Econ Exam 1

  1. A price ceiling represents what?

    D) A maximum price
  2. Production efficiency is achieved when...

    D) the economy is producing at the lowest average cost
  3. Suppose in the market for iPhones, the cost of iPhone screens has gone up. This will...

    C) shift the supply curve to the left
  4. Which of the following is a normative statement?

    B) The tax rate is too low for rich people
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    Which of the following events occur when the price is $25?

    C) Excess supply (surplus) of 100
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    What is the equilibrium price and quantity

    B) $20, 200 CDs
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    Which of the following statements is true?

    A) Mike has a comparative advantage in producing donuts
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    Which of the following trades would Mike accept?

    C) He would trade 3 donuts for 2 hot dogs
  9. The upward-sloping supply curve does NOT reflect...

    D) increasing willingness to pay for additional products
  10. Wendell just read an article that says scientists have proven that processed cheese increases brain power. We would expect Wendell's demand for processed cheese to:

    D) increase and shift to the right
  11. Which of the following is NOT a source of market failure?

    B) The price of goods is too high
  12. The principle that suppliers will normally offer more for sale at high prices and less at lower prices is...

    C) law of supply
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    At the price of $5, what would the market demand be?

    B) 14
  14. Suppose both the demand and supply for corn increase. What can we say would happen in the market for corn?

    A) Quantity will increase and price cannot be determined
  15. Economics deals with how...

    B) individuals make decisions to use scarce resources in order to satisfy their unlimited wants
  16. Excess supply (surplus) will exist whenever...

    D) the actual price is above the equilibrium price
  17. After graduating high school, Josh received an offer to work at a computer company with an annual salary of $50,000 and another offer to work at an automobile company with an annual salary of $80,000. Josh can also work in his father's firm but he would not receive a salary. In the end, Josh decides to go to college. What is his opportunity cost of going to college?

    B) $80,000
  18. Public goods are ___ and ___.

    D) Non-excludable, non-rival
  19. In one hour, George can fix 8 flat tires or type 200 words. His opportunity cost of fixing a flat tire is:

    C) 25 words
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    A farmer can grow apples and oranges on his farmland. If the farmer purchases his neighbor's land to expand his farm, how would the production possibilities frontier line shift?
    A) PPF would not shift
    B) PPF will shift inwards
    C) PPF will shift outwards
    D) PPF will become steeper
    C) PPF will shift outwards
  21. Which of the following best reflects an increase in quantity demanded and not an increase in demand?

    A) The price of Jeni's ice cream falls, so people buy more Jeni's ice cream
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    The price of one donut is $3. According to the table, how many donuts are purchased and how much consumer surplus is generated?

    A) 9 donuts, $31
  23. The free-rider problem occurs when...

    B) Someone benefits from the consumption of a public good without paying his or her full share
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    The graph shows the market for notebooks. Assume the government imposes a $10 price floor. Calculate the amount of the deadweight loss.

    B) $150
  25. A minimum wage set above the equilibrium wage rate is a price ___ that ___ the quantity of low-skilled labor demanded.

    C) Floor; decreases
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    Which movement reflects an increase in demand?

    A) From point A to point D
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    Price for Starbucks coffee is $2 per cup. Jim is a coffee lover and his total benefit for consuming multiple cups of coffee is shown in the table. How many cups of coffee should Jim buy?

    D) 4
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    The market equilibrium wage is ___ and market equilibrium number of labors hired is ___.

    A) $7, 125
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    The equilibrium price for tobacco is $6. Which of the following price regulations will be binding?

    D) A price ceiling of $4
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    If the government imposes a price floor of $8, then there is a ___ tobacco of ___ units.

    B) Surplus of, 200
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    Select the graph that best shows the change in the digital camera market when the productivity of workers in the industry increases.
    Graph C
  32. When a positive externality is present in a market, the quantity consumed:

    B) is less than the socially optimal quantity
  33. As a bakery owner, you use flower and eggs in your cakes. Economists classify these resources as...

    A) Land
  34. The income and substitution effects account for...

    B) the downward-sloping demand curve
  35. Which of the following event is consistent with the law of demand?

    C) An increase in the price of a soda causes a decrease in the quantity of soda demanded
  36. A supply curve does NOT shift due to...

    A) a sudden increase in price along the supply curve
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    ___ has a comparative advantage in picking apples and ___ has an absolute advantage in picking apples.

    A) Bob, Bob
  38. If an economy is operating at a point insife the production possibilities frontier (PPF), then...

    C) Society's resources are being inefficiently utilized
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    Select the graph that best shows the changes in demand and supply in the beef market if a new diet fad favoring beef consumption becomes hugely popular, while cattle producers see steeply rising costs of cattle feed.
    Graph D
  40. The supply curve is upward-sloping because:

    C) As the price increases, suppliers can earn higher levels of profit or justify higher marginal costs to produce more
Card Set
Econ Exam 1
Final practice