Test 2

Question 1

A market is defined as

Answer 1

A market is defined as

Question 2

The “law of demand” refers to the fact that, other things remaining the same, when the price of a good rises

Answer 2

there is a movement up along the demand curve to a smaller quantity demanded

Question 3

Which of the following results in a movement upward along the demand curve for movies?

Answer 3

an increase in the price of movie tickets

Question 4

The American Dairy Association starts a highly successful advertising campaign that makes most people want to drink more milk. As a result

Answer 4

the demand for milk increases

Question 5

If income increases and the demand for bus rides decreases

Answer 5

If income increases and the demand for bus rides decreases

Question 6

If the automobile workers’ union successfully negotiates a wage increase for its members, how does the wage hike affect the supply of automobiles

Answer 6

The supply decreases

Question 7

An increase in the number of fast-food restaurants

Answer 7

increases the supply of fast-food meals

Question 8

Hot dogs and hot dog buns are complements. If the price of a hot dog falls, then

Answer 8

Hot dogs and hot dog buns are complements. If the price of a hot dog falls, then

Question 9

Demand curves slope ________ because as the price increases and other things remain the same, the quantity demanded ________.

Answer 9

downward; decreases

Question 10

The market demand curve

Answer 10

is the horizontal sum of individual demand curves

Question 11

) The phrase “a change in demand” most directly implies a

Answer 11

shift of the demand curve.

Question 12

If the demand for used cars decreases after the price of a new car falls, used cars and new cars are

Answer 12

substitute goods

Question 13

Which of the following increases the demand for a good?

Answer 13

the expectation that future income will be higher

Question 14

“Other things remaining the same, if the price of a good rises, the quantity supplied of that good increases.” This sentence describes a

Answer 14

movement along a supply curve

Question 15

If both the supply and demand curves shift simultaneously, we can always predict what will happen to

Answer 15

If both the supply and demand curves shift simultaneously, we can always predict what will happen to

Question 16

Goods and services that the United States buys from other nations are called

Answer 16

exports

Question 17

Goods and services that the United States sells to other nations are called

Answer 17

exports.

Question 18

Which of the the following statements about the United States are true

Answer 18

All are true

Question 19

The fundamental force that generates international trade is

Answer 19

comparative advantage.

Question 20

The United States imports t-shirts because

Answer 20

foreign nations have a lower opportunity cost of production

Question 21

International trade benefits

Answer 21

International trade benefits

Question 22

A tariff is

Answer 22

a tax imposed on imports

Question 23

When the United States imposes a tariff on an imported good, the

Answer 23

quantity of the good purchased in the United States decreases

Question 24

A quota ________ a deadweight loss and a tariff ________ a deadweight loss

Answer 24

?

Question 25

The argument that jobs are lost to free trade is

Answer 25

correct because some jobs are lost but incorrect because new jobs also are created

Question 26

What is the infant-industry argument for protection from international trade

Answer 26

What is the infant-industry argument for protection from international trade

Question 27

International trade decreases the demand for workers in domestic industries that

Answer 27

produce goods that are imported into the country

Question 28

A firm’s fundamental goal is

Answer 28

A firm’s fundamental goal is

Question 29

John fishes for a living. Last year, he sold $100,000 of fish. Bait, nets and other fishing supplies cost John $10,000 and he paid $40,000 in salaries to his helpers. Depreciation on his boat and other equipment, as calculated using IRS rules, was $15,000. What was John’s profit as would be calculated by an accountant?

Answer 29

$35,000

Question 30

Suppose a firm’s total revenue is $1,000,000. The firm has incurred explicit costs of $750,000. There is also $50,000 of forgone wages by the owner, $10,000 of forgone interest by the owner, $3,000 worth of economic depreciation, and $20,000 worth of normal profit. What is the firm’s economic profit?

Answer 30

$167,000

Question 31

The short run is the time frame

Answer 31

during which the quantities of some resources are fixed

Question 32

The long run is defined as

Answer 32

the period of time when all resources are variable

Question 33

The total product curve shows the relationship between total product and

Answer 33

The total product curve shows the relationship between total product and

Question 34

The marginal product of labor is

Answer 34

the change in total product divided by the increase in labor

Question 35

The law of decreasing returns states that as a firm uses more of a

Answer 35

variable input, with a given quantity of fixed inputs, the marginal product of the variable input eventually decreases

Question 36

When the average product is at its maximum

Answer 36

it is equal to the marginal product

Question 37

Total cost includes

Answer 37

the cost of both variable and fixed resources

Question 38

The cost that does not change as output changes is

Answer 38

total fixed cost

Question 39

Marginal cost equals

Answer 39

the change in total cost that results from a one-unit increase in output

Question 40

Which of the following always decreases when output increases

Answer 40

average fixed cost

Question 41

The main source of economies of scale is

Answer 41

greater specialization of both labor and capital

Question 42

Diseconomies of scale is a result of

Answer 42

) difficulties of coordinating and controlling a large enterprise

Question 43

The long-run average cost curve is U-shaped because of which of the following?

Answer 43

economies and diseconomies of scale