Econ 102 Exam 1 2023 with verified questions and answers

Economics can be defined as the social science that explains the ________. Choices that we make as we cope with scarcity An example of a question that might be explored in microeconomics is to determine The number of workers employed by Intel Scarcity is a situation in which ________ (1) We are unable to satisfy all our wants (A) People must make choices because Of scarcity In every economic system, choices must be made because resources are ________ and our wants are ________. Limited; unlimited In broad terms the difference between microeconomics and macroeconomics is that Microeconomics studies decisions of individual people and firms and macroeconomics studies the entire national economy The study of the choices made by individuals is part of the definition of Microeconomics The fact that wants cannot be fully satisfied with available resources reflects the definition of Scarcity Scarcity is a situation in which (2) People cannot satisfy all their wants (B) All economic questions are about How to cope with scarcity Microeconomics is the study of ________. The choices that individuals and businesses make Macroeconomics is concerned with Economy-wide variables In part, microeconomics is concerned with How a business firm decides upon the amount it produces and the price it sets The branch of economics that deals with the analysis of the whole economy is called Macroeconomics Which of the following questions is a topic that would be studied by microeconomics? How will a lower price of digital cameras affect the quantity of cameras sold? Which of the following is NOT a factor of production? The wages paid to workers Which of the following is CORRECT? Factors of production are The inputs used to produce goods and services Which of the following is NOT a factor of production? 175 shares of Microsoft stock The income earned by the people who sell the services of the factor of production ________ is called ________. entrepreneurship; profit Which of the following best defines capital as a factor of production? instruments, machines, and buildings used in production In economics, the term "land" means land, mineral resources, and nature's other bounties Copper falls into which factor of production category? Land An economic system in which the government decides what, how, and for whom to produce, directs workers to jobs, and owns all the land and capital is Centrally planned socialism Jed had an exam score of 50 percentage points. There is an extra credit assignment that Jed can complete that will raise his exam score by 20 percentage points. Jed has determined that the extra credit assignment will take 10 hours of his time. Jed will complete the assignment he values the 20 percentage points more than the 10 hours of his time The statement "An increase in the price of gasoline will lead to a decrease in the amount purchased" is Positive statement A normative statement is (1) About what ought to be (A) Statements about what ought to be are called Normative statements Normative statements are statements about What ought to be Economic models Simplify reality Which of the following is a positive statement (1) A 5 percent increase in income leads to a 3 percent increase in the consumption of orange juice (A) Which of the following is a positive statement? Our planet is warming because of an increased carbon dioxide buildup in the atmosphere The statement that _____ is a positive statement the price of sugar in the United States is higher than the price in Australia Which of the following is a positive statement? (2) A 10 percent increase in income leads to a 4 percent increase in the consumption of beef (B) When Susan makes the statement, "The government should spend less money to take care of national parks," she is Making a normative statement Which of the following is an example of a positive statement Households are the primary source of saving Which of the following is a normative statement? (1) The unemployment rate is too high (A) A normative statement is About what ought to be Which of the following is a normative statement You should eat less candy Which of the following are TRUE regarding "positive" statements They describe what is believed about how the world appears and they can be tested as to their accuracy Making a choice at the margins means Deciding to do a little bit more or a little bit less of an activity The marginal benefit is the Additional gain from one more unit of an activity Fred and Anne are both given free tickets to see a movie. Both decide to see the same movie. We know that Both bear an opportunity cost of seeing the movie because they could have done other things instead of seeing the movie A lawn care service is deciding whether to add an additional employee to its summer crew. The marginal cost of hiring this worker depends on Total amount paid to only the new worker A student is student is studying for an exam 2 hours a day and is debating whether to study an extra hour. The students marginal benefit Is the benefit the student receives from studying the extra hour Opportunity cost is best defined as the highest-valued alternative that is given up to get something In terms of dollars, the marginal benefit of working five days a week instead of four days a week is the wages received for the fifth day of work Opportunity cost means the (2) the highest-valued alternative forgone (B) Which of the following creates an incentive to increase the amount