Test 1 - application

Question 1

What are the 3 incentives for society?

Answer 1

moral, social, and material (economic)

Question 2

What are the factors of production?

Answer 2

land, labor, capital, entrepreneurial ability, and technology

Question 3

Why is the productions possibility curve curved?

Answer 3

Law of increasing opportunity costs/law of diminishing marginal returns

Question 4

Why would production fall under the PPC?

Answer 4

unemployment, inefficiency, or discrimination

Question 5

Why would production fall over the PPC?

Answer 5

overextending resources or trade

Question 6

What happens when the PPC is not held constant?

Answer 6

resources improve, growth, curve pushes out

Question 7

A reduction in unemployment would cause the PPC to…

Answer 7

grow from UNDER the curve towards the curve

Question 8

New jobs would cause the PPC to…

Answer 8

Grow/push out

Question 9

What would cause the PPC to shrink?

Answer 9

disasters

Question 10

What are the determinants of demand?

Answer 10

1. taste and preferences
2. income
3. price/availability of related goods
4. # of buyers

Question 11

Why is the demand curve downward sloping?

Answer 11

1. diminishing marginal utility
2. income, opportunity to buy
3. people will find alternatives if prices are too high

Question 12

An increase in which determinants of demand will move the demand curve out for normal goods?

Answer 12

income, compliments, and number of buyers

Question 13

An increase in which determinants of demand will move the demand curve in for normal goods?

Answer 13

substitutes

Question 14

A decrease in income will push the demand curve out in what circumstances?

Answer 14

for inferior goods

Question 15

What are the determinants of supply?

Answer 15

price/availability of inputs and technology

Question 16

Maria has $20 and can either go to a concert or go to a movie. She chooses the concert. What is her opportunity cost?

Answer 16

The money spent on & time spent at the concert

Question 17

A coffee shop lowers prices and sees an increase in customers. Is this a microeconomic or macroeconomic concept?

Answer 17

microeconomic

Question 18

A car factory assigns workers to specialize in one task, such as installing doors. How does this affect productivity?

Answer 18

Increases efficiency by reducing time lost switching tasks, leading to higher output

Question 19

A technological breakthrough improves farming techniques, allowing more food production. How will this affect the PPC?

Answer 19

The PPC will shift outward, showing economic growth

Question 20

Due to a natural disaster, a country’s factories are destroyed. How will this affect the PPC?

Answer 20

The PPC will shift inward, showing a loss of production capacity.

Question 21

John eats three slices of pizza. He enjoys the first slice a lot, the second slightly less, and the third even less. What economic principle does this illustrate?

Answer 21

diminishing marginal utility

Question 22

The price of beef rises sharply. How might this affect the demand for chicken?

Answer 22

The demand for chicken will increase as consumers substitute beef with chicken

Question 23

A factory producing smartphones experiences a major labor shortage. What happens to the supply of smartphones?

Answer 23

The supply decreases, shifting the supply curve to the left.

Question 24

The government imposes a price ceiling on rent in a city. What is a likely consequence?

Answer 24

a housing shortage

Question 25

The demand for a good increases, and at the same time, the supply decreases. What happens to equilibrium price and quantity?

Answer 25

Price rises, but quantity is uncertain (depends on the relative size of the shifts).

Question 26

A new fashion trend causes a surge in demand for vintage clothing. What happens to the equilibrium price and quantity?

Answer 26

Both increase—higher demand shifts the curve right, raising both price and quantity.

Question 27

If the production possibilities frontier for a given country increased (i.e. shifted up and to the right), what would this mean?

Answer 27

the country could produce more goods and services

Question 28

What would cause an increase in demand for economics textbooks?

Answer 28

an increase in the number of students enrolled in college econ classes

Question 29

The difference between the minimum price that a firm must receive in order to produce a good and the market price is also known as

Answer 29

producer surplus

Question 30

Assume that you are willing to pay as much as $12 to see the remake of "Robocop," which hits theaters later this month. You decide to see the movie with two friends who are willing $10 and $9, respectively, to see the movie. If a ticket to the movie costs $8, what is the total consumer surplus for all three of you?

Answer 30

$7

Question 31

During the fall of each year, starting just after Labor Day, the price of gasoline tends to decrease, and fewer gallons of gasoline are sold. This is most likely due to

Answer 31

a decrease in the demand for gasoline

Question 32

What type of statement is "if we provide a basic income to all living people, world hunger will decrease"?

Answer 32

positive

Question 33

Douglas entered the Air Force's Officer Candidate School (AFOCS) after graduating from Clemson. Had he not entered the AFOCS, Douglas would have attended business school (he was accepted by Duke). Had he not been accepted by either the Air Force or Duke, he would have gone to work for his father. The opportunity cost of his going to AFOCS was...

Answer 33

attending Duke Business School

Question 34

Suppose you know the following facts: (i) UT has just won the national championship and the nation is going crazy, and (ii) a new technology has lowered the cost of producing orange dye. What would be the effect in the market for orange t-shirts?

Answer 34

The equilibrium quantity would rise but the effect on equilibrium price is uncertain

Question 35

The price of jelly rises, what will likely happen to the price of peanut butter?

Answer 35

it will decrease

Question 36

You want to purchase two pizzas. The price is $8 per pizza, 2 for $15, 3 for $20. What will be the marginal cost to you of buying a third pizza?

Answer 36

$5

Question 37

If Switzerland can make 35 pounds of chocolate or 5 watches while Albania can make 6 pounds of chocolate or 1 watch, who has the comparative advantage?

Answer 37

Switzerland has the comparative advantage in chocolate; Albania in watches

Question 38

If you've bought an $80 sticker to park on campus, and you plan to park on campus eighty times before the semester ends, the marginal cost to you each time you park is

Answer 38

$0 | sunken cost fallacy- you've already paid!

Question 39

Which of the following is an example of a scarce good: Coca Cola, Big Macs, Water, Diamonds

Answer 39

All are scarce goods