Liberty University ECON 213 quiz 2 complete solutions correct answers

Liberty University ECON 213 quiz 2 complete solutions correct answers A+ work
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Question 1 The area inside (within) the production possibilities frontier (PPF) contains:
Question 2 Michael and Angelo are both artists who can create sculptures or paint paintings each
day. The following table describes their maximum outputs per day. Does either person have an
absolute advantage?
Question 3 The figures below depict the production possibilities frontiers (PPFs) for two people
who can allocate the same amount of time between building wooden boats and solving crimes.
Refer to these figures to answer the questions that follow. What is Gibbs’s opportunity cost of
making a wooden boat?
Question 4 The ability of one producer to create more of a good than another producer using the
same quantity of resources is called:
Refer to these figures to answer the questions that follow. Which statement best describes
absolute advantage?
Question 6 You have a comparative advantage in producing a good whenever:
Question 7 Mrs. Abel has a comparative advantage in producing cabbage if, in comparison to Mrs.
Bee, Mrs. Abel can grow cabbage:
Question 8 The important act of holding all other variables constant while examining a particular
variable is known as:
Question 9 An increase in general resources that affects the production of both goods on a
production possibilities frontier (PPF) would cause an:
Question 10 Use these production possibilities frontier (PPF) curves, which compare the ancient
production of agricultural products to art and literature, to answer the questions that follow.
Suppose the plow is invented and agricultural productivity greatly increases. Which of the

following graphs best depicts how this would affect the PPF?
Question 11 Suppose you find a production possibilities frontier (PPF) that is shaped like a
straight line. What can you determine about the production of the two goods?
Question 12 A town on the Gulf Coast is battered by a massive hurricane that destroys most of its
productive resources. The community’s production possibilities frontier (PPF) would show an:
Question 13 Think of the production possibilities frontier (PPF) model. When society is producing
the largest possible output from its resources, it is operating:
Question 14 Which of the following is a positive statement?
Question 15 When the opportunity cost of producing a good rises as you produce more of it, you
experience:
Question 16 Which of the following is a normative statement?
Question 17 Refer to the following figure to answer the questions that follow. In the figure, point
E is:
Question 18 An economist’s use of experiments and realworld data to test a theory is an example
of:
Question 19 Consider the production possibilities frontier (PPF) shown in the figure below to
answer the questions that follow. Given current resources and technology, the unattainable range
is best described as:
Question 20 Refer to the following figure to answer the questions that follow. Which point in the
corresponding figure represents a combination of smoothies and milk shakes that society cannot
currently produce?
Question 1 Economists use the scientific method and the tools of economics to study:
Question 2 Ceteris paribus, if a society is producing at a point on the production possibilities
frontier (PPF), it can only increase the production of one good by:
Question 3 Goods that are produced today in order to make other valuable goods and services in
the future are called:

Question 4 Use these production possibilities frontier (PPF) curves, which compare the ancient
production of agricultural products to art and literature, to answer the questions that follow.
Suppose the printing press is invented. Which graph best depicts how this would affect the PPF?
Question 5 Refer to the following table to answer the questions that follow. Given the same
quantity of resources, what is JayZ’s opportunity cost of producing a New York pizza?
Question 6 Refer to the following figure to answer the questions that follow. Which point in the
corresponding figure represents a combination of smoothies and milk shakes that society cannot
currently produce?
Question 8 Refer to the following figure for the questions that follow. The opportunity cost of
increasing production of apple pies from 14 to 16 pies is:
Question 9 Which of the following is a positive statement? Selected Answer: e. Increases in the
minimum wage cause unemployment. Question 10 Refer to the following figure to answer the
questions that follow. In the figure, point E is:
Refer to these figures to answer the questions that follow. What is DiNozzo’s opportunity cost for
solving a crime?
Question 12 Greater investment in capital goods today leads to:
Question 13 Suppose that Sheldon and Leonard can either run errands or wash dishes. Their
maximum output per hour is listed in the following table. Given the same quantity of resources, at
what terms of trade (relative price ratio) could they specialize and trade so that both consume
outside their own production possibilities frontier (PPF)?
Question 14 For both parties to benefit from specialization and trade, the trading parties must
agree on:
Question 15 Which of the following is NOT an assumption that economists make when
developing a production possibilities frontier (PPF)?

