Econ 2000 Peralta Practice Exam 1

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A production possibilities frontier can shift outward if
Select one:
a. government increases the amount of money in the economy.
b. there is a technological improvement.
c. resources are shifted from the production of one good to the production of the other good.
d. the economy abandons inefficient production methods in favor of efficient production methods.
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Terms in this set (70)
A production possibilities frontier can shift outward if
Select one:
a. government increases the amount of money in the economy.
b. there is a technological improvement.
c. resources are shifted from the production of one good to the production of the other good.
d. the economy abandons inefficient production methods in favor of efficient production methods.
b. there is a technological improvement.
According to the circular-flow diagram, if Denny is the owner of a landscaping business and he just received $50 for mowing Mrs. Pendleton's lawn,
Select one:
a. the $50 represents a cost of production for Denny's firm.
b. the $50 represents wages, rent, and profit to Denny's firm.
c. Denny acts as a firm who interacted in the markets for factors of production with Mrs. Pendleton.
d. Denny acts as a firm who interacted in the markets for goods and services with Mrs. Pendleton.
d. Denny acts as a firm who interacted in the markets for goods and services with Mrs. Pendleton.
Among economic models, the circular-flow diagram is unusual in that it
Select one:
a. drastically simplifies the real world.
b. features more than one type of market.
c. features flows of dollars.
d. does not involve mathematics.
d. does not involve mathematics.
Economists make use of assumptions, some of which are unrealistic, for the purpose of
Select one:
a. teaching economics to people who have never before studied economics.
b. advancing their political agendas.
c. developing models when the scientific method cannot be used.
d. focusing their thinking.
d. focusing their thinking.
Economists, like mathematicians, physicists, and biologists,
Select one:
a. make use of the scientific method.
b. try to address their subject with a scientist's objectivity.
c. devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.
d. All of the above are correct.
d. All of the above are correct.
Factors of production are
Select one:
a. used to produce goods and services.
b. also called output.
c. abundant in most economies.
d. assumed to be owned by firms in the circular-flow diagram.
a. used to produce goods and services.
Microeconomics is the study of
Select one:
a. how money affects the economy.
b. how individual households and firms make decisions.
c. how government affects the economy.
d. how the economy as a whole works.
b. how individual households and firms make decisions.
On a bowed production possibilities frontier, as you move down along the curve
Select one:
a. more of one good must be given up to receive one unit of the other good.
b. the available production technology does not change.
c. the opportunity cost increases.
d. All of the above are correct.
d. All of the above are correct.
The art in scientific thinking -- whether in chemistry, economics, or biology -- is
Select one:
a. the design and implementation of laboratory experiments.
b. knowing when to stop collecting data and when to start analyzing the data.
c. deciding which assumptions to make.
d. being able to mathematically model natural phenomena.
c. deciding which assumptions to make.
Which of the following areas of study typifies microeconomics as opposed to macroeconomics?
Select one:
a. the impact of minimum-wage laws on employment in the fast food industry
b. the effect of changes in household saving rates on the growth rate of national income
c. the impact of faster money growth on the rate of inflation
d. a comparison of alternative tax policies and their respective impacts on the rate of the nation's economic growth
a. the impact of minimum-wage laws on employment in the fast food industry
A statement describing how the world is Select one: a. is a normative statement. b. is a positive statement. c. would only be made by an economist speaking as a policy adviser. d. would only be made by an economist employed by the government.b. is a positive statement.Congress relies on economists at the Congressional Budget Office to Select one: a. enforce the nation's antitrust laws. b. set the nation's monetary policy. c. provide evidence that incumbent members of Congress are performing well in their jobs. d. provide independent evaluations of policy proposals.d. provide independent evaluations of policy proposals.Economists at the Department of Justice Select one: a. track the behavior of the nation's money supply. b. advise Congress on economic matters. c. help enforce the nation's antitrust laws. d. prepare the federal budget.c. help enforce the nation's antitrust laws.Which of the following is a positive, as opposed to a normative, statement? Select one: a. The US Department of Justice should allow a merger between AT&T and T-Mobile because it would have little effect on consumers. b. Antitrust laws should be used to prevent further concentration in the wireless telephone service market. c. The US Department of Justice sued AT&T to block its merger with T-Mobile. d. The wireless telephone service market is too highly concentrated.c. The US Department of Justice sued AT&T to block its merger with T-Mobile.The first number in any