of an activity? a decrease in the marginal cost of the activity and an increase in the marginal benefit of the activity The opportunity cost of any action is (1) highest valued alternative given up (A) The term "opportunity cost" points out that Any decision regarding the use of a resource involves a costly choice In order to determine a household's budget line, you must know the prices of the goods bought and the household's income. Tonya, who is rich, and Jerome, who is poorer, both buy orange juice and croissants for lunch at the student cafeteria. Their budget constraints on a diagram with orange juice on the vertical axis and croissants on the horizontal have the same Slopes Joe has $50 to spend on pizza and movies. If movies are $5 each and a pizza is $10 then, assuming he spends all his money, he can buy which of the following bundle of goods? 6 movies and 2 pizzas Shaniq consumes only magazine and CDs. Her income equals $60 per month. CDs are $12 each and magazines are $5 each. What is the equation for her budget line? $60 = 12QCD + 5Qm Mary has $10 to spend each week on coffee, Qc and magazines, Qm. The price of a coffee is $1, and the price of a magazine is $2. Mary's budget equation is ________. $1 × Qc + $2 × Qm = $10 When moving along the production possibilities frontier, opportunity cost is measured as the decrease in the quantity produced of one good divided by the increase in the quantity produced of another good Increasing opportunity cost occurs along a production possibilities frontier because resources are not equally productive in all activities. Any production point outside the production possibilities frontier is Unattainable A point inside a production possibilities frontier could indicate that some resources are unemployed The production possibilities frontier is the boundary between those combination of goods and services that can be produced and those that cannot be produced A nation can produce at a point outside its PPF never Production efficiency means that producing more of one good is possible only if the production of some other good is decreased. Considering a PPF with health care services on the vertical axis and other goods and services on the horizontal axis, the increasing production of health care services in the United States as a result of the aging population represents a movement upward along the PPF A production possibilities frontier figure does NOT illustrate the exchange of one good or service for another If a society is operating at a point inside its production possibilities frontier, then this society's resources are being inefficiently utilized A president of the United States promises to produce more defense goods without any decreases in the production of other goods. This promise can be valid if the United States is producing at a point inside its production possibilities frontier The marginal benefit of a good or service decreases as more is consumed When an economy produces at its allocatively efficient production point a society can increase the production of one good only by decreasing the production of some other good that is valued more highly. Marginal benefit is the the benefit that a person receives from consuming one more unit of a good or service When the opportunity cost of producing more of a good is increasing, the marginal cost of producing more of the good is Increasing We measure the marginal ________ of a good by what a ________ for another unit of the good. benefit; person is willing to pay A marginal benefit curve shows the quantity of one good that people are willing to forgo to get another unit of another good Marginal cost increases as more is produced When we cannot produce more of any good without giving up some other good that we value more highly, we have achieved allocative efficiency Moving along a PPF, marginal cost is equal to the opportunity cost of producing one more unit of a good or service The PPF shifts if the resources available to the nation change An increase in the nation's capital stock will shift the PPF outward The production possibilities frontier shifts as technology changes After Hurricane Katrina devastated parts of Mississippi and New Orleans in 2005, we can be sure that the production possibilities frontier for that area temporarily shifted inward, toward the origin One of the opportunity costs of economic growth is reduced current consumption. Consider a production possibilities frontier with corn on the vertical axis and cars on the horizontal. Unusually good weather for growing corn shifts the vertical intercept upward but does not shift the horizontal intercept Any production point outside the production possibilities frontier is Unattainable The "law of demand" predicts that, other things being equal an increase in the price of pizza decreases the quantity of pizza demanded When the price of an inferior good falls, the substitution effect leads to ________ in the quantity purchased and the income effect leads to ________ in the quantity purchased an increase; a decrease Georgine buys more sweaters when her income increases. For Georgine, sweaters are a normal good A decrease in the price of bowling shifts the demand curve for bowling balls rightward When graphing a demand curve for corn, we are showing the relationship between the quantity demanded of corn and the relative price of corn A normal good is one for which demand increases when income increases The demand for a good increases when the price of a substitute ________ and also increases when the price of a complement rises; falls Wants, as opposed to demands are the unlimited desires of the consumer A normal good is a good for which demand increases when income increases The "law of demand" states that, other thing remaining the same, the higher the price of a good, the smaller is the quantity demanded Which of the following increases the demand for a normal good? the price of the good is expected to increase in the future If a producer can use resources to produce either good A or good B, then A and B are substitutes in production The wage rate paid by Walkman producers falls and at the same time the price of raw materials used in the production of Walkmans rises. You predict that the supply curve of Walkmans will shift either leftward or rightward A fall in the price of a good causes producers to reduce the quantity of the good they are willing to produce. This fact illustrates the law of supply Which of the following shifts the supply curve for oranges? disastrous weather that destroys about half of this year's orange crop The supply curve slopes upward when graphed against ________, because of ________. the price of the good; increasing marginal cost For a "change in the quantity supplied" but not "a change in supply" to occur, there must be a rightward shift of the demand curve or a leftward shift of the demand curve The quantity of CDs that firms plan to sell this month depends on all of the following EXCEPT the quantity of CDs that people plan to buy Which of the following does NOT shift the supply curve? an increase in the price of the good If the price of lumber rises, then, in the market for sawdust the supply curve of sawdust shifts rightward As the price of a pound of peanuts falls, the quantity of peanuts supplied decreases A change in which of the following would NOT shift the supply curve for sneakers? an increase in the price of sneakers The price of a good will fall if there is a surplus at the current price When the price is less than the equilibrium price the price will be forced higher, there will be a shortage, some consumers will be willing to pay a price higher than the prevailing price When there is a surplus in the market, the quantity sold is equal to the quantity demanded Suppose the equilibrium price for soft drinks is $1.00. If the current price in the soft drink market is $1.25 each there will be a surplus of soft drinks. In a supply and demand figure, the equilibrium price and quantity are found at the point where quantity supplied equals quantity demanded A shortage causes the price to rise If the price of a video download is below its equilibrium price, the quantity supplied is ________ than the quantity demanded. If the price of a video download is above its equilibrium price, the quantity supplied is ________ than the quantity demanded. less; greater The existence of a shortage pushes the price up In a market, at the equilibrium price neither buyers nor sellers can do business at a better price In 2014, the price of peanuts was rising, which lead peanut butter sellers and peanut butter buyers to expect the price of peanut butter would rise in the future. In the current market for peanut butter, the price falls and the quantity decreases. This set of results means that supply decreased by more than demand increased Beef is a normal good and people's incomes fall. At the same time a bumper corn crop reduces the cost of feeding steers. These changes result in an increase in the equilibrium quantity of beef if the shift in the demand curve is smaller than the shift in the supply curve We observe that the equilibrium price of digital cameras has fallen and the equilibrium quantity of digital cameras has increased. Which of the following events could be responsible for this? Technological advances in digital camera production The circular flow model shows that consumer goods and services produced by business firms are sold in the goods market Which of the following is a final good? flour purchased at the store to bake cookies Gross domestic product (GDP) is the ________ in a given time period. market value of final goods and services produced by the economy GDP does not directly include intermediate goods because that would count the intermediate goods twice ________ is gross investment minus ________ Net investment; depreciation Gross domestic product is the total ________ produced within a country in a given time period. market value of all final goods and services In computing GDP, it is essential to avoid double counting Which of the following expenditures associated with the production of a new high-performance SUV will be directly included in GDP? the purchase of new machine tools to manufacture the engines Which of the following expenditures is for an intermediate good? General Motors buys new tires to put on the cars it's building In the circular flow model of an economy, households receive income from producers for the use of factors in the factor markets The word "final" in the definition of GDP refers to not counting intermediate goods or services The circular flow of income shows that governments purchase goods and services Choose the best statement. GDP equals aggregate expenditure and equals aggregate income Which of the following is TRUE regarding the circular flow diagram? The government, households, and firms all have transactions in the goods market A new 2015 Honda Civic produced in 2015 and purchased in 2016 is part of GDP in 2015