Exam 1 Sample B

1. Scarcity exists
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1. Scarcity exists
C. because our unlimited wants exceed our limited resources.
2. Water is classified as "land" by economists because
A. it is a natural resource.
3. Which of the following would be considered "capital," as we defined the term in class?
B. a computer used in a business office.
4. The branch of economics that studies the decisions made by individual firms and individual consumers is called:
microeconomics
5. The phrase economists use that means "all else equal" is
A. ceteris paribus.
6. Which of the following best distinguishes a "command/control economy" from a "capitalist/market economy"?
D. Production and distribution decisions are made by governmental central planners in a command economy, but by prices in a market economy.
7. Select the answer below that today correctly ranks the listed nations from the most reliance on markets to the least reliance on markets?
D. United States, Sweden, China, North Korea
8. Which of the following statements is(are) TRUE?
A. All of the above are true.
9. Commitments to fight the war on terrorism
A. divert resources from producing goods and services in other industries such as vaccine production or education.
10. Jose's boss offers him twice his usual wage rate to work tonight instead of taking his girlfriend on a romantic date. This offer:
B. will increase his opportunity cost of going on the date.
11. Which of the following would shift a country's Production Possibilities Frontier (PPF) to the right?A. An improvement in the general level of literacy and education.12. One key way an economy can achieve economic growth in the future is toA. produce fewer consumption goods and more capital goods today.13. From the information above, the opportunity cost of increasing gun production from 10,000 guns to 20,000 guns isA. 10,000 fewer lbs. of butter.14. From the information above, if actual production were 40,000 guns and 30,000 lbs of butter, one would conclude thatA. some resources are unemployed or underemployed.15. A shift of the demand curve from D1 to D2 in the above graph would be termedC. an increase in demand.16. Which of the following will NOT shift the demand curve for iced tea to the right?D. a decrease in the price of iced tea17. Assume vodka and whiskey are considered by consumers to be substitutes. The likely economic impact of a decrease in the price of whiskey is:B. a leftward shift of the demand curve for vodka.18. Assume hamburgers and fries are complementary goods. If the price of hamburgers decreases:B. the demand for fries will increase.19. Which of the following is most likely an "inferior good"?A. low quality cuts of meat20. Research has shown that the demand for Ramen Noodles, a food commonly eaten by low-income households, shifted to the right. A reasonable cause might beD. a drop in incomes due to an economy-wide slowdown (e.g. a recession).21. A supply curve shows:B. how many units producers are willing and able to sell at various prices.22. Steel is a key input in the production of automobiles. If the cost of steel decreases dramatically, there will beD. increase the supply of ethanol (right shift of supply curve).23. Ceteris paribus, an increase in governmental subsidies to ethanol producers will:D. increase the supply of ethanol (right shift of supply curve).24. At the equilibrium price for gasoline:D. all of the above.25. A market will experience a _______whenever the price is above the equilibrium price and a _______ whenever the price is below the equilibrium price.C. surplus; shortage26. From the graph above, the equilibrium price of butter is:C. $3 per pound.27. If the government imposes a price floor of $4 per pound of butter, there will existB. a surplus of 4,000 pounds of butter28. In a freely operating market, when there exists a shortage at the current price, the ____________ to eliminate the shortage.B. demand curve for Nike® soccer balls will shift to the left; fall29. Suppose American consumers, in support of a ban on child labor, decide to boycott soccer balls made by Nike®. Ceteris paribus, the _________________ and the equilibrium price of Nike® soccer balls will ______.B. demand curve for Nike® soccer balls will shift to the left; fall30. Consider the market for argyle socks. Suppose there is a successful ad campaign (starring Pee Wee Herman) that significantly increases the popularity of wearing argyle socks. What effect will the increase in popularity have on the equilibrium price and quantity of argyle socks, ceteris paribus?A. price and quantity will rise31. Consider the market for pumpkins. Suppose too much rain makes for a poor growing season for pumpkins. Ceteris paribus, this will lead toB. a decrease in the supply of pumpkins and an increase in the price of pumpkins.32. Consider the market for Paris Hilton bobblehead dolls. Ceteris paribus, if consumers expect these bobbleheads to be cheaper tomorrow, the demand for these dolls today will shift to the _______ and this will cause the equilibrium price of these bobbleheads to ______.A. left; fall33. Assume Ruffles® potato chips and Lays® potato chips are substitutes. If the price of Ruffles® rises, then, everything else equal:C. the price of Lays® will rise.34. Assume Ray-Ban sunglasses are a normal good. Ceteris paribus, if incomes increase we would expect a(n) __________ in the demand for Ray-Ban sunglasses and a(n) ___________ in the price of these sunglasses.A. increase; increase.35. A price floor is ___________ and an example is __________.B. price ceiling; shortage36. The graph above portrays the market for gasoline in which a ____________has been imposed, resulting in a ____________of gasoline.B. price ceiling; shortage37. The price of a lollipop increased by 10%. Consequently, quantity demanded fell by 5%. The price-elasticity of demand for lollipops, pEd , isB. 0.538. If the demand for a given good is perfectly inelastic, thenD. all of the above are correct.39. The demand for _______ is more price elastic than the demand for _______.A. the Evian brand of water; water in general40. Suppose the price elasticity of demand, pEd , for a seasonal allergy medicine is 2.3 in Arizona and 1.2 in Colorado. From this information, we can conclude thatB. a one percent increase in price will cause a larger percentage drop in quantity demanded in Arizona than in Colorado.41. Suppose Wallaby, Inc. produces two products, Kangaroo Kookies and Crocodile Crunchies. If Kangaroo Kookies have a price elasticity of demand of 0.2 and Crocodile Crunchies have a price elasticity demand of 5.5, what pricing changes can the firm implement to increase its Total Revenue?A. Increase the price of Kangaroo Kookies and decrease the price of Crocodile Crunchies42. If the income elasticity of a good is negative (i.e. yEd<0), then we can conclude that the good is a(n) ________ good.inferior43. Suppose the price of Nintendo video game consoles increases by 10 percent and, as a result, PlayStation 2 video game consoles experience a 15 percent rise in demand. The value of the cross-price elasticity of demand ( xpEd ) for PlayStation 2 video game consoles isA. 1.544. Supply is more elasticB. the greater the ability of a firm to find additional inputs.45. When the quantity supplied of Sam's Sausage and Salami Pizza increases 30% in response to a 10% increase in the price he can charge for his pizzas, we can conclude that Sam's supply iselasticAfter a cruise ship is hijacked at sea by terrorists, fearful consumers seek to take their vacations on land. At the same time, cruise employees wage costs increase. The effect of these simultaneous shifts on the market for cruise vacations is: A. an increase in both the equilibrium price and quantity of cruise vacations.D. an uncertain impact on the equilibrium price and a decrease in the quantity of cruise vacations purchased.