Econ 1500 - Chapters 1-3

Front 1

Mary buys cell-phone services from a company that charges $30 per month. For that $30 she is allowed 600 minutes of free calls and then pays 25 cents per minutes for any calls above 600 minutes. Mary has used 300 minutes this month so far. What is her marginal cost per minute of making 2 more calls lasting 10 minutes each?
a. 2.50
b. 25 cents
c. 4 cents
d. 0

Back 1

d. 0

Front 2

Alexandra has determined that studying an hour for her economics quiz will improve her grade on the quiz from 75 to 100. She also determines that this improvement is worth $20. In order to study for an hour for her economics quiz, however, she will have to work one less hour at her part-time job. Alexandra should:
a. study for the quiz as long as her hourly wage rate is less than $20.
b. study for the quiz as long as her hourly wage rate is more than $20.
c. study for the quiz only if her hourly wage rate is exactly $20.
d. not study for the quiz because earning a higher grade cannot have a dollar value.

Back 2

a. study for the quiz as long as her hourly wage rate is less than $20.

Front 3

About 60,000 individuals in the U.S. are waiting for kidney transplants and, for a price, there are many individuals who would be willing to supply a kidney. A market for kidneys does not exist due to:
a. social forces reinforced by political and legal forces.
b. social forces only.
c. Obama’s command.
d. market forces because the demand far exceeds the supply.

Back 3

a. social forces reinforced by political and legal forces.

Front 4

When your wages rise the:
a. marginal benefit of working decreases.
b. opportunity cost of not working stays the same.
c. cost of working increases.
d. opportunity cost of an hour of not working increases.

Back 4

d. opportunity cost of an hour of not working increases.

Front 5

The table below shows how the marginal benefit of video tape rentals varies for Carol with the number rented per month.
a. 1 to 2.
b. 2 to 3.
c. 3 to 4.
d. 4 to 5.

Back 5

d. 4 to 5.

Front 6

The table below shows how the marginal benefit of video tape rentals varies for Carol with the number rented per month. The price (i.e., marginal cost to Carol) of each tape rental is reduced from $2.99 to $1.99. Assuming that Carol is rational, she will increase the number of tapes rented per month from:

Back 6

a. 1 to 2
b. 2 to 3
c. 3 to 4
d. 4 to 5

Front 7

The table below shows how the marginal benefit of video tape rentals varies for Carol with the number rented per month. The price (i.e., marginal cost to Carol) of each tape rental is reduced from $2.99 to $1.99.
1 $6
2 $5
3 $4
4 $3
5 $2
Assuming that Carol is rational, she will increase the number of tapes rented per month from:
a. 1 to 2
b. 2 to 3
c. 3 to 4
d. 4 to 5

Back 7

d. 4 to 5

Front 8

You're deciding whether to install a $400 moonroof and/or a $200 security system in your car. Suppose the marginal benefit from the moonroof is $350 while the marginal benefit from the security system is $300. The economic decision rule dictates that you should:
a. purchase only the moonroof because that will provide you with the greatest marginal benefit.
b. purchase only the security system because its marginal benefit exceeds its marginal cost.
c. purchase both options because the combined cost of both is less than the combined benefit.
d. not purchase either because the benefits of each do not exceed the costs.

Back 8

b. purchase only the security system because its marginal benefit exceeds its marginal cost.

Front 9

Which of the following is not one of the three questions that must be solved by all societies?
A. what and how much to produce
B. which wars to fight
C. how to produce
D. for whom to produce

Back 9

B. which wars to fight

Front 10

In economics individuals are assumed to be:
A. rational and self interested.
B. self interested but not rational.
C. neither self interested or rational.
D. racists.

Back 10

A. rational and self interested.

Front 11

The price of computers has fallen each year for the last 10 years. This is likely an example of the working of:
A. market forces
B. political forces
C. social forces
D. demographic forces

Back 11

A. market forces

Front 12

In the U.S. economy, what is the primary means of dealing with scarcity?
A. Government.
B. Corporations.
C. Markets.
D. Religion.

