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Chapters(1-5)

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Quiz on Chapters(1-5), created by Daniyar Nurekenov on 27/12/2018.
Daniyar Nurekenov
Quiz by Daniyar Nurekenov, updated more than 1 year ago
Daniyar Nurekenov
Created by Daniyar Nurekenov almost 6 years ago
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Question 1

Question
Government policies designed to promote efficiency:
Answer
  • a. usually do so at the expense of equity.
  • b. tend to cause the economy to grow more slowly.
  • c. always fail.
  • d. require very high taxes.

Question 2

Question
All of the following can be considered a student's costs of going to college, EXCEPT:
Answer
  • a. textbooks.
  • b. tuition and fees.
  • c. room and board (that costs her about the same as she was paying before entering college).
  • d. the student's time, which can no longer be devoted to earning a salary.

Question 3

Question
An airline's plane from Los Angeles to New York is about to take off, but it still has a few seats empty. If the average cost per seat is $500, what price should the airline charge passengers in standby to fill in those remaining seats? (Consider that quantitative decisions are made at the margin)
Answer
  • At least $500.
  • Exactly $500.
  • Any price above zero that will entice standby passengers to take the flight.
  • Slightly less than $500.

Question 4

Question
The Federal government enacted regulation in the 1960s requiring people to wear seatbelts in their cars. All of the following resulted from this regulation, EXCEPT:
Answer
  • overall deaths due to car accidents changed very little in the United States.
  • fewer deaths occurred per accident.
  • fewer pedestrians were killed in car accidents.
  • the frequency of accidents increased.

Question 5

Question
When two persons trade goods:
Answer
  • one person always gains at the expense of the other.
  • both persons usually gain from the exchange.
  • one person usually gains at the expense of the other.
  • the overall well being of

Question 6

Question
In a market economy, the decisions of what and how much to produce are made by:
Answer
  • voters in elections.
  • all producers and consumers.
  • the government only.
  • non governmental agencies.

Question 7

Question
Even though markets do a great job in organizing economic activity, governments are needed to do all of the following EXCEPT:
Answer
  • establish and enforce property rights.
  • intervene when markets fail due to externalities.
  • intervene when markets fail due to market power.
  • decide what and how much should be produced.

Question 8

Question
Living standards in the United States have risen tremendously over the years, mainly due to:
Answer
  • relentless increases in the productivity of labor over the years.
  • the forceful efforts of labor unions.
  • successive increases in the minimum wage.
  • trade protection from competition from countries

Question 9

Question
Rapid and persistent inflation occurs mainly due to
Answer
  • high wage increases demanded by labor unions
  • greedy firms that abuse consumers with higher-than-necessary prices.
  • rapid increases in the quantity of money in the economy.
  • trade with other countries.

Question 10

Question
A government that implements a policy designed to reduce inflation can expect unemployment to:
Answer
  • increase in the short-run.
  • decrease in the short-run.
  • increase in the long-run.
  • decrease in the long-run.

Question 11

Question
Which of the following is FALSE, regarding economics as a science?
Answer
  • Economic knowledge is obtained through the scientific method, just as in any other science.
  • It is difficult to conduct experiments in economic matters.
  • Economists pay close attention to natural experiments resulting from historical events.
  • Economic theories represent irrefutable facts.

Question 12

Question
Economists use assumptions in order to:
Answer
  • ecreate real situations accurately, with all their complexity.
  • avoid dealing with issues they would rather not talk about.
  • simplify economic theories, so as to make it possible to answer economic questions.
  • make their theories more realistic.

Question 13

Question
Economic models are:
Answer
  • simplified versions of economic theories.
  • All of the other options are true.
  • created by making assumptions.
  • usually composed of diagrams and equations.

Question 14

Question
All of the following are characteristics of the circular-flow model of the economy, EXCEPT:
Answer
  • the model has two markets: one for goods and services and one for factors of production.
  • the model includes two sectors: firms and households
  • the model describes two circular flows: one for inputs and one for outputs
  • the two flows described by the model move in opposite directions.

Question 15

Question
In the circular-flow model of the economy:
Answer
  • the economy has only two sectors: firms and households.
  • dollars in the economy are used over and over in an endless cycle.
  • firms produce and provide factors of production.
  • the government is the source of revenue for households to purchase goods and services from firms.

Question 16

Question
Which of the following is true regarding the production possibilities frontier (PPF) for the economy?
Answer
  • Any point on the PPF represents an efficient level of production.
  • Any point inside the PPF represents a combination of production that is not feasible.
  • The opportunity cost of producing one more unit of one of the goods remains the same at any point along the PPF.
  • Increases in the resources available for production will cause the PPF to shift toward the origin.

Question 17

Question
Economic growth in the economy can be portrayed in the model of the production possibilities frontier as a:
Answer
  • movement up and left along the PPF.
  • shift of the PPF away from the origin.
  • movement down and right along the PPF.
  • shift of the PPF toward the origin.

