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WorksheetsEcon Exam 1
Total questions: 88
Worksheet time: 1hrs 28mins
Which of the following is not one of the three central coordination problems of the economy given in the book?
How?
For Whom?
What?
Whether?
Positive economics seeks to:
determine what government economic policies are best.
objectively explain how societies value different economic outcomes.
objectively explain how the economy functions.
determine the most appropriate economic goals for society.
(a) is the additional cost over and above the costs already incurred.
The benefit you might have gained from choosing the next-best alternative is known as the (a) .
(a) is the study of what is and how the economy works.
Scarcity exists because:
the supply of goods is always less than the demand.
individuals cannot solve the three central coordination problems.
governments cannot solve the three central coordination problems.
new wants continue to develop and willingness to meet them is limited.
Alexandra has determined that studying an hour for her economics quiz will improve her grade on the quiz from 75 to 100. She also determines that this improvement is worth $20. To study for an hour for her economics quiz, however, she will have to work one fewer hour at her part-time job. Alexandra should:
not study for the quiz because earning a higher grade cannot have a dollar value.
study for the quiz as long as her hourly wage rate is more than $20.
study for the quiz only if her hourly wage rate is exactly $20.
study for the quiz as long as her hourly wage rate is less than $20.
The marginal benefit from consuming another unit of a good:
must be less than the marginal cost or the unit will not be consumed.
must equal the marginal cost or the unit will not be consumed.
equals the increase in total benefits from consuming the unit.
equals the total benefit obtained from the consumption of all prior units.
Mary buys cell-phone services from a company that charges $30 per month. For that $30 she is allowed 600 minutes of free calls and then pays 25 cents per minute for any calls above 600 minutes. Mary has used 300 minutes this month so far. What is her marginal cost per minute of making two more calls lasting 10 minutes each?
25 cents
$0
4 cents
$2.50
The marginal benefit of another T-shirt this month to Mary is $15. If the $10 price of a T-shirt reflects its marginal cost to Mary and Mary uses economic reasoning, she:
will not buy a T-shirt this month.
will buy another T-shirt this month.
will sell the T-shirts she has to others who are willing to pay $10.
cannot gain by buying another T-shirt.
Opportunity Cost:
is the same as sunk cost.
includes only monetary outlays.
is the net benefit forgone by not undertaking the next best alternative.
is nonexistent for some economic choices
Based on scientific nutritional studies, in most countries an income of $1 a day does not provide sufficient food, shelter, and clothing to live. Under these conditions the medical risk of death is high. This statement is:
a normative statement.
a subjective statement.
an art-of-economics statement.
a positive statement.
The price mechanism that guides people’s actions is called the:
invisible foot.
invisible hand.
invisible market force.
invisible handshake.
Market economies are based upon:
government planning and individual good will toward others.
private property and individual good will toward others.
private property and individual planning.
government planning and individual self-interest.
Governments do all of the following except:
supply labor services to businesses in the factor market.
demand goods and services from businesses in the goods market.
demand labor services from households in the factor market.
oversee the interaction of households and businesses in the goods and factor markets.
Market Failures:
can never be corrected through government action.
lead to a desired allocation of resources.
can always be corrected through government action.
are sometimes made worse by government failures.
(a) refers to the control a private individual or firm has over an asset.
An economic system based on the market in which the ownership of the means of production resides with individuals called capitalists is known as
(a)
(a) is a situation in which the invisible hand pushes in such a way that individual decisions do not lead to socially desirable outcomes.
A situation in which the government intervention in the market to improve market failure actually makes the situation worse is called (a) .
Which of the following is not a characteristic of pure capitalism?
Worker freedom
Government ownership of capital
Freedom of enterprise
Private ownership of land
In a market economy:
government sets prices to make necessities affordable because it is in society's best interest to make necessities affordable.
workers are directed by government planning boards to produce what is in society's best interest.
Correct!
businesses design their plans to maximize their profit and the market is relied upon to see that individual self-interest is consistent with society's interest.
government owns the means of production so that it can produce what is in society's best interest.
Markets coordinate economic activity through:
the legal mechanism.
commanding individuals what to do.
the price mechanism.
asking individuals what to do.
