1)
Refer to Figure 3-5. Hosne has a comparative advantage in the production of
a. purses and Merve has a comparative advantage in the production of wallets.
b. wallets and Merve has a comparative advantage in the production of purses.
c. both goods and Merve has a comparative advantage in the production of neither good.
d. neither good and Merve has a comparative advantage in the production of both goods.
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2) Suppose price is measured along the vertical axis on a graph. When price changes, there will be a
a. rotation of the curve.
b. shift of the curve.
c. movement along the curve.
d. change in the slope of the curve.
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3) When two variables have a negative correlation,
a. they tend to move in opposite directions.
b. they tend to move in the same direction.
c. one variable will move while the other remains constant.
d. the variables values are never positive.
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4) Under rent control, tenants can expect
a. lower rent and higher quality housing.
b. lower rent and lower quality housing.
c. higher rent and a shortage of rental housing.
d. higher rent and a surplus of rental housing.
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5) It costs a company $50,000 to produce 5000 beach towels. The companys cost will be $50,009 if it produces an additional beach towel. If the company produces 5,000 beach towels then
a. its average cost is greater than its marginal cost.
b. its average cost and its marginal cost are equal.
c. its average cost is less than its marginal cost.
d. there is insufficient information to compute average and marginal costs.
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6) If consumers often purchase muffins to eat while they drink their latts at local coffee shops, what would happen to the equilibrium price and quantity of latts if the price of muffins rises?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.
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7) Table 3-9
Barb and Jim run a business that sets up and tests computers. Assume that Barb and Jim can switch between setting up and testing computers at a constant rate. The following table applies.
Minutes Needed to Number of Computers Set Up or Tested in a 40-Hour Week
Set Up 1 Computer Test 1 Computer Computers Set Up Computers Tested
Barb 48 ? 50 40
Jim 30 40 80 60
Refer to Table 3-9. Barb has an absolute advantage in
a. both setting up and testing computers and a comparative advantage in setting up computers.
b. both setting up and testing computers and a comparative advantage in testing computers.
c. neither setting up nor testing computers and a comparative advantage in setting up computers.
d. neither setting up nor testing computers and a comparative advantage in testing computers.
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8) Which of the following statements is an example of a positive, as opposed to normative, statement?
a. Americans deserve a cleaner environment.
b. Reducing emissions reduces days missed from school due to asthma.
c. All Americans are entitled to quality health care.
d. Economic policies should focus on improving equality.
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9) Which of the following statements is not correct?
a. Trade allows for specialization.
b. Trade has the potential to benefit all nations.
c. Trade allows nations to consume outside of their production possibilities curves.
d. Absolute advantage is the driving force of specialization.
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10)
Refer to Figure 2-8, Panel (a). In order to gain 2 donuts by moving from point L to point M, society must sacrifice
a. efficiency.
b. employment.
c. 4 cups of coffee.
d. More than one of the above is correct.
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11) Rational people make decisions at the margin by
a. following marginal traditions.
b. behaving in a random fashion.
c. thinking in black-and-white terms.
d. comparing marginal costs and marginal benefits.
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12) Senator Green argues that replacing the income tax with a national sales tax would increase the level of output. Senator Brown objects that this policy would benefit the rich at the expense of the poor.
a. Both Senators arguments are primarily about equality.
b. Both Senators arguments are primarily about efficiency.
c. Senator Greens argument is primarily about equality, while Senator Browns argument is primarily about efficiency.
d. Senator Greens argument is primarily about efficiency, while Senator Browns argument is primarily about equality.
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13) Which of these activities will most likely impose an external cost?
a. An athlete works out at a gym.
b. A secretary smokes a cigarette in a crowded break room.
c. A young mother pushes her baby in a stroller.
d. A construction worker eats a hotdog during his lunch break.
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14) A person can benefit from specialization and trade by obtaining a good at a price that is
a. lower than his or her opportunity cost of that good.
b. the same as his or her opportunity cost of that good.
c. higher than his or her opportunity cost of that good.
d. different than his or her opportunity cost of that good.
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15) The outer loop of the circular-flow diagram represents the flows of dollars in the economy. Which of the following does not appear on the outer loop?
a. Wages
b. Income
c. Capital
d. Rent
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16) Which of the following is a correct statement about production possibilities frontiers?
a. An economy can produce only on the production possibilities frontier.
b. An economy can produce at any point inside or outside a production possibilities frontier.
c. An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier.
d. An economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier.
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17) Refer to Table 3-1. For the farmer, the opportunity cost of 15 pounds of meat is
a. 12 pounds of potatoes.
b. 16 pounds of potatoes.
c. 20 pounds of potatoes.
d. 24 pounds of potatoes.
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18) Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?
a. There is no such thing as a free lunch.
b. People buy more when prices are low than when prices are high.
c. No matter how much people earn, they tend to spend more than they earn.
d. Households and firms interacting in markets are guided by an “invisible hand” that leads them to desirable market outcomes.
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19) Two goods are substitutes when a decrease in the price of one good
a. decreases the demand for the other good.
b. decreases the quantity demanded of the other good.
c. increases the demand for the other good.
d. increases the quantity demanded of the other good.
