economics final

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economics is most importantly concerned with?

studying how we allocate scarce resources to satisfy unlimited wants

economic choices or tradeoffs are the result of?

scarcity

economics is concerned with

all of the answers are correct

economic resources are also known as?

factors of production

which of the following is not an example of a resource?

all of the answers are resources

human capital is?

the expertise or knowledge possessed by workers

which of the following is true?

poverty could be eliminated but scarcity could not

which of the following is true of resources?

they are the inputs used to produce goods and services

an example of a capital resource is?

a dump truck

entrepreneurship is

the resource that organizes the other factors of production in order to produce goods and or services

which of the following is an example of an individual motivated be self-interest?

all answers are correct

economists believe that individuals act as if they are motivated by self-interest and..

respond in predictable ways to changing circumstances

from an economists perspective which of the following observations is not true

self-interest is purely monetary in nature

when economists refer to economic behavior, they mean that?

rational people try to anticipate the likely consequences of their actions

what according to an economist, forms the basis of rational human behavior under current and anticipated circumstances

values and information

"as a rational person, you would expect individuals to always avoid actions that are illegal"

This is a false statement because it is expected that individuals will consider the consequences of their actions and that some will choose to commit illegal acts anyway.

when economists speak of markets, they primarily mean

mechanisms that coordinate actions of buyers and sellers.

which of the following serve as the language of the market system

Market prices

which of the following is an example of a market failure

all the examples are market failures

market failure occurs when

the economy fails to allocate resources efficiently on its own

a hypothesis is

a testable proposition

a theory can best be defined as

a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work

the importance of the ceteris paribus assumption is that it

allows one to analyze the relationship between two variables apart from the influences of other variables

economics is different from a "hard" science like physics because

economists cannot easily control all the variables that might influence human behavior

macroeconomis topics do not usually include

the profit maximizing decisions of an individual manufacturer

which of the following lies primarily within the realm of microeconomics

a study of supply and demand conditions in the market for orange juice

which of the following best illustrates the fallacy of composition

if ms. spann had more money, she could buy more scarce goods; if the nation had more money,everyone could buy more scarce goods

which of the following is a statement of positive economics

the income tax reduces after-tax incomes of the rich

Suppose there are two members of the U.S. Congress who were once economics professors. Why is it important to be able to distinguish their positive from their normative statements about economic policy?

Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments.

Which of the following is not an example of the use of the problem solving perspective provided by economics?

The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember.

because of scarcity

we must sacrifice valuable alternatives to obtain more goods and services we desire

Trent decides to spend an hour playing basketball rather than studying. His opportunity cost is:

the benefit to his grades from studying for an hour.

the opportunity cost of an item is

the highest valued alternative you give up to get that item

the opportunity cost of going to college includes

both tuition and the value of the students time

opportunity cost includes

both monetary and non-monetary costs

economists believe that in regards to criminal behavior

those choosing to commit criminal acts weigh the expected marginal benefits rather than the expected marginal costs

Despite the warning on a package of cigarettes about the potential health hazards of smoking, a man lights up a cigarette. An economist would conclude that:

in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost.

which of the following best defines rational behavior

undertaking activities whenever the marginal benefit exceeds the marginal cost

if people are self-interested

as their preferences for leisure time increases, they are likely to work less. as the wages they are offered increases, they are likely to work more

Pollution damages the environment we live in. An economist would advise that we reduce air pollution:

as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction.

specialization is a way for

individuals to make the best use of resources by devoting themselves to one primary productive activity

Resources are used more efficiently if people, regions, and countries specialize in goods for which they have a(n)

comparative advantage in production.

Sergei makes millions of dollars a year playing hockey. Sergei is also the best tailor in his hometown in Russia. Why doesn't Sergei make his own clothes?

The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career.

A nation has a comparative advantage in the production of cars over another nation if:

it can produce cars at a lower opportunity cost than the other country.

Mike is able to complete a tax return in two hours earning a fee of $100. As an alternative, he could pitch in at a volunteer car wash washing four cars in one hour. His roommate Joe would take four hours to complete a tax return earning a $100 fee and also can wash four cars in one hour. Both individuals could benefit if

Mike worked on tax returns for eight hours and paid Joe $10 for each car he washed.

