Economic Final Exam

question

Microeconomics focuses on:

answer

how governments, individuals, and businesses make decisions when faced with scarcity.

question

Resources are:

answer

relatively scarce in all countries

question

A recurring theme in economics is that people

answer

have unlimited economic wants, but limited resources

question

Economic reasoning is based on the premise that:

answer

all decisions or actions have a cost associated with them

question

To say that "people respond to incentives" is to say that:

answer

changes in benefits OR changes in costs influence people's decisions and their behavior

question

A rational decision

answer

results from the comparison of marginal benefit and marginal cost

question

When studying human behavior, economists assume rational self-interest. This means that people

answer

make decisions based on some desired outcome

question

Michelle wants to purchase a new phone. Michelle will purchase the phone if:

answer

the marginal benefit of the phone is greater than its marginal cost

question

The main significance of the equilibrium between marginal benefit and marginal cost is:

answer

a rational decision has been made

question

Jorge's Production Possibilities Schedule:
LBs of Green Beans - 0, 20, 40, 60, 80
LBs of Corn - 320, 240, 160, 80, 0

Jorge's production possibilities schedule demonstrates that:

answer

both corn and green beans require a trade off

question

A production possibilities frontier (PPF) illustrates which concept?

answer

opportunity cost

question

If Angela spends all her time making pies she can make 20 each day, whereas if she spends all her time making cakes she can only make 10 each day. What is the opportunity cost of making a cake?

answer

2 pies

question

Absolute advantage is found by comparing different producers

answer

input requirements per unit of output

question

Suppose Lou gives up the production of 50 bikes to make 1 car and Sally gives up the production of 75 bikes to make 1 car. Who has the comparative advantage in making cars?

answer

Lou; Lou has the lower opportunity cost of making a car

question

The theory of comparative advantage states that countries gain from trade because:

answer

if each country specializes in producing the products it is best suited to produce, world output can rise

question

Geoff: Dave:
Bread(loaves) - 5, 0. Bread(loaves) - 4, 0
Muffins(dozens) - 0,10. Muffins(dozens) - 0, 12

What is Geoff's opportunity cost of producing 1 loaf of bread?

answer

question

Geoff: Dave:
Bread(loaves) - 5, 0. Bread(loaves) - 4, 0
Muffins(dozens) - 0,10. Muffins(dozens) - 0, 12

What is Dave's opportunity cost of producing 1 loaf of bread?

answer

question

Geoff: Dave:
Bread(loaves) - 5, 0. Bread(loaves) - 4, 0
Muffins(dozens) - 0,10. Muffins(dozens) - 0, 12

Who has the comparative advantage in producing a loaf of bread?

answer

Geoff

question

Jake's Production Possibilities Schedule
LBs of Green Beans - 0, 10, 20, 30, 40
LBs of Corn - 160, 120, 80, 40, 0

Jane's Production Possibilities Schedule
LBs of Green Beans - 0, 20, 40, 60, 80
LBs of Corn - 80, 60, 40, 20, 0

Jake should specialize in the production of which good?

answer

Corn

question

Which of the following influence the terms of trade?

answer

different opportunity costs of the parties involved

question

Jake's Production Possibilities Schedule
LBs of Green Beans - 0, 10, 20, 30, 40
LBs of Corn - 160, 120, 80, 40, 0

Jane's Production Possibilities Schedule
LBs of Green Beans - 0, 20, 40, 60, 80
LBs of Corn - 80, 60, 40, 20, 0

The terms of trade for 1 pound of green beans must lie between ___ and ___ pounds of corn

answer

1; 4

question

Specialization:

answer

results in a more efficient use of resources

question

Week. Hours at the Gym. Quiz Grade
1 3. 85%
2. 4. 80%
3. 5. 72%
4. 6. 62%

Jan's schedule of hours she spends at the gym and her quiz grades in economics is below. What does this tell us?

answer

Jan is experiencing increasing opportunity costs

question

In the circular flow diagram, which of the following flows is correct?

answer

Goods and services (products) flow from businesses to the resource market

question

The most important purpose of a market is to

answer

bring buyers and sellers together so they can trade

question

Suppose you have only $20 to spend on gas each week. If the price of gas is $2 a gal how many gallons can you purchase?

