MICROECONOMICS - TEST #1 - Assignment Essays

question

The fundamental question in economics is how to

answer

Make the best use of scarce resources to satisfy your unlimited wants.

question

Economic reasoning is based on the premise that any activity involves a trade-off. What does this mean?

answer

It means that undertaking one activity necessitates giving up something else.

question

Which of the following is not classified as a factor of production?

answer

Money

question

Which of the following statements relates to microeconomics?

answer

Sharp increase in labor costs have increased production cots in the steel industry.

question

To say that people make marginal decisions suggests that

answer

they weigh the additional costs and additional benefits of an item before purchasing that item.

question

The difference between a positive economic analysis and a normative economic analysis is

answer

positive analysis reaches conclusion based on verifiable statements while normative analysis reaches conclusions based on opinions.

question

Which of the following is an example of a normative statement?

answer

reducing tax rates on the wealthy would be good for the country.

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Suppose you have a choice of working full-time during the summer or attending summer school full-time. Summer tuition and books are $3,000. If you worked , you could make $5,000. Your rent is $1,000 for summer, regardless of your choice. The opportunity cost of going to summer school is

answer

$8,000

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Market economies rely primarily on

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privately owned firms to produce foods and services and decide how to produce them.

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A market is

answer

an institutional arrangement that brings together buyers and sellers.

question

In a market economy how are goods and services distributed?

answer

They are distributed to those who have the ability to buy the goods and services.

question

A production possibilities frontier shows the

answer

the maximum attainable combination for two goods that can be produced with the available resources.

question

Being on the production possibilities frontier implies that more of one good can be produced only by

answer

Decreasing the quantity of the other good produced

question

Which of the following will not cause the production possibilities frontier (PPF) to shift?

answer

An increase in the unemployment rate

question

Adam Smith's "invisible hand"

answer

describes how economic agents, acting in their own self-interest brings about a market outcome that promotes general economic well-being.

question

Absolute advantage is the ability of en economic agent to

answer

produce more of a product than its competitors using the same amount of resources.

question

Comparative advantage in the production of a good occurs

answer

when an economy can produce that good at a lower opportunity cost than its competitors.

question

Refer to Figure 2-6. What is the opportunity cost of 1 million tons of wheat in Egdon?

answer

3 tractors

question

Refer to Figure 2-6. What is the opportunity cost of 1 million tons of wheat in Budmouth?

answer

4 tractors

question

Refer to Figure 2-6. What is the opportunity cost of 1 tractor in Egdon?

answer

1/3 million tons of wheat

question

Refer to Figure 2-6. What is the opportunity cost of 1 tractor in Budmouth?

answer

1/4 million tons of wheat

question

Refer to Figure 2-6. Suppose each country specializes in one good and then engage in trade. Which country should specialize in tractors?

answer

Budmouth

question

Refer to Figure 2-6. Suppose each country specializes in one good and then engage in trade. Which country should specialize in wheat production?

answer

Egdon

question

Refer to Figure 2-6. Suppose each country completely specializes in one good and then engage in trade. Egdon will produce

answer

50 million tons of wheat

question

Refer to Figure 2-6. Suppose each country completely specializes in one good and then engage in trade. Budmouth will produce

answer

120 tractors

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The basis for trade is

answer

comparative advantage

question

If a decrease in income results in an increase in the demand for macaroni, then macaroni is

answer

an inferior good

question

All of the following are vital to the success of a market system except

answer

a system with extensive government control over products and factor markets.

question

The coffee market is in equilibrium. What will happen to the equilibrium price and quantity of coffee, if the price of tea (a perfect substitute) increase?

answer

price and quantity will both rise

question

the coffee market is in equilibrium. What will happen to the equilibrium price and quantity of coffee, if the price of sugar (a complement to coffee) increases?

answer

price and quantity will both fall

question

The coffee market is in equilibrium. What will happen to the equilibrium price and quantity of coffee, ,if coffee producers expect the price of coffee to rise in the future?

answer

price will rise and quantity will fall

question

Refer to Figure 3-4. Which panel best describes what happens in the market for Fruitopia when the price of Snapple, a substitute product, decreases?

