All economic questions are about A) how to make money. B) what to produce. C) how to cope with scarcity. D) how to satisfy all our wants.
C
Scarcity exists because
A) society and people are greedy and wasteful.
B) our wants exceed the resources available to satisfy them.
C) of the inefficient choices we make.
D) poor people need more food and other goods.
B
Opportunity cost means the
A) accounting cost minus the marginal cost.
B) highest-valued alternative forgone.
C) accounting cost minus the marginal benefit.
D) monetary costs of an activity.
B
Which of the following is NOT true concerning a society’s production possibilities frontier (PPF)?
A) It reveals the maximum amount of any two goods that can be produced from a given quantity of resources.
B) Tradeoffs occur when moving along a PPF.
C) Production efficiency occurs when production is on the frontier itself.
D) Consumers will receive equal benefits from the two goods illustrated in the PPF.
D
Harry produces 2 balloon rides and 4 boat rides an hour. Harry could produce more balloon rides but to do so he must produce fewer boat rides. Harry is \_\_\_\_\_\_\_\_ his production possibilities frontier. A) producing inside B) producing on C) producing outside D) producing either inside or on
B
If the marginal benefit of a good exceeds its marginal cost
A) we’ve achieved efficient resource use.
B) we should produce more to achieve efficient use of resources.
C) we should produce less to achieve efficient use of resources.
D) we cannot tell if more or less should be produced to achieve efficient use of resources.
B
Comparative advantage is
A) the ability to perform an activity at a lower opportunity cost than anyone else.
B) the ability to perform an activity at a higher opportunity cost than anyone else.
C) the ability to perform an activity at a zero opportunity cost.
D) another name for absolute advantage.
A
The kitchen manager at an Italian restaurant is deciding what assignments he should give to his two cooks, John and David. John can make 25 pizzas or 40 servings of pasta per hour and David can make 20 pizzas or 30 servings of pasta. Which of the following should be the manager’s choice?
A) Fire David because he is not as productive as John. John will do both jobs.
B) John will make pizza because he has comparative advantage in making pizza.
C) David will make pizza because he has comparative advantage in making pizza.
D) John and David both will spend half their time making pizza and half their time making pasta because each has a comparative advantage in making pizza.
C
Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. Both individuals will be better off if
A) Tom trades sandwiches in exchange for eggs.
B) Jerry trades sandwiches in exchange for eggs.
C) they trade, no matter who trades sandwiches and who eggs.
D) they don’t trade.
B
You decide to take a vacation and the trip costs you $2,000. While you are on vacation, you do not go to work where you could have earned $750. In terms of dollars, the opportunity cost of the vacation is A) $2,000. B) $750. C) $2,750. D) $1,250
C
Suppose that you are spending two hours a day studying economics, and your grade is 85 percent. You want a higher grade and decide to study for an extra hour a day. As a result, your grade rises to 90 percent. Your marginal benefit is the
A) 5 point increase in your grade minus the opportunity cost to you of spending the hour studying.
B) extra hour per day you spend on studying.
C) 5 point increase in your grade.
D) three hours per day you spend on studying.
C
A lawn service is deciding whether to add an additional employee to its summer crew. The marginal cost of hiring this worker depends on the
A) total amount paid to only the new worker.
B) total amount paid to all previously hired workers.
C) the total amount paid to all the workers, both the new one and the previously hired workers.
D) the additional revenue created by having an additional worker minus the cost of hiring the worker.
A
Which of the following creates an incentive to increase the amount of an activity?
A) an increase in the marginal cost of the activity and a decrease in the marginal benefit of the activity
B) a decrease in the marginal cost of the activity and an increase in the marginal benefit of the activity
C) constant marginal cost and constant marginal benefit of the activity
D) None of the above create an incentive to increase the amount of an activity.
B
In the figure above, suppose that Mac and Izzie specialize and trade to reach point c. Mac sends Izzie A) 12 computers in exchange for 12 TVs. B) 12 computers in exchange for 6 TVs. C) 6 computers in exchange for 12 TVs. D) 6 computers in exchange for 6 TVs.