answer

10 gallons

question

Suppose the price of gas rises from $2 to $4 per gallon. You have $20 to spend on gas each week, how many gallons can you purchase?

answer

5 gallons

question

When the Economics Department serves all-you-can-eat ice cream at its annual spring student-recruiting event, you eat three ice cream cones. You really enjoy the first, the second is just okay, and the third is tasteless.

answer

Diminishing Marginal Utility

question

Your parents gave you the $400 you thought you needed to purchase books for the semester. When you realized your books were much cheaper than you thought, you decided to purchase all of the required and recommended books instead of just the few.

answer

Income effect

question

When the price of strawberries is high in the winter you purchase apples, but in the summer when the price of strawberries drops you purchase strawberries.

answer

Substitution effect

question

In understanding and analyzing "market demand," we focus on how much all buyers are

answer

willing and able to buy at different prices

question

When economists say that the demand for a product has decreased, they mean that

answer

consumers are now willing and able to buy less of this product at each possible price

question

An increase in Ashley's income has caused the change in the graph below. The good depicted must be:

answer

inferior

question

A decrease in Ashley's income has caused the change in the graph below. The good depicted must be:

answer

normal

question

On Tuesday, a movie theater discounts tickets to all shows. What would we expect to see happen to popcorn on Tuesdays?

answer

increased demand for popcorn

question

An increase in the price of dinners at fancy restaurants would likely cause the demand for babysitters to ___. This is because fancy dinners and babysitting services are likely ___.

answer

decrease; complements

question

How does market supply differ from individual supply?

answer

market supply is the sum of all individual suppliers

question

Which of the following describes the relationships between price and quantity supplied?

answer

it is a direct relationship

question

Which of the following scenarios will NOT cause an increase in supply?

answer

the price of the product decreases

question

Smaller, fuel efficient SUVs have become very popular. Many customers are trading in existing cars and buying new SUVs. As a result, the supply of used cars will be ___ and the price of used cars will ___. Additionally, the demand for new SUVs will ___ and the price of new SUVs will __.

answer

increase, decrease; increase, increase

question

Which of the following statements does NOT describe equilibrium?

answer

Equilibrium is a goal that is seldom achieved in the real world

question

For a price ceiling to be binding it must:

answer

be lower than the equilibrium price

question

For a price floor to be binding it must:

answer

be higher than the equilibrium price

question

Taxes on products

answer

increase the marginal cost for producers

question

Michael buys a handmade sweater for $60, although he was willing to pay $85. The minimum acceptable price to the seller, Susan, was $45. Michael experiences a:

answer

consumer surplus of $25; Susan experiences a producer surplus of $15

question

A deadweight loss ___ as tax rates change

answer

changes

question

Suppose the equilibrium price is 50$. If the actual price paid by the buyer is $60 for one item, and the minimum acceptable price to the seller is $40, then:

answer

there is a deadweight loss

question

Which of the following is NOT correct when describing allocative efficiency?

answer

it occurs when firms producer at the lowest possible average total cost

question

How is the slop of a linear demand curve different from its elasticity?

answer

Along a linear demand curve, elasticity changes

question

If the change in price is 20% and the change in quantity demanded is 10%, what type of elasticity is present? (if less than 1, it is inelastic)

answer

Inelastic

question

If the price elasticity of demand for a product is ___, it is considered elastic.

answer

greater than one

question

Which of the following statements is correct when the price elasticity of demand is inelastic?

answer

The elasticity coefficient is less than one

question

The price of a camera decreases from $200 to $180, and in response to the price change the quantity demanded increases from 60 to 65 units. Therefore, demand for cameras in this price range:

answer

is inelastic

question

Consumers can be ___ in their demand for a product when many substitutes exist

answer

elastic

question

The demand for necessities tends to be

answer

inelastic

question

The price of a good falls from $3 to $2.80 and the quantity demanded increases from 105 to 125. Using the midpoint formula, what is the price elasticity of demand?

answer

2.521

question

Which is more elastic in demand?

answer

Having cable television service

question

Cross-price elasticity identifies goods as substitutes when:

answer

the sign of the coefficient or result of the calculation is positive

question

Cross-price elasticity identifies goods as complements when:

answer

the sign of the coefficient or result of the calculation is negative

question

Which of the following is not correct regarding income elasticity of demand?

