour.
a) susan has an absolute advantage over paul in washing windows
b) susan has a comparative advantage over paul in washing windows
c) paul has a comparative advantage over susan in ironing shirt s
d) all of the above are correct

the law of supply states that, other things equal, when the price of a good
a) rises, the supply of the good falls
b) falls, then the supply of the good rises
c) falls, the quantity supplied of the good rises
d) rises, the quantity of the good supplied rises

which of the following events must cause equilibrium quantity to fall?
a) demand and supply both decrease
b) demand decreases and supply increases
c) demand and supply both increase
d) demand increases and supply decreases

market economies are distinguished from other types of economies largely on the basis of
a) the number of retail outlets available to consumers
b) the process by which government officials are elected or appointed
c) the ways in which scarce resources are allocated
d) the political affiliations of government officials

what must be given up to obtain an item is called
a) out-of-pocket cost
b) absolute value
c) opportunity cost
d) comparative worth

while pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. this statement illustrates the principle that
a) trade can make everyone better off
b) people face tradeoffs
c) people respond to incentives
d) rational people think at the margin

the supply of a good or service is determined by
a) the government
b) both those who buy and those who sell the good or service
c) those who buy the good or service
d) those who sell the good or service

when we move along a given demand curve
a) all determinants of quantity demanded are held constant
b) all nonprime determinants of demand are held constant
c) income and price are held constant
d) only price is held constant

workers at a bicycle assembly plant currently earn the mandatory minimum wage. if the federal government increases the minimum wage by $1.00 per hour, then it is likely that the
a) demand for bicycle assembly workers will increase
b) firm just increase output to maintain profit labels
c) supply of bicycles will shift to the right
d) supply of bicycles will shift to the left

productivity is defined as the
a) number of workers required to produce a given amount of goods and services
b) amount of labor that can be saved by replacing workers with machines
c) actual amount of effort workers put into an hour of working time
d) amount of goods and services produced from each unit of labor input

suppose that demand for a good increases and, at the same time, supply of the good decreases. what would happen in the market for the good?
a) equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous
b) equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous
c) equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous
d) equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous

if a country allows trade and, for a certain good, the domestic price without trade is lower than the world price,
a) the country will be an exporter of the good
b) the country will be an importer of the good
c) the country will be neither an exporter nor an importer
d) additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good or neither

sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the
a) tax is placed on the sellers of the product
b) tax is placed on the buyers of the product
c) demand for the product is more elastic than the supply of the product
d) supply of the product is more elastic than the demand for the product

which of the following is not a determinant of the price elasticity of demand for a good?
a) the steepness or flatness of the supply curve for the good
b) the definition of the market for the good
c) the availability of substitutes for the good
d) the time horizon

a tariff is a
a) limit on how much of a good can be imported
b) tax on an imported good
c) limit on how much of a good can be exported
d) tax on an exported good

a binding price floor
i) causes a surplus
ii) causes a shortage
iii) is set at a price above the equilibrium price
iv) is set at a price below the equilibrium price

a) i and iii only
b) ii and iv only
c) i only
d) iii only

generally, a firm is more willing and able to increase quantity supplied in response to a price change when
a) the relevant time period is long rather than short
b) the firm is experiencing capacity problems
c) supply is inelastic
d) the relevant time period is short rather than long

which of the following could be the cross-price elasticity of demand for two goods that are complements?
a) 1.4
b) 0.2
c) -1.3
d) 0

the difference between social cost and private cost is a measure of the
a) loss in profit to the seller as the result of a negative externality
b) cost reduction when the negative externality is eliminated
c) cost incurred by the government when it intervenes in the market
d) cost of an externality

a tax levied on the sellers of a good shifts the
a) demand curve upward (or to the right)
b) supply curve upward (or to the left)
c) supply curve downward (or to the right)
d) demand curve downward (or the left)

when a good rival is in consumption
a) people can be prevented from using the good
b) an unlimited number of people can use the good at the same time
c) one persons use of the good diminishes another persons ability to use it
d) everyone will be excluded from obtaining the good

because public goods are
a) excludable, people do not have an incentive to be free riders
b) not excludable, people do not have an incentive to be free riders
c) not excludable, people have an incentive to be free riders
d) excludable, people have an incentive to be free riders