Back 12

C. Markets.

Front 13

Microeconomics includes the study of:
A. inflation.
B. unemployment
C. business cycles.
D. a firm's pricing policies.

Back 13

D. a firm's pricing policies.

Front 14

The marginal benefit of going to a movie during the week is currently $6 for you. Assume that $4 the price of going to the movies measures its marginal cost. Following the economic decision rule, you will:
A. continue going to movies until the marginal benefit of doing so falls to zero.
B. choose not to go to any movies during the week.
C. continue going to movies until the marginal benefit of doing so falls below $4
D. not be able to enjoy a net gain from going to the movies during the week.

Back 14

C. continue going to movies until the marginal benefit of doing so falls below $4

Front 15

Alan is sitting in a bar drinking beers that cost $1 each. According to the economic decision rule, Alan will quit drinking when the marginal:
A. benefit to him of an additional beer is less than $1.
B. cost to him of an additional beer is less than the marginal benefit.
C. cost remains at $1.
D. benefit to him of an additional beer is greater than $1.

Back 15

A. benefit to him of an additional beer is less than $1.

Front 16

The price mechanism of the market system that guides our actions is called the:
A. the Obama rule.
B. invisible hand.
C. invisible handshake.
D. invisible foot.

Back 16

B. invisible hand.

Front 17

Which of the following is most strongly an example of a macroeconomic topic?
A. The effect of a frost on the Florida orange crop.
B. Wages of cross-country truckers.
C. What caused the economic recession of 2008.
D. The high cost of college text books.

Back 17

C. What caused the economic recession of 2008

Front 18

Which of the following statements about urban sprawl and traffic congestion is the best illustration of a normative statement?
A. Snarled traffic cost motorists in the 85 largest U.S. cities 3.5 billion hours in 2002.
B. The average U.S. urban traveler was stuck in road traffic 46 hours in 2002.
C. Traffic congestion has increased in the last 20 years.
D. Because urban sprawl is the result of individual choice, it is okay.

Back 18

D. Because urban sprawl is the result of individual choice, it is okay.

Front 19

Applying the concept of opportunity cost to the pollution of a lake, an economist would probably conclude that:
A. all pollution in the lake should be eliminated, regardless of cost.
B. no pollution in the lake should be eliminated, regardless of benefit.
C. pollution should be eliminated as long as the benefit from a clean-up exceeds the opportunity cost.
D. pollution should be eliminated as long as the opportunity cost of a clean-up exceeds the cost of the resources required for the clean-up.

Back 19

C. pollution should be eliminated as long as the benefit from a clean-up exceeds the opportunity cost.

Front 20

The quantity of goods and services available to society:
A. is fixed.
B. depends on human action.
C. is not of economic importance.
D. will eventually increase and solve the problem of scarcity.

Back 20

B. depends on human action.

Front 21

The opportunity cost of attending college is likely to be highest for a high school graduate:
A. whose next-best option is to flip hamburgers and has access to no student loans.
B. whose next-best option is to be a retail salesperson and whose family is extremely wealthy.
C. whose next-best option is to drive a school bus but has the promise of a six-figure salary after college.
D. who is capable of competing successfully in professional tennis

Back 21

D. who is capable of competing successfully in professional tennis

Front 22

A necessary assumption behind the invisible hand theory is that:
A. market forces are determined by cultural norms.
B. market forces produce inefficient outcomes.
C. income is distributed evenly.
D. people behave rationally.

Back 22

D. people behave rationally.

Front 23

A country that specializes according to its comparative advantage and then trades with another country will be able to:
A. consume more goods
B. produce more of all goods.
C. produce less of all goods and consume more of one good.
D. both produce and consume less.

