MicroEconomics 165 Unit 1

All of the following are examples of opportunity cost except:
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All of the following are examples of opportunity cost except:
B. the tuition fees paid to a university.
Suppose that in the land of Plenty there is no scarcity. We can conclude that:
A. all resources are fully employed.
B. the production possibilities curve is concave to the origin.
C. opportunity costs are zero when the production of bread increases.
D. all goods are free.
Suppose you have to wait in line to purchase a soft drink at a Missouri State - Tulsa football game. The drink costs one dollar. While, waiting in line, you hear the crowd roar as someone scores a touchdown. While running back to your seat, you fall and spill your drink on another spectator. What is your opportunity cost for the drink?
the lost enjoyment of not seeing the Missouri State touchdown, your thirst (you didn't get a drink), and your discomfort (assuming the other spectator responded by throwing his drink in your lap) of sitting in the sun with wet, sticky clothing.
Which of the following is the best definition of opportunity costs?
the amount of one good that must be given up in order to produce one more unit of another good.
A free good is not scarce because:
individuals can have all they desire at zero price.
Which of the following statements could not be tested by economic analysis?
Gambling should be legalized to raise tax revenue.
Which of the following is a positive statement?
When the national unemployment rate is 7 percent, the unemployment rate for inner-city youth is often close to 40 percent.
All of the following statements are positive except:
A. "My administration will balance the federal budget by 1983." (Ronald Reagan, campaign promise, 1980.)
B. "It is an economic contradiction for airline passengers to pay higher fares to fly shorter distances than longer ones." (Hobart Rowen, Washington Post, 1985.)
C. "inflation makes everyone worse off by lowering the purchasing power of people's income."
D. "rent controls are preferable to income grants for assisting low-income families."****************
E. all of the above are positive statements.
Microeconomics is not concerned with:
the size of aggregate money flows in the economy.
Most of economic theory
assumes that individuals act purposefully and rationally to maximize their own self interest
If it is impossible to make somebody better off without making someone else worse off, the current situation must:be allocatively efficient.Inefficiency:occurs whenever it is possible to make someone better off without making someone else suffer.All of the following basic economic questions deal with microeconomics exceptA. How is the supply of goods allocated among the members of the society? B. What goods and services are being produced and in what quantities? C. By what methods are goods and services being produced? D. Is the economy's capacity to produce goods growing over time?************ E. all of the aboveWhich of the following is "not" illustrated by a production possibility boundary?allocative efficiencyConsider the above production possibilities table. The table shows the maximum combinations of bread and guns that can be produced when all resources are fully employed. We can conclude that:the opportunity cost of producing 400 guns instead of 100 guns is 600 units of bread.Which of the following changes will have no effect on the production possibility boundary?an increase in unemployment.All of the following would tend to increase a nations production possibilities EXCEPT:A. the society becomes more accepting of women who work. B. a new hybrid for wheat is discovered. C. a government program is instituted that encourages college education. D. the nation decides (by whatever method) to increase production of investment goods and decrease production of consumption goods. E. all of the above would tend to expand a nations production possibilities**************Production possibility frontiers are thought to be concave from the origin (bowed out) because:productive resources differ in their suitability for producing different goods.Which of the following would tend to increase U.S. production possibilities in the future?a government program is instituted that encourages college education.At the beginning of world war II, the U.S. moved from the interior of their production possibility frontier to the boundary. In the graph above, this is represented by a move from point A to point B. What is the opportunity cost to the U.S. of making that decision?since the U.S. could have moved to point C rather than point B, the opportunity cost of moving to point B is the loss in potential consumption equal to the horizontal distance C1 - C2.Suppose you need to study six hours per week to earn a C, nine hours per week to earn a B, and 15 hours per week to earn an A. This implies:decreasing returns to hours studied.The "vicious circle of poverty" faced by many third world countries refers to the fact that:most third world countries have very little resources but large populations and must produce mainly consumption goods just to feed their population at a subsistence level.Economists make all of the following assumptions about business firms except:firms are the principal owners of factors of production.Markets for factor services arise:in an economy characterized by specialization of labor.In economic theory, the behavioral assumptions of consistent behavior and maximization of satisfaction or profit are applied to:households and firms.Which of the following statements about quantity demanded is not true? Quantity demanded is:the entire relation between price and quantity.To say that the demand curve for movies is downward sloping to the right means that:less will be demanded at higher prices.Which of the following will NOT, all else equal, cause demand for good A to change?a change in the price of A.One purpose of advertising is to:shift the demand curve for the good to the right.Consider automobiles and automobile tires. When the price of automobiles decreases, the demand for tires is predicted to:increase.As a household's average income rises, we usually expect:its demand for luxuries to increase.A fall in the price of raw milk, used in the production of ice cream, will:increase the supply of ice cream, causing the supply curve of ice cream to shift to the right.An increase in the price of cheese, all else equal, is likely to have all of the following effects except a:A. decrease in the quantity demanded of cheese. B. decrease in the supply of pizza. C. increase in demand for peanut butter (a substitute