Economics

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tmckenzie98
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198234
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Economics
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2013-02-06 13:41:54
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Test economics
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Test 11) Economics is concerned with the efficient use of scarce resources to achieve the maximum satisfaction of economic wants. True False First test economics
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  1.  Economics is concerned with the efficient use of scarce resources to achieve the maximum satisfaction of economic wants.True      False 
    Ans: True
  2. A trade off is a situation in which one of the economic goals is sacrificed to obtain another economic goal.             True      False
    Ans: True
  3. When value judgments are made about the economy or economic policy this is called positive economics.            True      False
    Ans: False
  4. Another term for the assumption that “other things equal” is
    a) ceteris paribus
    b) the correlation fallacy
    c)the fallacy of composition
    d)post hoc, ergo propter hoc
    Ans: a
  5. When we look at the whole economy or our analysis would be at the level of
    a)      microeconomics
    b)     macroeconomics
    c)      positive economics
    d)     normative economics
    Ans: b
  6. Which would be studied in microeconomics? a)the output of the entire economy
    b)the total # of workers employed in the US
    c)the gen level of prices in the US economy
    d)the output and price of wheat in the US
    Ans: d
  7. Which would be studied in macroeconomics ? a) The output and prices of beef in the US b) The general rate of inflation in the US
    c)Households preferences for different goods d)Relative prices for different goods
    Ans: b
  8. The payment to entrepreneurial is interest income.True      False 
    Ans: False
  9. 1)  The payment to Labor is wage.True        False                        
    Ans: True
  10. 1)  The payment to Land is interest income.True         False                          
    Ans: False   
  11. 11)   Economic growth means an increase in the production of goods and services, and is shown by a movement of the production possibilities curve outward and to the right.True      False
    ANS: True
  12. 11)   The more capital goods economy produces today, the greater will be the total output of all goods it can produce in the future, other things being equal.  True      False
    ANS: True
  13. When a production possibilities schedule is written (or a production possibilities curve is drawn) in this chapter, four assumptions are made. Which of the following is one of those assumptions?
    a. More than two products are produced b.The state of technology changes
    c. The economy has both full employment and full production
    d.The quantities of all resources available are not fixed.
    Ans: c
  14. Economic growth could be presented by
    a.  movement from point A to point B
    b.a movement from point B to point D
    c. a shift in the production possibilities curve out towards point C
    d.a shift in the production possibilities curve in towards point D 
    Ans: c
  15. 11)   The production  possibilities curve is  
    a. concave
    b.convex
    c. linear
    d.positive
    Ans: a
  16. 11)   The nation’s production possibilities curve will shift outward if there would be more resources invested in new plants and equipmentTrue       False
    Ans: True
  17. Production possibilities(altenatives)                 
                                A       B    C     D    E     F
    Capital goods        100   95   85   70   50    0
    Consumer goods   0    100 180  240 280 300 The choice of alternative B compared with alternative D would tend to promote
    a.  slower rate of economic growth
    b. faster rate of economic growth
    c.  increased consumption in the present
    d. central economic planning
    Ans: b
  18. A       B    C     D    E     F Capital goods        100   95   85   70   50    0 Consumer goods   0    100 180  240 280 300
    The choice of alternative E compared with alternative C would tend to promote
    a.   slower rate of economic growth
    b.  faster rate of economic growth
    c.  increased consumption in the present
    d.  central economic planning
    Ans: a
  19.  23)  In the circular flow model, businesses 
    a.  buy products and resources
    b. sell products and resources
    c.  buy products and sell resources
    d. sell products and buy resources
    Ans: d
  20. Which of the following concepts is NOT illustrated by the production possibilities frontier? a.   efficiency   
    b.   opportunity cost   
    c.   equity   
    d.   tradeoffs
    Ans: c
  21. 27) In the circular flow model, households sell resources in the product market.  True                           False 
    Ans: False
  22. The law of demand states that as price increases, other things being equal the quantity of the product demanded increases               True False         
    Ans: False
  23. If consumer tastes or preferences for a product decrease, the demand for the product will tend to decrease.               True           False
    Ans: True
  24. An increase in the resource prices will tend to decrease supply.               True           False
    Ans: True
  25. The income of a consumer decreases and the consumer’s demand for a particular good increases. It can be concluded that the good is a) normal b)inferior c) a substitute
    d) a complement  
    Ans: B
  26. Which of the following could cause a decrease in consumer demand for coffee?   a) an increase in consumer income
    b) an increase in the prices of goods that are substitutes for coffee, for e.g., tea
    c)an increase in the prices of goods that are complements for coffee, for e.g., sugar
    d)a decrease in the price of computers.
    Ans: C
  27. If two goods are substitutes for each other, cet.par., an increase in the price of one will   a) decrease the demand for the other
    b) increase the demand for the other
    c)not affect the demand for the other.
    d) Not sure
    Ans: B
  28. Which of the following could not cause an increase in the supply of cotton?
    a)increase in the price of cotton
    b)improvements in the technology of producing cotton
    c)a decrease in the price of machinery and tools  employed in cotton production
