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• Exam 1
  • Question 1
  • Question 2
  • Question 3
  • Question 4
  • Question 5
  • Question 6
  • Question 7
  • Question 8
  • Question 9
  • Question 10
  • Question 11
  • Question 12
  • Question 13
  • Question 14
  • Question 15
  • Question 16
  • Question 17
  • Question 18
  • Question 19
  • Question 20
  • Question 21
  • Question 22
  • Question 23
  • Question 24
  • Question 25
  • Question 26
  • Question 27
  • Question 28
  • Question 29
  • Question 30
  • Question 31
  • Question 32
  • Question 33
  • Question 34
  • Question 35
  • Question 36
  • Question 37
  • Question 38
  • Question 39
  • Question 40
  • Question 41
  • Question 42
  • Question 43
  • Question 44
  • Question 45
  • Question 46
  • Question 47
  • Question 48
  • Question 49
  • Question 50

Exam 1

Each question is equally worth 2 points. The exam is worth 100 points.

Question 1

(Figure: Production Possibilities Frontier II.) Use the figure Production Possibilities Frontier II. What kind of opportunity costs does the shape of the PPF indicate?

Figure: The Production Possibilities Frontier II

A. constant opportunity costs
B. decreasing opportunity costs
C. no opportunity costs
D. increasing opportunity costs

Answer

D. increasing opportunity costs

Question 2

(Figure: The Production Possibilities Frontier I.) Use the figure The Production Possibilities Frontier I. If this economy is currently producing a combination of output represented by point D, what is the opportunity cost of producing one more television?

Figure: The Production Possibilities Frontier I

A. three lamps
B. one lamp
C. one-third of a lamp
D. nine lamps

Answer

A. three lamps

Question 3

(Figure: The Production Possibilities Frontier III) Use the figure The Production Possibilities Frontier III. Which point is unattainable given the current availability of resources?

Figure: The Production Possibilities Frontier III

A. I
B. K
C. J
D. L

Answer

A. three lamps

Question 4

Economic growth has occurred if:

A. the amount of resources and technology available has decreased.
B. opportunity costs have have decreased.
C. idle resources have been put to use.
D. the maximum amount of production in an economy has increased.

Answer

D. the maximum amount of production in an economy has increased.

Question 5

Which of the following is an example of normative economics?

A. Minneapolis has been rated as one of the cleanest cities in the United States.
B. The city of Seattle is among the U.S. cities with the highest cost of living.
C. A higher carbon tax will likely reduce electricity consumption and improve air quality in our cities.
D. Our city leaders must spend more money on crime prevention and hire more police officers.

Answer

D. Our city leaders must spend more money on crime prevention and hire more police officers.

Question 6

Theo has only 10 minutes to eat breakfast each morning. What is the term for the condition that Theo faces?

A. normative economics
B. scarcity
C. ceteris paribus
D. incentives

Answer

B. scarcity

Question 7

______ is the study of the economy as a whole.

A. Macroeconomics
B. International economics
C. Labor economics
D. Microeconomics

Answer

A. Macroeconomics

Question 8

A policy maker is faced with a dilemma: she can use tax dollars to build either a bridge or a new high school. Which of the following is the opportunity cost of the high school?

A. the cost of construction for the high school
B. the value that people place on building a bridge
C. the cost of construction for the bridge
D. the value that people place on building a high school

Answer

B. the value that people place on building a bridge

Question 9

What combinations of production are efficient in a production possibilities frontier (PPF)?

A. all points that are on the PPF
B. all points that lie on the axes
C. all points that are outside the PPF
D. all points that are inside the PPF

Answer

A. all points that are on the PPF

Question 10

(Figure: The Production Possibilities Frontier III.) Use the figure The Production Possibilities Frontier III. An economy that wants to produce an efficient combination of goods would NOT choose the combination of goods represented by point:

Figure: The Production Possibilities Frontier III

A. J
B. G
C. K
D. I

Answer

A. J

Question 11

Oliver’s lumberyard is deciding on whether he should produce more sheets of plywood or more hardwood flooring. Which of the three fundamental economic questions is he trying to answer?

A. How to produce goods?
B. Is the economy efficient?
C. What to produce?
D. For whom to produce?

Answer

C. What to produce?

Question 12

Which of the following is an example of normative economics?

A. The inflation rate is too high, and the central bank must take measures to lower it.
B. The city of Portland has one of the highest rates of homelessness in the nation.
C. The consumer price index is higher this year than it was last year.
D. A higher gasoline tax will likely reduce gasoline consumption and improve air quality in our cities.

Answer

A. The inflation rate is too high, and the central bank must take measures to lower it.

Question 13

In the circular flow diagram, _____ are traded in product markets, and _____ are traded in factor markets.