good). D. decrease in the demand for apple pie (a complimentary good). E. all of the above will occur****************Which of the following will cause an increase in the supply of U.S. wheat?A temperance movement in the U.S. gains popular acceptance and demand for beer and barley (an input in beer production) fall. (Assume wheat and barley are substitutes in production.)Legalizing the use of addicting drugs would have all of the following effects except:A. the supply of addicting drugs would increase. B. the demand for addicting drugs would increase. C. in the long-run, price would fall while quantity exchanged would rise. D. the quality of addicting drugs being sold in the legalized market would be expected to be better than in the illegal market. E. all of the above**************In class, we demonstrated that the quantity demanded for a given product was inversely related to its absolute price, all else equal. This relationship is explained by which of the following statements?B. the substitution effect causes consumers to buy more of any good at lower absolute prices, all else equal.Which one of the following would be most likely to cause the demand for firewood to increase?an increase in the price of fuel oil.A fall in the price of raw milk, used in the production of ice cream, will:decrease the price while increasing the quantity demanded of ice cream.Suppose it is observed that initially increases in income cause consumption of hamburger to rise but that as income continues to rise consumption of hamburger begins to decline. This would imply that hamburger:is a normal good at low income levels but an inferior good at high income levels.Which of the following is a stock concept?A. the weekly receipts of a drugstore. B. a household's rent payment. C. an accountant's salary. D. the number of incoming freshmen at Missouri State in fall 1988********** E. all of the above are flow variables.You know the following facts: a) the Boston Celtics have just won the 1989 NBA championships with the LA Lakers. Both Larry Bird and Magic Johnson, wearing Converse basketball shoes, have played magnificently. As a result, millions of young boys and girls wish to emulate them in every particular. b) Converse announces major labor strikes by 50% of their employees. What is the effect on Price and Quantity exchanged in the market for Converse basketball shoes?price would increase and quantity exchanged would be indeterminate.If it is observed that, in a particular market, price has risen and quantity exchanged has increased, it is likely that:demand has increased.All of the following statements about price floors are true except:If the price floor is set below the equilibrium price, the price must be reduced.To be effective, a price ceiling must lie:anywhere below P0The quantity demanded will equal the quantity supplied at a free market equilibrium and also when:A. a price floor is established above the equilibrium price. B. a shortage of a commodity persists. C. a price ceiling is established below the equilibrium price. D. an effective price ceiling exists and the government is able to prevent the development of a black market. E. none of the above cause quantity demanded to equal quantity supplied*****************If, in response to a price ceiling, a black market develops that gains control of all of the supply of the commodity, all of the following will be true except:quantity demanded will exceed quantity exchanged at the black market price.During 1988's presidential election, Jesse Jackson, Ted Kennedy and others strongly endorsed the need for an increase in the current minimum wage. Suppose that the current minimum wage is actually increased and that the government can enforce the minimum wage and the minimum wage is actually above the equilibrium wage for at least some workers. We would expect:A. the number of jobs available to black youths and other relatively unskilled workers to fall. B. the number of jobs available to union workers and other relatively skilled workers to rise. C. wage income to fall for at least some unskilled workers. D. wage income to rise for all relatively skilled workers. E. all of the above*************************Excess supply for a commodity is ordinarily eliminated through market forces by:A. price rising, demand decreasing, and supply increasing. B. price rising, quantity demanded decreasing, and quantity supplied increasing. C. price rising, demand increasing, and supply decreasing. D. price rising, quantity demanded increasing, and quantity supplied decreasing. E. none of the above eliminate excess supply.***********A price completely stabilized by the government buying surpluses and selling its stocks when there are shortages means that:farmers' revenues will be proportional to output.You know the following facts: a) the Boston Celtics have just won the 1989 NBA championships with the LA Lakers. Both Larry Bird and Magic Johnson, wearing Converse basketball shoes, have played magnificently. As a result, millions of young boys and girls wish to emulate them in every particular. b) Nike invests in new equipment that significantly increases labor productivity. What is the effect on Price and Quantity exchanged in the market for Nike basketball shoes?price would decrease and quantity exchanged would be indeterminate.The quantity demanded will equal the quantity supplied at a free market equilibrium and also when:suppliers are able to sell their commodity for the black market price.In 1968, there were 20 million acres of commercially valuable forestland in Utah. The timber on this land was worth roughly 2 billion dollars. In 1969, forest fires destroyed half of this timber, yet the value in the market for the remaining timber was higher (2.6 billion dollars) than in 1968.this could happen if, for whatever reason, demand for timber increased simultaneously driving up both the price and quantity demanded of timber.A subsidy on a good does notalways mean that suppliers receive more and buyers pay less.When the actual price of a good is above its equilibrium market price, competition among:sellers will force the actual price downward.Consider the market for labor where the wage rate is the price of labor. Assume initially that the federal minimum wage equals the market equilibrium wage rate. Now assume the government increases its minimum wage to $1 above the market equilibrium wage rate. One would not expect:incomes from wages to rise for all working-class families.Economic theory suggests that divorce rates are higher in urban areas as opposed to rural areas for all of the following reasons except:life tends to be less stressful in rural areas than in urban areas.