Suppose that at the current price consumers would like to purchase 10 million large-screen televisions and 15 million are available. When the market coordinates the demand and supply for large-screen televisions, the price of large-screen televisions will:
fall.
stay the same.
rise.
be fixed by the government.
A socialist economy in theory:
is coordinated by the invisible hand.
expects people to be altruistic.
expects people to be selfish.
requires private ownership of property.
In the factor market:
households supply factors of production to business and are paid by government for doing so.
households supply factors of production to business and are paid by business for doing so.
government produces goods and services and supplies them to households and business.
business produces goods and services and sells them to households and government.
The market where businesses sell goods and services to households and the government is called the:
capital market.
factor market.
goods market.
money market.
Government is on the:
supply side of factor markets and the demand side of goods markets.
supply side of both factor markets and goods markets.
demand side of both factor markets and goods markets.
demand side of factor markets and the supply side of goods markets.
According to the law of demand, an increase in the price of baseball trading cards causes:
baseball trading cards to grow in abundance.
people to buy fewer trading cards.
the scarcity of baseball trading cards to increase.
people to buy more trading cards.
The more the current price exceeds the equilibrium price, the:
greater the resulting shortage will be.
smaller the resulting surplus will be.
greater the resulting surplus will be.
smaller the resulting shortage will be.
Suppose the given supply and demand tables reflect the supply and demand for milk per week. At a price of $1, there is a:
shortage of 1,000 gallons per week.
surplus of 500 gallons per week.
shortage of 2,500 gallons per week.
surplus of 1,000 gallons per week.
The increase in the availability of organic foods likely:
raises equilibrium quantity and lowers equilibrium price for organic foods.
lowers equilibrium quantity and price for organic foods.
lowers equilibrium quantity and raises equilibrium price for organic foods.
raises equilibrium quantity and price for organic foods.
Refer to the graphs shown. The relevant market is corn. The impact of a poor corn harvest on the market for corn would most likely be demonstrated by which graph?
d
b
c
a
A graphical representation of the relationship between price and quantity supplied is called the (a) .
(a) is a specific amount that will be demanded per unit of time at a specific price, other things constant.
The graphical representation of the effect of anything other than price on demand is called a(n) (a) .
(a) refers to the situation when quantity supplied is greater than quantity demanded.
The distinction between demand and the quantity demanded is best made by saying that:
demand is represented graphically by a curve and quantity demanded is a point on that curve.
the quantity demanded is in a direct relation with prices, whereas demand is in an inverse relation.
the quantity demanded is in an inverse relation with prices, whereas demand is in a direct relation.
the quantity demanded is represented graphically by a curve and demand is a point on that curve.
Given that diesel cars get much better gas mileage than the typical car, an increase in the price of gasoline would be expected to:
increase the demand for gasoline.
increase the demand for diesel cars.
decrease the demand for diesel cars.
decrease the demand for gasoline.
Refer to the graphs shown. The effect of an increase in price is best shown by which arrow?
d
a
c
b
Refer to the graph shown. If the price is changed from $12.00 to $4.00, the quantity demanded increases by:
4 CDs per week.
8 CDs per week.
2 CDs per week.
6 CDs per week
Refer to the graphs shown. Assume the graph reflects demand in the egg market. Which arrow best captures the impact of increased consumer concern about cholesterol on the egg market?
D
C
B
A
Suppose farmers can use their land to grow either wheat or corn. The law of supply predicts that an increase in the market price of wheat will cause:
farmers to substitute corn for the production of wheat.
farmers to lower the production of corn and wheat.
farmers to substitute wheat for the production of corn.
farmers to raise the production of wheat and corn.
An upward sloping supply curve implies that:
quantity supplied increases when price decreases.
the law of supply is invalid.
quantity supplied increases when price increases.
there is no relationship between price and quantity supplied.
Assume the graphs shown reflect the egg market. The arrow that would best capture the impact of cheaper, prefabricated henhouses on the egg market is:
Z
W
Y
X
Suppose a recent and widely circulated medical article reports new benefits of exercise. Simultaneously, the price of the parts needed to make bikes falls. What is the likely effect on the equilibrium price and quantity of exercise bikes sold?
Price of exercise bikes increases and quantity sold also increases.
Price of exercise bikes decreases and quantity sold remains the same.