Which of the following is true?

A. People specialize by concentrating their energies on the activity to which they are best suited, because they incur lower opportunity costs as a result.

B. The primary reason people pursue their comparative advantage is their self-interest.

C. One advantage of specialization is that workers acquire greater skill from repetition.

D. If a person, a region, or a country can produce a good or service at a lower opportunity cost than others, we say that they have a comparative advantage in the production of that good or service.

E. All of the above are true.

Which of the following is true?

A. Voluntary trades give both parties more in value than what they give up.

B. Without the ability to trade, people would not tend to specialize in those areas where they had a comparative advantage.

C. People can gain by specializing in the production of the good in which they have a comparative advantage.

D. Voluntary trade directly increases wealth by making both parties better off, and it is the prospect of wealth-increasing exchange that leads to productive specialization.

E. All of the above are true.

Which of the following is not true?

What one trader gains from a trade, the other must lose.

advantages of specialization do not include

reduced interdependence

Tom is a castaway who washes up on a remote island. He can kill eight birds per hour or catch ten fish per day. The natives on the island can kill ten birds per day or catch twenty fish per day. According to comparative advantage,

tom should kill more birds and fish less, then trade birds for fish

which of the following is true of a competitive market

buyer and sellers have little market power

the law of demand refers to

inverse relationship between the price of a good and the quantity demanded

in economics, the demand for a good refers to the amount of the good people

will buy at various prices

the demand schedule for a good

indicates the quantities that will be purchased at alternative market prices

the price of music downloads decreases, which of the following is most likely to happen

quantity demanded will increase

if the price of tennis rackets were to increase, we would expect

the demand for tennis balls to decrease

which of the following is most likely to be an inferior good

used clothing

a decrease in consumer incomes will

A. decrease the demand for an inferior good.

B. decrease the supply of an inferior good.

C. increase the demand for a normal good.

D. increase the supply of a normal good.

E. do none of the above.

Whenever the price of Good A decreases, the demand for Good B increases. Good A and B appear to be:

complements

A change in which of the following variables does not cause a change in demand?

prices of unrelated goods

the supply curve shows

how the quantity produced varies with price

an upward sloping supply curve shows that

suppliers are willing to increase production of their goods if they receive higher prices for them

a supply schedule shows

how many units producers are willing and able to sell at various prices

each point on the supply curve shows

quantity supplied at that price

the market supply schedule reflects the total quantity

supplied at each price by all of the producers

which of the following would NOT cause a change in the supply of milk?

an increase in the price of milk

to an economists, a decrease in supply means a

A. rightward shift of the supply curve.

B. movement up along a supply curve.

C. downward shift of the supply curve.

D. movement down along the supply curve.

E. none of the above

The difference between a change in quantity supplied and a change in supply is that a change in:

quantity supplied is caused by a change in a good's own, current price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.

Which of the following would be most likely to cause a reduction in the supply of Nintendo video games?

an increase in the price of computer chips used to make Nintendo games

Which of the following would not shift the supply curve for swordfish?

an increase in the price of swordfish

If there is a surplus, ____ will be frustrated by their inability to exchange at the current price, and they will compete the prices ____ as a result.

sellers; down.

Ceteris paribus, if the vacancy rate in an apartment complex increased from 5% to 20% over the past two years, we would expect to see

the price decrease leading to an increase in quantity demanded.

Which of the following is the correct way to describe equilibrium in a market?

At equilibrium, quantity demanded equals quantity supplied.

At the equilibrium price for gasoline:

both a. and d. are correct.

When there is an excess quantity supplied of a product at the current price, then:

both c. and d. will occur.

Interpret the following statement: "Demand exceeds the available quantity of apartment housing. If the price of apartment rentals were increased, demand would decrease and an equilibrium could be achieved."

The statement is incorrect because it confuses "demand" with "quantity demanded."

When there is an excess quantity demanded of a product at the current price, then:

the price will tend to rise.

Which of the following would increase the quantity of LCD TVs demanded but would not increase the demand for LCD TVs?

a decrease in the current price of LCD TVs

Assume that coffee and tea are substitutes for each other. If weather conditions cause a substantial portion of the available coffee crop to be destroyed, then most probably:

the demand for tea will increase.