ordered pair is Select one: a. the x-coordinate. b. the y-coordinate. c. the vertical location of the point. d. the slope.a. the x-coordinate.When two variables have a negative correlation and the x-variable decreases, Select one: a. the y-variable increases. b. the y-variable decreases. c. the y-variable stays the same. d. the x-variable can never be positive.a. the y-variable increases.When two variables have a negative correlation, Select one: a. when the x-variable decreases, the y-variable decreases. b. when the x-variable decreases, the y-variable increases. c. when the x-variable increases, the y-variable increases. d. More than one of the above is correct.b. when the x-variable decreases, the y-variable increases.In a market economy, Select one: a. supply determines demand and demand, in turn, determines prices. b. demand determines supply and supply, in turn, determines prices. c. the allocation of scarce resources determines prices and prices, in turn, determine supply and demand. d. supply and demand determine prices and prices, in turn, allocate the economy's scarce resources.d. supply and demand determine prices and prices, in turn, allocate the economy's scarce resources.A competitive market is a market in which Select one: a. an auctioneer helps set prices and arrange sales. b. there are only a few sellers. c. the forces of supply and demand do not apply. d. no individual buyer or seller has any significant impact on the market price.d. no individual buyer or seller has any significant impact on the market price.A monopoly is a market with one Select one: a. seller, and that seller is a price taker. b. seller, and that seller sets the price. c. buyer, and that buyer is a price taker. d. buyer, and that buyer sets the price.b. seller, and that seller sets the price.An example of a perfectly competitive market would be the Select one: a. cable TV market. b. soybean market. c. breakfast cereal market. d. shampoo market.b. soybean market.Assume Leo buys coffee beans in a competitive market. It follows that Select one: a. Leo has a limited number of sellers from which to buy coffee beans. b. Leo will negotiate with sellers whenever he buys coffee beans. c. Leo can influence the price of coffee beans if he buys a large quantity of them. d. None of the above is correct.d. None of the above is correct.Which of the following is an example of a highly organized market? Select one: a. the market for textbooks b. the market for spa services c. the market for soybeans d. the market for ice creamc. the market for soybeansWhich of the following is an example of a less-than-highly-organized market? Select one: a. the market for U.S. Treasury bonds b. the market for corn c. the market for soybeans d. the market for ice creamd. the market for ice creamA decrease in demand is represented by a Select one: a. movement downward and to the right along a demand curve. b. movement upward and to the left along a demand curve. c. rightward shift of a demand curve. d. leftward shift of a demand curve.d. leftward shift of a demand curve.A decrease in quantity demanded Select one: a. results in a movement downward and to the right along a demand curve. b. results in a movement upward and to the left along a demand curve. c. shifts the demand curve to the left. d. shifts the demand curve to the right.b. results in a movement upward and to the left along a demand curve.A demand schedule is a table that shows the relationship between Select one: a. quantity demanded and quantity supplied. b. income and quantity demanded. c. price and quantity demanded. d. price and income.c. price and quantity demanded.A downward-sloping demand curve illustrates Select one: a. that demand decreases over time. b. that prices fall over time. c. the relationship between income and quantity demanded. d. the law of demand.d. the law of demand.A likely example of complementary goods for most people would be Select one: a. butter and margarine. b. lawnmowers and automobiles. c. chips and salsa. d. cola and lemonade.c. chips and salsa.A likely example of substitute goods for most people would be Select one: a. peanut butter and jelly. b. tennis balls and tennis rackets. c. televisions and subscriptions to cable television services. d. pencils and pens.d. pencils and pens.A movement downward and to the right along a demand curve is called a Select one: a. increase in demand. b. decrease in demand. c. decrease in quantity demanded. d. increase in quantity demanded.d. increase in quantity demanded.A movement upward and to the left along a demand curve is called a Select one: a. increase in demand. b. decrease in demand. c. decrease in quantity demanded. d. increase in quantity demanded.c. decrease in quantity demandedFor teenagers, a 10 percent increase in the price of cigarettes leads to a Select one: a. 1 percent reduction in the quantity demanded of cigarettes. b. 4 percent reduction in the quantity demanded of cigarettes. c. 10 percent reduction in the quantity demanded of cigarettes. d. 12 percent reduction in the quantity demanded of cigarettes.d. 12 percent reduction in the quantity demanded of cigarettes.For the general population, a 10 percent increase in the price of cigarettes leads to a Select one: a. 1 percent reduction in the quantity demanded of cigarettes. b. 4 percent reduction in the quantity demanded of cigarettes. c. 10 percent reduction in the quantity demanded of cigarettes. d. 12 percent reduction in the quantity demanded of cigarettes.b. 4 percent reduction in the quantity demanded of