ECON 110 Final Exam Practice Questions
ECON 110 Final Exam Practice Questions Econ 110
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Spring 2016 ECON 110 Principles of Macroeconomics Review Practice Questions This review provides individual questions from each lectured chapter covered throughout the course to help solidify topics and practice calculations of tested material. Chapters 1 6 1. The overriding reason why households and societies face many decisions is that a. Resources are scarce b. Goods and services are not scarce c. Incomes fluctuate with business cycles d. People, by nature, tend to disagree 2. Who receives the most of what is produced in a market economy? a. Lawmakers and other politically favored groups b. Those who are willing and able to buy them c. Everyone receives an equal amount d. People who earn the highest incomes 3. Making rational decisions “at the margin” means that people a. Make those decisions that do not impose a marginal cost b. Evaluate how easily a decision can be reversed if problems arise c. Compare the marginal costs and marginal benefits of each decision d. Always calculate the dollar costs for each decision 4. If society decides it wants more of one good and all resources are fully utilized, then a. It is unable to do this unless technology advances b. Additional resource supplies will have to be found c. It has to give up some of other goods incur some opportunity costs d. More unemployment will occur 5. The term “property rights” refers to a. The physical possession of a house or any other property which the owner legally purchased b. The ability to exercise control over one’s own resources within the confines of the law c. The government’s right to appropriate land from wealthy landowners to redistribute to peasants d. The right of a business not to have its assets confiscated by the government in the event that the business is accused of committing fraud Spring 2016 6. Refer to the figure below. If Chile and Colombia switch from each country dividing its time equally between the production of coffee and soybeans to each country spending all of its time producing the good in which it has a comparative advantage, then total production of soybeans will increase by a. 3 pounds b. 6 pounds c. 9 pounds d. 12 pounds Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table below. She would have to hire a worker for those hours at a wage rate of $10 per hour. 7. Refer to the table above. Using marginal analysis, determine how many hours should Lydia extend her nail salon’s hours of operations? Spring 2016 a. 2 hours b. 3 hours c. 4 hours d. 5 hours 8. What is the difference between an “increase in demand” and an “increase in quantity demanded”? a. There is no difference between the two terms; they both refer to a shift of the demand curve. b. An “increase in demand” is represented by a rightward shift of the demand curve while an “increase in quantity demanded” is represented by a movement along a given demand curve. c. There is no difference between the two terms; they both refer to a movement downward along a given demand curve. d. An “increase in demand” is represented by a movement along a given demand curve, while an “increase in quantity demanded” is represented by a rightward shift of the demand curve. 9. One would speak of a change in the quantity of a good supplied, rather than a change in supply, if a. Supplier expectations about future prices change b. The price of the good changes c. The cost of producing the good changes d. Prices of substitutes in production change 10. Refer to the table above. Which of the following statements is true? a. Haley has an absolute advantage in making both products b. Serena has an absolute advantage in making both products c. Haley has an absolute advantage in making bracelets and Serena in making necklaces d. Haley has an absolute advantage in making necklaces and Serena in making bracelets Spring 2016 11. Refer to the figure above. One segment of the circular flow diagram in the figure shows the flow of goods and services from market C to economic agents A. What is the market C and who are economic agents A? a. C = factor markes; A = households b. C = product markets; A = households c. C = factor markets; A = firms d. C = product markets; A = firms 12. 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 13. Prices direct economic activity in a market economy by a. Influencing the actions of buyers and sellers b. Reducing scarcity of the goods and services produced c. Eliminating the need for government intervention d. Allocating goods and services in the most equitable way 14. Which of the following is a macroeconomics question? a. What determines the inflation rate? b. What determines the production of DVDs? c. What factors determine the price of carrots? d. What determines the wage of auto workers? Spring 2016 15. In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga caviar, the most prized of caviars, from the Caspian Sea. What happened in the market for caviar in the U.S.? a. The supply curve shifted to the left b. The supply curve shifted to the right c. The demand curve shifted to the right d. The demand curve shifted to the left 16. The _________ demonstrates the roles played by households and firms in the market system. a. Production possibilities frontier b. Circular flow model c. Theory of comparative advantage d. Business cycle 17. Most economists believe that an increase in the quantity of money results in a. An increase in the demand for goods and services b. Lower unemployment in the short run c. Higher inflation in the long run d. All of the above are correct 18. Rent control is an example of a. A subsidy for lowskilled workers b. A price floor c. A price ceiling d. A black market 19. The decision about what goods and services will be produced made in a market economy is made by a. Lawmakers in the government voting on what will be produced b. Producers deciding what society wants most c. Consumers and firms choosing which goods and services to buy or produce d. Consumer dictating to firm what they need most Spring 2016 20. Refer to the figure above. If the economy is currently producing at point Y, what is the opportunity cost of moving to point W? a. 2 million tons of steel b. zero c. 9 million tons of paper d. 16 million tons of paper 21. Which of the following is a flow in the circular flow model? a. The flow of goods and services from households to firms b. The flow of profit and the flow of revenue c. The flow income earned by firms and the flow of expenditures earned by households d. The flow of revenue received by firms and the flow of payments to resource owners Spring 2016 22. Refer to the figure above. Which of the following statements is not correct? a. When the price is $10, quantity supplied equals quantity demanded b. When the price is $6, there is a surplus of 8 units c. When the price is $12, there is a surplus of 4 units d. When the price is $16, quantity supplied exceeds quantity demanded by 12 units 23. Which of the following is a result of a market economy? a. Environmental protection b. An equal income distribution c. Agreement on equity d. Voluntary exchange Spring 2016 24. Refer to the figure above. Which of the following statements best relates the figure to the events that occurred in the United State in the 1970s? a. Buyers of gasoline paid a price of P before 1973; they paid a price of P after 1 2 OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price. b. Buyers of gasoline paid a price of P 1before 1973; they paid a price of P 3after OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price. c. Buyers of gasoline paid a price of P 2before 1973; they paid a price of P 3after OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price. d. The price ceiling was binding before 1973; the price ceiling was no longer binding after OPEC increased the price of crude oil in 1973. 25. Specializing the production of a good or service in which one has a comparative advantage enables a country to do all of the following except a. Engage in mutually beneficial trade with other nations b. Increase the variety of products that it can consume with no increase in resources c. Consume a combination of goods that lies outside its own production possibilities frontier d. Produce combination of goods that lies outside its own production possibilities frontier Spring 2016 26. Refer to the figure above. Suppose a tax of $2 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed? a. $3 b. Between $3 and $5 c. Between $5 and $7 d. $7 27. When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good a. Increase as more of the good is produced b. Decrease as more of the good is produced c. Does not change as more of the good is produced d. May increase, decrease, or not change as more of the good is produced 28. Total output in an economy increase when each person specializes because a. There is less competition for the same resources b. Each person spends more time producing that product in which he or she has a comparative advantage c. A wider variety of products will be produced within each country due to specialization d. Government necessarily plays a larger role in the economy due to specialization 29. The law of demand implies, holding everything else constant, that a. As the price of bagels increases, the quantity of bagels demanded will decrease b. As the price of bagels increases, the demand for bagel will decrease c. The price of bagels increases, the quantity of bagels demanded will increase d. As the price of bagels increases, the demand for bagels will increase 30. An economic theory about international trade that is based on the assumption that there are only two countries trading two goods a. Is useless,, since the real world has many countries trading many goods Spring 2016 b. Can be useful only in situations involving two countries and two goods c. Can be useful in the classroom, but is useless in the real world d. Can be useful and helping economist understand the complex world of international trade involving many countries and many goods 31. Society faces a tradeoff in all of the following situationexcept a. When deciding who will receive the goods and services produced b. When deciding what goods and services will be produced c. When deciding how goods and services will be produced d. When some previously unemployed workers find jobs 32. A change in all of the