WorksheetsEconomics Exam 1 Review
Total questions: 27
Worksheet time: 14mins
Scarcity exists because
currently available resources are not sufficient to produce everything people want and need.
“The government should raise the minimum wage” is an example of a
Ceteris paribus statement
positive statement
normative statement
Which of the following would most likely be studied in a microeconomics course
The relationship between national output and the rate of unemployment
The strategy used by the owners of a competitive firm to maximize profits
Incorrectly concluding that because tax reform benefits some individuals, tax reform is also
beneficial for the economy as a whole is an example of the
fallacy of composition
fallacy of division
Which of the following is not an example of the factor of production or economic resource
referred to as capital?
An office building
computers used by a tax preparation business
lawn mowers owned by a landscaping business
money used to start a new business
Scarcity forces society to address the basic economic questions of:
what outputs to produce?
how should outputs be produced?
who gets to consume the outputs produced?
scarcity forces society to address all of the above questions
The opportunity cost to Sam of working three hours of overtime at $30 per hour instead of
going to the park with friends is
the $90 Sam earns by working overtime
the foregone enjoyment from going to the park with friends.
$0 because going to a park is free.
higher than if he was not being paid overtime wages.
Which of the following is false regarding types of economic systems?
Economic activity is mainly guided by self-interest and prices in a capitalist market
economy
Capitalism is a system in which government regulates the use of both physical and
financial capital
Centralized decision-making is a characteristic of a planned economy
Many economies are mixed economies because they have elements of both market and
planned economies
In the simple circular flow model, households (consumers)
demand goods and services in product (output) markets and supply labor in resource (input) markets
demand labor in resource (input) markets
Trey’s assumption that his baseball team wins whenever he wears his lucky socks is a possible
example of the
sunk cost fallacy
fallacy of false cause
All of the following are true regarding the production possibilities model except
it assumes available resources are fully employed and production is efficient
a production possibilities frontier (PPF) shows the maximum amount of two outputs
that can be produced in a given time period, ceteris paribus.
the resources and technology available vary depending on which output is being
produced
economic growth is illustrated by an outward shift of the PPF
Two parties can enjoy gains from trade by specializing in the activities for which
an absolute advantage exists
a comparative advantage exists
If country A can produce coffee at a lower opportunity cost than country B, then:
country A has an absolute advantage in the production of coffee
country B has an absolute advantage in the production of coffee
country A has a comparative advantage in the production of coffee.
country B has a comparative advantage in the production of coffee
Suppose Lottie can weave 4 baskets or 2 rugs in a given time period. In the same time
period, Rufus can weave 3 baskets or 1 rug. The opportunity cost of 1 rug
is 2 baskets for Lottie and 3 baskets for Rufus.
is 1/2 basket for Lottie and 1/3 basket for Rufus
is 4 baskets for Lottie and 9 baskets for Rufus
Suppose Lottie can weave 4 baskets or 2 rugs in a given time period. In the same time period,
Rufus can weave 3 baskets or 1 rug. Based on this information, all of the following are true
Lottie has an absolute advantage in the production of both baskets and rugs.
Lottie has a comparative advantage in the production of baskets.
Rufus has an absolute advantage in the production of neither baskets nor rugs
Rufus has a comparative advantage in the production of baskets.
According to the law of demand, an increase in the price of personal computers will lead to:
an increase in the demand for personal computers, ceteris paribus
a decrease in the demand for personal computers, ceteris paribus
an increase in the quantity demanded of personal computers, ceteris paribus
a decrease in the quantity demanded of personal computers, ceteris paribus.
Ceteris paribus, the demand for jeans increases in response to all of the following except
an increase in income, assuming jeans are normal goods
a decrease in the price of khakis, assuming khakis are substitutes for jeans
an increase in the popularity of jeans.
an increase in the number of schools that allow students to wear jeans.
An upward-sloping supply curve illustrates:
the direct (positive) relationship between price and supply
the direct (positive) relationship between price and quantity supplied
none of the above; supply curves slope downward
Which of the following best explains a decrease in the supply of bicycles?
A decrease in the price of bicycles
An increase in the popularity of bicycling
A decrease in the number of bicycle manufacturers
Ceteris paribus, for an inferior good, an increase in consumer income leads to
a higher equilibrium price and a lower equilibrium quantity
a higher equilibrium price and a higher equilibrium quantity
a lower equilibrium price and a higher equilibrium quantity
a lower equilibrium price and a lower equilibrium quantity
Price elasticity of demand is calculated as:
the responsiveness of equilibrium price to a shift in the demand curve
the percentage change in quantity demanded divided by the percentage change in price
f a 10% decrease in the price of a good results in a 5% increase in the quantity demanded of
the good, the absolute value of the price elasticity of demand coefficient is
2, and demand is said to be elastic.
½, and demand is said to be inelastic
1, and demand is said to be unit elastic
If the absolute value of the price elasticity of demand coefficient for liquid hand soap is 1.67,
the demand for liquid hand soap is:
elastic
unit elastic
inelastic
perfectly inelastic
Ceteris paribus, the demand for a product will be more elastic when
the product is a necessity.
there are many good close substitutes for the product available
the price of the product is small relative to income
When the price of a hotdog at the ballpark is $4, quantity demanded is 2,250. When the price
of a hotdog at the ballpark is $6, quantity demanded is 1,750. The change in total revenue
when price increases from $4 to $6 indicates that the demand for hotdogs at the ballpark is
relatively inelastic.
True
False
Ceteris paribus, if the absolute value of the price elasticity of demand coefficient for milk is
0.75, then the demand for milk is:
elastic, and a decrease in price will lead to an increase in total revenue
inelastic, and an increase in price will lead to an increase in total revenue
The demand for products that are necessities tends to be relatively inelastic
True
False