cigarettes.If a good is inferior, then an increase in income will result in a Select one: a. increase in the demand for the good. b. decrease in the demand for the good. c. movement down and to the right along the demand curve for the good. d. movement up and to the left along the demand curve for the good.b. decrease in the demand for the good.If a good is normal, then an increase in income will result in a Select one: a. increase in the demand for the good. b. decrease in the demand for the good. c. movement down and to the right along the demand curve for the good. d. movement up and to the left along the demand curve for the good.a. increase in the demand for the good.If a increase in income decreases the demand for a good, then the good is a Select one: a. substitute good. b. complementary good. c. normal good. d. inferior good.d. inferior good.If the number of buyers in a market decreases, then Select one: a. demand will increase. b. demand will decrease. c. supply will increase. d. supply will decrease.b. demand will decrease.If the price of ice cream rose to $30 per gallon, consumers would purchase fewer gallons of ice cream than if the price were $4 per gallon. If the price of chocolate sauce fell to $0.50 per can, consumers would purchase more chocolate sauce than if the price were $5 per can. These relationships illustrate the Select one: a. law of supply. b. law of demand. c. difference between normal and inferior goods. d. difference between substitute and complement goods.b. law of demand.Soup is an inferior good if the demand Select one: a. for soup falls when the price of a substitute for soup rises. b. for soup rises when the price of soup falls. c. curve for soup slopes upward. d. for soup falls when income rises.d. for soup falls when income rises.The University of Iowa was voted the #1 "party school" in 2013. The University of Iowa is located in Iowa City. At the end of August each year, the market demand for beer in Iowa City Select one: a. decreases. b. increases. c. remains constant, but we observe a movement downward and to the right along the demand curve. d. remains constant, but we observe a movement upward and to the left along the demand curve.b. increases.When quantity demanded has increased at every price, it might be because Select one: a. the number of buyers in the market has decreased. b. income has increased, and the good is an inferior good. c. the costs incurred by sellers producing the good have decreased. d. the price of a complementary good has decreased.d. the price of a complementary good has decreased.When quantity demanded increases at every possible price, the demand curve has Select one: a. shifted to the left. b. shifted to the right. c. not shifted; rather, we have moved along the demand curve to a new point on the same curve. d. not shifted; rather, the demand curve has become steeper. Feedbackb. shifted to the right.You lose your job and, as a result, you buy more frozen pizzas. For you, frozen pizza are a Select one: a. luxury good. b. inferior good. c. normal good. d. complementary good.b. inferior good.A decrease in quantity supplied Select one: a. results in a movement downward and to the left along a fixed supply curve. b. results in a movement upward and to the right along a fixed supply curve. c. shifts the supply curve to the left. d. shifts the supply curve to the right.a. results in a movement downward and to the left along a fixed supply curve.A decrease in supply is represented by a Select one: a. movement downward and to the left along a supply curve. b. movement upward and to the right along a supply curve. c. rightward shift of a supply curve. d. leftward shift of a supply curve.d. leftward shift of a supply curve.A leftward shift of a supply curve is called a Select one: a. increase in supply. b. decrease in supply. c. decrease in quantity supplied. d. increase in quantity supplied.b. decrease in supply.If sellers expect higher basket prices in the near future, the current Select one: a. supply of baskets will increase. b. supply of baskets will decrease. c. supply of baskets will be unaffected. d. demand for baskets will decrease.b. supply of baskets will decrease.If something happens to alter the quantity supplied at any given price, then Select one: a. we move along the supply curve. b. the supply curve shifts. c. the supply curve becomes steeper. d. the supply curve becomes flatter.b. the supply curve shifts.The sum of all the individual supply curves for a product is called Select one: a. total supply. b. market supply. c. aggregate supply. d. total output.b. market supply.Which of the following events could cause an increase in the supply of ceiling fans? Select one: a. The number of sellers of ceiling fans increases. b. There is an increase in the price of air conditioners, and consumers regard air conditioners and ceiling fans as substitutes. c. There is an increase in the price of the motor that powers ceiling fans. d. All of the above are correct.a. The number of sellers of ceiling fans increases.Which of the following events would cause a movement downward and to the left along the supply curve for mangos? Select one: a. The number of sellers of mangos decreases. b. There is an advance in technology that reduces the cost of producing mangos. c. The price of mangos falls. d. The price of fertilizer increases, and fertilizer is an input in the production of mangos.c. The price of mangos falls.A shortage exists in a market if Select one: a. there is an excess supply of the good. b. quantity supplied