A. transfer payments; taxes
B. goods and services; resources
C. resources; goods
D. services; goods

Answer

B. goods and services; resources

Question 14

Traditional economies make economic decisions based on:

A. precedent.
B. markets.
C. supply and demand.
D. elected committees.

Answer

A. precedent.

Question 15

The ability to assemble all of the other factors of production into a good falls under the category of:

A. labor.
B. land.
C. entrepreneurship.
D. capital.

Answer

C. entrepreneurship.

Question 16

If the goods and services that are produced in a society are allocated in such a way that the ones who receive those goods and services are the ones who value them the most, what economic question has been answered?

A. What should be produced?
B. For whom should it be produced?
C. What should the price be?
D. How should it be produced?

Answer

B. For whom should it be produced?

Question 17

A business owner receives which of the following types of payment in return for the willingness to accept risk and innovate?

A. credit
B. profit
C. rent
D. wages

Answer

B. profit

Question 18

If an entrepreneur wants the tightest control over the decision making in a firm, what is the best type of firm to operate?

A. corporation
B. partnership
C. limited liability partnership (LLP)
D. sole proprietorship

Answer

D. sole proprietorship

Question 19

In order to purchase goods and services and factors of production, a government must:

A. provide transfer payments.
B. pay dividends.
C. collect taxes.
D. issue stock.

Answer

C. collect taxes.

Question 20

An economy in which economic decisions are based primarily on the interactions of buyers and sellers is known as a _____ economy.

A. market-based
B. traditional
C. command
D. socialist

Answer

A. market-based.

Question 21

When power plants switch from using coal as a fuel for electricity generation to using less expensive natural gas as a fuel, it demonstrates which of the economic questions?

A. For whom should it be produced?
B. Where shall we produce?
C. What shall be produced?
D. How should it be produced?

Answer

D. How should it be produced?

Question 22

An organization that has the authority to lead and govern is called a:

A. corporation.
B. partnership.
C. limited liability corporation (LLC).
D. government.

Answer

D. government.

Question 23

If chips and pretzels are substitutes, then when the price of chips decreases, the quantity demanded of chips _____, and the demand for pretzels _____.

A. decreases; increases
B. increases; increases
C. increases; decreases
D. decreases; decreases

Answer

C. increases; decreases

Question 24

(Table: Demand Schedule for Pairs of Leather Boots) Use Table: Demand Schedule for Pairs of Leather Boots. What is the highest price that can be charged to make all three potential buyers willing to buy boots?

A. \$80
B. \$70
C. \$50
D. \$60

Answer

C. \$50

Question 25

If bologna is an inferior good, when average consumer income rises, the demand curve for bologna will _____, all else equal.

A. decrease
B. increase
C. see a movement upward along the curve
D. remain unchanged

Answer

A. decrease

Question 26

When the price of ice cream cones is \$2 per cone, Celine buys three cones in a month. Which of the following describes a downward movement along Celine’s monthly demand for ice cream cones?

A. When the price of ice cream cones is \$1, she will buy four cones per month.
B. When the price of ice cream cones is \$2, she will buy four cones per month.
C. When the price of ice cream cones is \$2, she will buy two cones per month.
D. When the price of ice cream cones is \$3, she will buy two cones per month.

Answer

A. When the price of ice cream cones is \$1, she will buy four cones per month.

Question 27

Suppose that persuasive advertising has caused people to increase their demand for orange juice. This increase in demand can best be attributed to a change in _____, all else equal.

A. the price of a substitute good
B. the price of the good
C. income
D. tastes

Answer

D. tastes

Question 28

If something changes that makes people more willing to buy a good at every possible price, this represents:

A. an increase in quantity demanded.
B. an increase in demand.
C. a decrease in demand.
D. a decrease in quantity demanded.

Answer

B. an increase in demand.

Question 29

Netta considers apples and oranges complements. All else equal, what will happen to Netta’s demand for oranges when the price of apples increases?

A. The demand for oranges will shift to the right.
B. The quantity demanded of oranges will increase.
C. The demand for oranges will not be affected.
D. The demand for oranges will shift to the left.

Answer

D. The demand for oranges will shift to the left.

Question 30

When the price of chips increases, Hector’s demand for soda decreases. What kinds of goods does Hector consider chips and soda?

A. normal goods
B. inferior goods
C. substitutes
D. complements

Answer

D. complements

Question 31

What is measured on the horizontal axis of a demand graph?

A. quantity
B. utility
C. price
D. satisfaction

Answer

A. quantity

Question 32

Consumers are worried that the economy will soon slip into a recession and incomes will fall. Assuming that gasoline is a normal good, today the demand curve for gasoline will _____, all else equal.

A. see a movement downward along the curve
B. decrease
C. increase
D. remain unchanged

Answer

B. decrease

Question 33

Which of the following concepts best describes why a consumer’s willingness to pay for a good decreases as the quantity consumed increases?