following variables will change the market demand for product except a. The price of the product b. Population and demographics c. Income d. Tastes 33. If, the market oranges, the supply has increased then a. The supply curve for oranges has shifted to the right b. The supply curve for oranges has shifted to the left c. There has been a movement of words along a supply curve for oranges d. There has been a movement downwards along the supply curve for oranges 34. Arlene quits her $125,000ayear job to take care of her ailing parents. What is the opportunity cost of her decision? a. Zero, since she will no longer be earning a salary b. It depends on the “going rate” for homecare providers c. At least $125,000 d. The value she attributes to the satisfaction she receives from taking care of her parents 35. Which of the following is a positive economic statement? a. People should not buy SUVs b. The government should mandate electric automobiles c. Scarcity necessitates that people make tradeoffs d. Foreign workers should not be allowed to work for lower wages than the citizens of a country Spring 2016 36. Refer to figure above. The movement from point A to point B on the graph shows a a. Decrease in demand b. Increase in demand c. Decrease in quantity demanded d. Increase in quantity demanded 37. If a firm has an incentive to increase supply now and decrease supply in the future, the firm expects that the a. Price of its product will be lower in the future than it is today b. Price of its product will be higher in the future than it is today c. Price of inputs will be lower in the future than they are today d. Demand for the product will be lower in the future than it is today 38. If an increase in income leads to a decrease in the demand for popcorn, then popcorn is a a. An inferior good b. A neutral good c. A necessity d. A normal good 39. In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga caviar, the most prized of caviars, from the Caspian Sea. What happened in the market for caviar in the U.S.? a. The supply curve shifted to the left b. The supply curve shifted to the right c. The demand curve shifted to the right d. The demand curve shifted to the left Spring 2016 40. Refer to figure above. which country has a comparative advantage in the production of cotton? a. Indonesia b. They have equal productive abilities c. Pakistan d. Neither country 41. The basic principle in economic studies is a. Tradeoff b. Scarcity c. Money d. Efficiency 42. The assumption that people are __________ is one of the basic assumptions in economic studies. a. Emotional b. Generous c. Rational d. Smart 43. Marginal analysis is involving comparing a. MC and AC b. MB and MC c. MB and AC d. MC and VC 44. Every society faces a tradeoff between ______ a. Equality and efficiency b. Efficiency and effectiveness Spring 2016 c. Equality and fair distribution d. Efficiency and production 45. We need to privatize the social security program in the State of Kansas is a a. Normative statement b. Positive statement c. Social statement d. Market statement 46. The opportunity cost of the good on the xaxis is that _________ of the PPF. a. Height b. Slope c. Yintercept d. Inverse of the slope 47. If the PPF is linear, then the opportunity cost of producing a good or service is a. Decreasing b. Constant c. Increasing d. Stay the same 48. The Circular Flow Diagram shows how firms and households interact in the markets of a. Goods and services b. Money c. Goods and services and inputs d. All of the above 49. Economic decline happens when the PPF shifts a. Outward b. Inward c. Outside d. None of the above 50. One of the basic principles of economics is that trade makes: a. Everyone better off b. Everyone worse off c. Some people better off and others worse off d. None of the above 51. In a perfectly competitive market; the buyer and sellers are price a. Makers b. Takers c. Neutral d. Fixers 52. The law of demand is the rule that, _______ as the price of a good or service decreases, the quantity demanded increases. Spring 2016 a. Crius Partus b. Ceteris Paribus c. Paribus Ceteris d. Cyrous Parallal 53. As the income increases and people buy less of the good, then the good is called a. Complementary good b. Normal good c. Inferior good d. Substitute good 54. The change in price of the same good or service causes a change in a. Demand b. Quantity demanded c. Shift d. Growth 55. The supply curve has a a. Negative slope b. Positive slope c. Perfect slope d. Undetermined slope 56. The improvement in technology will lead to increase in the a. Supply b. Quantity supplied c. Cost of production d. Number of firms 57. Shortage happens when quantity supplied is ______ quantity demanded. a. Greater b. Smaller c. Equal d. None of the above 58. An increase in demand and supply by the same size will cause the price of the good to: a. Increase b. Decrease c. Stay the same d. All of the above 59. Trade among nations is based off of: a. Absolute advantage b. Comparative advantage c. Less advantage d. More advantage Spring 2016 60. The equilibrium quantity is the quantity that appears in the market at the a. Demand price b. Supply price c. Equilibrium price d. None of the above 61. Economists use some familiar