answer

it measures the response of consumer demand to change in the price of a related good

question

If the change in price is 2% and the change in quantity supplied is 10% supply is:

answer

elastic

question

The most important determinant of price elasticity of supply is:

answer

the length of time available to the producer to make adjustments

question

Which of the following is NOT true for the price elasticity of supply?

answer

it has the same determinants as price elasticity of demand

question

Which of the following is true for suppliers in the short run?

answer

suppliers can change employees and raw materials

question

The price elasticity of supply measures:

answer

how responsive the quantity of a good supplied is to changes in its own price

question

Generally, accounting profits are:

answer

greater than economic profits, because accounting profits do not consider implicit costs

question

Suppose that a business incurred explicit costs of 1.5 billion and implicit costs of $300,000 last year. If the firm sold 4,500 units of its output at $450 per unit, its accounting profits were ___ and its economic profits were ___.

answer

$525,000; $225,000

question

Marginal Product:

answer

usually increases then decreases and may become negative

question

When total product is rising:

answer

marginal product is positive

question

Average fixed cost:

answer

declines continually as output expands

question

Average total cost is ___ divided by the number of units of output

answer

total cost

question

Marginal cost describes a change in ___ when output is expanded by one more unit

answer

total cost

question

The marginal cost curve crosses the:

answer

average variable and average total cost curves at their lowest points

question

Which of the following scenarios does not illustrate a long-run adjustment?

answer

a local Starbucks hires two new employees

question

Which of the following statements describes a difference between the short run and the long run?

answer

Some resources are fixed in the short run and all resources are variable in the long run

question

One reason a firm may experience economies of scale is:

answer

the firm experienced specialization in labor and management

question

A firm is experiencing diseconomies of scale if:

answer

costs increase as output expands

question

Which of the following statements does NOT describe a perfectly competitive market?

answer

price is greater than marginal revenue

question

A perfectly competitive firm:

answer

can sell as much output as it wants at the equilibrium price

question

Price for a perfectly competitive seller equals:

answer

marginal revenue

question

In the short run, a perfectly competitive firm calculates the profit-maximizing (or loss-minimizing) production output by equating:

answer

marginal revenue and marginal cost

question

In a perfectly competitive industry, firms seek to maximize:

answer

total profit

question

Assume the Unico Corporation is producing 40 units of output and selling the output in a perfectly competitive market for $5 per unit. Its total fixed cost is $4 for each of the 40 units of output. Unico:

answer

earns a loss of $70

question

In the short run, if ATC is greater than price at the output level where MC=MR then:

answer

the firm may be able to minimize losses

question

A perfectly competitive firm's short-run supply curve is at its lowest point when MC equals the minimum point of:

answer

the average variable cost curve

question

In the long run, if ATC equals price at the output level where MC=MR then:

answer

the firm will earn a normal profit

question

In the long run, perfectly competitive firms achieve:

answer

allocative and productive efficiency

question

Which of the following statements describes what perfectly competitive firms experience in the long run?

answer

Price equals the minimum point on ATC

question

Which of the following statements describes a perfectly competitive market under conditions of constant cost?

answer

The market supply curve becomes perfectly elastic in the long run

question

Which of the following is NOT a characteristic of monopoly?

answer

its demand curve is perfectly elastic

question

A monopolist's demand curve:

answer

is the same as the market demand curve

question

A monopolist's marginal revenue curve:

answer

lies below the demand curve

question

Which of the following statements explains why a pure monopolist's marginal revenue is less than price?

answer

it must lower price to sell more output, and the lower price applies to all units of output sold

question

Assuming the same costs, a monopoly will:

answer

producer less and charge a higher price than a perfectly competitive firm

question

The MR=MC rule is used to analyze:

answer

both monopoly and perfect competition profit maximization

question

Which of the following statements explains when a natural monopoly occurs?

answer

Economies of scale occur as ATC decreases over a wide range of output

question

Regulation of natural monopolies often causes a price ceiling price that:

answer

achieves allocative efficiency and may result in government subsidies

question

In monopolistically competitive markets, entry barriers:

answer

are more prevalent than in perfectly competitive markers but les than in monopoly markets

question

It is more difficult to analyze a monopolistically competitive market than a perfectly competitive market because in a monopolistically competitive market:

answer

products are differentiated, which results in no price competition

question

Which of the following statements explains a similarity between perfect competition and monopolistic competition?

