Microeconomics Test 1

Question 1

Scarcity is

a) an economic problem only for poor people
b) eliminated by choice
c) our inability to satisfy all our wants
d) a situation that exists during economic recessions but not during economic booms

Answer 1

c

Question 2

The problem of “scarcity” applies

a) only in underdeveloped countries because there are few productive resources in these countries
b) only in industrially developed countries because resources are scarce in these countries
c) only in economic systems that are just beginning to develop because specialized resources are scarce
d) to all economic systems, regardless of their level of development

Answer 2

d

Question 3

The analysis of the behavior of individual decision-making units is the definition of

a) microeconomics
b) macroeconomics
c) positive economics
d) normative economics

Answer 3

a

Question 4

Which of the following is NOT a factor of production?

a) wilderness areas that have yet to be developed
b) 175 shares of Microsoft stock
c) a person developing a production schedule for a new product
d) vans used by a bakery company for deliveries

Answer 4

b

Question 5

Entrepreneurs do all of the following EXCEPT

a) own all the other resources used in the production process
b) organze labor, land, and capital
c) bear risk from business decisions
d) come up with new ideas about what and how to produce

Answer 5

a

Question 6

Opportunity cost means the

a) accounting cost minus the marginal cost
b) monetary costs of an activity
c) highest-valued alternative forgone
d) accounting vost minus the marginal benefit

Answer 6

c

Question 7

On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gum, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is

a) working out at the gym
b) zero because you do not have to pay money to use the library
c) working out at the gym, having breakfast with friends, and sleeping late
d) not clear because not enough information is given

Answer 7

a

Question 8

In terms of dollars, the marginal benefit of working five days a week instead of four days a week is

a) the wages received for 5 days of work
b) the wages received for the fifth day of work
c) the wages received for 4 days of work
d) none of the above

Answer 8

b

Question 9

Making a choice at the margin means

a) deciding to do a little bit more or a little bit less of an activity
b) making a choice by comparing the total benefit and the total cost
c) waiting until the last minute to make a choice
d) letting someone else choose for you

Answer 9

a

Question 10

Which of the following is a positive statement?

a) Unemployment is a more important problem than inflation
b) When the national unemployment rate is 9 percent, the unemployment rate for inner-city youth is often close to 40 precent
c) Unemployment and inflation are equally important problems
d) An unemployment rate of 9 precent is a national disgrace

Answer 10

b

Question 11

The statement “Unemployment should be below 6 precent” is

a) a prediction
b) a positive statement
c) an assumption
d) a normative statement

Answer 11

d

Question 12

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 possibility frontier

a) producing on
b) producing either inside or on
c) producing outside
d) producing inside

Answer 12

a

Question 13

A society that is producing on its production possibilities frontier is

a) not being fully technologically efficient
b) fully utilizing all of its productive resources
c) not utilizing all of its resources
d) producing too much output

Answer 13

b

Question 14

At one point along a PPF, 10 pizzas and 7 sandwiches can be produces. At another point along the same PPF, 9 pizzas and 12 sandwiches can be produces. The opportunity cost of a pizza between these points is _______ per pizza.

a) 5 sandwiches
b) 12/7 of a sandwich
c) 3 sandwiches
d) 7/12 of a sandwich

Answer 14

a

Question 15

The table above lists six points on the PPF for grain and cars. From this information, you can conclude that production is inefficient if this economy produces

a) 2 tons of grain and 28 cars
b) 6 tons of grain and 17 cars
c) 10 tons of grain and 0 cars
d) 8 tons of grain and 10 cars

Answer 15

b

Question 16

The opportunity cost of moving from point a to point b in the figure about is

a) 3 pairs of socks
b) zero
c) 2 sweaters
d) 3/2 pairs of socks per sweater

Answer 16

b

Question 17

• Increasing opportunity cost while moving along the PPF is the result of
  a) the fact act resources are not equally productive in alternative uses
  b) the fact that it is more difficult to use resources efficiently the more society produces
  c) taxes
  d) firms’ needs to produce profits

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Answer 17

a

Question 18

In the above table, the opportunity cost of the 2nd pizza is

a) 0 cases of soda per pizza
b) 95 cases of soda per pizza
c) 80 cases of soda per pizza
d) 15 cases of soda per pizza

