mirco Economics chapter 1-7 - Assignment Essays

question

All economic models must involve simplifications because:

answer

reality is too complex to understand in its entirety, so we must reduce the complexity to a level that we can understand.

question

A hypothesis is:

answer

a prediction of what will occur given certain assumptions.

question

The difference between a good and a service is that:

answer

a good is tangible, but a service is not.

question

The scientific method is useful:

answer

for testing the validity of theoretical predictions.

question

Someone who commits the fallacy of composition is likely to assume that:

answer

what is true for the individual is also true for the group.

question

economics studies how decision makers use scarce resources to satisfy unlimited wants.

answer

true

question

It is always rational to acquire more information before making a decision.

answer

true

question

Economic decision makers will continue to acquire information only as long as the expected additional benefit exceeds the expected additional cost of the information.

answer

true

question

Profit is the payment received by resource owners for the use of their capital.

answer

false

question

Households:

answer

own and sell resources.

question

One flaw of pure capitalism is that a person who owns no resources could starve.

answer

true

question

Barter occurs when:

answer

one product is exchanged directly for another product.

question

Hans can do 4 loads of laundry per hour, and he can type 6 pages per hour. Maria can do 12 loads of laundry per hour, and she can type 8 pages per hour. Hans's opportunity cost of doing one load of laundry is:

answer

equal to typing 1 1/2 pages.

question

In one week, Mohammed can knit 5 sweaters or bake 240 cookies. In one week, Aisha can knit 15 sweaters or bake 480 cookies. Mohammed and Aisha would produce the maximum quantities of both cookies and sweaters if:

answer

Aisha knitted and Mohammed baked.

question

A point inside the production possibilities frontier illustrates a situation in which resources are not fully employed.

answer

true

question

If all resources are used efficiently to produce goods and services, a nation will find itself producing:

answer

somewhere on its production possibilities frontier.

question

Specialization often leads to gains in productivity for society as a whole.

answer

true

question

A university should not disband its football team since it has already paid for the stadium.

answer

false

question

A disadvantage of the corporate form of business organization is that corporate income is taxed twice.

answer

true

question

Rationality in the household decision-making process means that:

answer

households act in their own best interests.

question

Suppose you own a proprietorship that is in serious financial difficulty. The assets of the company are $100,000, but liabilities are $175,000. You also own stock in General Motors worth $200,000. If you file for bankruptcy, what amount of personal assets do you stand to lose?

answer

$75,000

question

Externalities can occur as a result of either production or consumption activities.

answer

true

question

The term fiscal policy refers to:

answer

spending and taxing by governments.

question

In recent years, redistribution has been the fastest growing category of federal government outlays.

answer

true

question

The movement of households from rural to urban settings increased the degree of specialization in factory production.

answer

true

question

Household production still exists because it often requires fewer specialized resources than market production does.

answer

true

question

Messitt and McNulty spend $50,000 each to form a law partnership. On the first day, someone trips over a potted plant in their lobby and sues them for $400,000. Which of the following is true?

answer

If a $400,000 judgment is passed against the partnership and if McNulty cannot afford to pay any of it, then Messitt is liable for $400,000.

question

A major advantage of the corporate form of business organization is the limited personal liability of the owners.

answer

true

question

If the price of potato chips increases, other things constant, the demand for potato chip dip will:

answer

decrease because the goods are complements.

question

Markets tend to increase the costs of time and information required for exchange.

answer

false

question

Suppose the market for a good is in equilibrium. Which of the following is most likely to occur if both the demand for and the supply of the good decrease during a particular point in time?

answer

The equilibrium quantity will decrease.

question

Other things constant, which of these is likely to increase the supply of vanilla ice cream?

answer

A decrease in the price of milk, an ingredient in ice cream

question

If Good A and Good B are complements, then a decrease in the price of Good B:

answer

increases the demand for Good A.

question

Suppose you drink more tea because the price of coffee has increased. This is indicative of:

answer

. the substitution effect of a price change.

question

The income effect of an increase in the price of backpacks, a normal good, is a(n):

answer

decrease in the quantity of backpacks demanded.

question

Attempts are being made to develop a biodegradable plastic using agricultural produce such as potatoes. Identify a likely impact on the equilibrium price and quantity of potatoes if such attempts are successful, all other things remaining constant.

answer

Both equilibrium price and quantity will increase.

question

A price floor set below the equilibrium price will result in a surplus.