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20) Which of the following areas of study typifies macroeconomics as opposed to microeconomics?
a. the effects of rent control on the availability of housing in New York City
b. the economic impact of tornadoes on cities and towns in Oklahoma
c. how tariffs on shoes affects the shoe industry
d. the effect on the economy of changes in the nations unemployment rate
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21) The minimum wage
a. is an example of a price ceiling.
b. has its greatest impact on middle-aged and immigrant workers.
c. does not apply to unpaid internships.
d. does not affect the quantity of labor demanded; it only affects the quantity of labor supplied.
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22) Efficiency
a. and equality both refer to how much a society can produce with its resources.
b. and equality both refer to how fairly the benefits from using resources are distributed between members of a society.
c. refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society.
d. refers to how evenly the benefits from using resources are distributed between members of society. Equality refers to how much a society can produce with its resources
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23) If buyers today become more willing and able than before to purchase larger quantities of Vanilla Coke at each price of Vanilla Coke, then
a. we will observe a movement downward and to the right along the demand curve for Vanilla Coke.
b. we will observe a movement upward and to the left along the demand curve for Vanilla Coke.
c. the demand curve for Vanilla Coke will shift to the right.
d. the demand curve for Vanilla Coke will shift to the left.
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24) A rational decisionmaker takes an action if and only if
a. the marginal benefit of the action exceeds the marginal cost of the action.
b. the marginal cost of the action exceeds the marginal benefit of the action.
c. the marginal cost of the action is zero.
d. the opportunity cost of the action is zero.
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25) In the United States, incomes historically have grown about 2 percent per year. At this rate, average income doubles every
a. 15 years.
b. 25 years.
c. 35 years.
d. 45 years.
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26) If an economy is producing efficiently, then
a. there is no way to produce more of one good without producing less of another good.
b. it is possible to produce more of both goods without increasing the quantities of inputs that are being used.
c. it is possible to produce more of one good without producing less of another good.
d. it is not possible to produce more of any good at any cost.
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27) Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. If the two countries do not trade, Cornland will produce and consume 400 bushels of corn and 100 bushels of oats, while Oatland will produce and consume 60 bushels of corn and 400 bushels of oats. If each country made the decision to specialize in producing the good in which it has a comparative advantage, then the combined yearly output of the two countries would increase by
a. 280 bushels of corn and 450 bushels of oats.
b. 340 bushels of corn and 500 bushels of oats.
c. 360 bushels of corn and 520 bushels of oats.
d. 360 bushels of corn and 640 bushels of oats.
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28)
Refer to Figure 3-2. If the production possibilities frontier shown is for one month of production, then which of the following combinations of emeralds and rubies could Peru not produce in a given month?
a. 6 emeralds and 60 rubies
b. 4 emeralds and 120 rubies
c. 3 emeralds and 160 rubies
d. 1 emeralds and 210 rubies
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29) When quantity demanded has increased at every price, it might be because
a. the number of buyers in the market has decreased.
b. income has increased, and the good is an inferior good.
c. the costs incurred by sellers producing the good have decreased.
d. the price of a complementary good has decreased.
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30) Once the supply curve for a product or service is drawn, it
a. remains stable over time.
b. can shift either rightward or leftward.
c. is possible to move along the curve, but the curve will not shift.
d. tends to become steeper over time.
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31) A relatively flat demand curve indicates that
a. quantity demanded will adjust only slightly to a price change.
b. quantity demanded will adjust significantly to a price change.
c. quantity demanded will not adjust to a price change.
d. the change in quantity demanded will exactly equal a change in price.
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32) When demand is perfectly inelastic, the price elasticity of demand
a. is zero, and the demand curve is vertical.
b. is zero, and the demand curve is horizontal.
c. approaches infinity, and the demand curve is vertical.
d. approaches infinity, and the demand curve is horizontal.
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33) The production possibilities frontier provides an illustration of the principle that
a. trade can make everyone better off.
b. governments can sometimes improve market outcomes.
c. people face trade-offs.
d. people respond to incentives.
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34) Table 3-1
Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate.
Minutes Needed to Make 1
Bushel of Wheat Pound of Beef
Andia 20 12
Zardia 15 10
Refer to Table 3-1. What is Zardias opportunity cost of producing one bushel of wheat?
a. 2/3 pound of beef
b. 3/4 pound of beef
c. 5/6 pound of beef
d. 3/2 pounds of beef
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35) Which of the following would be the least likely result of a binding price ceiling imposed on the market for rental cars?
a. an accumulation of dirt in the interior of rental cars
b. poor engine maintenance in rental cars
c. free gasoline given to people as an incentive to a rent a car
d. slow replacement of old rental cars with newer ones
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36) The quantity demanded of a good is the amount that buyers are
a. willing to purchase.
b. willing and able to purchase.
c. willing, able, and need to purchase.
d. able to purchase.
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37) A rational decisionmaker takes an action if and only if the marginal cost exceeds the marginal benefit.
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38) Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.
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39) Prices allocate a market economys scarce resources.
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40) Trade allows a country to consume outside its production possibilities frontier.
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41) A price floor set above the equilibrium price causes a surplus in the market.
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42) If a determinant of demand other than price changes, the demand curve shifts.
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43) Supply refers to the position of the supply curve, whereas the quantity supplied refers to the amount suppliers wish to sell.
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44) While the scientific method is applicable to studying natural sciences, it is not applicable to studying a nations economy.
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45) A price ceiling set above the equilibrium price causes a surplus in the market.
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46) The effects of rent control in the long run include lower rents and lower-quality housing.
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