Exam 1 Sample A

Which of the following statements is/are true?
Click the card to flip 👆
1 / 50
Terms in this set (50)
Which of the following statements is/are true?
As a result of scarcity, individuals face trade-offs and must make choices.
1. Which of the following statements is/are true?
goods and services are produced and distributed in a world with limited resources but relatively unlimited wants.
3. Which of the following is most likely a topic of discussion in a microeconomics course?
an increase in the price of lumber used to construct houses
4. Maya is an economist, and to her, a good economic model can be thought of as a(n):
abstraction from reality useful for both explaining and predicting human behavior.
5. The term "ceteris paribus" means that:
all variables except those specified are held constant.
6. The "law of demand" asserts that consumers will purchase less of a good at higher prices than they will at lower prices, ceteris paribus. However, when the average price of cars increased over the last decade, more cars were purchased. Which of the following best explains the apparent conflict between theory and data?
It is likely that variables other than the price and quantity of cars demanded were changing.
7. In a purely capitalistic economic system, decisions about how to allocate resources are made:
by a lottery system.
8. A drawback/criticism of the capitalist/market system for answering the basic economic questions is that:
it yields very low incomes and low consumption levels for people without many marketable skills or resources.
9. On the basis of the continuum illustrated below, economic changes in China since the 1980s would be most appropriately shown by a movement
from point F to point E.
10. Adam Smith's concept of "laissez-faire" capitalism and the "invisible hand"
holds that individual decision making with minimal government intervention will maximize the interests of society.
11. Which of the following statements relating to the four basic inputs is true?Money is important for economic activity, but it is not one of the four basic inputs.12. Which of the following is an example of "capital" (as we defined the term in class)?a fishing boat13. The opportunity cost of attending a UW Badgers football game:includes both the value of your time in its next-best alternative and the money sacrificed as a result of attending the game (e.g. to buy the tickets).14. Based on the PPF above, Point ____ is currently impossible to achieve, Point ____ represents a situation with unemployment of inputs, and Point ____ reflects a situation of technical efficiency.G; A; F15. A Production Possibilities Frontier (PPF) shows:that when resources are currently being used efficiently, it is possible to increase production of one good only by sacrificing some of another good.16. Suppose the country of Futurama produces few consumption goods and many investment goods today while the country of Myopia produces few investment goods and many consumption goods today. Other things equal, in the future you would expectthe PPF for Futurama to shift outward more rapidly than the PPF of Myopia.17. A candidate for president made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise could be kept if:larger and larger amounts of clothing for each additional unit of food.18. The above PPF is "concave to the origin." Assume the economy is originally operating on the PPF curve. If this economy chooses to shift more of its resources into food production, it will have to give up:larger and larger amounts of clothing for each additional unit of food.19. What is the opportunity cost of increasing the production of military goods from 55 million to 75 million?30 billion fewer civilian goods20. Is it currently possible for this economy to simultaneously produce 50 billion civilian goods and 90 million military goods?No, because resources are currently too limited given the existing technology.21. Which of the following will NOT shift a nation's PPF outward?an improvement in technology22. The difference between a change in quantity demanded and a change in demand is that a change in:quantity demanded is caused by a change in a good's own price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations.23. One of Dr. Ron's favorite economics murder mysteries (yes, such a genre does exist :>) is a book entitled The Fatal Equilibrium by Marshall Jevons. In the overall market for this book, the quantity demanded will increase as price falls, ceteris paribus; this behavior is explained, in part, by the fact thata decrease in price leads consumers to substitute toward this book which is now relatively cheaper compared with other items the consumer might consider buying.24. Which of the following will NOT cause the demand curve for Ilene's Ideal Iced Tea to shift from D0 to D1?a decrease in the price of Ilene's Ideal Iced tea25. Assume that Billabong® hooded sweatshirts and Quiksilver® hooded sweatshirts are substitutes. Ceteris