answer

false

question

Necessities and luxuries are both types of normal goods.

answer

true

question

If Joe says that nothing comes close to Pepsi, his demand for Pepsi is likely to be:

answer

relatively price inelastic.

question

The ability of increasing quantity supplied in response to a higher price is identical across industries.

answer

false

question

The demand for flour is:

answer

inelastic because there are few substitutes for flour and it represents a small percentage of a consumer's budget.

question

Both the income elasticity of demand and the cross-price elasticity of demand coefficients can take on negative, zero, or positive values.

answer

true

question

If an increase in the price of peanut butter causes a decline in the demand for jelly, then:

answer

the goods are complements.

question

A successful advertising campaign is most likely to:

answer

reduce the price elasticity of demand by stressing upon the uniqueness of the product.

question

If the price elasticity of supply in the kiwi fruit industry equals 1, supply is:

answer

unit elastic.

question

Sally wants to visit Orlando during the week-long spring break. She can get there by bus in two and one-half days or fly there in four hours. The round trip by bus and plane would cost $20 and $200, respectively. Which of the following is not true?

answer

The true cost of going to Orlando is either the time or the money she spends traveling, whichever she values more

question

If a good is offered free of charge, one would:

answer

stop consuming it when its marginal utility has declined to zero.

question

A free good will be consumed up to the point at which its marginal utility is positive.

answer

true

question

Joshua consumes pizza and cola in such a way that the marginal utility of per dollar spent on the last piece of pizza is 3 units and that of the last cola is 1.5 units. Thus, Joshua should spend more on pizza and less on cola in order to maximize his utility.

answer

true

question

Diminishing marginal utility means that:

answer

as one consumes more of a good, other things constant, the additional satisfaction obtained from each additional unit of the good tends to fall.

question

Consumer surplus is:

answer

the difference between the maximum price consumers are willing to pay and the amount they actually pay.

question

Suppose the marginal utility of a unit of good x = MUx, the marginal utility of a unit of good y = MUy, Px= the price of a unit of good x, and Py= the price of a unit of a good y. If MUx/Px > MUy/Py, the consumer can increase utility by buying more of good x.

answer

true

question

Arthur has $7,800. He goes into an upscale men's store and buys 32 green sweaters, each costing $200. If Arthur has maximized his utility from this purchase, which of the following is the marginal utility of the thirty-third green sweater?

answer

Less than $200

question

Suppose a soccer coach has been making $25,000 per year but gives up his coaching job in order to make soccer shoes. If his revenue from the sale of these shoes is $50,000 and his materials cost $20,000, then his economic profit is equal to

answer

5,000

question

Increasing marginal returns are generally the result of _____

answer

the specialization and division of labor

question

If a firm is producing at its minimum efficient scale, increasing its output slightly will always lead to diseconomies of scale.

answer

false

question

If marginal product is negative, total product must be negative.

answer

false

question

A firm's accounting profit is equal to _____.

answer

total revenue minus explicit costs

question

Minimum efficient scale is the level of output at which:

answer

long-run average cost stops decreasing.

question

Economic profit is defined as _____.

answer

total revenue minus implicit and explicit costs

question

An implicit cost is:

answer

an opportunity cost.

1 of 61

question

All economic models must involve simplifications because:

answer

reality is too complex to understand in its entirety, so we must reduce the complexity to a level that we can understand.

question

A hypothesis is:

answer

a prediction of what will occur given certain assumptions.

question

The difference between a good and a service is that:

answer

a good is tangible, but a service is not.

question

The scientific method is useful:

answer

for testing the validity of theoretical predictions.

question

Someone who commits the fallacy of composition is likely to assume that:

answer

what is true for the individual is also true for the group.

question

economics studies how decision makers use scarce resources to satisfy unlimited wants.

answer

true

question

It is always rational to acquire more information before making a decision.

answer

true

question

Economic decision makers will continue to acquire information only as long as the expected additional benefit exceeds the expected additional cost of the information.

answer

true

question

Profit is the payment received by resource owners for the use of their capital.

answer

false

question

Households:

answer

own and sell resources.

question

One flaw of pure capitalism is that a person who owns no resources could starve.

answer

true

question

Barter occurs when:

answer

one product is exchanged directly for another product.

question

answer

equal to typing 1 1/2 pages.

question

answer

Aisha knitted and Mohammed baked.

question

A point inside the production possibilities frontier illustrates a situation in which resources are not fully employed.