Question 18

Question
Microeconomics is the study of:
Answer
  • how governments can get the economy out of a recession.
  • economy-wide phenomena, including inflation, unemployment, and economic growth.
  • how households and firms make decisions and how they interact in markets.
  • how governments can reduce inflation

Question 19

Question
Which of the following is an example of a normative statement?
Answer
  • Higher interest rates will cause people to borrow and invest less.
  • The government should increase spending during recessions, so that the economy recovers quickly.
  • When the price of a good increases, consumers respond by reducing the quantity of that good they want to purchase.
  • Over the past 50 years, the number of women who participate in the labor force has increased dramatically.

Question 20

Question
Economists tend to disagree with each other because:
Answer
  • different economists espouse different theories, so they believe different things are going on in the economy.
  • different economists make different assumptions to theories, leading them to different conclusions in economic matters
  • different economists have different values and priorities in economic matters.
  • All the other options are true.

Question 21

Question
Which of the following is NOT a characteristic of a perfectly competitive market?
Answer
  • The goods being offered for sale are all the same.
  • There are a large number of buyers and sellers.
  • Buyers and sellers are price takers.
  • It is difficult for new firms to enter the market.

Question 22

Question
A market with only one firm is called:
Answer
  • an oligopoly.
  • a monopoly.
  • perfect competition.
  • monopolistic competition.

Question 23

Question
An increase in demand means that:
Answer
  • when price falls consumers are willing to purchase greater quantities of the good.
  • consumers are willing to purchase greater quantities of the good at any given price.
  • when the price rises, consumers are willing to purchase greater quantities of the good.
  • consumers cause the price drop by buying greater quantities of the good.

Question 24

Question
If good B is a substitute for good A, and the price of good B increases:
Answer
  • the quantity demanded of good A will decrease.
  • the demand for good A will increase.
  • the price of good A will decrease.
  • the quantity demanded of good B will increase.

Question 25

Question
When the price of good X increases:
Answer
  • the quantity supplied of good X will increase.
  • the quantity supplied of good X will decrease.
  • the supply curve for good X will shift to the right.
  • the supply curve for good X will shift to the left.

Question 26

Question
A new technology that helps firms reduce production costs will cause a:
Answer
  • movement down and left along the supply curve.
  • movement up and right along the supply curve.
  • shift to the right of the supply curve.
  • shift to the left of the supply curve.

Question 27

Question
If the price in a market happens to be below equilibrium, there will be a ________ in the market, and the price will tend to ________.
Answer
  • surplus, fall
  • surplus, rise
  • shortage, fall
  • shortage, rise

Question 28

Question
If the price in a market happens to be above equilibrium, there will be a ________ in the market, and the price will tend to ________.
Answer
  • surplus, fall
  • surplus, rise
  • shortage, fall
  • shortage, rise

Question 29

Question
Suppose that a scientific study just published demonstrates that eating apples makes people much healthier. How will this affect the equilibrium price and quantity in the market?
Answer
  • The equilibrium price will increase and the equilibrium quantity will decrease.
  • The equilibrium price will decrease and the equilibrium quantity will increase.
  • Both the equilibrium quantity and price will increase.
  • Both the equilibrium quantity and price will decrease.

Question 30

Question
Suppose the price of corn syrup increases. Given that corn syrup is a major ingredient in the production of soft drinks, how will this affect the equilibrium price and quantity in the soft drink market?
Answer
  • The equilibrium price will increase and the equilibrium quantity will decrease.
  • The equilibrium price will decrease and the equilibrium quantity will increase
  • Both the equilibrium quantity and price will increase
  • Both the equilibrium quantity and price will decrease.

Question 31

Question
The production possibilities frontiers used to explain trade are straight lines because:
Answer
  • it is assumed the farmer and rancher can switch at a constant rate from producing meat to producing potatoes
  • that is always true when the same person produces two goods.
  • the farmer is better than the rancher in producing both goods.
  • the gains of trade will benefit the farmer and the rancher.

Question 32

Question
The principle of absolute advantage refers to the situation in which one producer
Answer
  • can produce a good in greater quantities than other producers.
  • can produce a good using less resources than other producers.
  • is able to produce exactly the same quantity of a good as other producers.
  • has access to more resources than other producers.

Question 33

Question
The principle of comparative advantage refers to the situation in which one producer:
Answer
  • has a lower opportunity cost than other producers in the production of a good.
  • can produce a good in greater quantities than other producers.
  • has access to more resources than other producers.
  • can produce a good using more resources than other producers.

Question 34

Question
Which of the following is true regarding the principle of comparative advantage?
Answer
  • Nations should specialize in producing those goods for which they have a lower opportunity cost.
  • Nations should export goods for which they do not have an absolute advantage.
  • Nations should specialize in producing those goods for which they have an absolute advantage.
  • Nations should export goods for which they have a higher opportunity cost.