D
Which of the following influences people's buying plans and does not shift the demand curve? A) the price of the good B) the prices of related goods C) income D) preferences
A
The quantity demanded is
A) always equal to the equilibrium quantity.
B) independent of the price of the good.
C) the amount of a good that consumers plan to purchase at a particular price.
D) independent of consumers’ buying plans.
C
The law of demand states that, other things remaining the same, the higher the price of a good, the
A) smaller is the demand for the good.
B) larger is the demand for the good.
C) smaller is the quantity of the good demanded.
D) larger is the quantity of the good demanded.
C
The price of cereal rises. As a result, people have cereal for breakfast on fewer days and eat eggs instead. This behavior is an example of
A) a decrease in the quantity demanded of cereal because of the substitution effect.
B) an increase in the quantity demanded of eggs because of the income effect.
C) a decrease in the quantity supplied of cereal because of the substitution effect.
D) an increase in the quantity supplied of eggs because of the income effect.
A
Which of the following influences people's buying plans and does not shift the demand curve? A) the price of the good B) the prices of related goods C) income D) preferences
A
Ham and eggs are complements. If the price of ham rises, the demand for eggs will
A) increase or decrease but the demand curve for ham will not change.
B) decrease and the demand curve for ham will shift rightward.
C) not change but there will be a movement along the demand curve for eggs.
D) decrease and the demand curve for eggs will shift leftward.
D
The demand curve for a normal good shifts leftward if income \_\_\_\_\_\_\_\_ or the expected future price \_\_\_\_\_\_\_\_. A) decreases; falls B) decreases; rises C) increases; falls D) increases; rises
A
Which of the following explains why supply curves slope upward?
A) prices and income
B) increasing marginal cost
C) resources and technology
D) substitutes in production and complements in production
B
Auto workers negotiate a wage increase. How does this wage hike affect the supply of cars?
A) It decreases the supply.
B) It increase the supply.
C) It has no effect.
D) There is not enough information to tell if the change increases, decreases, or has no effect on the supply of cars.
A
A bakery can produce either cakes or cookies. If the price of cookies rises, then
A) the supply curve of cake shifts leftward.
B) the supply curve of cake shifts rightward.
C) there is a movement downward along the supply curve of cakes.
D) there is a movement upward along the supply curve of cakes.
A
Growers expect that the price of a bushel of wheat will increase in one month. This belief results in
A) an increase in current supply of wheat.
B) a decrease in current supply of wheat.
C) a decrease in future supply of wheat.
D) no change in current or future supply of wheat.
B
An increase in the number of suppliers in a market results in a A) movement up along the supply curve. B) rightward shift in the supply curve. C) leftward shift in the supply curve. D) Both answers A and C are correct.
B
The equilibrium price is the price at which the quantity
A) sold equals the quantity bought.
B) demanded equals the quantity sold.
C) demanded equals the quantity supplied.
D) supplied equals the quantity bought.
C
When the price is below the equilibrium price, the quantity demanded
A) is less than the equilibrium quantity and the quantity supplied also is less than the equilibrium quantity.
B) is less than the equilibrium quantity but the quantity supplied exceeds the equilibrium quantity.
C) exceeds the equilibrium quantity and the quantity supplied also exceeds the equilibrium quantity.
D) exceeds the equilibrium quantity but the quantity supplied is less than the equilibrium quantity.
D
A price below the equilibrium price results in A) a surplus. B) a shortage. C) excess supply. D) a further price fall.
B
The price of a good will fall if
A) there is a surplus at the current price.
B) the current price is less than the equilibrium price.
C) the quantity demanded exceeds the quantity supplied.
D) the price of a complement in consumption falls.
A
How does one find Opportunity Cost?
Divide both goods by one another-> the lowest opportunity cost will be the better choice for that individual
When does the demand curve shift right? left?
Right: When demand increases
Left: When demand decreases
When does the supply curve shift right? left?
Right: When supply decreases
Left: When supply increases