A shortage currently exists in the market for strawberries. Which of the following statements is correct?

The quantity of strawberries demanded exceeds the quantity supplied and the market price is below the equilibrium price.

price elasticity of demand is defines as

the percentage change in quantity demanded divided by the percentage change in price

Demand is said to be ____ when the quantity demanded is very responsive to changes in price.

elastic

A steel mill raises the price of steel by 7%, which results in a 20% reduction in the quantity of steel demanded. The demand curve facing this firm is:

elastic

Fantastic Cuts Hair Salon knows that a 15% increase in the price of their haircuts will result in a 5% decrease in the number of haircuts sold. What is the elasticity of demand facing Fantastic Cuts?

0.33

Which of the following is false?

A. The price elasticity of demand measures the responsiveness of quantity demanded to a change in price.

B. The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

C. If demand is elastic, it means the quantity demanded changes by a relatively larger amount than the price change.

D. If demand is inelastic, it means the quantity demanded changes by a relatively smaller amount than the price change.

E. All of the above are true

If the price elasticity of demand was 4.0 (in absolute terms), a 10% off sale would lead to:

a 40% increase in purchases by customers.

The Shoe Emporium reduces the price of its shoes by 50% and finds that the quantity demanded for its shoes more than doubles. The demand for shoes from The Shoe Emporium appears to be:

. elastic.

If the demand is perfectly inelastic, what would happen to the quantity demanded if there is a tiny increase in price?

quantity demanded will remain the same

which of the following would most likely feature elastic demand

fresh green beans

Elasticity of demand will ____ as the availability of substitutes ____.

Both c. and d. are correct answers.

If the elasticity of demand for bangles is equal to 1, moving along the demand curve for bangles, an increase in price will:

increase the quantity demanded and leave total revenue unchanged.

A price cut will increase the total revenue a firm receives if the demand for its product is:

elastic

The Book Nook reduces prices by 20%. If the dollar value of The Book Nook's sales remain constant, it indicates that:

the quantity of books sold increases by 20%

A 10% decrease in the price of energy bars leads to a 20% increase in the quantity of energy bars demanded. It appears that:

demand is elastic and total revenue will increase

If the elasticity of supply of a good was 2, how much would the price have to increase to lead to an increase in output of 6 percent?

3%

If the elasticity of supply of bangles is equal to 1, moving along the supply curve for bangles, an increase in price will:

increases the quantity supplied and increases total revenue

The elasticity of supply is defined as the ____ change in quantity supplied divided by the ____ change in price.

percentage, percentage

if the supply curve for a product is vertical, then the elasticity of supply is

equal to zero

a perfectly elastic supply curve is

horizontal

the longer the time period considered, the elasticity of supply tends to

increase

a surplus will result whenever the

government imposes a price floor above the equilibrium price

Assume a price floor is imposed at the current equilibrium price in the market for lettuce. If the demand for lettuce then increases:

the quantity of lettuce supplied will increase

the imposition of a price ceiling on a market often results in

a shortage

Which of the below is true?

Both price floors and price ceilings generally reduce the quantity exchanged in the market.

Which of the following is an example of an unintended consequence?

a price ceiling on gasoline that causes a gas shortage

If the demand for apples is highly elastic and the supply is highly inelastic, then if a tax is imposed on apples it will be paid:

largely by the sellers of apples

Consumer surplus is:

the difference between what consumers are willing to pay and what they are required to pay for a good.

Graphically, consumer surplus is measured by:

the area below the demand curve, but above the market price.

Which of the following best explains the source of consumer surplus for Good A?

Many consumers would be willing to pay more than the market price for some units of Good A.

ceteris paribus, an increase in the price of a good will cause the

consumer surplus derived from the good to decrease

ethics

can be defined in any of the above ways

in free market economics

most market exchanges will result in all parties "winning."

