Assignment 1 - Final
Assignment 1 - Final
FIRST ASSIGNMENT
DUE ON OR BEFORE 6/7/2017
EACH QUESTION WORTH POINTS
2) A trade-off refers to
A) allowing the government and other organizations to choose for us.
B) sacrificing one thing for another.
C) deciding who consumes the products produced in an economy.
D) holding other variables fixed.
4) The knowledge and skills acquired by a worker through education and experience is a description of
which factor of production?
A) physical capital
B) human capital
C) labor
D) entrepreneurship
6) Normative economics
A) is the focus of most modern economic reasoning.
B) answers the question "What ought to be?"
C) predicts the consequences of alternative actions.
D) answers the question "What is?"
9) Deciding if a power company will generate electricity from wind power or coal answers the economic
question of
A) who consumes the products produced.
B) what products will be produced.
C) where will the products be consumed.
D) how will the products be produced.
12) Who is associated with the following summary of the economic way of thinking: "The theory of
economics does not furnish a body of settled conclusions immediately acceptable to policy. It is a
method rather than a doctrine, an apparatus of the mind, a technique of thinking which helps its
processer draw correct conclusions."
A) John Maynard Keynes
B) Alfred Marshall
C) Adam Smith
D) President Harry Truman
13) To make things simpler and focus attention on what really matters, economists
A) use assumptions.
B) ignore all variables.
C) think at the margin.
D) respond to incentives.
14) The Latin phrase ceteris paribus means that when a relationship between two variables is being
studied
A) both are treated as unpredictable.
B) neither of those two variables is allowed to change.
C) all other variables are held fixed.
D) we recognize that some factors are unknown.
15) Jerome has a "C" average in his philosophy course and a "B" average in his economics course. He
decides to study an extra hour for his philosophy exam. This is an example of
A) thinking at the margin.
B) using assumptions to simplify.
C) ceteris paribus.
D) caveat emptor.
17) When economists assume that people are rational and respond to incentives, they mean
A) people act with kindness.
B) people are altruistic.
C) people act in their own self-interest.
D) people are selfish.
18) When determining an appropriate congestion tax, economists would use which of the following
elements of the economic way of thinking?
A) thinking at the margin
B) isolating variables
C) making assumptions
D) all of the above
20) The study of the choices made by individual households, firms, and government is called
A) macroeconomics.
B) microeconomics.
C) managerial economics.
D) market economics.
22) Spending money on a new car instead of a used car when you are on a fixed budget is an example of
A) the incursion of an opportunity cost.
B) isolating variables.
C) a bad thing to do because you run out of money.
D) living on the edge.
23) The trade-offs made by the U.S. government to fund the war in Iraq
A) prove that the government is spending too much on the war.
B) show that the government is justified in its war spending.
C) exceed the benefits derived from the war.
D) represent what was potentially sacrificed to engage in the war.
24) Referring to Figure 2.1, if you increase the production of farm goods, what other area is affected?
A) the price of produce
B) the production of manufactured goods
C) how much people can purchase
D) the wages earned by farm workers
25) The production possibilities curve in Figure 2.1 illustrates the notion of
A) increased factory goods production.
B) increased farm produce production.
C) diminishing resources.
D) opportunity cost.
26) Refer to Figure 2.1. If you choose to produce only agricultural products, what is the maximum
quantity you can produce per year?
A) 200 tons
B) 400 tons
C) 600 tons
D) > 600 tons
28) The extra benefit resulting from a small increase in an activity is called the
A) opportunity cost.
B) marginal benefit.
C) marginal cost.
D) diminishing returns of the activity.
29) The additional cost resulting from a small increase in some activity is called the
A) opportunity cost.
B) marginal benefit.
C) marginal cost.
D) diminishing returns of the activity.
30) People acting in their own self interest is the basis of the
A) principle of supply and demand.
B) principle of voluntary exchange.
C) real-nominal principle.
D) principle of scarcity.
31) The principle of diminishing returns implies that as one input increases while the other inputs are
held fixed, output
A) increases at an increasing rate.
B) increases at a decreasing rate.