terms in specialized ways a. To make the subject sound more complex than it is b. Because every respectable field of study has its own language c. To provide a new and useful way of thinking about the world d. Because it was too difficult to come up with new terms 62. The essence of science is a. The laboratory experiments b. The scientific method c. The study of nature, but not the study of society d. All of the above are correct 63. The goal of an economist who formulates new theories is to a. Provide an interesting framework of analysis, whether or not the framework turns out to be of much use in understanding how the world works. b. Provoke stimulating debate in scientific journals c. Contribute to an understanding of how the world works d. Demonstrate that economist, like other scientists, can formulate testable theories 64. Because it is difficult for economists to use experiments to generate data, they generally must a. Do without data b. Substitute assumptions for data when data are unavailable c. Rely upon hypothetical data that were previously concocted by other economists d. Use whatever data the world gives them 65. Economists make assumptions to a. Mimic the methodologies employed by other scientists. b. Minimize the number of experiments that yield no useful data. c. Minimize the likelihood that some aspect of the problem at hand is being overlooked. d. Focus their thinking on the essence of the problem at hand. 66. When studying the effects of public policy changes, economists a. Always refrain from making assumptions b. Sometimes make different assumptions about the short run and the long run c. Consider only the direct effects of those policy changes and not the indirect effects Spring 2016 d. Consider only the shortrun effects of those policy changes and not the longrun effects 67. Economic models a. Cannot be useful if they are based on false assumptions b. Were once thought to be useful, but that is no longer true c. Must incorporate all aspects of the economy if they are to be useful d. Can be useful, even if they are not particularly realistic 68. A circularflow diagram is a model that a. Helps to explain how participants in the economy interact with one another b. Helps to explain how the economy is organized c. Incorporates all aspects of the real economy d. Both (a) and (b) are correct 69. The two loops in the circularflow diagram represent a. The flow of goods and the flow of services b. The flow of dollars and the flow of financial assets c. The flow of inputs into production processes and the flow of outputs from production processes d. The flows of inputs and outputs and the flow of dollars 70. Refer to Figure above. Devin works as an attorney for a corporation and is paid a salary in exchange for the legal services he performs. Juan owns office buildings and rents his buildings to companies in exchange for rent payments. If Devin’s income is represented by a flow of dollars from Box D to Box B of this circular flow diagram, then Juan’s income is represented by a flow of dollars a. From Box A to Box C b. From Box C to Box A c. From Box B to Box D d. From Box D to Box B Spring 2016 71. Any point on a country's production possibilities frontier represents a combination of two goods that an economy a. Never be able to produce b. Can produce using all available resources and technology c. Can produce using some portion, but not all, of its resources and technology d. May be able to produce in the future with more resources and/or superior technology 72. The bowed shape of the production possibilities frontier can be explained by the fact that a. All resources are scarce b. Economic growth is always occurring c. The opportunity cost of one good in terms of the other depends on how much of each good the economy is producing d. The only way to get more of one good is to get less of the other 73. Refer to Figure above. This economy has the ability to produce at which point(s)? a. Q, R, T, U b. R, T, U c. R, U d. T Spring 2016 74. Refer to Figure above. The opportunity cost of obtaining 40 additional dryers by moving from point D to point C is a. 0 washers b. 20 washers c. 40 washers d. None of the above; the economy cannot move from point D to point C. 75. Refer to Figure above. The shift of the production possibilities frontier from A to B illustrates a. Simultaneous technological advances in the book and DVD industries b. A reallocation of resources away from the production of DVDs and toward the production of books c. Economic growth d. All of the above are correct 76. A macroeconomist — as opposed to a microeconomist — might study the effect of Spring 2016 a. Changes in the money supply on the inflation rate b. An increase in the gas tax on fuel consumption c. A technological advance on the natural gas industry d. A hurricane on prices in the orange industry 77. Which of the following statements is correct about the roles of economists? a. Economists are best viewed as policy advisers b. Economists are best viewed as scientists c. In trying to explain the world, economists are policy advisers; in trying to improve the world, they are scientists d. In trying to explain the world, economists are scientists; in trying to improve the world, they are policy advisers 78. One way to characterize the difference between positive statements and normative statements is as follows: a. Positive statements tend to reflect optimism about the economy and its future, whereas normative statements tend to reflect pessimism about the economy and its future b. Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be c. Positive statements involve advice on policy matters, whereas normative statements are supported by scientific theory and observation d. Economists outside of government tend to make normative statements, whereas governmentemployed economists tend to make positive statements 79. When an economist points out that you and millions of other people are interdependent, he or she is referring to the fact that we all a. Rely upon the government to provide us with the basic necessities of life b. Rely upon one another for the goods and services we consume c. Have similar tastes and abilities d. Are concerned about one another’s well being 80. An economy’s production possibilities frontier is also its consumption possibilities frontier a. Under all circumstances b. Under no circumstances c. When the economy is selfsufficient d. When the rate of tradeoff between the two goods being produced is constant. 81. The most obvious benefit of specialization and trade is that they allow us to a. Work more hours per week than we otherwise would be able to work b. Consume more goods than we otherwise would be able to consume c. Spend more money on goods that are beneficial to society, and less money on goods that are harmful to society Spring 2016 d. Consume more goods by forcing people in other countries to consume fewer goods. 82. Assume that England and Holland can switch between producing milk and oats at a constant rate. Refer to Table above. We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for Holland. If we were to do this, measuring milk along the horizontal axis, then a. the slope of England’s production possibilities frontier would be 10/4 and the slope of Holland’s production possibilities frontier would be 4/3 b. the slope of England’s production possibilities frontier would be 4/10 and the slope of Holland’s production possibilities frontier would be ¾ c. the slope of England’s production possibilities frontier would be 10/4 and the slope of Holland’s production possibilities frontier would be 4/3 d. the slope of England’s production possibilities frontier would be 4/10 and the slope of Holland’s production possibilities frontier would be 3/4. 83. Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. Refer to Table above. Assume that the farmer and the rancher each has 24 labor hours available. If each person divides his time equally between the production of meat and potatoes, then total production is a. 6 pounds of meat and 4.5 pounds of potatoes b. 5.5 pounds of meat and 8 pounds of potatoes c. 12 pounds of meat and 9 pounds of potatoes d. 5 pounds of meat and 5.5 pounds of potatoes. 84. Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. Spring 2016 Refer to Table above. We could use the information in the table to draw a production possibilities frontier for Japan and a second production possibilities frontier for Korea. If we were to do this, measuring cars along the horizontal axis, then a. the slope of Japan’s production possibilities frontier would be 5 and the slope of Korea’s production possibilities frontier would be 3 b. the slope of Japan’s production possibilities frontier would be 0.2 and the slope of Korea’s production possibilities frontier would be 0.33 c. the slope of Japan’s production possibilities frontier would be 0.2 and the slope of Korea’s production possibilities frontier would be 0.33 d. the slope of Japan’s production possibilities frontier would be 5 and the slope of Korea’s production possibilities frontier would be 3. 85. Refer to Figure below. If the production possibilities frontier shown is for 24 hours of production, then how long does it take Brazil to make one cashew? Brazil’s Production Possibilities Frontier a. 1/10 hour b. 1/3 hour c. 3 hours d. 10 hours Spring 2016 86. Chile’s Production Possibilities Frontier Colombia’s Production Possibilities Frontier Refer to Figure above. If the production possibilities frontiers shown are each for one day of production, then which of the following combinations of coffee and soybeans could Chile and Colombia together make in a given day? a. 4 pounds of coffee and 16 pounds of soybeans b. 8 pounds of coffee and 15 pounds of soybeans c. 16 pounds of coffee and 10 pounds of soybeans d. 24 pounds of coffee and 4 pounds of soybeans 87. Alice and Betty’s Production Possibilities in one 8 hour day. Refer to Figure above. If point A represents Alice’s current production and point B represents Betty’s current production, under what circumstances can both Alice and Betty benefit from specialization and trade? a. Alice produces more pizzas and Betty produces more lemonade b. Alice produces more lemonade and Betty produces more pizzas c. Both Alice and Betty produce only pizzas d. There are no circumstances under which both Alice and Betty can benefit from specialization and trade. Spring 2016 88. A farmer has the ability to grow either corn or cotton or some combination of the two. Given no other information, it follows that the farmer’s opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton a. is equal to 0 b. is between 0 and 1 c. is equal to 1 d. is greater than 1 89. Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that the opportunity cost of 1 chair is a. 1/6 table for Ken and 1/3 table for Traci b. 1/6 table for Ken and 3 tables for Traci c. 6 tables for Ken and 1/3 table for Traci d. 6 tables for Ken and 3 tables for Traci. 90. The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good, a. has a low opportunity cost of producing that good, relative to the opportunity costs of other producers b. has a comparative advantage in the production of that good c. has an absolute advantage in the production of that good d. should be the only producer of that good. 91. Refer to Figure above. At which of the following prices would both Chile and Colombia gain from trade with each other? Spring 2016 a. 6 pounds of soybeans for 9 pounds of coffee b. 8 pounds of soybeans for 20 pounds of coffee c. 11 pounds of soybeans for 33 pounds of coffee d. Chile and Colombia could not both gain from trade with each other at any price. 92. US and French Production Opportunities Refer to Table above. France has an absolute advantage in the production of a. Wine b. Cheese c. Both wine and cheese d. Neither wine nor cheese 93. Adam Smith asserted that a person should never attempt to make at home a. What it will cost him more to make than to buy b. Any good in which that person does not have an absolute advantage c. Any luxury good d. Any necessity. 94. In a market economy, a. supply determines demand and demand, in turn, determines prices b. demand determines supply and supply, in turn, determines prices c. the allocation of scarce resources determines prices and prices, in turn, determine supply and demand d. supply and demand determine prices and prices, in turn, allocate the economy’s scarce resources 95. A group of buyers and sellers of a particular good or service is called a(n) a. Coalition b. Economy c. Market d. Competition 96. A competitive market is a market in which a. an auctioneer helps set prices and arrange sales b. there are only a few sellers c. the forces of supply and demand do not apply d. no individual buyer or seller has any significant impact on the market price 97. Which of the following characteristics is required for a perfectly competitive market? a. The goods offered for sale are exactly the same Spring 2016 b. There are so many buyers and sellers that no single buyer or seller has any influence over the market price c. It is difficult for new sellers to enter the market d. Both a and b are correct 98. An increase in quantity demanded a. results in a movement downward and to the right along a demand curve b. results in a movement upward and to the left along a demand curve c. shifts the demand curve to the left d. shifts the demand curve to the right 99. A downwardsloping demand curve illustrates a. that demand decreases over time b. that prices fall over time c. the relationship between income and quantity demanded d. the law of demand 100. When we move along a given demand curve, a. only price is held constant b. income and price are held constant c. all nonprice determinants of demand are held constant d. all determinants of quantity demanded are held constant 101. Refer to Figure above. Which of the following would cause the demand curve to shift from Demand A to Demand B in the market for oranges in the United States? a. a freeze in Florida b. a technological advance that allows oranges to ripen faster c. a decrease in the price of apples d. an announcement by the FDA that oranges prevent heart disease 102. Suppose that when income rises, the demand curve for doctor’s visits shifts to the right. In this case, we know doctor’s visits are a. inferior goods Spring 2016 b. normal goods c. perfectly competitive goods d. durable goods 103. Refer to Figure above. The movement from Point A to Point B represents a(n) a. shift in the supply curve b. decrease in the quantity supplied c. increase in the quantity supplied d. Both a and b are correct 104. A supply curve slopes upward because a. as more is produced, total cost of production falls b. an increase in input prices increases supply c. the quantity supplied of most goods and services increases over time d. an increase in price gives producers an incentive to supply a larger quantity 105. Refer to Figure above. The shift from S to S’ could be caused by an Spring 2016 a. increase in the price of the good b. improvement in production technology c. increase in income d. increase in input prices 106. Which of the following events must cause equilibrium quantity to rise? a. demand increases and supply decreases b. demand and supply both decrease c. demand decreases and supply increases d. demand and supply both increase 107. Refer to Figure above. If the price is $25, then there would be an excess a. supply of 100 units, and price would fall b. supply of 300 units, and price would fall c. demand of 100 units, and price would fall d. demand of 300 units, and price would fall Spring 2016 108. Refer to Figure above. Which of the following movements would illustrate the effect in the market for Ramen noodles of a decrease in the incomes of young adults, assuming that Ramen noodles are an inferior good? a. Point A to Point B b. Point C to Point B c. Point C to Point D d. Point A to Point D 109. Adam Smith suggested that an invisible hand guides market economies. In this analogy, what is the baton that the invisible hand uses to conduct the economic orchestra? a. the government b. Prices c. Subsidies d. the Federal Reserve 110. Price controls are usually enacted a. as a means of raising revenue for public purposes b. when policymakers believe that the market price of a good or service is unfair to buyers or sellers c. when policymakers tax a good d. All of the above are correct. 