when the government intervenes in markets with externalities, it does so in order to
a) protect the interests of bystanders
b) increase production when negative externalities are present
c) make certain all benefits are received by market participants
d) reduce production when positive externalities are present

a tax levied in the buyers of a good shifts the
a) supply curve upward ( or to the left)
b) demand curve upward ( or to the right)
c) supply curve downward (or to the right)
d) demand curve downward (or to the left)

if the price elasticity of demand for a good is 10.0, then a 4 percent increase in price results in a
a) 2.5 precedent decrease in the quantity demanded
b) 40 percent decrease in the quantity demanded
c) 4 percent decrease in the quantity demanded
d) 0.4 percent decrease in the quantity demanded

producer surplus is
a) the amount a seller is paid minus the cost of production
b) the opportunity cost of production minus the cost of producing goods that go unsold
c) measured using the demand curve for a good
d) always a negative number for sellers in a competitive market

assume the nation of cropland does not trade with the rest of the world. by comparing world price of corn to the price of corn in cropland, we can determine whether
a) consumer surplus exceeds producer surplus in cropland
b) cropland has an absolute advantage in producing corn
c) cropland has a comparative advantage in producing corn
d) all of the above are correct

suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. price elasticity of demand for X is
a) 36.
b) 6.
c) 1.
d) 0.

total surplus
a) can be used to measure a markets efficiency
b) is the sum of consumer and producer surplus
c) is the to value to buyers minus the cost of sellers
d) all of the above are correct

total surplus is represented by area
a) above the supply curve and up to the price
b) under the demand curve and above the price
c) between the demand and supply curves up to the point of equilibrium
d) under the supply curve and up to the price

what is the fundamental basis for trade among nations?
a) comparative advantage
b) shortages or surpluses in nations that do not trade
c) misguided economic policies
d) absolute advantage

"owners of firms in young industries should be willing to incur temporary losses if they believe that those firms will be profitable in the long run." this observation helps to explain why many economists are skeptical about the
a) unfair-competition argument
b) infant-industry argument
c) national-security argument
d) jobs argument

the price of elasticity of demand for bread
a) is computed as the percentage change in quantity demanded for bread divided by the percentage change in price of bread
b) depends, in part, on the availability of close substitutes
c) reflects the many economic, social, and psychological forces that influence consumers' tastes for bread
d) all of the above are correct

after a binding price floor becomes effective, a
a) smaller quantity of the good is bought and sold
b) a larger quantity of the good is demanded
c) a smaller quantity of the good is supplied
d) all of the above are correct

when a country allows trade and becomes an importer of a good,
a) both domestic producers and domestic consumers become better off
b) domestic producers become worse off, and domestic consumers become better off
c) both domestic producers and domestic consumers become worse off
d) domestic producers becomes better off, and domestic consumers become worse off

externalities tend to cause markets to be
a) unnecessary
b) inefficient
c) overwhelmed
d) unequal

a price ceiling will be biding only if it is set
a) below the equilibrium price
b) either above or below the equilibrium price
c) equal to the equilibrium price
d)above the equilibrium price

deadweight loss measures the loss
a) of equality in a market due to government intervention
b) of total revenue to business firms due to the price wedge caused by the tax
c) in a market to buyers and sellers that is not offset by an increase in government revenue
d) in revenue to the government when buyers choose to buy less of the product because of tax

a free rider is a person who
a) receives the benefit of a good but avoids paying for it
b) can produce a good for no cost
c) will only purchase a product on sale
d) rides public transit regularly

Danita rescues dogs from her local animal shelter. when danita's income rises by 7 percent, her quantity demanded of dog biscuits increases by 12 percent. for danita, the income elasticity of demand for dog biscuits is
a) positive, and dog biscuits are an inferior good
b) negative, and dog biscuits are an inferior good
c) negative, and dog biscuits are a normal good
d) positive, and dog biscuits are a normal good

a tax imposed on the sellers of a good will raise the
a) effective price received by sellers and lower the equilibrium quantity
b) effective price received by sellers and raise the equilibrium quantity
c) price paid by buyers and lower the equilibrium quantity
d) price paid by buyers and raise the equilibrium quantity