Question 35

Question
Which of the following is true regarding the principle of absolute advantage?
Answer
  • A nation cannot have an absolute advantage in more than one good.
  • A nation with an absolute advantage in the production of a good may have a comparative advantage in the production of the same good.
  • A nation has nothing to gain from trade if it can produce more of a good than other nations.
  • A nation has nothing to gain from trade if it has more resources than other nations.

Question 36

Question
The boy next door has offered to mow Tiger Woods' lawn. It will take this boy twice as long as Tiger Woods to mow the lawn. Should Tiger Woods let the boy mow his lawn, instead of doing it himself?
Answer
  • Yes, as long as the boy has a lower opportunity cost than Tiger Woods.
  • Yes, because the boy next door needs the money and Tiger Woods can help him out that way.
  • No, because it will be more efficient if Tiger Woods mows his own lawn, since he can do it faster.
  • No, because Tiger Woods has better things to do with his money than pay the boy to mow the lawn.

Question 37

Question
Suppose that engaging in free trade means we have to stop making cars, which could cause American car manufacturers to reduce output and could cause people to lose jobs. Is it worth it having free trade?
Answer
  • Yes, because in spite of the lost jobs, we still want to get along with other nations.
  • Yes, because the gains outweigh the losses: new businesses and new jobs will flourish in other industries.
  • No, because we need to protect our jobs.
  • No, because our wages would have to fall drastically to make us remain competitive with low wage countries.

Question 38

Question
Suppose that Jill can type 10 pages per hour on the computer, while Jim can only type 8. Further suppose that Jill can review 5 articles per hour while Jim can only review 2. If they are working on a final project together, who should specialize in what task in order to be as productive as possible?
Answer
  • Jill should specialize in typing and Jim in reviewing articles.
  • Jill should specialize in reviewing articles and Jim in typing.
  • . Jill should perform both tasks, since she is better at both than Jim.
  • Jim should perform both tasks, since he is better at both than Jill.

Question 39

Question
Suppose that Jill can type 10 pages per hour on the computer, while Jim can only type 8. Further suppose that Jill can review 5 articles per hour while Jim can only review 2. Based on this, we can say that:
Answer
  • Jim has a comparative advantage over Jill in reviewing articles.
  • Jill has an absolute advantage over Jim in reviewing articles.
  • Jim has an absolute advantage over Jill in typing
  • Jill has a comparative advantage over Jim in typing.

Question 40

Question
The principle of comparative advantage suggests all of the following, EXCEPT:
Answer
  • specialization allows producers to become more efficient.
  • free trade tends to cause bankruptcies and high unemployment.
  • free trade allows producers to specialize.
  • as producers become more efficient, overall production increases, making everybody better off.

Question 41

Question
A good will tend to have an inelastic demand if:
Answer
  • the good has many close substitutes
  • the good is a luxury
  • the market is defined very broadly.
  • the time horizon is long.

Question 42

Question
A perfectly elastic demand is represented graphically by a:
Answer
  • relatively steep demand curve.
  • relatively flat demand curve
  • vertical demand curve.
  • horizontal demand curve

Question 43

Question
What effect will an increase in the price have on total revenue if demand is elastic?
Answer
  • Total revenue will increase.
  • Total revenue will decrease.
  • Total revenue will first decrease and then increase.
  • Total revenue will remain unchanged.

Question 44

Question
The price elasticity of demand tends to be more elastic:
Answer
  • at points further up and to the left along the demand curve.
  • at points further down and to the right along the demand curve.
  • when the demand curve becomes steeper.
  • when the demand curve is vertical.

Question 45

Question
Suppose that General Cars increases the price of its Cadiclap model from $13,500 to $16,500. As a result of this, the quantity demanded of the Cadiclap model decreases from 600,000 to 400,000 per year. Find the price elasticity of demand of the Cadiclap using the mid-point method.
Answer
  • -3.0
  • -0.5
  • -2.0
  • -0.3

Question 46

Question
If a firm needs to increase its total revenue, the firm should ________ the price if the demand for its product is ________.
Answer
  • raise, inelastic
  • raise, elastic
  • drop, elastic
  • drop, unit elastic

Question 47

Question
Suppose that consumers' incomes rise by 3% and this causes demand for a good to increase by 4.5%. What is the income elasticity of demand?
Answer
  • 1.50
  • 0.67
  • -1.50
  • -0.67

Question 48

Question
Suppose that a good has an income elasticity of demand of -2.0. This means that the good is:
Answer
  • normal.
  • inferior.
  • a substitute.
  • a complement.

Question 49

Question
Suppose that two goods have a cross-price elasticity of demand of -0.8. This means that these goods are:
Answer
  • normal
  • inferior
  • substitutes.
  • complements.

Question 50

Question
The price of good A increases from $4.50 to $5.50. This causes the quantity demanded of good B to increase from 900 to 1100 units per month. Find the cross price elasticity of demand using the mid-point method.
Answer
  • -1.0
  • +2.0
  • +1.0
  • -2.0
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