111. A price ceiling is a. often imposed on markets in which “cutthroat competition” would prevail without a price ceiling b. a legal maximum on the price at which a good can be sold Spring 2016 c. often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling d. All of the above are correct. 112. If the government removes a binding price ceiling from a market, then the price paid by buyers will a. increase, and the quantity sold in the market will increase b. increase, and the quantity sold in the market will decrease c. decrease, and the quantity sold in the market will increase d. decrease, and the quantity sold in the market will decrease. 113. A price ceiling is binding when it is set a. above the equilibrium price, causing a shortage b. above the equilibrium price, causing a surplus c. below the equilibrium price, causing a shortage d. below the equilibrium price, causing a surplus. 114. Refer to Figure above. The price ceiling causes quantity a. supplied to exceed quantity demanded by 45 units b. supplied to exceed quantity demanded by 85 units c. demanded to exceed quantity supplied by 45 units d. demanded to exceed quantity supplied by 85 units. 115. After a binding price floor becomes effective, a a. smaller quantity of the good is bought and sold b. a larger quantity of the good is demanded c. a smaller quantity of the good is supplied d. All of the above are correct. 116. When a binding price floor is imposed on a market, Spring 2016 a. price no longer serves as a rationing device b. the quantity supplied at the price floor exceeds the quantity that would have been supplied without the price floor c. only some sellers benefit d. All of the above are correct. 117. When a binding price floor is imposed on a market to benefit sellers, a. every seller in the market benefits b. all buyers and sellers benefit c. every seller who wants to sell the good will be able to do so, but only if he appeals to the personal biases of the buyers d. some sellers will not be able to sell any amount of the good. 118. Refer to Figure above. A governmentimposed price of $24 in this market is an example of a a. binding price ceiling that creates a shortage b. nonbinding price ceiling that creates a shortage c. binding price floor that creates a surplus d. nonbinding price floor that creates a surplus. 119. An outcome that can result from either a price ceiling or a price floor is a. a surplus in the market b. a shortage in the market c. a nonbinding price control d. long lines of frustrated buyers Spring 2016 120. Refer to Figure above. If the government imposes a price ceiling of $8 on this market, then there will be a. no shortage b. a shortage of 10 units c. a shortage of 20 units d. a shortage of 40 units 121. Refer to Figure above. When the price ceiling applies in this market, and the supply curve for gasoline shifts from S1 to S2, the resulting quantity of gasoline that is bought and sold is a. less than Q3 b. Q3 c. between Q1 and Q3 d. at least Q1 Spring 2016 122. Refer to Figure above. If the horizontal line on the graph represents a price floor, then the price floor is a. binding and creates a shortage of 20 units of the good b. binding and creates a shortage of 40 units of the good c. not binding but creates a shortage of 40 units of the good d. not binding, and there will be no surplus or shortage of the good 123. An example of a price floor is a. the regulation of gasoline prices in the U.S. in the 1970s b. rent control c. the minimum wage d. any restriction on price that leads to a shortage 124. If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would a. increase by more than $1,000 b. increase by exactly $1,000 c. increase by less than $1,000 d. decrease by an indeterminate amount Spring 2016 125. Refer to Figure above. The price that buyers pay after the tax is imposed is a. $8.00 b. $9.00 c. $10.50 d. $12.00 Chapters 10 12 1. Expenditures on a nation's domestic production a. Are less than its domestic production b. Are equal to its domestic production c. Are greater than its domestic production d. Could be less than, equal to, or greater than its domestic production 2. Which of the following measures how the level of wellbeing in a country has changed over time? a. Level of nominal GDP per person b. Growth rate of nominal GDP c. Growth rate of real GDP d. Growth rate of real GDP per person 3. Over the last century, U.S. re
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