Exam 1 Review

Question 1

Choosing to produce at any point within a production possibilities frontier:

A. is inefficient, meaning the society would not be using all its available resources in their best possible use.

B. Is efficient, meaning the society would be using all its available resources in their best possible use.

C. Is unobtainable, meaning the society cannot produce that combination of goods.

D. Is efficient, meaning the society would be using all its available resources, though not in their best use.

Answer 1

A

Question 2

A production possibilities frontier is a line or curve that

A. Shows all the possible combinations of outputs that can be produced using all available resources.

B. Shows what can be produces when all available resources are efficiently used.

C. Shows the best combinations of outputs that can be produces using all available resources.

D. Explains why societies make the choices they do.

Answer 2

A

Question 3

Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. The opportunity cost of one tomato in Country A is:

Answer 3

5 bananas

Question 4

A perfectly competitive market is one in which:

A. Fully informed, price-taking buyers and sellers easily trade a standardized good or service.

B. Fully informed, price-making buyers and seller easily trade a standardized good or service.

C. Uninformed, price-taking buyers and sellers easily trade a standardized good or service.

D. Uninformed, price-making buyers and seller easily trade a standardized good or service.

Answer 4

A

Question 5

An expectation of increased prices of a good in the future is likely to:

A. Increase current demand.
B. Decrease current demand.
C. Have no impact on current demand.
D. Only affect seller’s decisions.

Answer 5

A

Question 6

Roy just got a big promotion at work which includes a sizable pay increase. Roy’s demand for Ramen Noodles, an inferior good, will likely:

A. Decrease, and his demand curve will shift to the right.
B. Decrease, and his demand curve will shift to the left.
C. Decrease, and his demand curve will shift straight down.
D. Decrease, causing a movement down along his demand curve.

Answer 6

B

Question 7

Consider a market that is in equilibrium. If it experiences both a decrease in demand and an increase in supply, what can be said of the new equilibrium?

A. The equilibrium price and quantity will both rise.
B. The equilibrium quantity will definitely fall, while the equilibrium price cannot be predicted.
C. The equilibrium price will definitely fall, while the equilibrium quantity cannot be predicted.
D. The equilibrium price and quantity will both fall.

Answer 7

C

Question 8

If supply and demand analysis is a measure of how, then elasticity is a measure of:

Answer 8

how much.

Question 9

When a good has a lot of close substitutes available, it is likely to be:

A. More price elastic than goods without close substitutes available.
B. Less price elastic than goods without close substitutes available.
C. More price elastic than those with a lot of complement goods available.
D. Less price elastic than those with a lot of complement goods available.

Answer 9

A

Question 10

A good that has an income elasticity of 0.4 is:

A. a luxury good.
B. a normal good.
C. an inferior good.
D. a substitute good.

Answer 10

B

Question 11

When a market is efficient,

A. There is no exchange that can make anyone better off without someone becoming worse off.
B. A central planner must be involved.
C. Only increased prices can benefit those involved.
D. None of these is true.

Answer 11

A

Question 12

Which of the following prices could represent Eli’s willingness to pay for a baseball glove if he observed the market price of $43 and decided not buy one?

A. $37
B. $45
C. $50
D. None of these could represent Eli’s willingness to pay.

Answer 12

A

Question 13

Scarcity reflects our inability to satisfy wants due to:

Answer 13

limited resources

Question 14

If Johnny weren’t in economics class this morning, he’d be sleeping. The value Johnny places on sleeping represents his:

A. marginal benefit.
B. incentives.
C. sunk cost.
D. opportunity cost.

Answer 14

D

Question 15

Which of the following is an example positive statement?

A. The state government should allocate more funds toward education.
B. Teachers should be paid higher salaries.
C. Individuals with a bachelor’s degree earn higher average incomes than those with only a high school diploma.
D. The consumption of marijuana is unacceptable and should never be legally allowed in a society.

Answer 15

C

Question 16

A movie costs you and your friend $15 each. After one hour of watching the movie, you have struggled to stay awake while your friend has been on Facebook and is also bored with the movie. You suggest that you and your friend leave the movie and go to the park. Your friend responds by stating that he is not going to waste his $15 that was previously spent on the movie. Your friend is considering:

A. an opportunity cost of the movie.
B. a sunk cost.
C. the marginal benefit.
D. depreciation.

Answer 16

B

Question 17

The price of dog collars, a normal good, has gone down. This change can be shown graphically as:

A. a shift in the demand curve to the right.
B. a shift in the demand curve to the left.
C. a movement along the demand curve to the right.
D. a movement along the demand curve to the left.

Answer 17

C