who can allocate the same amount of time between making pizzas and making stromboli. Refer
to these figures to answer the questions that follow. What is Jim’s opportunity cost of making 1
stromboli?
Question 18 Consider the following scenario to answer the questions that follow: Two friends,
Rachel and Joey, enjoy baking bread and making apple pies. Rachel takes two hours to bake 1
loaf of bread and one hour to make 1 pie. Joey takes four hours to bake 1 loaf of bread and four
hours to make 1 pie. What is Rachel’s opportunity cost of baking 1 loaf of bread?
Question 19 The _________ illustrates the various combinations of output that a society can
produce if all of its resources are being used efficiently.
Question 20 A graph that shows the maximum attainable combinations of two goods when
society efficiently uses its productive resources is called:
Question 1 When one producer has a comparative advantage in production, she:
Question 2 The process of using current resources to create or buy new capital is called:
Question 3 A positive statement:
Question 4 An increase in general resources that affects the production of both goods on a
production possibilities frontier (PPF) would cause an:
Question 5 Refer to the following table to answer the questions that follow. Given the same
quantity of resources, what is JayZ’s opportunity cost of producing a New York pizza?
Question 6 Refer to the following figure for the questions that follow. According to the figure, a
new technology that makes it easier to peel, core, and prepare apples will cause:
Question 7 To determine which of two producers has a comparative advantage, you would need
to know their:
Question 8 Consider the following scenario. Two friends, Rachel and Joey, enjoy baking bread and
making apple pies. Rachel takes two hours to bake one loaf of bread and one hour to make one
pie. Joey takes four hours to bake one loaf of bread and four hours to make one pie. If Rachel
and Joey decide to specialize in order to maximize their combined output, who should produce

what?
Question 9 Refer to the accompanying figure to answer the questions that follow. Unemployed
resources are evident at:
Question 10 Refer to the following table to answer the questions that follow. Suppose that Alicia
Keys and JayZ could each make either New York–style pizza or Philly cheesesteaks. Given an
eighthour workday, which of the following would permit them to consume outside their respective
production possibilities frontiers (PPFs)?
Question 11 When the opportunity cost of producing a good rises as you produce more of it, you
experience:
who can allocate the same amount of time between making pizzas and making stromboli. Refer
to these figures to answer the questions that follow. What is Jim’s opportunity cost of making 1
stromboli?
Question 13 Ceteris paribus means:
Question 14 The ability of one producer to create more of a good than another producer using
the same quantity of resources is called:
Question 16 Refer to the following table to answer the questions that follow. Given an eighthour
workday, and to experience gains from trade,
Question 17 Consider the production possibilities frontier (PPF) shown in the figure below to
answer the questions that follow. Given current resources and technology, the attainable range is
best described as:
Question 19 Consider the following scenario to answer the questions that follow: Two friends,
Rachel and Joey, enjoy baking bread and making apple pies. Rachel takes two hours to bake 1
loaf of bread and one hour to make 1 pie. Joey takes four hours to bake 1 loaf of bread and fou r
hours to make 1 pie. What is Joey’s opportunity cost of baking 1 pie?
Question 20 Suppose you are studying a production possibilities frontier (PPF) that has a bowed-

out shape relative to the origin. What causes this shape?
The process of using current resources to create or buy new capital is called
The movie Saving Private Ryan is about a military mission to find and recover a particular soldier—Private
Ryan. The movie is predominantly about how much was given up in an effort to save this one particular soldier.
The main economic theme of the movie is
An increase in the labor force would be reflected in a society’s production possibilities frontier (PPF) by an
Refer to the following figure for the questions that follow According to the figure, a new technology that makes
it easier to peel, core, and prepare apples will cause.
The ability of one producerto produce a good at a lower opportunity cost than another produceris called
The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same
amount of time between building wooden boats and solving crimes. Refer to these figures to answer the
questions that follow. Which statement best describes absolute advantage?
Refer to the following table to answer the questions that follow. Given the same quantity of resources, what is
Alicia Keys’s opportunity cost ofproducing a New York pizza?
If Jim can sell paperat a lower opportunity cost than Dwight can, then
Greater investment in capital goods today leads to
Consider the following scenario to answer the questions that follow: Two friends, Rachel and Joey, enjoy baking
bread and making apple pies. Rachel takes two hours to bake 1 loaf of bread and one hour to make 1 pie. Joey
takes four hours to bake 1 loaf of bread and four hours to make 1 pie. What is Rachel’s opportunity cost of
baking 1 loaf of bread?
One reason that economists make assumptions when designing models is to
Suppose you are studying a production possibilities frontier (PPF) that has a bowed-out shape relative to the
origin. What causes this shape?
Ceteris paribus means
The important act of holding all other variables constant while examining a particular variable is known as:
Variables that are controlled for in a model are called
Refer to the following figures to answer the questions that follow. Which allocation point in
the short-run production possibilities frontier (PPF) will lead to the most significant growth in
the long-run PPF?
You have a comparative advantage in producing a good whenever
The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same
amount of time between building wooden boats and solving crimes. Refer to these figures to answer the
questions that follow. What is Gibbs’s opportunity cost of solving a crime?