Back 23

A. consume more goods

Front 24

The principle of increasing marginal opportunity cost is true in which of the following cases?
A. All inputs are equally adaptable to the production of all goods.
B. The production possibility curve is a downward sloping straight line.
C. Some inputs are better off producing particular goods.
D. Each input can be used to produce only one good.

Back 24

C. Some inputs are better off producing particular goods.

Front 25

If you move from a point inside the production possibility curve to a point on the production possibility curve, it follows that efficiency is:
A. increased because the economy is now on the production possibility curve.
B. increased only if production of both goods increases.
C. increased as long as the combined output of both goods increases.
D. reduced if less of one good is produced.

Back 25

A. increased because the economy is now on the production possibility curve.

Front 26

Suppose that in Slovakia, one unit of labor can produce either 16 tons of wheat or 32 tons of soy while in Poland, one unit of labor can produce either 4 tons of wheat or 2 tons of soy. Given this information, which of the following statements is true?
A. Slovakia has a comparative advantage in producing neither wheat nor soy.
B. Slovakia has a comparative advantage in producing both wheat and soy.
C. Poland has a comparative advantage in producing soy but not wheat.
D. Poland has a comparative advantage in producing wheat but not soy.

Back 26

D. Poland has a comparative advantage in producing wheat but not soy.

Front 27

Heber and Jane Kimbell are both economists who are deciding how to split household chores of cooking and cleaning. They discover that Heber has a comparative advantage in cooking. Does this discovery tell them anything about comparative advantage in cleaning?
A. No; both or neither may have a comparative advantage in cleaning
B. No; either one may have a comparative advantage in cleaning.
C. Yes; Heber must also have a comparative advantage in cleaning.
D. Yes; Jane must have a comparative advantage in cleaning.

Back 27

D. Yes; Jane must have a comparative advantage in cleaning.

Front 28

Assume you can make the combinations of Ums and Umies shown in the table. The opportunity cost of producing 60 Umies instead of 30 Umies is:
Ums Umies
60 0
40 30
20 60
0 90
A. 10 Ums.
B. 20 Ums.
C. 30 Ums.
D. 40 Ums.

Back 28

B. 20 Ums.

Front 29

The iPod was designed by Apple in the U.S., manufactured in factories in Asia, and sold throughout the world. Many other firms, both American and foreign, began to try to develop alternatives to the iPod. The iPod is an example of American comparative advantage in:
A. innovation.
B. mass production.
C. hand production.
D. consumerism.

Back 29

A. innovation.

Front 30

Which of the shifts explains what would happen to the production possibility curve if improved technologies increased the production of pre-kindergarten (pre-k) toys by 25% and the production of children's toys by 50%?
A. I
B. II
C. III
D. IV

Back 30

C. III

Front 31

A resource is said to have a comparative advantage if:
A. it is better suited to the production of one good than to the production of an alternative good.
B. it is equally suited to the production of all goods.
C. its suitability to the production of one good changes as it produces more of that good.
D. its suitability to the production of one good does not change as it produces more of that good.

Back 31

A. it is better suited to the production of one good than to the production of an alternative good.

Front 32

According to Adam Smith, individuals are directed to do those things for which they have a comparative advantage by:
A. their self interest.
B. corporate management.
C. government policy.
D. the educational system.

Back 32

A. their self interest.

Front 33

If the hourly wage of U.S. workers is $16, the hourly wage of Mexican workers is $2, and U.S. workers produce 9 times as much output per hour as Mexican workers, then, all else equal, it would be efficient to locate production facilities in:
A. the U.S. since the cost per unit of output will be higher.
B. the U.S. since the cost per unit of output will be lower.
C. Mexico since the cost per unit of output will be higher.
D. Mexico since the cost per unit of output will be lower.

Back 33

B. the U.S. since the cost per unit of output will be lower.

Front 34

The fact that some resources are better at producing some goods rather than others means that the production possibility curve will be:
A. flat.
B. straight.
C. bowed outward.
D. bowed inward.