A. constant marginal benefit
B. increasing additional cost
C. decreasing additional cost
D. diminishing marginal utility

Answer

D. diminishing marginal utility

Question 34

An increase in demand will be caused by:

A. an increase in the price of a good.
B. a change in something other than price.
C. a decrease in the price of a good.
D. a decrease in utility

Answer

B. a change in something other than price.

Question 35

If gasoline is a normal good and all else is qual, when average consumer income falls, the demand curve for gasoline will:

A. see a movement downward along the curve.
B. remain unchanged.
C. decrease.
D. increase.

Answer

C. decrease.

Question 36

The satisfaction or happiness received from consuming one more unit of a good is the:

A. demand schedule.
B. marginal utility.
C. maximum willingness to pay.
D. quantity demanded.

Answer

B. marginal utility.

Question 37

The law of supply implies that supply curves are always:

A. upward sloping.
B. horizontal.
C. downward sloping.
D. vertical.

Answer

A. upward sloping.

Question 38

Suppliers are willing to supply a higher quantity only at higher prices because they:

A. will charge whatever buyers are willing to pay.
B. have to take a market price as given.
C. have higher opportunity costs as more is supplied.
D. are greedy.

Answer

C. have higher opportunity costs as more is supplied.

Question 39

_____ is the amount by which the price exceeds the marginal cost of each unit sold.

A. Producer surplus
B. Consumer surplus
C. Marginal revenue
A. Profit

Answer

A. Producer surplus

Question 40

Which of the following best describes why suppliers of handmade bead necklaces are willing to supply higher quantities of necklaces only when the price of necklaces increases?

A. Necklace producers must give up increasingly valuable periods of their day to produce them.
B. The total cost of production increases as more necklaces are produced.
C. The cost of a typical necklace is always increasing.
D. There is no scarcity in the resources that are available to suppliers of necklaces.

Answer

A. Necklace producers must give up increasingly valuable periods of their day to produce them.

Question 41

What does the word marginal mean in the term marginal cost?

A. average
B. best
C. lowest
D. one more

Answer

D. one more

Question 42

(Table: The Supply Schedule for Beaded Necklaces) Use the table The Supply Schedule for Beaded Necklaces. What is the market supply at a price of \$20?

A. six
B. zero
C. two
D. three

Answer

A. six

Question 43

(Figure: The Supply of Radishes) Use the figure The Supply of Radishes. Which of the following changes would cause the movement shown in this graph?

Figure: The Supply of Radishes

A. an elimination of radish pests
B. improved technology for radish harvesting
C. higher wages for radish pickers
D. reduced regulation of radish farms

Answer

C. higher wages for radish pickers

Question 44

(Figure: A Change in the Supply Curve II) Use the figure A Change in the Supply Curve II. What caused the change shown in this graph?

Figure: A Change in the Supply Curve II

A. Consumer incomes increased.
B. The price of a substitute in production to this good increased.
C. The prices of the resources used to produce this good have gotten cheaper.
D. There are more firms in this market.

Answer

B. The price of a substitute in production to this good increased.

Question 45

Maria is a baker. The price of kolaches increased, and as a result, Maria’s supply of croissants decreased. What are these two goods?

A. substitutes in consumption
B. substitutes in production
C. complements in production
D. complements in consumption

Answer

B. substitutes in production

Question 46

(Figure: Producer Surplus in the Market for Marzipan I). Use the figure Producer Surplus in the Market for Marzipan I. What is producer surplus at a price of $5 per pound?

A. \$2
B. \$4
C. \$6
D. \$5

Answer

B. \$4

Question 47

A curve that illustrates the relationship between the price of a good or service and the quantity that firms are willing to supply is called the:

A. demand curve.
B. production possibilities frontier.
C. supply curve.
D. average cost curve.

Answer

C. supply curve.

Question 48

Which of the following does NOT cause the supply curve to increase?

A. an increase in the number of sellers
B. cheaper resources used to produce the good
C. a decrease in the number of sellers
D. higher consumer incomes

Answer

D. higher consumer incomes

Question 49

(Table: The Supply Schedule for Beaded Necklaces) Use the table The Supply Schedule for Beaded Necklaces. What can be inferred about Abby when the price of necklaces is \$20?

A. Her opportunity cost of producing a necklace is higher than \$20.
B. Her total cost of producing a typical necklace when she produced four necklaces is higher than \$20.
C. She values the opportunity cost of her time to produce one necklace at \$20.
D. She has a net gain of producing necklaces when the price less than \$20.

Answer

C. She values the opportunity cost of her time to produce one necklace at \$20.

Question 50

Suppose that ideal weather conditions, including optimal rainfall, have created an enormous soybean crop in the United States. How would this affect the supply of soybeans in the United States?

A. There would be a shift to the right of the supply curve.
B. There would be a shift to the left of the supply curve.
C. There would be an upward movement to the right along a supply curve.
D. There would be a downward movement to the left along a supply curve.

Answer

A. There would be a shift to the right of the supply curve.