Exam 1

Question 1

An increase in the price of an input will cause supply to increase T/F?

Answer 1

False

Question 2

In a MARKET system, the ultimate decision about what to produce is left to

Answer 2

sellers

Question 3

A situation where limited resources make it impossible to fulfill all of our wants is known as

Answer 3

scarcity

Question 4

Tobacco companies did not resist the advertising can instituted in 1970 because they actually increased profits by not being allowed to advertise. This ban forced these companies to abondon their dominant strategy of advertising and wind up at a cooperative outcome of not advertising. Prior to the ban, the tobacco companies were involved in playing

Answer 4

a prisoner’s dilemma game

Question 5

Incentives

Answer 5

can be used to either encourage or discourage particular behaviors

Question 6

Incentives work by changing the trade-offs faced by individuals T/F?

Answer 6

True

Question 7

If a company could spend $3 per bicycle on a safety device that would prevent $2,000 worth of harm for every 1,000 bicycles sold, spending the $3 would be a cost-justified precaution. T/F?

Answer 7

False

Question 8

Taxes can be adversely affect free exchange T/F?

Answer 8

True

Question 9

Ultimately, quotas ______ prices for imported goods and ______ prices for domestic goods.

Answer 9

raise; raise

Question 10

If supply is elastic, the supply curve is relatively _______, and if demand is elastic, the demand curve is relatively _______.

Answer 10

flat; flat

Question 11

The amount Jacqueline recieves for selling cupcakes beyond the minimum she would be willing to sell the cupcakes for is called

Answer 11

producer surplus

Question 12

Markets are forums where buyers and sellers conduct transactions T/F?

Answer 12

True

Question 13

Gerald is deciding what kind of light bulbs to install in the light fixtures in his new home. He has it narrowed down to compact fluorescent bulbs (CFLs) or LED bulbs. The CFLs will cost $350 and the LEDs will cost $900. Gerald estimates that the energy-saving benefits from the CFLs will be $750 and the energy-saving benefits from the LEDs will be $1,250. Based on these numbers, Gerald should purchase the

Answer 13

CFLs because the net benefit is greater

Question 14

Andrea: one bracelet takes 2 hrs, 1 tiara takes 12 hrs

What is Andrea’s opportunity cost of producing one bracelet?

Answer 14

1/6 of a tiara

Question 15

If a product is a normal good, an increase in your income will

Answer 15

increase your demand for the product

Question 16

You decide to spend time studying for a philosophy exam, even though you have offers to go to see a movie, go out to dinner, or go to a poetry reading. This is a difficult choice for you because you really want to go to the poetry reading and would choose that overseeing the movie or going out to dinner. Your opportunity cost of spending time studying for your philosophy exam is

Answer 16

going to the poetry reading

Question 17

Prices help coordinate all phases of production, so producers have the right quantities of resources they need, in the right place, to operate. T/F?

Answer 17

True

Question 18

All of the following are factors that will shift the demand curve EXCEPT

Answer 18

a change in the price of inputs

Question 19

A supply schedule is a table that reports:

Answer 19

the different quantities of a good that producers are willing to sell at different prices

Question 20

Globalization has given U.S. consumers a wider variety of gourmet food products from which to choose and has lowered the prices of these products in general. This, in turn, has encouraged consumers to buy more gourmet food items, which has ________ the amount of cooperative surplus for the buyers and sellers of gourmet food products.

Answer 20

increased

Question 21

According to the U.S. National Safety Council, a person has a better chance of being killed in which of the following situations?

Answer 21

while walking

Question 22

In a COMMAND economy, the ultimate decision about what to produce is left to

Answer 22

the government

Question 23

Who faces trade-offs?

Answer 23

all of the above

Question 24

If Carla can pick more oranges in one hour than Benjamin, then Carla definitely has a comparative advantage in picking oranges. T/F?

Answer 24

False

Question 25

An economy’s resources include

Answer 25

all of the above

Question 26

Which of the following is not a characteristic of a battle of the sexes game?

Answer 26

each player has a dominant strategy

Question 27

Claudia’s Copy Shop is deciding which 3-D printer to purchase, and it only has room for one printer. It can purchase the “Mini-Me” small-object printer, which would generate benefits of $50,000 at a cost of $5,000, or it can purchase the “Gargantuan” large-object printer which would generate benefits of $250,000 at a cost of $25,000. Based on these numbers, Claudia’s Copy Shop should purchase

Answer 27

the “Gargsntuan” printer

Question 28

A chain saw manufacturer can make its chain saws safer by adding a titanium chain guard to its products. Adding the titanium chain guard costs $35 per chain saw. The manufacturer estimates that this will prevent 10 injuries for every 5,000 chain saws sold and that, on average, each injury causes $15,000 of harm. The injury cost per chain saw is

Answer 28

$30.00.

Question 29

Property rights connect effort with reward T/F?