Price of exercise bikes remains the same and quantity sold increases.
The change in price is ambiguous, but the quantity sold increases.
A government-imposed price ceiling of $2 will result in:
an excess supply of 2.
neither excess supply nor excess demand since it is binding.
neither excess supply nor excess demand since it is not binding.
an excess demand of 2.
If the United States imposes tariffs on steel imports:
the demand for steel shifts to the left and raises its market price.
the demand for steel shifts to the left and lowers its market price.
the supply of steel shifts to the right and lowers its market price.
the supply of the imported steel shifts to the left and raises its market price.
A government-set price below the market equilibrium price is called a(n) (a) . In other words, a government-imposed limit on how high a price can be charged.
Demand and supply are initially D and S1 respectively. Which of the following best describes the effect of a $0.50 per pound tariff on Danish hams imported into the United States?
Neither supply nor demand shift, but price paid by consumers declines to $1.50 a pound while quantity sold remains at 80 thousand pounds
Supply shifts from S1 to S2; quantity sold rises to 100 thousand pounds and price paid by consumers declines to $1.75 a pound
Supply shifts from S1 to S0; quantity sold declines to 60 thousand pounds and price paid by consumers rises to $2.25 a pound
Supply shifts from S1 to S0; quantity sold declines to 60 thousand pounds and price paid by consumers rises to $2.50 a pound
A(n) (a) is a government-imposed limit on how low a price can be charged.
An increase in price and decrease in quantity are consistent with a:
ightward shift in supply and a leftward shift in demand.
leftward shift in demand and no shift in supply.
leftward shift in supply and no shift in demand.
rightward shift in supply and a rightward shift in demand.
A decrease in price and an indeterminate change in quantity are consistent with a:
leftward shift in demand and no shift in supply.
leftward shift in supply and no shift in demand.
leftward shift in supply and a rightward shift in demand.
rightward shift in supply and a leftward shift in demand.
A recent report indicates that the device known as the right heart catheter used to diagnose heart conditions poses more risks than previously thought. The effect of the report on the market for right heart catheters is best shown by which of the graphs?
IV
III
II
I
Suppose caviar sales soars at the same time price increases. What would lead to both a higher quantity sold and higher price of caviar?
A shift in demand to the right and a larger shift in supply to the right.
A shift in demand to the left and a smaller shift in supply to the right.
A shift in demand to the left and a smaller shift in supply to the left.
A shift in demand to the right and a smaller shift in supply to the left.
Price ceilings and price floors:
cause surpluses and shortages in markets respectively.
cause demand and supply curves to shift thus having no effect on the rationing function of prices.
make the rationing function of markets more efficient.
interfere with the allocation function of prices.
An increase in the Federal minimum wage, assuming the minimum is higher than equilibrium wage and that all other things remain constant, will:
reduce the number of unemployed.
increase the number of unemployed.
shift the supply of labor to the right.
shift the demand of labor to the right.
A price ceiling would be binding, resulting in a market shortage if it is set at:
$2.25.
either $3.00 or $1.50.
$3.00.
$1.50.
The most likely impact of an effective price floor is:
a surplus will develop.
the demand curve will shift to the left.
the supply curve will shift to the right.
a shortage will develop.
In general, the greater the elasticity, the:
larger the responsiveness of price to changes in quantity.
larger the responsiveness of quantity to changes in price.
smaller the responsiveness of quantity to changes in price.
smaller the responsiveness of price to changes in quantity.
GreenTree Corporation sells live Christmas trees. It observes that when it increases the price of Christmas trees by 10 percent, revenue rises by 25 percent. The demand for Christmas trees is:
inelastic.
perfectly elastic.
elastic.
unit elastic.
Calculate the approximate average elasticity of demand as the price falls from $18 to $0:
3
2/3
1
3/2
The price elasticity of demand for insulin by diabetic patients is much smaller than the price elasticity of demand for leather shoes. This is an example of how the price elasticity of demand:
falls the less specifically the good is defined.
rises the more a good is a necessity.
falls the more a good is a necessity.
rises the less specifically the good is defined.
When price is $40, revenue equals areas:
A, B, C, D, and E.
A and B only.
A only.
A, B, and D only.