Answer 18

d

Question 19

Marginal cost curves slope

a) upwards because of increasing opportunity cost
b) downward because of increasing opportunity cost
c) downward because of decreasing opportunity cost
d) upward because of decreasing opportunity cost

Answer 19

a

Question 20

Marginal benefit curves slope ___ and marginal cost curves slope____.

a) upward; upward
b) downward; downward
c) upward; downward
d) downward; upward

Answer 20

d

Question 21

Resources use is allocatively efficient

a) whenever marginal cost exceeds marginal benefit
b) when marginal benefit equals marginal cost
c) when the maximum possible quantity is being produced
d) whenever marginal benefit exceeds marginal cost

Answer 21

b

Question 22

Which graph shoes the impact of scientists developing a more powerful fertilizer?

a) Figure A
b) Figure B
c) Figure C
d) Figure D

Answer 22

a

Question 23

In one week Alice can produce 5 pairs of shoes or 4 bookshelves while Roger can produce 10 pairs of shoes or 6 bookshelves. Alice has _____ advantage in producing ______.

a) a comparative; booksehleves
b) a comparative; shoes
c) an absolute; shoes
d) an absolute; bookshelves

Answer 23

a

Question 24

The above table shows the dos of steel and concrete that can be produced by the US and France in an hour. From the date in the table,

a) the US has a comparative advantage in the production of concrete
b) the US has a comparative advantage in the production of both goods
c) France has an absolute advantage in the production of concrete
d) France has a comparative advantage in the production of concrete

Answer 24

d

Question 25

Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following is correct?

a) homer has a comparative advantage in both catching fish and picking fruit
b) Homer has a comparative advantage in catching fish and Teddy has a comparative advantage in picking fruit
c) Homer has a comparative advantage in picking fruit and Teddy has a comparative advantage in catching fish
d) Teddy has a comparative advantage in both catching fish and picking fruit

Answer 25

b

Question 26

The “law of demand” is illustrated by a

a) rightward shift of the demand curve
b) leftward shine of the demand curve
c) movement along the demand curve
d) both A and B are correct

Answer 26

c

Question 27

Whats your favorite color?

Answer 27

red

Question 28

Which of the following shifts the demand curve for oranges?

a) disastrous weather that destroys about half of this year’s orange crop
b) a decrease in the price of a point of bananas, a substitute in consumption for oranges
c) great weather that produces a bumper orange crop this year
d) an increase in the price of the fuel used to transport oranges to supermarkets

Answer 28

b

Question 29

Oatmeal is a normal good and cold cereal is a substitute for oatmeal. Raisins are a complement for oatmeal. Which of the following increases the demand for oatmeal?

a) an increase in the price of cold cereal
b) an increase in the price of raisins
c) a decrease in population
d) a decrease in income

Answer 29

a

Question 30

Which of the following shifts the demand curve for hot dogs leftward?

a) an increase in the price of a hot dog
b) an increase in the price of a hamburger
c) an increase in the price of a hot dog bun
d) a decrease in the price of a hot dog bun

Answer 30

c

Question 31

A crease in the expected future price of cars

a) decreases the current demand for cars, that is, there is a leftward shift of the demand curve for cars
b) increases the quantity demanded of cars, that is, there is a movement downward along the demand curve for cars
c) decreases the current quantity demanded of cars, that is, there is a movement upwards along the demand curve for cars
d) increases the current demand for cars, that is, there is a rightward shift of the demand curve for cars

Answer 31

a

Question 32

• If macaroni and cheese is an inferior good, and increase in income will
  a) not affect the demand for macaroni and cheese
  b) increase the demand for macaroni and cheese
  c) decrease the demand for macaroni and cheese
  d) create no income effect

Answer 32

c

Question 33

Which of the following leads to a movement along the demand curve for spinach but does not shift the demand curve for spinach?

a) an increase in income for all spinach lovers
b) a rise in the price of spinach
c) an increase in the price of broccoli, a substitute for spinach
d) a newly discovered health benefit from eating spinach

Answer 33

b

Question 34

If the price of lumber rises, then, in the market for sawdust

a) there is a movement upward along the supply curve for sawdust
b) there is a movement downward along the supply curve for sawdust
c) the supply curve of sawdust shifts leftward
d) the supply curve of sawdust shifts rightward