Answer 29

True

Question 30

Your opportunity cost of attending a lecture on the number of brain cells lost by binge-watching episodes of Tiger King is

Answer 30

the value of attending a meditation class, which is your next-best alternative.

Question 31

Which of the following is not a characteristic of a chicken game?

Answer 31

When both players play their tough strategy, they can receive their best possible payout.

Question 32

Economies can be organizations such as

Answer 32

households, states, and countries

Question 33

Which of the following is likely to use the concepts of game theory?

Answer 33

International trade negotiation

Question 34

Human beings are generally very good at accurately estimating probabilities T/F?

Answer 34

False

Question 35

Which of the following is a key question that must be addressed by an economy?

Answer 35

How will we distribute our products?

Question 36

The process of making the best of our limited resources by doing the things we are best at and hiring other people to do the things we are not particularly good at is called

Answer 36

specialization

Question 37

In 2009, Samoa changed from everyone driving on the right side of the road to everyone driving on the left side of the road. Although everyone agreed that it was important to drive on the same side of the road, some Samoans were not happy about the change. This created a disagreement about which Nash equilibrium was the best equilibrium, and therefore represented

Answer 37

a battle of the sexes game

Question 38

Which of the following is a key question that must be addressed by an economy?

Answer 38

What will be made with our resources?

Question 39

If Jacqueline is willing to accept $1 for a cupcake and Jameson is willing to pay $3 for a cupcake, the cooperative surplus will ________ if the negotiated price is $1.50 as opposed to $2.00.

Answer 39

not change

Question 40

The quantity supplied of a good

Answer 40

is the amount of the good that sellers are ready to supply at a given price

Question 41

With respect to the Ford Pinto, comparing the cost of the modification to the fuel tank with the lives the modification would save was the best way Ford could reflect its customers views about the value of safety in the design of its products. T/F?

Answer 41

True

Question 42

The tobacco industry is an example of an oligopoly market structure. T/F?

Answer 42

True

Question 43

Property rights are limited to tangible items such as land and machinery. T/F?

Answer 43

False

Question 44

A market structure where many sellers offer differentiated products is called perfect competition. T/F?

Answer 44

False

Question 45

All of the following are factors that will shift the supply curve except

Answer 45

changing tastes and preferences

Question 46

Inducements to act in particular ways are called

Answer 46

Incentives

Question 47

A game in which both players want to coordinate, but each player prefers coordinating on a different equilibrium outcome is called

Answer 47

a battle of the sexes game

Question 48

If Jacqueline is willing to accept $1 for a cupcake and Jameson is willing to pay $3 for a cupcake, the producer surplus will ________ if the negotiated price is $1.50 as opposed to $2.00.

Answer 48

decrease

Question 49

A tax on an imported good is a(n)

Answer 49

tariff

Question 50

A game in which players want to coordinate on an outcome and in which both agree that coordinating on one particular outcome is preferred to coordinating on the other is called

Answer 50

an assurance game

Question 51

Governments,

Answer 51

like individuals, face opportunity costs.

Question 52

Tariffs create deadweight losses and destroy wealth, whereas quotas increase cooperative surplus and create wealth. T/F?

Answer 52

False

Question 53

The opportunity cost of an activity is

Answer 53

what you sacrifice to engage in the activity

Question 54

You are trying to decide if you should take a day off from work to go to a casino. In making your decision, you compare what you would sacrifice to go to the casino (lost wages for the day, potential losses at the casino, the amount of work you will have to make up, etc.) with the enjoyment you would receive from the day off (relaxation, potential winnings, etc.). The analysis you have just conducted is called

Answer 54

cost-benefit analysis

Question 55

Homer and Marge have been accused of committing a crime, and the payoff matrix below represents the payoffs associated with confessing to the crime and denying having committed the crime.

What is the number of outcomes which represent Nash equilibria in this game?

Answer 55

1

Question 56

A deadweight loss occurs when the market is functioning efficiently. T/F?

Answer 56

False

Question 57

A game in which players want to coordinate on an outcome and in which both agree that coordinating on one particular outcome is preferred to coordinating on the other is called

Answer 57

an assurance game

Question 58

Arriving at a decision by comparing total costs and total benefits is called marginal analysis. T/F?

Answer 58

False

Question 59

It is possible to have a comparative advantage in producing a good or service without having an absolute advantage. T/F?

Answer 59

True

Question 60

If Jacqueline is willing to accept $1 for a cupcake and Jameson is willing to pay $3 for a cupcake, the consumer surplus will ________ if the negotiated price is $1.50 as opposed to $2.00.

Answer 60

increase

Question 61

An American farmer buys an irrigation system from a Norwegian irrigation company based in Oslo. To Americans, the irrigation system is a(n)

Answer 61

import

Question 62

Patents and copyrights are granted for a period of 20 years from the date of creation. T/F?

Answer 62

False

Question 63

Which of the following is not a characteristic of a prisoner’s dilemma game?

Answer 63

The Nash equilibrium is the best outcome for each individual and for the group.