answer

Firms in these models find it easy to enter a market

question

In which of the following markets are demand and marginal revenue equal?

answer

Perfect competition only

question

In the short run, monopolistically competitive firms:

answer

can earn an economic profit, minimize a loss, earn a normal profit, and shut down

question

Oligopolies produce

answer

standard and differentiated products

question

In which market model does mutual interdependence exist?

answer

Oligopoly

1 of 104

question

Microeconomics focuses on:

answer

how governments, individuals, and businesses make decisions when faced with scarcity.

question

Resources are:

answer

relatively scarce in all countries

question

A recurring theme in economics is that people

answer

have unlimited economic wants, but limited resources

question

Economic reasoning is based on the premise that:

answer

all decisions or actions have a cost associated with them

question

To say that "people respond to incentives" is to say that:

answer

changes in benefits OR changes in costs influence people's decisions and their behavior

question

A rational decision

answer

results from the comparison of marginal benefit and marginal cost

question

When studying human behavior, economists assume rational self-interest. This means that people

answer

make decisions based on some desired outcome

question

Michelle wants to purchase a new phone. Michelle will purchase the phone if:

answer

the marginal benefit of the phone is greater than its marginal cost

question

The main significance of the equilibrium between marginal benefit and marginal cost is:

answer

a rational decision has been made

question

Jorge's Production Possibilities Schedule:
LBs of Green Beans - 0, 20, 40, 60, 80
LBs of Corn - 320, 240, 160, 80, 0

Jorge's production possibilities schedule demonstrates that:

answer

both corn and green beans require a trade off

question

A production possibilities frontier (PPF) illustrates which concept?

answer

opportunity cost

question

If Angela spends all her time making pies she can make 20 each day, whereas if she spends all her time making cakes she can only make 10 each day. What is the opportunity cost of making a cake?

answer

2 pies

question

Absolute advantage is found by comparing different producers

answer

input requirements per unit of output

question

Suppose Lou gives up the production of 50 bikes to make 1 car and Sally gives up the production of 75 bikes to make 1 car. Who has the comparative advantage in making cars?

answer

Lou; Lou has the lower opportunity cost of making a car

question

The theory of comparative advantage states that countries gain from trade because:

answer

if each country specializes in producing the products it is best suited to produce, world output can rise

question

Geoff: Dave:
Bread(loaves) - 5, 0. Bread(loaves) - 4, 0
Muffins(dozens) - 0,10. Muffins(dozens) - 0, 12

What is Geoff's opportunity cost of producing 1 loaf of bread?

answer

question

Geoff: Dave:
Bread(loaves) - 5, 0. Bread(loaves) - 4, 0
Muffins(dozens) - 0,10. Muffins(dozens) - 0, 12

What is Dave's opportunity cost of producing 1 loaf of bread?

answer

question

Geoff: Dave:
Bread(loaves) - 5, 0. Bread(loaves) - 4, 0
Muffins(dozens) - 0,10. Muffins(dozens) - 0, 12

Who has the comparative advantage in producing a loaf of bread?

answer

Geoff

question

answer

Corn

question

Which of the following influence the terms of trade?

answer

different opportunity costs of the parties involved

question

Jake's Production Possibilities Schedule
LBs of Green Beans - 0, 10, 20, 30, 40
LBs of Corn - 160, 120, 80, 40, 0

Jane's Production Possibilities Schedule
LBs of Green Beans - 0, 20, 40, 60, 80
LBs of Corn - 80, 60, 40, 20, 0

The terms of trade for 1 pound of green beans must lie between ___ and ___ pounds of corn

answer

1; 4

question

Specialization:

answer

results in a more efficient use of resources

question

Week. Hours at the Gym. Quiz Grade
1 3. 85%
2. 4. 80%
3. 5. 72%
4. 6. 62%

Jan's schedule of hours she spends at the gym and her quiz grades in economics is below. What does this tell us?

answer

Jan is experiencing increasing opportunity costs

question

In the circular flow diagram, which of the following flows is correct?