    d) a decrease in the price of corn.    
    Ans: D
  29. Price($)  Qty demanded  QtySupplied
    20              395                    200 22              375                    250 24              350                    290
    26              320                    320
    28              280                    345
    30              235                    365 
                                                                                The equilibrium price in this market is          a) 22      b) 24    c) 26    d) 28
    Ans: C
  30. 9) Due to an earthquake a decrease in supply and a decrease in demand will
    a) increase equilibrium price and decrease the equilibrium quantity exchanged
    b) decrease equilibrium price and increase the equilibrium quantity exchanged
    c)increase equilibrium price and affect the equilibrium quantity exchanged in an indeterminate way
    d) affect equilibrium price in an indeterminate way and equilibrium decrease the quantity exchanged 
    Ans: D
  31. Which of the following is determinant of supply   
    a.  tastes.   
    b.  technology.   
    c.   income.   
    d.  preference of the people
    Ans: B
  32. If a good is a necessity, demand for the good would tend to be     
    a.         elastic.     
    b.     horizontal.     
    c.      unit elastic.     
    d.     inelastic.
    ANSWER: d.         inelastic.
  33. When quantity demanded responds substantially to changes in price, demand is said to be     
    a. elastic.     
    b. inelastic.       
    c. unit elastic
    d. inelastic.
    ANSWER: a.       elastic.
  34. Suppose that good X has a negative income elasticity of demand. This implies that the good is  a.     a normal good.  
    b. a necessity. c. an inferior good.     
    d.  a luxury.
     ANSWER: c.        an inferior good.
  35. If the elasticity of supply is zero, then     
    a.supply is very elastic.     
    b. the supply curve is horizontal.     
    c. the quantity supplied is the same regardless of price.     
    d. Both b and c are correct.
    ANSWER: c. the quantity supplied is the same regardless of price.
  36. In the graph shown, which supply curve is most likely the long-run supply curve?     
    a.     S1     
    b.     S2     
    c. S3     
    d. All of the above are equally likely to be the long-run supply curve.
    ANSWER: c.          S3
  37. Suppose a producer is able to separate customers into two groups, one having a price inelastic demand and the other having a price elastic demand. If the producer’s objective is to increase total revenue, she should      a. increase the price charged to customers with the price elastic demand and decrease the price charged to customers with the price inelastic demand.  b.     decrease the price charged to customers with the price elastic demand and increase the price charged to customers with the price inelastic demand. c. charge the same price to both groups of customers. d.     increase the price for both groups of customers.
    ANSWER: b.         decreasethe price charged to customers with the price elastic demand and increase theprice charged to customers with the price inelastic demand.
  38. When her income increased from $10,000 to $20,000, Heather’s consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather,      a. macaroni and soy-burgers are both normal goods with income elasticities equal to 1.b.macaroni is an inferior good and soy-burgers are normal goods; both have income elasticities of 1.      c. macaroni is an inferior good with an income elasticity of –1 and soy-burgers are normal goods with an income elasticity of 1. d. macaroni and soy-burgers are both inferior goods with income elasticities equal to -1.
    ANSWER: c. macaroni is an inferior good with an income elasticity of –1 and soy-burgers are normal goods with an income elasticity of 1.
  39. Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.  
    ANSWER: T
  40. Which is an assumption of the marginal utility theory of consumer behavior? 
    a) The consumer has a small income
    b) The consumer is rational
    c) Goods and services are free 
    ANS: B
  41. Consumer is making purchases of products A and B such that the marginal utility of product A is 20 and the marginal utility of product B is 30. The price of product A is $10 and the price of product B is $20. The utility maximizing tool suggests that this consumer should  a) Increase consumption of product B and decrease consumption of product A b) Increase consumption of product B and increase consumption of product A c) Increase consumption of product A and decrease consumption of product B d) Make no change in consumption of A or B
    ANS: C 
  42. Which one is not true for an indifference curve? a) It is downward sloping b) It is convex to the origin c) There are only 2 goods in the economy d) It shows how much the consumer is able to buy.
    ANS: D
  43. 6). An individual’s indifference curve      
    a. is downward sloping    
    b. is upward rising    
    c. illustrates all the bundles the               consumer can purchase    
    d. none of the above
    ANS: A
  44. If both bundles A and B lie on the same indifference curve, the consumer    
    a. prefers A to B    
    b. prefers B to A    
    c. finds both A and B equally attractive    
    d. none of the above 
    ANS: C
  45.  Which of the following is a characteristic of indifference curves? a) They are concave to the origin b) They are convex to the origin c) Curves closer to the origin have the highest level of total utility d) Curves closer to the origin have the highest level of marginal utility 
    ANS: B
  46. Suppose the income of the consumer increases. The budget line will shift 
    a) Inward
    b) Outward
    c) Not move
    d) Not sure 
    ANS:B
  47. In indifference curve analysis, the consumer will be in equilibrium at the point where the a) Indifference curve is concave to the origin b) Budget line crosses the vertical axis c) Two indifference curves intersect and are tangent to the budget line d) Budget line is tangent to an indifference curve
    ANS: D
  48. If a consumer is initially in equilibrium, a decrease in money income will a) Move the consumer to a new equilibrium on a lower indifference curve b) Move the consumer to a new equilibrium on a higher indifference curve c) Make the slope of the consumer’s indifference curves steeper d) Have no effect on the equilibrium position
    ANS:A

