Exam 1 Review

Which of the following statements best represents the fact that I cannot put in extra hours of work because of scarcity? a. I don't have enough time for additional work because I need to spend time with my family and there are only so many hours in the day. b. I don't like going to work, so why would I work more than I have to? c. I don't think that overtime pay is high enough. d. I am worried that if I work extra hours, I will get bored with my job. e. I don't want my coworkers to feel pressure to work more because I am working additional hours.

Rational decision-making under conditions of scarcity requires individuals to: a. place a monetary value on everything. b. know the prices of all goods they might buy. c. be alert to price reductions on desired products. d. understand that trade-offs are necessary. e. earn as much income as possible.

Assume that the price of rubber increased at the same time that Michael Jordan, arguably the best NBA basketball player of all time, became famous. What do you expect to happen to the equilibrium price and equilibrium quantity of the basketball shoes that are promoted by Michael Jordan? a. Equilibrium price will go up and equilibrium quantity will go down. b. Equilibrium price will go up and equilibrium quantity will go up. c. Equilibrium price will go down and equilibrium quantity will be indeterminate. d. Equilibrium price will go down and equilibrium quantity will go up. e. Equilibrium price will go up and equilibrium quantity will be indeterminate.

Given an eight-hour workday, and to experience gains from trade, a. Alicia should make pizzas and Jay-Z should make cheesesteaks. b. Alicia should make cheesesteaks and Jay-Z should make pizzas. c. each should make their own cheesesteaks and pizzas. d. Alicia should produce both pizzas and cheesesteaks. e. Jay-Z should produce both pizzas and cheesesteaks.

During the winter months, many elderly persons leave their homes in northern New York and travel south to Florida or Arizona. What would you expect to happen to the equilibrium price and quantity of items most used by the elderly in northern New York? a. They would both increase. b. They would both decrease. c. One would increase and one would decrease, but we don't know which would do what. d. The price would increase and the quantity would decrease. e. The price would decrease and the quantity would increase.

Refer to the table below: Assume that the market for iPods has only two consumers: Chuck and Ryan. According the table above, if the price of an iPod is $85, the market will demand: a. 8 iPods. b. 6 iPods. c. 5 iPods. d. 28 iPods. e. 45 iPods.

Instead of deciding to finish high school, you could have decided to work full-time. How would an economist explain your decision to receive your high school degree? a. The cost of going to high school was greater than the benefit of working full-time. b. The benefit of working full-time was greater than the benefit of going to high school. c. The benefit of going to high school was greater than the benefit of working full-time. d. The cost of working full-time was greater than the benefit of going to high school. e. The benefit of working full-time was greater than the cost of going to high school.

The ability of one producer to create more of a good than another producer using the same quantity of resources is called: a. comparative advantage. b. absolute advantage. c. a positive-sum game. d. gains from trade. e. the law of increasing relative cost.

If the cross-price elasticity between Good A and Good B is -1.5 and the percentage change in quantity demanded of Good B is 15%, what is the percentage change in the price of Good A? a. -10% b. -0.10% c. -11.50% d. -1% e. 11.50%

Some studies have shown that eating chocolate before a test can increase brain activity, thereby causing students to score higher on exams. When these findings were announced, the price and quantity sold of chocolate increased in college towns. One reason for this could have been that the: a. producers increased their supply of chocolate. b. consumers increased their demand for chocolate. c. producers increased their supply of chocolate and consumers increased their demand for chocolate. d. producers decreased their supply of chocolate. e. consumers decreased their demand of chocolate.

The equilibrium price of peanut butter is $5. A study comes out that says the fat in peanut butter is good for your heart. Holding all other factors constant, which of the following scenarios could happen? a. The price of peanut butter increases to $7 because of a supply shift. b. The price of peanut butter decreases to $4 because of a supply shift. c. The price of peanut butter decreases to $4 because of a demand shift. d. The price of peanut butter increases to $7 because of a demand shift. e. The price of peanut butter increases to $7 because of a demand AND a supply shift.

When the price increases by 30% and the quantity demanded drops by 30%, the price elasticity of demand is: a. perfectly inelastic. b. inelastic. c. unitary elastic. d. elastic. e. perfectly elastic.

When the government places a tax on the producer of a good or service: a. the demand curve for the good or service shifts to the right. b. the demand curve for the good or service shifts to the left. c. the supply curve for the good or service shifts to the right. d. the supply curve for the good or service shifts to the left. e. both the supply and demand curves for the good or service shifts to the left.

Something is an inferior good if the demand for the good: a. increases as the consumer's income increases. b. increases as the consumer's income decreases. c. decreases as the price of a complement increases. d. decreases as the price of a substitute increases. e. decreases as the consumer's income decreases.

Chuck drives past the same gas station every day. He realizes that the gas station always changes its prices on Tuesdays but keeps the price steady the rest of the week. On Saturday, Chuck turns on the news and hears a report projecting that the price of gasoline is going to increase. Holding all else constant, what do you think would happen to Chuck's demand for gasoline on Monday? a. His demand would shift to the right. b. His demand would shift to the left. c. You would see a movement down on his demand curve but no shift. d. You would see a movement up on his demand curve but no shift. e. You would see nothing happen to his demand curve until the price changed on Tuesday.

Cross-price elasticity measures the relationship between: a. normal goods and inferior goods. b. complements and inferior goods. c. necessities and luxuries. d. two goods and services. e. income and substitute goods.