answer

Goods and services (products) flow from businesses to the resource market

question

The most important purpose of a market is to

answer

bring buyers and sellers together so they can trade

question

Suppose you have only $20 to spend on gas each week. If the price of gas is $2 a gal how many gallons can you purchase?

answer

10 gallons

question

Suppose the price of gas rises from $2 to $4 per gallon. You have $20 to spend on gas each week, how many gallons can you purchase?

answer

5 gallons

question

answer

Diminishing Marginal Utility

question

answer

Income effect

question

When the price of strawberries is high in the winter you purchase apples, but in the summer when the price of strawberries drops you purchase strawberries.

answer

Substitution effect

question

In understanding and analyzing "market demand," we focus on how much all buyers are

answer

willing and able to buy at different prices

question

When economists say that the demand for a product has decreased, they mean that

answer

consumers are now willing and able to buy less of this product at each possible price

question

An increase in Ashley's income has caused the change in the graph below. The good depicted must be:

answer

inferior

question

A decrease in Ashley's income has caused the change in the graph below. The good depicted must be:

answer

normal

question

On Tuesday, a movie theater discounts tickets to all shows. What would we expect to see happen to popcorn on Tuesdays?

answer

increased demand for popcorn

question

An increase in the price of dinners at fancy restaurants would likely cause the demand for babysitters to ___. This is because fancy dinners and babysitting services are likely ___.

answer

decrease; complements

question

How does market supply differ from individual supply?

answer

market supply is the sum of all individual suppliers

question

Which of the following describes the relationships between price and quantity supplied?

answer

it is a direct relationship

question

Which of the following scenarios will NOT cause an increase in supply?

answer

the price of the product decreases

question

answer

increase, decrease; increase, increase

question

Which of the following statements does NOT describe equilibrium?

answer

Equilibrium is a goal that is seldom achieved in the real world

question

For a price ceiling to be binding it must:

answer

be lower than the equilibrium price

question

For a price floor to be binding it must:

answer

be higher than the equilibrium price

question

Taxes on products

answer

increase the marginal cost for producers

question

Michael buys a handmade sweater for $60, although he was willing to pay $85. The minimum acceptable price to the seller, Susan, was $45. Michael experiences a:

answer

consumer surplus of $25; Susan experiences a producer surplus of $15

question

A deadweight loss ___ as tax rates change

answer

changes

question

Suppose the equilibrium price is 50$. If the actual price paid by the buyer is $60 for one item, and the minimum acceptable price to the seller is $40, then:

answer

there is a deadweight loss

question

Which of the following is NOT correct when describing allocative efficiency?

answer

it occurs when firms producer at the lowest possible average total cost

question

How is the slop of a linear demand curve different from its elasticity?

answer

Along a linear demand curve, elasticity changes

question

If the change in price is 20% and the change in quantity demanded is 10%, what type of elasticity is present? (if less than 1, it is inelastic)

answer

Inelastic

question

If the price elasticity of demand for a product is ___, it is considered elastic.

answer

greater than one

question

Which of the following statements is correct when the price elasticity of demand is inelastic?

answer

The elasticity coefficient is less than one

question

The price of a camera decreases from $200 to $180, and in response to the price change the quantity demanded increases from 60 to 65 units. Therefore, demand for cameras in this price range:

answer

is inelastic

question

Consumers can be ___ in their demand for a product when many substitutes exist

answer

elastic

question

The demand for necessities tends to be

answer

inelastic

question

The price of a good falls from $3 to $2.80 and the quantity demanded increases from 105 to 125. Using the midpoint formula, what is the price elasticity of demand?

answer

2.521

question

Which is more elastic in demand?

answer

Having cable television service

question

Cross-price elasticity identifies goods as substitutes when:

answer

the sign of the coefficient or result of the calculation is positive

question

Cross-price elasticity identifies goods as complements when:

answer

the sign of the coefficient or result of the calculation is negative

question

Which of the following is not correct regarding income elasticity of demand?

answer

it measures the response of consumer demand to change in the price of a related good

question

If the change in price is 2% and the change in quantity supplied is 10% supply is:

answer

elastic

question

The most important determinant of price elasticity of supply is:

answer

the length of time available to the producer to make adjustments

question

Which of the following is NOT true for the price elasticity of supply?

answer

it has the same determinants as price elasticity of demand

question

Which of the following is true for suppliers in the short run?