  49. 11)   At point B on the production possibilities curve in the above illustration,
    a. Tubas production is inefficient
    b.tractor production is inefficient
    c. the economy is employing all its resources
    d.the economy is not employing all its resources
    Ans: c

  50. 11)   At Point A on the production possibility curve in the above illustration,
    a.      Tractor production is inefficient
    b.      Tubas production is inefficient
    c.        Unattainable point
    d.       Production is unattainable 
     
    Ans: d

  51. 11)   At point E on the production possibility curve in the above illustration,
    a. The economy employing all its resources to produce tractors
    b.The economy employing all its resources to produce tubas
    c. Tubas production is inefficient
    d.The economy is not employing all its resources
    Ans: b

  52. 11)   Unemployment and productive inefficiency would best be presented in the graph by point:
    a.  A
    b. B
    c.  C
    d. D
    Ans: d

  53. 11)   Economic growth could be presented by
    a.  movement from point A to point B
    b.a movement from point B to point D
    c. a shift in the production possibilities curve out towards point C
    d.a shift in the production possibilities curve in towards point D 
     
    Ans: c

  54. 11)   The production  possibilities curve is  
    a. concave
    b.convex
    c. linear
    d.positive
    Ans: a

  55. ) Which of the following concepts is NOT illustrated by the production possibilities frontier?
        a.   efficiency
        b.   opportunity cost
        c.   equity
        d.   tradeoffs
    Ans: c

  56.     On the production possibilities frontier shown, the opportunity cost to the economy of getting 30 additional toothbrushes by moving from point A to point D is
        a.  10 toasters.
        b.  25 toasters.
        c.   20 toasters.
         d.   25 toasters.
    ANS: c

  57. On the production possibilities frontier shown, the opportunity cost to the economy of getting 30 additional toothbrushes by moving from point B to point D is
        a.  20 toasters.
        b.  10 toasters.
        c.   15 toasters.
         d.   5 toasters.
    ANS: b
  58.  
    . According to the graph, equilibrium price and quantity are
        a.  $35, 200.
        b.  $35, 600.
        c.   $25, 400.
        d.  $15, 200. 
     
    Ans: C

  59. [i].    According to the graph, if the price decreased from $18 to $6, what would happen to total revenue? 
    a.Total revenue would increase by $1200 and demand would be elastic. 
    b.Total revenue would increase by $800 and demand would be elastic. 
    c. Total revenue would decrease by $1200 and demand would be inelastic. 
    d.Total revenue would decrease by $800 and demand would be inelastic. 
       




     
    ANSWER: a.Total revenue would increase by $1200 and demand would be elastic.

  60. According to the graph, as price falls from PA to PB, which demand curve is most elastic? 
    a. D1 
    b. D2 
    c. D3 
    d. All of the above are equally elastic. 
     
    ANSWER: a.       D1

  61.       Suppose that good X has a negative income elasticity of demand. This implies that the good is
          a.a normal good.
          b.a necessity.
          c. an inferior good.
          d.a luxury. 
     
    ANSWER: c.       an inferior good.

  62. [i].    In the graph shown, which supply curve is most likely the long-run supply curve? 
    a. S1 
    b. S2 
    c. S3 
    d.All of the above are equally likely to be the long-run supply curve. 
      
     ANSWER: c.       S3

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