Exam #1

Question 1

The concave, or bowed-out, shape of the production possibilities curve illustrates the law of increasing opportunity costs

Answer 1

True

Question 2

Rational behavior suggests that

Answer 2

individuals will make different choices because their preferences and circumstances differ

Question 3

The law of increasing opportunity costs states that

Answer 3

if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of other goods to do so

Question 4

The alternative combinations of two goods which a consumer can purchase with a given money income is shown by

Answer 4

a budget line

Question 5

For economists, the word “utility” means

Answer 5

pleasure and satisfaction

Question 6

DVD players and DVDs are

Answer 6

complementary goods

Question 7

Consumers purchase more normal goods as

Answer 7

incomes increase

Question 8

Toothpaste and toothbrushes are substitute goods

Answer 8

False

Question 9

A positive statement is one which is

Answer 9

objective and based on facts

Question 10

Rational individuals may make different choices because their preferences and circumstances differ.

Answer 10

True

Question 11

The term Ceteris paribus means

Answer 11

other thing being equal

Question 12

The law of demand states that

Answer 12

price and quantity demanded are inversely related

Question 13

The market demand for a product is found by

Answer 13

horizontally summing the individual demand curves

Question 14

The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment and productive efficiency

Answer 14

True

Question 15

Economic rationale for the law of increasing opportunity cost is that economic resources are not fully adaptable to alternative uses.

Answer 15

True

Question 16

The graph above shows the production possibilities curve for an economy producing two goods, X and Y. Which of the points on the graph indicate unemployed resources?

Answer 16

E and A only

Question 17

Which is not a factor of production?

Answer 17

money

Question 18

Refer to the above diagram. A shortage of 160 units would be encountered if price was

Answer 18

$.50

Question 19

Refer to the above diagram. A surplus of 160 units would be encountered if price was

Answer 19

$1.60

Question 20

Refer to the above diagram. The equilibrium price and quantity in this market will be

Answer 20

$1.00 and 200

Question 21

The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is _____.

Answer 21

direct, inverse

Question 22

When consumers discard their gasoline-powered automobiles for electric-powered ones, this partially reflects the ___________ of gasoline:

Answer 22

Scarcity

Question 23

The movie Saving Private Ryan is about a military mission to find and recover a
particular soldier - Private Ryan. The movie is predominantly about how much was given up in an effort to save this one particular soldier. The main economic theme of the movie is:

Answer 23

opportunity cost

Question 24

Black markets are associated with:

Answer 24

ceiling prices and the resulting product shortages

Question 25

The four factors of production are land, labor, capital, and government services

Answer 25

False

Question 26

Chuck drives past the same gas station every day. He realizes that the gas station always changed its prices on Tuesdays but keeps price steady the rest of the week. On Saturday, Chuck turns on the news and hears a report projecting that the price of gasoline is going to increase. Holding all else constant (ceteris paribus), what do you think would happen to Chuck’s demand for gasoline on Monday?

Answer 26

His demand would shift to the right

Question 27

An inferior good is

Answer 27

not accurately defined by any of the above statements

Question 28

Productive efficiency means that goods and services are being produced by society in the least costly way

Answer 28

True

Question 29

When you chose a major, you likely thought about your skills. Let’s say you don’t enjoy dealing with numbers. How could you explain to your parents, using logics from economics, why you chose to major in English instead of mathematics?

Answer 29

The opportunity cost of learning mathematics is too high

Question 30

Which one of the following expressions best states the idea of opportunity cost?

Answer 30

“There is no such thing as a free lunch.”

Question 31

Economics is the study of:

Answer 31

how to allocate resources to satisfy wants and needs

Question 32

Microeconomics is the branch of economics that focus on the

Answer 32

choices and decision-making of individuals and firms

Question 33

Instead of taking an economics course, you could have taken a history course that meets at the exact same time. The total cost of taking the economics course would be:

Answer 33

the tuition cost, the cost of textbook and notebook, and the fact that you could not take the history course at the same time

Question 34

The assertion that “There is no free lunch” means that

Answer 34

all production involves the use of scarce resources and thus the sacrifice of alternative goods.

Question 35

Normative statements are concerned with

Answer 35

what ought to be

Question 36

The economizing problem of economics is

Answer 36

that productive resources are scarce relative to economic wants

Question 37

What is the opportunity cost of taking this exam?

Answer 37

the highest valued alternative that you gave up to prepare for and attend the exam

Question 38

Opportunity cost is best defined as:

Answer 38

the amount of one product that must be given up to produce one more unit of another product.

Question 39

According to economists, one reason few professional athletes have PhD’s is that the:

Answer 39

opportunity cost of going to graduate school is too high

Question 40

Imagine you find yourself in a heat wave and your air-conditioner has broken. Unable to find a new one at the store because of a price gouging law, you purchase an air conditioner on the black market. What role did the price gouging law have?

Answer 40

It increased the incentive of individuals to supply the good on the black market