answer

true

question

If all resources are used efficiently to produce goods and services, a nation will find itself producing:

answer

somewhere on its production possibilities frontier.

question

Specialization often leads to gains in productivity for society as a whole.

answer

true

question

A university should not disband its football team since it has already paid for the stadium.

answer

false

question

A disadvantage of the corporate form of business organization is that corporate income is taxed twice.

answer

true

question

Rationality in the household decision-making process means that:

answer

households act in their own best interests.

question

answer

$75,000

question

Externalities can occur as a result of either production or consumption activities.

answer

true

question

The term fiscal policy refers to:

answer

spending and taxing by governments.

question

In recent years, redistribution has been the fastest growing category of federal government outlays.

answer

true

question

The movement of households from rural to urban settings increased the degree of specialization in factory production.

answer

true

question

Household production still exists because it often requires fewer specialized resources than market production does.

answer

true

question

Messitt and McNulty spend $50,000 each to form a law partnership. On the first day, someone trips over a potted plant in their lobby and sues them for $400,000. Which of the following is true?

answer

If a $400,000 judgment is passed against the partnership and if McNulty cannot afford to pay any of it, then Messitt is liable for $400,000.

question

A major advantage of the corporate form of business organization is the limited personal liability of the owners.

answer

true

question

If the price of potato chips increases, other things constant, the demand for potato chip dip will:

answer

decrease because the goods are complements.

question

Markets tend to increase the costs of time and information required for exchange.

answer

false

question

Suppose the market for a good is in equilibrium. Which of the following is most likely to occur if both the demand for and the supply of the good decrease during a particular point in time?

answer

The equilibrium quantity will decrease.

question

Other things constant, which of these is likely to increase the supply of vanilla ice cream?

answer

A decrease in the price of milk, an ingredient in ice cream

question

If Good A and Good B are complements, then a decrease in the price of Good B:

answer

increases the demand for Good A.

question

Suppose you drink more tea because the price of coffee has increased. This is indicative of:

answer

. the substitution effect of a price change.

question

The income effect of an increase in the price of backpacks, a normal good, is a(n):

answer

decrease in the quantity of backpacks demanded.

question

answer

Both equilibrium price and quantity will increase.

question

A price floor set below the equilibrium price will result in a surplus.

answer

false

question

Necessities and luxuries are both types of normal goods.

answer

true

question

If Joe says that nothing comes close to Pepsi, his demand for Pepsi is likely to be:

answer

relatively price inelastic.

question

The ability of increasing quantity supplied in response to a higher price is identical across industries.

answer

false

question

The demand for flour is:

answer

inelastic because there are few substitutes for flour and it represents a small percentage of a consumer's budget.

question

Both the income elasticity of demand and the cross-price elasticity of demand coefficients can take on negative, zero, or positive values.

answer

true

question

If an increase in the price of peanut butter causes a decline in the demand for jelly, then:

answer

the goods are complements.

question

A successful advertising campaign is most likely to:

answer

reduce the price elasticity of demand by stressing upon the uniqueness of the product.

question

If the price elasticity of supply in the kiwi fruit industry equals 1, supply is:

answer

unit elastic.

question

answer

The true cost of going to Orlando is either the time or the money she spends traveling, whichever she values more

question

If a good is offered free of charge, one would:

answer

stop consuming it when its marginal utility has declined to zero.

question

A free good will be consumed up to the point at which its marginal utility is positive.

answer

true

question

answer

true

question

Diminishing marginal utility means that:

answer

as one consumes more of a good, other things constant, the additional satisfaction obtained from each additional unit of the good tends to fall.

question

Consumer surplus is:

answer

the difference between the maximum price consumers are willing to pay and the amount they actually pay.

question

answer

true

question

answer

Less than $200

question

answer

5,000

question

Increasing marginal returns are generally the result of _____

answer

the specialization and division of labor

question

If a firm is producing at its minimum efficient scale, increasing its output slightly will always lead to diseconomies of scale.

answer

false

question

If marginal product is negative, total product must be negative.

answer

false

question

A firm's accounting profit is equal to _____.

answer

total revenue minus explicit costs

question

Minimum efficient scale is the level of output at which:

answer

long-run average cost stops decreasing.

question

Economic profit is defined as _____.

answer

total revenue minus implicit and explicit costs

question

An implicit cost is:

answer

an opportunity cost.

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