Back 34

C. bowed outward.

Front 35

The slope of a line is the:
A. value on the vertical axis divided by the value on the horizontal axis.
B. value on the horizontal axis divided by the value on the vertical axis.
C. change in the value on the vertical axis divided by the change in the value on the horizontal axis.
D. change in the value on the horizontal axis divided by the change in the value on the vertical axis.

Back 35

C. change in the value on the vertical axis divided by the change in the value on the horizontal axis.

Front 36

Mexico has a comparative advantage in producing corn:
A. if its opportunity cost of producing corn is higher than the opportunity cost in other countries.
B. if its opportunity cost of producing corn is the same as the opportunity cost in other countries.
C. if its opportunity cost of producing corn is lower than the opportunity cost in other countries.
D. regardless of the opportunity cost in other countries.

Back 36

C. if its opportunity cost of producing corn is lower than the opportunity cost in other countries.

Front 37

Orson can clean the house in three hours and do the laundry in four. Eliza can clean the house in two hours or do the laundry in two. Can they benefit by specialization and trade?
A. Neither can benefit because Orson has nothing to offer.
B. Orson could benefit from an exchange but Eliza cannot because she is better at both.
C. Both can benefit because Orson has a comparative advantage in laundry.
D. Both can benefit because Orson has a comparative advantage in cleaning.

Back 37

D. Both can benefit because Orson has a comparative advantage in cleaning.

Front 38

If there were decreasing marginal opportunity costs, the production possibility curve would be:
A. flat.
B. straight.
C. bowed out.
D. bowed in.

Back 38

D. bowed in.

Front 39

Government is on the:

Back 39

demand side of both factor markets and goods markets.

Front 40

Which of the following is a characteristic of a market economy?
A. Private property.
B. Government ownership of the means of production
C. Distribution according to need.
D. Tradition determines the what, how, and for whom decisions.

Back 40

A. Private property.

Front 41

Households do all of the following except:
A. receive income as a result of supplying factors of production to businesses.
B. demand labor services from businesses in the factor market.
C. demand goods and services from businesses in the goods market.
D. supply labor services to the government in the factor market.

Back 41

B. demand labor services from businesses in the factor market.

Front 42

Which of the following is not one of the three principal components of a socialist economy?
A. Government ownership of the means of production.
B. Workers directed by a government planning board as to where they will work and how much they will be paid.
C. Entrepreneurs are encouraged by the profit motive, rather than government directive, to satisfy consumer wants in the most efficient manner possible.
D. Distribution is according to need.

Back 42

C. Entrepreneurs are encouraged by the profit motive, rather than government directive, to satisfy consumer wants in the most efficient manner possible.

Front 43

Cache County government prohibits beer sales on Sundays. In terms of the roles that the government plays in enforcing this ordinance, the government is acting as

Back 43

A. referee.

**study what an actor is: pg. 66

Front 44

In the factor market:
A. businesses supply goods and services to households and government.
B. government provides income support to households unable to supply factors of production to businesses.
C. households supply labor and other factors of production to businesses.
D. households purchase goods and services from businesses.

Back 44

C. households supply labor and other factors of production to businesses.

Front 45

Socialism in theory is based on the principle that individuals should:

Back 45

cooperate with one another to meet their needs.

Front 46

In contrast to the capitalism of the early Industrial Revolution, both feudalism and mercantilism:

Back 46

relied less on the "invisible hand" to coordinate economic decisions.

Front 47

Governments do all of the following except:
A. oversee the interaction of households and businesses in the goods and factor markets.
B. demand labor services from households in the factor market.
C. demand goods and services from businesses in the goods market.
D. supply labor services to businesses in the factor market.

Back 47

D. supply labor services to businesses in the factor market.

Front 48

For a market to exist, you have to have:
A. a capitalist economy.
B. private property rights.
C. no government intervention.
D. externalities.