C) decreases at a decreasing rate.
D) decreases at an increasing rate.
33) The principle that states that what matters to people is the real value or purchasing power of money
is the
A) marginal principle.
B) principle of diminishing returns.
C) spillover principle.
D) real-nominal principle.
35) If real salaries increase but nominal salaries do not, this means that
A) the purchasing power of money has decreased.
B) prices have not changed.
C) prices have risen.
D) prices have fallen.
40) In considering the relationships between price and quantity demanded, ceteris paribus directs the
economist to assume that
A) price increases affect quantity.
B) quantity increases affect prices.
C) either price nor quantity affect demand.
D) all other variables remain unchanged.
43) Figure 3.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $7, there is
an
A) excess demand of 8 t-shirts.
B) excess supply of 8 t-shirts.
C) excess demand of 10 t-shirts.
D) excess supply of 10 t-shirts.
44) Figure 3.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $15, there is
an
A) excess demand of 8 t-shirts.
B) excess supply of 8 t-shirts.
C) excess demand of 10 t-shirts.
D) excess supply of 10 t-shirts.
45) Figure 3.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $7, we would
expect that
A) demand will decrease until quantity demanded equals quantity supplied.
B) supply will increase until quantity demanded equals quantity supplied.
C) price will increase until quantity demanded equals quantity supplied.
D) there will be no change in the price since the market is in equilibrium.
46) Figure 3.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $10, we
would expect that
A) demand will decrease until quantity demanded equals quantity supplied.
B) supply will increase until quantity demanded equals quantity supplied.
C) price will increase until quantity demanded equals quantity supplied.
D) there will be no change in the price since the market is in equilibrium.
48) The government sometimes creates an excess demand for a product by setting a maximum price at
which the product may be sold to consumers. This is sometimes called a
A) price ceiling.
B) price floor.
C) tax.
D) subsidy.
49) A government sometimes creates an excess supply of a product by setting a minimum price at which
the product may be sold to consumers. This is sometimes called a
A) price ceiling.
B) price floor.
C) tax.
D) subsidy.
Figure 3.3
50) Figure 3.3 illustrates the demand for tacos. An increase in the demand for tacos is represented by
the movement from
A) point a to point b.
B) point c to point b.
C) D2 to D1.
D) D0 to D1.
51) Figure 3.3 illustrates the demand for tacos. A decrease in the demand for tacos is represented by the
movement from
A) point a to point b.
B) point c to point b.
C) D2 to D1.
D) D0 to D1.
52) Figure 3.3 illustrates the demand for tacos. Assume tacos are a normal good. An increase in income
would bring about a movement from
A) point a to point b.
B) point c to point b.
C) D2 to D1.
D) D0 to D1.
53) Figure 3.3 illustrates the demand for tacos. An increase in price of tacos would bring about a
movement from
A) point a to point c.
B) point c to point a.
C) D2 to D0.
D) D0 to D1.
54) Figure 3.3 illustrates the demand for tacos. A decrease in price of tacos would bring about a
movement from
A) point a to point c.
B) point c to point a.
C) D2 to D0.
D) D0 to D2.
55) Figure 3.3 illustrates the demand for tacos. A successful advertising campaign to sell tacos would
bring about a movement from
A) point a to point b.
B) point c to point b.
C) D2 to D1.
D) D0 to D1.
57) Assume that coffee and tea are substitutes. When the price of coffee increases
A) the demand for tea decreases.
B) the demand for tea increases.
C) the supply of tea increases.
D) the supply of tea decreases.
58) Suppose that consumers expect that the price of a product will increase in the future. The result is
that
A) the current demand for the product increases.
B) the current demand for the product decreases.
C) the current supply of the product increases.
D) the current supply of the product decreases.
59) A good for which demand decreases when income increases is known as a(n) ________ good.
A) normal
B) inferior
C) complementary
D) substitute
60) The price of iPhones has fallen dramatically. Which of the following is likely to happen?
A) The quantity of iPhones supplied will decrease.
B) The quantity of iPhones supplied will increase.
C) The supply of iPhones will decrease.
D) The supply of iPhones will increase.