paribus, if the price of Billabong® hoodies increases,the demand for Quiksilver® hoodies will increase (right shift of whole curve).26. TV weather reporter Wynn D. Day announces that bad weather in Central America will likely lead to the destruction of many, many cocoa bean plants, and, as a result, consumers now expect that the price of chocolate will rise in the near future. As a result:today's market demand for chocolate will increase (shift right of whole curve).27. According to the law of supply, when the price of a good increases, ceteris paribus, we would predict that:more will be produced.28. A supply shift from S0 to S1 in the above graph can be best explained by:an increase in taxes on businesses.29. Which of the following would NOT cause an increase in the supply (right shift of whole supply curve) of milk?an increase in the price of milk30. Consider the following statement: "The price of gasoline fell from $3.75 per gallon to $3.00 per gallon and the supply of gasoline decreased as a result." According to an economist, this statement:would be correct if "quantity supplied" were substituted for the word "supply."31. At a price of $75 a ticket, there are many empty seats at the Overture Hall musical performance of "Dr. Ron and the Marginal Maniacs" (an eclectic on-the-rise economics rock/techno/punk/R&B/country/zydeco/polka/hip-hop band!). This is evidence that:the current $75 price is higher than the equilibrium price.32. Ceteris paribus, if the popularity of "I Am Not a Plastic Bag" ® reusable shopping bags increases, what will happen to the equilibrium price and equilibrium quantity of these bags?price will increase; quantity will increase.33. All else equal, if the cost of sugar rises, what will happen to the equilibrium price and quantity of Red Bull® energy drink (an energy drink made with lots of sugar)?price will increase; quantity will decrease.34. Assume a freely operating market. If there exists a shortage of a product at the current price, then:both b. and c. are true35. In June, 2,500 quarts of Mad-City Mayhem ice cream were sold in Madison at $2 per quart. In July, 4,000 quarts were sold at $2.50 a quart. This change in the price and quantity sold of ice cream may have been caused by:the release of a medical study showing that ice cream consumption improves mental health.36. All else equal, if a large number of American consumers decide to boycott grapes to protest the poor working conditions of farm workers, the:quantity of grapes supplied will decrease (movement along the supply curve).37. A surplus will result whenever the:government imposes a price floor above the equilibrium price.38. In the Madison market above, the equilibrium price of cigars equals ____ and the equilibrium quantity of cigars equals _____.$5; 5,00039. If the government decides to impose a price floor of $7 per cigar. This wouldresult in a surplus of 8,000 cigars40. Which of the following is likely to result from an increase in the federal minimum wage?all of the above.41. Suppose the market equilibrium price of one-bedroom apartments in Sleepytown is $1000 per month, but there is a price ceiling (rent control) imposed at $800 per month. If that price ceiling is then lowered to $600 per month,the shortage of one-bedroom apartments will get worse.42. Otto Mechanic runs a small car repair shop. If a 20% decrease in the price of oil changes at Otto's shop leads to a 20% increase in the quantity of oil changes demanded, Otto's demand isunit elastic.43. Mary's "Mesmerizingly Magnificent Massages" store offers hourly and half-hourly massages to customers. Mary knows that a 10% increase in the price of her massages will result in a 15% decrease in the number of massages purchased by customers. Thus, the price elasticity of demand (pEd) facing Mary's business equals _____. So, if Mary wants to increase her Total Revenues, she should ______________.1.5; decrease the price of her massages.44. The price elasticity of demand (pEd) for bread is estimated to be equal to 0.5. Thus, a 20% increase in the price of bread will lead to:Over time, supply is typically less elastic.45. Which of the following statements is FALSE?Over time, supply is typically less elastic.46. Put the following products in order from the most elastic to the least elastic demand: farmer Jack's pumpkin pie, pumpkin pie, pies in general, food.(1) farmer Jack's pumpkin pie, (2) pumpkin pie, (3) pies in general, (4) food47. A relatively inelastic demand curve israther steep and negatively-sloped.48. If the demand curve is perfectly inelastic, then an increase in supply will:decrease the price but result in no change in the quantity exchanged.49. If the cross-price elasticity of demand (xpEd) between two goods, X and Y, equals +6.7:the two goods must must be substitutes.50. Which of the following pairs of goods would most likely exhibit a cross-price elasticity of demand (xpEd) of - 3.5?Eastgate Cinema movie tickets and theater Popcorn buckets