Back 48

B. private property rights.

Front 49

In a socialist economic system:
A. markets are relied upon to decide what to produce, but government intervenes when necessary.
B. consumers tell government what to produce and the government decides how best to achieve that goal.
C. government decides what to produce but markets determine the distribution of income.
D. government decides what to produce and who gets it.

Back 49

D. government decides what to produce and who gets it.

Front 50

When I (Tyler) was young, Coca Cola introduced New Coke. Despite a major marketing effort, sales of New Coke were weak and the product failed. Coke's experience with New Coke illustrates the economic concept of:

Back 50

consumer sovereignty.

Front 51

Which of the following occurs in the real world?
A. Neither market failures nor government failures.
B. Government failures but not market failures.
C. Market failures but not government failures.
D. Both market failures and government failures.

Back 51

D. Both market failures and government failures.

Front 52

In a feudalist society, in comparison with mercantilism:

Back 52

tradition plays a more important role than the government.

Front 53

Households are on the:

Back 53

supply side of factor markets and the demand side of goods markets.

Front 54

In the former USSR, state planners decided what was to be produced. They passed orders down to factories, allocating raw materials, workers, and other factors of production to them. This is an example of (a):

Back 54

command economy

Front 55

Which of the following is most likely an action that supports competition?
A. Requiring professionals, such as architects and engineers, to be licensed.
B. Using tariffs to restrict the ability of foreign firms to sell products in domestic markets.
C. Preventing two dominant firms in the same market from merging.
D. Granting subsidies to farmers based on production levels

Back 55

C. Preventing two dominant firms in the same market from merging.

Front 56

Markets coordinate economic activity through:

Back 56

asking individuals what to do.

Front 57

During the Industrial Revolution:
A. feudal lords lost their power to mercantilists.
B. artisans lost their power to capitalists.
C. capitalists lost their power to labor unions.
D. capitalists lost their power to mercantilists.

Back 57

B. artisans lost their power to capitalists.

Front 58

Adam Smith advocated laissez-faire because he believed it was in the interest of:

Back 58

D. society as a whole.

Front 59

What are the 3 coordination problems that an economics system must solve?

Back 59

1. what and how much to produce
2. how to produce it
3. for whom to produce it

Front 60

The quantity of goods, services & usable resources depends on ____ & ____?

Back 60

technology & human action

Front 61

Total value of the ___ ___ ___ of ___ ___ ____ ___ is the OPPORTUNITY COST of choosing something

Back 61

next best alternative

what you gave up

Front 62

What is marginal cost?

What is marginal benefit?

Back 62

the additional cost over & above costs already incurred

the additional benefit above & beyond what has already accrued

Front 63

If the ____ ____ of doing something exceeds the ____ ____, DO IT!

Back 63

Marginal Benefits

Marginal Costs

Front 64

What is the invisible hand?

Back 64

a MARKET FORCE that rations goods by CHANGING PRICES

Front 65

What are Economic forces?

Back 65

mechanisms that RATION scarce GOODS

Front 66

What is a Market System/Force?

Back 66

an Economic Force that is given FREE REIGN by society

Front 67

According to the Invisible Hand Theory, a ___ economy, through the ___ ____, will allocate resources efficiently

Back 67

Market

price mechanism

Front 68

How to produce?

Back 68

Efficiently! (achieve a goal as cheaply as possible)

*The most efficient will survive

Front 69

What is the difference between Micro and Macro economics

give example of each

Back 69

Micro is the study of individual choice and how that choice is influenced by economic forces whereas Macro is the study of the economy as a whole. Micro is more specific on a case by case basis and Macro is more general and usually has to do with society as a whole

Micro: pricing of a particular company
Macro: inflation, unemployment, economic growth

Front 70

define: Economic Institutions

define: Economic Policies

Back 70

Laws, common practices & organizations that affect the economy

actions (or inactions) taken by government to influence economic actions

Front 71

_____ policy analysis: keeps value judgements separate

_____ policy analysis: reflects the analysts view of how things should be

Back 71

Objective

Subjective

Front 72

"Study of What is"

"Study of What should be"

Back 72

Positive economics

Normative economics

Front 73

What is the Art of Economics??