answer

suppliers can change employees and raw materials

question

The price elasticity of supply measures:

answer

how responsive the quantity of a good supplied is to changes in its own price

question

Generally, accounting profits are:

answer

greater than economic profits, because accounting profits do not consider implicit costs

question

answer

$525,000; $225,000

question

Marginal Product:

answer

usually increases then decreases and may become negative

question

When total product is rising:

answer

marginal product is positive

question

Average fixed cost:

answer

declines continually as output expands

question

Average total cost is ___ divided by the number of units of output

answer

total cost

question

Marginal cost describes a change in ___ when output is expanded by one more unit

answer

total cost

question

The marginal cost curve crosses the:

answer

average variable and average total cost curves at their lowest points

question

Which of the following scenarios does not illustrate a long-run adjustment?

answer

a local Starbucks hires two new employees

question

Which of the following statements describes a difference between the short run and the long run?

answer

Some resources are fixed in the short run and all resources are variable in the long run

question

One reason a firm may experience economies of scale is:

answer

the firm experienced specialization in labor and management

question

A firm is experiencing diseconomies of scale if:

answer

costs increase as output expands

question

Which of the following statements does NOT describe a perfectly competitive market?

answer

price is greater than marginal revenue

question

A perfectly competitive firm:

answer

can sell as much output as it wants at the equilibrium price

question

Price for a perfectly competitive seller equals:

answer

marginal revenue

question

In the short run, a perfectly competitive firm calculates the profit-maximizing (or loss-minimizing) production output by equating:

answer

marginal revenue and marginal cost

question

In a perfectly competitive industry, firms seek to maximize:

answer

total profit

question

answer

earns a loss of $70

question

In the short run, if ATC is greater than price at the output level where MC=MR then:

answer

the firm may be able to minimize losses

question

A perfectly competitive firm's short-run supply curve is at its lowest point when MC equals the minimum point of:

answer

the average variable cost curve

question

In the long run, if ATC equals price at the output level where MC=MR then:

answer

the firm will earn a normal profit

question

In the long run, perfectly competitive firms achieve:

answer

allocative and productive efficiency

question

Which of the following statements describes what perfectly competitive firms experience in the long run?

answer

Price equals the minimum point on ATC

question

Which of the following statements describes a perfectly competitive market under conditions of constant cost?

answer

The market supply curve becomes perfectly elastic in the long run

question

Which of the following is NOT a characteristic of monopoly?

answer

its demand curve is perfectly elastic

question

A monopolist's demand curve:

answer

is the same as the market demand curve

question

A monopolist's marginal revenue curve:

answer

lies below the demand curve

question

Which of the following statements explains why a pure monopolist's marginal revenue is less than price?

answer

it must lower price to sell more output, and the lower price applies to all units of output sold

question

Assuming the same costs, a monopoly will:

answer

producer less and charge a higher price than a perfectly competitive firm

question

The MR=MC rule is used to analyze:

answer

both monopoly and perfect competition profit maximization

question

Which of the following statements explains when a natural monopoly occurs?

answer

Economies of scale occur as ATC decreases over a wide range of output

question

Regulation of natural monopolies often causes a price ceiling price that:

answer

achieves allocative efficiency and may result in government subsidies

question

In monopolistically competitive markets, entry barriers:

answer

are more prevalent than in perfectly competitive markers but les than in monopoly markets

question

It is more difficult to analyze a monopolistically competitive market than a perfectly competitive market because in a monopolistically competitive market:

answer

products are differentiated, which results in no price competition

question

Which of the following statements explains a similarity between perfect competition and monopolistic competition?

answer

Firms in these models find it easy to enter a market

question

In which of the following markets are demand and marginal revenue equal?

answer

Perfect competition only

question

In the short run, monopolistically competitive firms:

answer

can earn an economic profit, minimize a loss, earn a normal profit, and shut down

question

Oligopolies produce

answer

standard and differentiated products

question

In which market model does mutual interdependence exist?

answer

Oligopoly

Continue to order Get a quote

Economic Final Exam

Recent Posts

Recent Comments

Calculate the price of your order

Our guarantees

Money-back guarantee

Zero-plagiarism guarantee

Free-revision policy

Privacy policy

Fair-cooperation guarantee