A market economy without any ethics would have:

no value

Effective free market ethical systems must provide for all of the following EXCEPT:

a clearly defined moral foundation

Cost-benefit analysis can determine the optimal amount of all the following EXCEPT

fairness of rules

More efficient positive market ethics will generally help improve all of the following challenges EXCEPT:

moral externalities of a market

In order for a market's ethics to be effective, all of the following must occur, EXCEPT

everyone must agree to take part in the market

Ethical rules based on morals or concepts of fairness are called

normative ethics

If we know someone pays all their taxes and gives money to charity, we know that

only that they pay their taxes and give money to charity

Which of the following does not specify positive ethical rules?

websters dictionary

which of the following statements is TRUE

The U.S. government defines and enforces business ethics in order to protect the economy.

In free markets which allows a high level of unethical corruption:

suppliers will be forced to be corrupt or to leave the market

Ethics violators like embezzlers, frauds, tax cheats and bank robbers

A. usually follow most rules and other ethics most of the time.

B. not only injure individuals and companies, but also often hurt entire markets.

C. often use rational cost-benefit analysis when deciding whether to cheat.

D. may feel so ashamed and guilty of their crimes that they are driven to suicide.

E. All of the above may be true of ethics violators.

which of the following would break a positive ethic

driving two miles per hour over the speed limit

Which of these conditions are most likely to motivate honest people to become corrupt?

seeing your boss and fellow workers get rich by lying and cheating

plagiarism is unethical because

A. plagiarism might result in stealing profits from the original writer

B. plagiarism can decrease the value of honest students' diplomas

C. plagiarism can make it more difficult for instructors to assess the quality of students' writings

D. plagiarism is a type of fraud

E. all of the above are reasons

Which of the following are NOT very important to maintaining effective market ethics?

whether people understand the reasons for the rules or regulations

which of the following people are more likely to break ethical rules

someone who is ignorant

Which of the following are reasons why most owners of companies want their employees to act ethically?

A. Because they care about the well-being of their customers

B. To enhance productivity

C. To maximize public good will toward the company

D. To avoid large fines and expensive lawsuits

E. All the above are reasons why.

A free market lacking clear ethical rules, adequate oversight and meaningful punishments for rule breakers might suffer:

A. decrease in market demand.

B. decrease in market supply.

C. decrease in equilibrium price.

D. total market collapse.

E. all of the above.

An externality occurs when:

people other than those making the demand and supply decisions share the benefits or the costs of an activity.

Costs that accrue to the total population are called ____ costs. Costs incurred by the producer or consumer who makes the decision are called ____ costs.

social, private

If a negative externality results from the refining of oil, the cost of production as seen by the oil refinery:

does not include the external cost

which of the following statements is true

externalities can never refer to costs borne by the seller

If Don paints the outside of his house a horrendous color:

he probably has lowered the value of his home and the value of his neighbors' homeshe is unlikely to bear all the social costs of his actions.

If there are significant external costs associated with the production of a product, it can be said that the private cost of production to the firm ____ the cost to society associated with this product and output should ____ to move toward the efficient situation.

understates; decreases

If a positive externality results from the consumption of higher education, then the marginal benefit students receive from education:

is less than the marginal social benefit

If a good that features a positive externality is produced in an unregulated free market, the good will be:

under-produced and under-priced

to internalize a positive externality

the consumers of a good could receive a subsidy equal to the external benefit resulting from the production or consumption of the good.

If the production of a particular good involves significant external benefits, to force the externality to be internalized the government might:

offer a subsidy for production of the good in order to increase production.

which of the following is an example of a public good

clean air

As an additional consumer obtains the benefits of a public good such as national defense, the benefits to existing consumers:

do not change

Which of the following is true?

It is extremely difficult to limit the benefits of a public good to the people who pay for it.

public goods are those that are consumed

by the paying and nonpaying public alike

Public goods are characterized by:

nonrivalry in consumption. nonexcludability of nonpayers

Without government intervention, society is likely to get too little production of:

both private goods that generate external benefits and public goods

the determination of which goods are public depends on

whether it is possible to exclude additional users from consuming the good if they do not pay for it.

Which of the following is true?

A. The government may be able to overcome the free rider problem with public goods by providing the public goods and imposing taxes to pay for them.

B. The nature of public goods is such that the government cannot accurately assess the benefits and costs of those affected.

C. National defense and flood control are illustrations of public goods.

D. Just as in the case of external benefits, public goods tend to be underprovided by the private sector.

E. All of the above are true.

in a competitive economy with no government sector

there will be too few public goods produced

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