Back 73

Using the knowledge of positive economics to achieve goals determined in normative economics.

Front 74

Increasing Marginal Opportunity Cost:

Opportunity Costs _____ as you produce ____ of one product

Back 74

increase

more

Front 75

Production Possibilities Curve:

____ at which we are ____ ___ something to ____ something else

Back 75

Rate
Giving up
produce

Front 76

If a point is outside the PPC, what is it defined as?

If a point is inside the PPC, what is it defined as?

Back 76

Unattainable point

Attainable but not desired

Front 77

The slope of the PPC gives you the ____ ___ of the good on the ____ ___

Back 77

Opportunity Cost

horizontal axis

Front 78

_____ & _____ allows everybody to win!

Back 78

Specialization

Trade

Front 79

relocation of production to foreign countries

Back 79

outsourcing

Front 80

What is globalization?

Name 2 things it does

Back 80

the increasing integration of economics, cultures & institutions around the world

provides larger markets
increases competition

Front 81

Market Economy needs what 3 things?

Back 81

Private Property
LIMITED government
Freedom of Choice

Front 82

Economic system based on the market & self interest

economic system based on individuals good will toward others

Back 82

capitalism

socialism

Front 83

What are the 4 evolving economic systems in order?

Back 83

Feudalism
Mercantilsm
Industrial Revolution
Capitlalism

Front 84

Problems with Feudalism

Back 84

prevented people from doing what they did best

one person dominated all decisions

Front 85

How did feudalism evolve into mecantilism? (3)

Back 85

serfs escaped to the towns/cities where markets reigned.

Trading allowed people to have income

traders and merchants became more wealthy than Lords

Front 86

What modernized production and caused the industrial revolution?

Back 86

Technology

Front 87

What was Karl Marx against?

Back 87

Capitalism.

Front 88

Why did Russia's state socialism fail?

Back 88

People had no motivation by profit or self interest

products were good quality

they didn't produce what consumers wanted

Front 89

Explain the households role in the US Economy

Back 89

Households are demanders of the goods markets and suppliers of the factors market. They also supply employees to the goverment

Front 90

Explain the Businesses role in the US economy

Back 90

Businesses are suppliers to the goods market and demanders of the factors market. They also supply goods to the government

Front 91

Explain the Governments role in the US economy

Back 91

Government demands from both household and business but supplies back to households in the form of tax refunds, etc...

Front 92

Consumers' wishes determine what is produced by businesses. This is called ___.

Consumers are ___ ___

Back 92

Consumer Sovereignty.

all powerful

Front 93

Roles of Government in the market:
(6)

Back 93

1. stable institutional framework
2. promote competition
3. correct externalities
4. ensure stability
5. provide public goods
6. adjust for undesirable market results

Front 94

example of externality

Back 94

smoking (government makes non-smoking areas)

Front 95

example of public good

Back 95

national defense

Front 96

market does not lead to a desired result

situations where government makes things worse

Back 96

Market Failures

Government Failures

Front 97

Group of 5

Group of 8

Back 97

Japan, Germany, Britain, France, & US

above plus Canada, Italy and Russia

Front 98

explain proprietorship

Back 98

Direct control by owner, limitid ability to get funds, unlim. personal liability

Front 99

explain partnership

Back 99

partners form to share work and risk. unlim. personal liability, limited ability to get funds

Front 100

explain corporation

Back 100

no personal liability, legal hassle to form, possible double taxation

Front 101

What is ECommerce

Back 101

Internet Business

Front 102

B2B
B2C
C2B
C2C

Back 102

Firms Exchanging
Stores selling to people via online catalogs, etc...
Contractors or Consultant
Individuals selling to individuals (ebay)