Econ prep test

1.

1 point

Consumer surplus is defined as supply minus demand price

True

False

2.

1 point

Marginal cost is the opportunity cost

that your activity imposes on someone else

of a good or service that exceeds its benefits

that arises rom producing one more unit of a good or service

of a good or service divided by the number of units produced

3.

1 point

The ______ describes the mistake of reasoning that what is good for the individual is also good for the group as a whole

Fallacy of supposition

Fallacy of composition

post hoe fallacy

ceteris paribus fallacy

4.

1 point

Ham and eggs are complements. If the price of ham decreases, the price of eggs will

increase and the demand curve for eggs will shift rightward

not change but there will be a movement along the demand curve for eggs

decrease and the demand curve for eggs will shift leftward

not change and the demand curve for eggs will not change

5.

1 point

If demand increases and supply increase (dual curve shift), the equilibrium quantity

decreases and equilibrium price rises

is indeterminate and price increases

decreases and the effect on the equilibrium price is indeterminate

increases and the equilibrium price is indeterminate

6.

1 point

a cost or benefit that arises from production (or consumption) and falls on someone other than the producer (or consumer) is called

an externality

a deadweight loss

public provision

a property right

7.

1 point

Free market economist (classical) are more likely to be allied with Republicans than are Keynesian economists who are more likely to be allied with Democrats

True

False

8.

1 point

Which of the following is NOT one of the factors that influences the supply of a product

expected future prices

number of suppliers

income

technology

9.

1 point

The classical school of though emphasizes the redistribution function of government

True

False

10.

1 point

The free-rider problem is the inability of private markets to achieve the efficient level of production of

public goods

excludable goods

rival goods

private goods

11.

1 point

Deadweight or welfare loss is the decrease in _____ from producing an inefficient amount of a product

only producer surplus

only consumer surplus

profit

consumer surplus and producer surplus

12.

1 point

In our macro example using the PPC model, according to the classical school of thought the economy is typically

Inside the PPC frontier implying 0% opportunity cost to government stabilization effort

on the frontier of the PPC frontier implying 0% opportunity cost to government stabilization effort

on the frontier of the PPC frontier implying 100% opportunity cost to government stabilization effort

Inside the PPC frontier implying 100% opportunity cost to government stabilization effort

13.

1 point

The law of supply states that the quantity of a good supplied varies

directly with income

inversely with the price of substitute goods

directly with its price

inversely with its price

directly with population

14.

1 point

The gains-from-trade redistribution that occurs in a price ceiling is from the buyers to the seller

True

False

15.

1 point

Economics believe that

all human activity has an opportunity cost

consumer wants are unlimited

all resources are scarce

all of the above

none of the above

16.

1 point

A decrease in the quantity supplied is represented by a

movement up on the supply curve

movement down the supply curve

leftward shift on the supply curve

rightward shift on the supply curve

17.

1 point

The ______ describes the mistake of reasoning that what is good for the individual is also good for the group as a whole

Fallacy of supposition

Fallacy of composition

post hoe fallacy

ceteris paribus fallacy

18.

1 point

Most economists believe that “exporting jobs” in the process of globalization is good for the U.S and world economy

True

False

19.

1 point

If the price of a substitute good in consumption good fall (ceteris paribus), effect on the good in question

demand increases, price increases, quantity supplied increases

supply increases, price falls, and quantity demanded increases

demand decreases, price decreases, quantity supplied decreases

supply decreases, price rises, quantity demanded decreases

20.

1 point

If demand increases (shifts right)

price decreases and quantity increases

price increases and quantity increases

price increases and quantity decreases

price decreases and quantity decreases

21.

1 point

Allocative efficiency occurs:

any point on the production possibilities curve

at a specific point (i.e a specific mix of production) on the production possibilities curve (frontier) that is valued above all alternatives

Inside the PC curve (frontier)

all of the above

none of the above

22.

1 point

A shortage occurs when the price is

greater than the equilibrium price

equal to the equilibrium price

less than the equilibrium price

none of the above because the existence of a surplus is independent of the price of the good

23.

1 point

The majority of economists in the U.S support which of the following?

dropping most if not all trade barriers

greater immigration to the U.S

reducing or eliminating most agricultural subsidies

all of the above

none of the above

24.

1 point

a (pure) public good is

excludable

non rival

divisible

all of the above

25.

1 point

Free trade and globalization increases jobs in the U.S overall

True

False

26.

1 point

A straight line production possibilities curve has constant opportunity cost

True

False

27.

1 point

Governmental failure is the failure of the market to allocate goods, and services efficiently

True

False

28.

1 point

If consumer income increase on a normal good (ceteris paribus), its effect on the good in question

supply decreases, price rises, and quantity demanded decreases

demand increases, price increases, and quantity supplied increases

supply increases, price falls, and quantity demanded increases

demand decreases, price decreases, and quantity supplied decreases

29.

1 point

The problem of the Tragedy of the Commons is the absence of incentives to

use privately owned resources

have commonly owned resources

use commonly owned resources

prevent the overuse of commonly owned resources

30.

1 point

Supply price is defined as

the lowest price a seller will accept for a good

the actual price a consumer pays for a good

the highest price a seller will accept for a good

the highest price a consumer is willing and able to pay

31.

1 point

The best definition of a capital good is “foregone consumption”

True

False

32.

1 point

An inferior good is a good for which

demand decreases when income increases

there are very few complements

demand increases when income increases

there are few substitutes

33.

1 point

The fact that individual productive resources are NOT equally useful in all activities

follows from the law of demand

implies that a production possibilities frontier will be bowed outward

implies that grain from specialization and trade is unlikely

implies a linear production possibilities frontier

34.

1 point

if the quantity supplied exceeds the quantity demanded, then there is

a shortage and the price is below the equilibrium price

a shortage and the price is above the equilibrium price

a surplus and the price is above the equilibrium price

a surplus and the price is below the equilibrium price

35.

1 point

Which of the following always increases the equilibrium quantity?

a decrease in both demand and supply

an increase in demand combined with a decrease in supply

an increase in both demand and supply

a decrease in demand combined with an increase in supply

36.

1 point

The branch of economics that deals with the analysis of GDP, inflation, and unemployment is called
a) microeconomics
b) marginal analysis
c) macroeconomics
d) metro analysis

microeconomics

marginal analysis

macroeconomics

metro analysis

37.

1 point

Which of the following explains why demand curves slope downward?

resources and technology

prices and income

diminishing marginal cost

over abundance of the product

38.

1 point

In the circular flow model, firms are assumed to own the means of production (land, labor, capital, entrepreneurship)

True

False

39.

1 point

A person has a comparative advantage in an activity if that person can

perform the activity at a lower opportunity cost than anyone else

produce fewer goods in a given amount of time than the other person

perform that activity at a higher opportunity cost than anyone else

produce more goods in a given amount of time than the other person

40.

1 point

Classical economists believe the economy is analogous to

a swiss watch

a washing machine

an old Idaho pickup

Dallas cowboys football team

41.

1 point

A price ceiling is government imposed price below the equilibrium price in a market

True

False

42.

1 point

If the price of a complement good in consumption good falls (ceteris paribus), its effect on the good in question

demand decreases, price decreases, quantity supplied decreases

supply decreases, price rises, and quantity demanded decreases

demand increases, price increases, quantity supplied increases

Supply increases, price falls, and quantity demanded increases

43.

1 point

A normative statement is

one that does not use the ceteris paribus clause

about what ought to be

about what is

always true

44.

1 point

A shift rightward of the production possibilities frontier (curve) can be caused by

a decline in unemployment workers

an increase in human capital (education)

an increase in production costs

none of the above