Which of the following is both a shift in supply and a shift in demand? a. the number of firms in an industry b. tastes and preferences c. income changes d. expectations of future prices e. the number of buyers

Which of the following could cause the supply curve for the market for oranges to shift to the left? a. an increase in the income of consumers of oranges b. a decrease in the cost of workers c. an increase in the price of orange juice d. a new study saying that eating oranges will give you heart disease e. a severe hurricane in Florida

Graph ________ most likely shows the price elasticity of demand for the following situation: Bob's Boots can sell out its entire stock of shoe polish at $2.50 but can sell none if it raises the price to $2.55. A b. B c. C d. D e. E

A health insurance company may offer its policy-holders a discount on their premiums if they prove that they have stopped smoking. What type of incentive is the health insurance company offering? a. a direct incentive. b. an indirect incentive. c. a neutral incentive. d. a complementary incentive. e. an unintended incentive.

What good is most likely to have an income elasticity of demand equal to 0.3? a. medication b. takeout dinner c. used clothing d. laptop e. a download on iTunes

When both supply and demand shift to the left, the: a. equilibrium price always rises. b. equilibrium price always falls. c. equilibrium quantity always falls. d. equilibrium quantity always rises. e. equilibrium quantity is indeterminate.

Taxes cause the equilibrium price of a good to: a. increase. b. decrease. c. remain the same. d. go up only for producers. e. go down only for consumers.

Wine and cheese are complement goods because they are consumed together. What would you expect to happen to the equilibrium quantity of cheese if the price of wine increased and all else is held constant? a. It would increase because of a supply shift. b. It would increase because of a demand shift. c. It would stay the same because of both a demand and a supply shift. d. It would decrease because of a supply shift. e. It would decrease because of a demand shift.

An opportunity cost is the: a. lowest possible cost. b. highest possible cost. c. monetary price paid for a good or service. d. cost of a purchase or decision as measured by what is given up. e. cost of finding the lowest price for a product.

When supply shifts to the right and demand stays constant, the equilibrium price: a. increases and the equilibrium quantity decreases. b. increases and the equilibrium quantity increases. c. decreases and the equilibrium quantity decreases. d. decreases and the equilibrium quantity increases. e. stays the same and the equilibrium quantity increases.

A local sandwich shop can quickly place an order for food with its local vendors if it uses up its existing resources quickly. This indicates that the price elasticity of supply is: a. unitary elastic. b. perfectly elastic. c. perfectly inelastic. d. relatively elastic. e. relatively inelastic.

Which of the following scenarios best describes the change in the equilibrium shown in the accompanying graph? a. firms entering the market b. firms leaving the market c. buyers entering the market d. buyers leaving the market e. an input cost decreasing

An improvement in technology: a. is one way to shift the demand curve. b. always increases producers' profits. c. allows a producer to decrease output with the same amount of input. d. allows a producer to increase output with the same amount of input. e. shifts the supply curve to the left.

Which of the following is a positive statement? a. Individuals should make good long-term decisions. b. Corporations should maximize shareholder value. c. Government should reduce the level of unemployment. d. The most important effects of policy happen in the short term. e. The unemployment rate is 8%.

When a hurricane rips through Florida, the price of oranges rises because the: a. demand curve shifts to the left. b. supply curve shifts to the right. c. demand curve shifts to the right. d. supply curve shifts to the left. e. supply and demand curves both shift to the left.

Why do economists use models? a. Models are used to add complexity to a simple world. b. Models allow us to study a simplified version of a complex world. c. Models allow us to control exogenous factors. d. Models make the world harder to understand. e. Models allow us to examine more factors than what actually exists in our world.

When would oil producers see the largest percentage decline in the quantity demanded for oil due to an increase in the price of oil today? a. tomorrow b. in 6 months c. in 2 years d. in 8 years e. in 15 years

When the price elasticity of demand is elastic, a consumer is: a. completely unresponsive to a change in price. b. relatively unresponsive to a change in price. c. unaffected by a change in price. d. relatively responsive to a change in price. e. completely responsive to a change in price.

For a market to be competitive: a. each buyer and seller is small, relative to the whole market; no single decision-maker has any influence over the market price. b. sellers must produce goods and services that are different from their competitors. c. sellers should have substantial pricing power. d. all you need are many buyers and many sellers. e. the price must be a fair price.

On January 30, 2012, Starbucks India announced plans to open 50 cafés. What would you expect to happen to the market for coffee in India, assuming all other factors are held constant? a. The demand for coffee will increase in India. b. The demand for coffee will decrease in India. c. Both the supply and demand for coffee will increase in India. d. The supply for coffee will increase in India. e. The supply for coffee will decrease in India.

What is Michael's opportunity cost of a painting? a. 1/2 painting b. 1/2 sculpture c. 3 paintings d. 2 sculptures e. 2 paintings

Oil is a main component in the manufacture of plastic bags. If the price of oil were to increase, the price of plastics bags would: a. increase and the quantity would increase. b. increase and the quantity would decrease. c. decrease and the quantity would increase. d. decrease and the quantity would decrease. e. increase and the quantity would stay the same.

Given the same quantity of resources, what is Alicia Keys's opportunity cost of producing a New York pizza? a. 5/2 Philly cheesesteaks b. 2/5 Philly cheesesteak c. 3 Philly cheesesteaks d. 1/3 New York pizza e. 4/5 New York pizza

When a parent tells you not to study economics because it is a pointless discipline, why is he or she incorrect? a. The government continues to play a role in our daily lives. b. People have the freedom to do whatever they want, and economists have nothing to add to their decision-making process. c. There are not enough resources to produce all the goods and services that are wanted and needed. d. Economics has nothing to offer in terms of understanding the stock market. e. Economics has nothing to offer in terms of understanding government programs like Social Security.