Question 64

Does either Andrea and Hector have an absolute advantage and if so, in what product?

Answer 64

Andrea has an absolute advantage in producing both products.

Question 65

Resources are items that a society uses to create goods and services. T/F?

Answer 65

True

Question 66

You paid $145 for an iPod Nano. The cash you sacrificed is a(n)

Answer 66

explicit cost

Question 67

Assume that the graph in this figure represents the demand and supply curves for orange juice. An increase in the price of apple juice, which is a substitute for orange juice, would be represented by a shift from

Answer 67

Demand 1 to Demand 2

Question 68

The quantity supplied of a good:

Answer 68

is the amount of the good that sellers are ready to supply at a given price.

Question 69

Assume that the graph in this figure represents the demand and supply curves for used cars, which are inferior goods. An increase in income would be represented by a shift from

Answer 69

Demand 2 to Demand 1

Question 70

If, as a consumer, Jeannine is very sensitive to changes in the price of pineapples,

Answer 70

her DEMAND is price eleastic

Question 71

All of the following are characteristics of a battle of the sexes game except

Answer 71

each player prefers the same Nash equilibrium

Question 72

Economics is the study of how ________ manages its ________ resources to satisfy its wants.

Answer 72

society; scarce

Question 73

In 2014, tire industry lobbyists pressured the United States government to consider imposing an additional tariff of up to 86% on top of the current 4% tariff on imported Chinese-made tires. The loss that is associated with fewer transactions occurring because of the tariff is called

Answer 73

deadweight loss

Question 74

Economists should consider ________ when evaluating options.

Answer 74

both explicit and implicit costs and benefits

Question 75

In a society where government mandates that everyone shares the product of one’s hard work with everyone else, people will tend to work harder than they would if they could keep the full product of their work. T/F?

Answer 75

False

Question 76

The quantity supplied of a good:

Answer 76

is the amount of the good that sellers are ready to supply at a given price.

Question 77

Assume that the graph in this figure represents the demand and supply curves for walnuts. An advance in production technology which makes harvesting walnuts less time consuming would be represented by a shift from
Correct answer:

Answer 77

Supply 1 to Supply 2

Question 78

Prices serve as a key means of communication between buyers and sellers. T/F?

Answer 78

True

Question 79

A white paper on elasticity of demand for postage stamps in the U.S. found that the demand for stamps is relatively inelastic. Therefore, if the U.S. Postal Service decreased the price of stamps:

Answer 79

Revenue would decrease

Question 80

According to cost–benefit analysis, where safety is concerned

Answer 80

All of the above are possible.

Question 81

What is the marginal benefit of the fifth gallon of gas?

Answer 81

3

Question 82

The price elasticity of demand is calculated as the

Answer 82

percentage change in quantity demanded divided by the percentage change in price.

Question 83

The ground rules, customs, and conventions that govern the behavior of market participants are often referred to as institutions.

Answer 83

True

Question 84

Assume that the graph in this figure represents the demand and supply curves for women’s clothing. An increase in the wage rate for seamstresses would be represented by a shift from

Answer 84

Supply 2 to Supply 1

Question 85

The ability to produce a good using fewer resources than someone else is called

Answer 85

absolute advantage

Question 86

At what number of pearls harvested should the diver stop diving for more pearls?

Answer 86

3

Question 87

A white paper on elasticity of demand for postage stamps in the U.S. found that the demand for stamps is relatively inelastic. Therefore, if the U.S. Postal Service increased the price of stamps:

Answer 87

Revenue would increase

Question 88

When conducting cost–benefit analysis, it is important to ignore previously incurred costs and previously received benefits. T/F?

Answer 88

True

Question 89

A decrease in the price of an input will

Answer 89

increase supply of the product

Question 90

Which of the following is not a characteristic of an assurance game?

Answer 90

Each of the Nash equilibria offers identical payoffs to any particular player.

Question 91

What is the marginal benefit of the fourth gallon of gas?

Answer 91

4

Question 92

Information facilitates exchange by fostering competition. T/F?

Answer 92

True

Question 93

There is no single market structure where firms offer either differentiated or identical products. T/F?

Answer 93

False

Question 94

How do you calculate Marginal cost?

Answer 94

profit of each pearl times the quantity then subtract it from the effort money amount. If the marginal cost is grater than the time and effort it is good.

Question 95

Jeff Brown says that he feels he has to buy his wife roses on Valentine’s Day, even if the price is very high on that day, because no other gift will be acceptable to her. Based on his statement, how would you describe his elasticity of demand for roses on Valentine’s Day?

Answer 95

Own-price unit elastic

Question 96

Hector has a comparative advantage in the production of

Answer 96

tiaras

Question 97

Ultimately, quotas ________ the ability of foreign countries to buy the domestic country’s exports and therefore ________ wealth.

Answer 97

reduce; destroy

Question 98

Consumer surplus is the difference between the maximum amount a buyer is willing to pay for a product and the price he actually pays. T/F?

Answer 98

True