answer

Panel (d)

question

Refer to Figure 3-4. Which panel best describes what happens in the garment market when the wages of seamstresses rise?

answer

Panel (b)

question

Refer to Figure 3-4. Which panel best describes what happens in the market for bike helmets if there is a substantial increase in the price of bicycles?

answer

Panel (d)

question

Refer to Figure 3-4. Steak and potatoes are complements, when the price of steak rises, what happens in the market for potatoes?

answer

Panel (d)

question

The difference between the maximum price a person is willing to pay for a good and the price actually paid for the good called

answer

consumer surplus

question

The actual division of the burden of a tax between buyers and seller in a market is called

answer

tax incidence

question

Refer to Figure 4-7. What is the size of the unit tax?

answer

question

Refer to Figure 4-7. The price buyers pay after the tax is

answer

question

Refer to Figure 4-7. For each unit sold, the price sellers receive after the tax (net of tax) is

answer

question

Refer to Figure 4-7. What is the consumer's burden of the tax?

answer

$3.00

question

Refer to Figure 4-7. Calculate the value of consumer surplus after the imposition of the tax.

answer

$80,000

question

Refer to Figure 5-1. Assume the government imposes a price ceiling of $1.80. The price ceiling will result in a

answer

shortage of 2,000 cups.

question

Refer to Figure 5-1. Assume the government imposes a price ceiling of $1.80, the dead-weight will be equal to

answer

$200

question

Refer to Figure 5-1. Assume the government imposes a price ceiling of 1.80, the black market price will be equal to

answer

$2.20

question

Refer to Figure 5-1. If the government eliminates the price ceiling of $1.80.

answer

the price will rise 20 cents and quantity in the market will rise by 1,000 cups.

question

Refer to Figure 4-6. What is the area that represents consumer surplus after the imposition of the price floor?

answer

question

Refer to Figure 4-6. What is the area that represents producer surplus after the imposition of the price floor?

answer

B+E

question

Refer to Figure 4-6. What is the area that represents the portion of the consumer surplus that has been transferred to producers surplus as a result of the price floor?

answer

B+E

question

Refer to Figure 4-6. What is the area that represents the dead-weight loss after the imposition of the price floor?

answer

C+D

1 of 50

question

The fundamental question in economics is how to

answer

Make the best use of scarce resources to satisfy your unlimited wants.

question

Economic reasoning is based on the premise that any activity involves a trade-off. What does this mean?

answer

It means that undertaking one activity necessitates giving up something else.

question

Which of the following is not classified as a factor of production?

answer

Money

question

Which of the following statements relates to microeconomics?

answer

Sharp increase in labor costs have increased production cots in the steel industry.

question

To say that people make marginal decisions suggests that

answer

they weigh the additional costs and additional benefits of an item before purchasing that item.

question

The difference between a positive economic analysis and a normative economic analysis is

answer

positive analysis reaches conclusion based on verifiable statements while normative analysis reaches conclusions based on opinions.

question

Which of the following is an example of a normative statement?

answer

reducing tax rates on the wealthy would be good for the country.

question

answer

$8,000

question

Market economies rely primarily on

answer

privately owned firms to produce foods and services and decide how to produce them.

question

A market is

answer

an institutional arrangement that brings together buyers and sellers.

question

In a market economy how are goods and services distributed?

answer

They are distributed to those who have the ability to buy the goods and services.

question

A production possibilities frontier shows the

answer

the maximum attainable combination for two goods that can be produced with the available resources.

question

Being on the production possibilities frontier implies that more of one good can be produced only by

answer

Decreasing the quantity of the other good produced

question

Which of the following will not cause the production possibilities frontier (PPF) to shift?

answer

An increase in the unemployment rate

question

Adam Smith's "invisible hand"

answer

describes how economic agents, acting in their own self-interest brings about a market outcome that promotes general economic well-being.

question

Absolute advantage is the ability of en economic agent to

answer

produce more of a product than its competitors using the same amount of resources.

question

Comparative advantage in the production of a good occurs

answer

when an economy can produce that good at a lower opportunity cost than its competitors.

question

Refer to Figure 2-6. What is the opportunity cost of 1 million tons of wheat in Egdon?