exceeds quantity demanded. c. the current price is below its equilibrium price. d. All of the above are correct.c. the current price is below its equilibrium price.A surplus exists in a market if Select one: a. there is an excess demand for the good. b. quantity demanded exceeds quantity supplied. c. the current price is above its equilibrium price. d. All of the above are correct.c. the current price is above its equilibrium price.If consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would happen to the equilibrium price and quantity of lattés if the price of muffins rises? Select one: a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would increase, and the equilibrium quantity would decrease. d. The equilibrium price would decrease, and the equilibrium quantity would increase.b. Both the equilibrium price and quantity would decrease.If consumers view cappuccinos and lattés as substitutes, what would happen to the equilibrium price and quantity of lattés if the price of cappuccinos rises? Select one: a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would increase, and the equilibrium quantity would decrease. d. The equilibrium price would decrease, and the equilibrium quantity would increase.a. Both the equilibrium price and quantity would increase.If the demand for a product decreases, then we would expect equilibrium price Select one: a. to increase and equilibrium quantity to decrease. b. to decrease and equilibrium quantity to increase. c. and equilibrium quantity to both increase. d. and equilibrium quantity to both decrease.d. and equilibrium quantity to both decrease.If the supply of a product decreases, then we would expect equilibrium price Select one: a. to increase and equilibrium quantity to decrease. b. to decrease and equilibrium quantity to increase. c. and equilibrium quantity to both increase. d. and equilibrium quantity to both decrease.a. to increase and equilibrium quantity to decrease.If, at the current price, there is a shortage of a good, then Select one: a. sellers are producing more than buyers wish to buy. b. the market must be in equilibrium. c. the price is below the equilibrium price. d. quantity demanded equals quantity supplied.c. the price is below the equilibrium price.What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages? Select one: a. Price will fall, and the effect on quantity is ambiguous. b. Price will rise, and the effect on quantity is ambiguous. c. Quantity will fall, and the effect on price is ambiguous. d. Quantity will rise, and the effect on price is ambiguous.c. Quantity will fall, and the effect on price is ambiguous.What will happen to the equilibrium price of new textbooks if more students attend college, paper becomes cheaper, textbook authors accept lower royalties, and fewer used textbooks are sold? Select one: a. Price will rise. b. Price will fall. c. Price will stay exactly the same. d. The price change will be ambiguous.d. The price change will be ambiguous.What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that reduced the amount of labor necessary to produce steamed milk, which is used to make lattés, and scientists discovered that lattés cause heart attacks? Select one: a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would decrease, and the effect on equilibrium quantity would be ambiguous. d. The equilibrium quantity would decrease, and the effect on equilibrium price would be ambiguous.c. The equilibrium price would decrease, and the effect on equilibrium quantity would be ambiguous.Demand is said to be price elastic if Select one: a. the price of the good responds substantially to changes in demand. b. demand shifts substantially when income or the expected future price of the good changes. c. buyers do not respond much to changes in the price of the good. d. buyers respond substantially to changes in the price of the good.d. buyers respond substantially to changes in the price of the good.Demand is said to be unit elastic if quantity demanded Select one: a. changes by the same percent as the price. b. changes by a larger percent than the price. c. changes by a smaller percent than the price. d. does not respond to a change in price.a. changes by the same percent as the price.For a good that is a necessity, Select one: a. quantity demanded tends to respond substantially to a change in price. b. demand tends to be inelastic. c. the law of demand does not apply. d. All of the above are correct.b. demand tends to be inelastic.For a good that is a necessity, demand Select one: a. tends to be inelastic. b. tends to be elastic. c. has unit elasticity. d. cannot be represented by a demand curve in the usual way.a. tends to be inelastic.For a vertical demand curve, Select one: a. the slope is undefined, and the price elasticity of demand is equal to 0. b. the slope is equal to 0, and the price elasticity of demand is undefined. c. both the slope and price elasticity of demand are undefined. d. both the slope and price elasticity of demand are equal to 0.a. the slope is undefined, and the price elasticity of demand is equal to 0.Goods with many close substitutes tend to have Select one: a. more elastic demands. b. less elastic demands. c. price elasticities of demand that are unit elastic. d. income elasticities of demand that are negative.a. more elastic demands.If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is Select one: a. 0.50. b. 1. c. 1.5. d. 2.d. 2.If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is Select one: a. 0.75. b. 1.25. c. 1.33. d. 1.60.c. 1.33.