An economist estimates the elasticity of demand for baseball tickets to be 0.23. Using this information, a club that wants to raise revenues should:
lower ticket prices.
raise the prices of other goods sold at games.
increase ticket prices.
leave ticket prices unchanged, because it is maximizing revenue.
The (a) is the percentage change in quantity demanded divided by the percentage change in price.
If the percentage change in quantity is greater than the percentage change in price (E > 1) then the demand or supply curve is said to be (a) .
In a case where quantity does not respond at all to changes in price (E = 0) we call the demand or supply curve (a) .
The (a) is computed by the percentage change in demand divided by the percentage change in income.
If quantity demanded falls by 25 percent when price rises by 50 percent, demand is said to be:
elastic.
proportional.
inelastic.
unit elastic.
If average movie ticket prices rise by about 5 percent and attendance falls by about 2 percent, other things being equal, the elasticity of demand for movie tickets is about:
2.5
0.4
0.0
0.6
If the price elasticity of supply is 0.5, a 10 percent increase in price will cause a:
5 percent decrease in quantity supplied.
20 percent increase in quantity supplied.
20 percent decrease in quantity supplied
5 percent increase in quantity supplied.
As the manager of a ski resort, you want to increase the number of lift tickets sold by 8 percent. Your staff economist has determined that the price elasticity of demand for lift tickets is 2. To increase sales by the desired amount, you should decrease the price of a lift ticket by:
16 percent.
2 percent.
8 percent.
4 percent.
Compute the approximate elasticity of supply from the following data:
.2
.5
5.0
2.1
If the quantity of houses supplied in an area increases 10 percent when the price goes up 25 percent, the supply:
is elastic.
is unit elastic.
is inelastic.
is perfectly elastic.
Between $2 and $2.20, demand is:
inelastic.
unit elastic.
perfectly elastic.
elastic.
The demand for a good is inelastic. Which of the following would be an explanation for this?
The time interval considered is long.
The good is a necessity.
The good is specifically defined.
The good costs a large portion of one's total income.
The following table lists the utility that Sarah receives from consuming bananas at $0.25 a banana. What is the marginal utility of consuming the fourth banana?
40
2
8
32
(a) is the satisfaction one gets from consuming one additional unit of a product above and beyond what one has consumed up to that point.
The idea that says that the reduction in quantity demanded is because price increases make us poorer is known as the (a) .
As long as total utility is increasing, we know that marginal utility is:
negative.
increasing.
positive.
decreasing.
If Steve willingly consumes another slice of pizza, you can be sure that his marginal utility is:
negative.
falling.
rising.
positive.
The following table describes utility for consuming cans of soda. At what point does the law of diminishing marginal utility set in?
between three and four cans
Marginal utility never diminishes.
Marginal utility diminishes everywhere.
between four and five cans
In choosing between two products, a rational consumer will choose the product that gives her the:
least marginal utility per dollar.
highest cost per additional unit of utility.
greatest total utility regardless of cost.
lowest cost per additional unit of utility.
Joan is deciding where to spend her spring break. If she goes to Cancún, Mexico, the trip will give her 9,000 units of utility and will cost her $300. If she travels to Florida instead, the trip will give her 8,000 units of utility and will cost her only $200. Joan will do best going to:
Florida because her pleasure per dollar will be greater.
Mexico because her total pleasure will be greater.
Mexico because her pleasure per dollar will be greater.
Florida because her total cost will be lower.
Suppose Paul has chosen a combination of two goods, A and B, such that the marginal utility per dollar spent for good A (MUA/PA) is .6 and the marginal utility per dollar spent for good B (MUB/PB) is 1. To increase utility with the same amount of money, Paul should:
do nothing; he cannot increase total utility.
increase the number of A consumed and decrease the number of B consumed.
increase the number of B consumed and decrease the number of A consumed.
increase the number of both A and B consumed.
If the price of one can of Alpo is $0.50 and the price of each McBurger is $1, which of the following would Ms. Tightwad, a utility-maximizing consumer, buy with her $4?
3 McBurgers and 2 cans of Alpo
1 McBurger and 6 cans of Alpo
2 McBurgers and 4 cans of Alpo
4 McBurgers
The name economists give to the pleasure or satisfaction that one expects to get from consuming a good or service is (a) .