answer

3 tractors

question

Refer to Figure 2-6. What is the opportunity cost of 1 million tons of wheat in Budmouth?

answer

4 tractors

question

Refer to Figure 2-6. What is the opportunity cost of 1 tractor in Egdon?

answer

1/3 million tons of wheat

question

Refer to Figure 2-6. What is the opportunity cost of 1 tractor in Budmouth?

answer

1/4 million tons of wheat

question

Refer to Figure 2-6. Suppose each country specializes in one good and then engage in trade. Which country should specialize in tractors?

answer

Budmouth

question

Refer to Figure 2-6. Suppose each country specializes in one good and then engage in trade. Which country should specialize in wheat production?

answer

Egdon

question

Refer to Figure 2-6. Suppose each country completely specializes in one good and then engage in trade. Egdon will produce

answer

50 million tons of wheat

question

Refer to Figure 2-6. Suppose each country completely specializes in one good and then engage in trade. Budmouth will produce

answer

120 tractors

question

The basis for trade is

answer

comparative advantage

question

If a decrease in income results in an increase in the demand for macaroni, then macaroni is

answer

an inferior good

question

All of the following are vital to the success of a market system except

answer

a system with extensive government control over products and factor markets.

question

The coffee market is in equilibrium. What will happen to the equilibrium price and quantity of coffee, if the price of tea (a perfect substitute) increase?

answer

price and quantity will both rise

question

the coffee market is in equilibrium. What will happen to the equilibrium price and quantity of coffee, if the price of sugar (a complement to coffee) increases?

answer

price and quantity will both fall

question

The coffee market is in equilibrium. What will happen to the equilibrium price and quantity of coffee, ,if coffee producers expect the price of coffee to rise in the future?

answer

price will rise and quantity will fall

question

Refer to Figure 3-4. Which panel best describes what happens in the market for Fruitopia when the price of Snapple, a substitute product, decreases?

answer

Panel (d)

question

Refer to Figure 3-4. Which panel best describes what happens in the garment market when the wages of seamstresses rise?

answer

Panel (b)

question

Refer to Figure 3-4. Which panel best describes what happens in the market for bike helmets if there is a substantial increase in the price of bicycles?

answer

Panel (d)

question

Refer to Figure 3-4. Steak and potatoes are complements, when the price of steak rises, what happens in the market for potatoes?

answer

Panel (d)

question

The difference between the maximum price a person is willing to pay for a good and the price actually paid for the good called

answer

consumer surplus

question

The actual division of the burden of a tax between buyers and seller in a market is called

answer

tax incidence

question

Refer to Figure 4-7. What is the size of the unit tax?

answer

question

Refer to Figure 4-7. The price buyers pay after the tax is

answer

question

Refer to Figure 4-7. For each unit sold, the price sellers receive after the tax (net of tax) is

answer

question

Refer to Figure 4-7. What is the consumer's burden of the tax?

answer

$3.00

question

Refer to Figure 4-7. Calculate the value of consumer surplus after the imposition of the tax.

answer

$80,000

question

Refer to Figure 5-1. Assume the government imposes a price ceiling of $1.80. The price ceiling will result in a

answer

shortage of 2,000 cups.

question

Refer to Figure 5-1. Assume the government imposes a price ceiling of $1.80, the dead-weight will be equal to

answer

$200

question

Refer to Figure 5-1. Assume the government imposes a price ceiling of 1.80, the black market price will be equal to

answer

$2.20

question

Refer to Figure 5-1. If the government eliminates the price ceiling of $1.80.

answer

the price will rise 20 cents and quantity in the market will rise by 1,000 cups.

question

Refer to Figure 4-6. What is the area that represents consumer surplus after the imposition of the price floor?

answer

question

Refer to Figure 4-6. What is the area that represents producer surplus after the imposition of the price floor?

answer

B+E

question

Refer to Figure 4-6. What is the area that represents the portion of the consumer surplus that has been transferred to producers surplus as a result of the price floor?

answer

B+E

question

Refer to Figure 4-6. What is the area that represents the dead-weight loss after the imposition of the price floor?

answer

C+D

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MICROECONOMICS – TEST #1

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