Answer 34

d

Question 35

The figure above shows supply curve for soft drinks. Suppose the economy is at point a. A decrease in the price of sugar used to make soft drinks shown as a movement from point a to a point such as

a) none of the points that are illustrated
b) point b
c) point c
d) point d

Answer 35

b

Question 36

• The above table shows the demand schedule and supply schedule for chocolate chip cookies. What is the equilibrium quantity and equilibrium price for chocolate chip cookies?
  a) 2 pounds, $6.00 per pound
  b) 2 pounds, $3.00 per pound
  c) 7 pounds, $3.00 per pound
  d) 4 pounds, $5.00 per pound

Answer 36

d

Question 37

The above table shows the demand schedule and supply schedule for chocolate chip cookies. An increase in income results in an increase in the demand for chocolate chip cookies by an amount of 5 pounds at every price. What are the new equilibrium quantity and equilibrium price?

a) 4 pounds, $6.00 per pound
b) 4 pounds, $5.00 per pound
c) 5 pounds, $5.00 per pound
d) 6 pounds, $7.00 per pound

Answer 37

d

Question 38

• If the quantity of textbooks supplied is 10,000 per year and the quantity of textbooks demand is 8,00 per year, there is a _____ in the market and the price will ____.
  a) shortage; fall
  b) surplus; fall
  c) shortage; rise
  d) surplus; rise

Answer 38

b

Question 39

Suppose the quantity demanded is 5 units when the price is $1.00. If the price rises to $2.00, the quantity demanded falls to 3 units. The price elasticity of demand is

a) 0.5
b) 2.00
c) 0.75
d) 1.33

Answer 39

c

Question 40

Last year the price of corn was $3.00 per bushel and the quantity of corn demanded was 8 million bushels. This year the price of corn is $4.00 per bushel and the quantity of corn demanded is 7 million bushels. Assuming that the demand curve has not shifted, what is the price elasticity of demand for corn?

a) 0.29
b) 2.14
c) 1
d) 0.47

Answer 40

d

Question 41

If the price elastic of demand for gasoline is 0.8 and the price elasticity of demand for plane tickets is 2.2 then the demand for gasoline is ____ and the demand for plane tickets is ____.

a) elastic; elastic
b) inelastic; inelastic
c) inelastic; elastic
d) elastic; inelastic

Answer 41

c

Question 42

In the above figure, which demand curve illustrates perfectly inelastic demand?

a) H
b) J
c) I
d) G

Answer 42

c

Question 43

In the above figure, at which point on the demand curve is the price elasticity of demand equal to 1?

a) a
b) b
c) c
d) It is impossible to say at which point the elastic equals one

Answer 43

c

Question 44

In the above figure, at point b on the demand curve, the price cut of one dollar will

a) leave total revenue unchanged
b) have an indeterminate effect on total revenue
c) decrease total revenue
d) increase total revenue

Answer 44

d

Question 45

The above figure represents the behavior of total revenue as price falls along a straight-line demand curve. Unit elasticity of demand occurs at

a) point h
b) point g
c) point i
d) point j

Answer 45

a

Question 46

The demand for a good is less price elastic

a) if the share of the good in the average consumer’s budget is smaller
b) in the long run than in the short run
c) if closer substitutes are available
d) if the good is a luxury rather than a necessity

Answer 46

a

Question 47

A product is likely to have a price elasticity of demand that exceeds 1 when

a) it has close substitutes
b) it is a necessity
c) its price falls
d) the percentage of income spent on it decrease

Answer 47

a

Question 48

Toothpaste and toothbrushes are complements, so the _____ elasticity of demand is _____.

a) income; negative
b) cross; positive
c) cross; negative
d) income; positive

Answer 48

c

Question 49

Based on the following pieces of information, which fast food product do consumers see as the closest substitute for Wendy’s Hamburgers?

a) McDonald’s, which have a cross elasticity of 1.01 with Wendy’s
b) KFC, which has a cross elasticity of -1.70 with Wendy’s
c) Pizza Hut, which has a cross elasticity of 2.05 with Wnedy’s
d) Taco Bell. which has a cross elasticity of -1.25 with Wendy’s

Answer 49

c

Question 50

Goods whose income elasticities are negative are called

a) superior goods
b) normal goods
c) inferior goods
d) complements

Answer 50

c