which of the following would be the most likely result of a binding price ceiling imposed on the market for rental cars?
a) enhanced maintenance programs to promote the high quality of the cars
b) free gasoline given to people as an incentive to rent a car
c) frequent rental programs such as " rent nine times and the tenth rental is free!"
d) slow replacement of old rental cars with new ones

holding all other forces constant, when the price of gasoline rises, the umber of gallons of gasoline demanded would fall substantially over a ten-year period because
a) buyers will have substantially more real income over a ten-year period
b) buyers tend to be much more sensitive to a change in price when given more time to react
c) the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline
d) buyers tend to be much mess sensitive to a change in price when given more time to react

a legal maximum on the price at which a good can be sold is called a price
a) floor
b) subsidy
c) support
d ceiling

the price elasticity of demand measures
a) buyers' responsiveness to a change in the price of a good
b) how much more of a good consumers will demand when incomes rise
c) the extent to which demand increases as additional buyers enter the market
d) the movement along a supply curve when there is a change in demand

consumer surplus
a) is the amount a consumer is willing to pay minus the amount the consumer actually pays
b) measures how much a seller values a good
c) is the number of consumers who are excluded from a market because of scarcity
d) is the amount of a good that a consumer can buy at a price below equilibrium price

when a tax is placed on a product, the price paid by buyers
a) falls, and the price received by sellers falls
b) falls, and price received by sellers rises
c) rises, and price received by sellers falls
d) rises, and the price received by sellers rises

when a tax is levied on a good, the buyers and sellers of the good share the burden,
a) provided the tax is levied on the sellers
b) regardless of how the tax is levied
c) provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers
d) provided the tax is levied on the buyers

if the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. but if the price of salt rises, people would have difficulty purchasing something to use in its place. these examples illustrate the importance of
a) the availability of close substitutes in determining the price elasticity of demand
b) necessity versus a luxury in determining the price elasticity of demand
c) the definition of a market in determining the price elasticity of demand
d) the time horizon in determining the price elasticity of demand

a good is excludable if
a) people can be prevented from buying it
b) the government can regulate its availability
c) it is not a normal good
d) one person's use of it diminishes another person's enjoyment of it

a consumer's willingness to pay directly measures
a) how much a buyer values a good
b) consumer surplus
c) the cost of the good to the buyer
d) the extent to which advertising and other external forces have influenced the consumer's preferences

if the price elasticity of supply is 0.2 and the price increase led to a 3% increase in quantity supplied, then the price increase is about
a) 6%
b) 15%
c) 0.60%
d) 0.07%

the presence of price control in a market for a good or service usually is an indication that
a) policymakers correctly believed that price controls would generate no inequities of their own once imposed
b) the usual forces of supply and demand were not able to establish an equilibrium price in that market
c) policymakers believed that the price prevailed in that market in the absence of price controls was unfair to buyers or sellers
d) an insufficient quantity of the good or service was being produced in that market to meet the public's need

if the government levies a $500 tax per car on sellers of cars, then the price received by sellers of cars would
a) increase by an indeterminate amount
b) decrease by exactly $500
c) decrease by less than $500
d) decrease by more than $500

when a country allows trade and becomes an exporter of a good,
a) domestic producers gain and domestic consumers lose
b) domestics producers lose and domestic consumers lose
c) domestic producers and domestic consumers both gain
d) domestic producers and domestic consumers both lose

when a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,
a) buyers and sellers will each bear 50 percent of the burden of tax
b) sellers of the good will bear most of the burden of tax
c) buyers of the good will bear most of the burden of tax
d) both equilibrium price and quantity will increase

Justin builds fences for a living. Justin's out-of-pocket expenses (for wood, paint, etc) plus the value he places on his own time amount to his
a) cost of building fences
b) producer surplus
c) producer deficit
d) profit

because of the free-rider problem
a) private markets tend to undersupply public goods
b) fireworks displays have become increasingly dangerous
c) poverty has increased
d) the federal government spends too many resources on national defense and not enough resources on medical research

a tax on the sellers of coffee mugs
a) increases the size of the coffee mug market
b) may increase, decrease, or have no effect on the size of the coffee mug market
c) decreases the size of the coffee mug market
d) has no effect on the size of the coffee mug market