When testing a paper airplane on your campus quad, which of the following would be an exogenous factor?
Consider the following scenario to answer the questions that follow: Two friends, Rachel and Joey, enjoy baking
bread and making apple pies. Rachel takes two hours to bake 1 loaf of bread and one hour to make 1 pie. Joey
takes four hours to bake 1 loaf of bread and four hours to make 1 pie. What is Joey’s opportunity cost of baking
1 pie?
When the price is the equilibrium price, we would expect there to be a
causing the market to put pressure on the price until it went back to the
equilibrium price.
Suppose that Dwight and Jim can either make salads or grill steaks. Their
maximum output per hour is listed in the following table. Given the same
quantity of resources, at what terms of trade (relative price ratio) could they
specialize and trade so that both consume outside their own production
possibilities frontier (PPF)?
What would you expect to happen to the price of bagels if the price of flour
decreased and the price of cream cheese decreased?
To determine which of two producers has a comparative advantage, you
would need to know their
The area inside (within) the production possibilities frontier (PPF) contains
Economics professors are well aware of the importance of incentives. Which
of the following situations shows the use of a positive incentive
Which one of the following pairs of goods is likely to have a negative cross-
price elasticity of demand
The accompanying figures depict the production possibilities frontiers
(PPFs) for two people who can allocate the same amount of time between
making pizzas and making stromboli. If Jim and Pam were to specialize
and trade, at what exchange rate would they find some quantity of trade
to be mutually beneficial?
Use the following table to answer the questions that follow. What is the

surplus when the price floor is $0.75 in the market for public transportation?
Why are binding price ceiling laws passed?
The figures below depict the production possibilities frontiers (PPFs) for two
people who can allocate the same amount of time between building wooden
boats and solving crimes. Refer to these figures to answer the questions that
follow. Which statement best describes absolute advantage?
Which of the following will cause a movement along a good’s supply curve?
What would happen in the market for SUVs if the government started to
subsidize the production of SUVs that get very few miles per gallon and the
price of gasoline went up?
If the percentage change in the quantity consumed of pizza is 8% and the
percentage change in income is 2%, what is the income elasticity of demand
for pizza?
If the price and quantity for a normal good, Good X, is $8 and 6 units at the
original equilibrium, what is one possibility for the new equilibrium of Good X
if we see income increase and all other factors stay constant?
Chris runs a sporting goods store and knows that the price elasticity of
demand for his sports clothing line is –1.5. He is planning to lower prices by
10%. The percentage change in quantity demanded will be
If the cross-price elasticity of demand for two goods is zero, the two goods are
The price of peanut butter increases from $2.50 to $3.00 and the quantity of jelly demanded
falls from 30 jars to 24 jars. Calculate the cross-price elasticity of demand
During the winter months, many elderly persons leave their homes in
northern New York and travel south to Florida or Arizona. What would you
expect to happen to the equilibrium price and quantity of items most used by
the elderly in northern New York?
When Heavenly Cookies prices its sugar cookies at $1.00, they sell 75
cookies. They lowered the price to $0.50 and sold 200 cookies. Their

total revenue because the price elasticity of demand for sugar cookies is
For a market to be competitive
If a good is subject to a binding price ceiling and you purchase it on the black
market, what do you expect to happen to the price over time?
Use these production possibilities frontier (PPF) curves, which compare the
ancient production of agricultural products to art and literature, to answer
the questions that follow. Suppose a great plague wipes out half of the
society’s population. Which of the following graphs best depicts how this
would affect the PPF?
In the first few months of 2012, the price of gasoline increased by
approximately 15%. Because of this increase, we would expect the curve in
the market for hybrid cars to
An increase in general resources that affects the production of both goods on
a production possibilities frontier (PPF) would cause an
Use the following scenario to answer the questions that follow: Dairy Dream,
a local ice cream store, finds that it sells out of ice cream sandwiches at the
current price of $1. It raises the price to increase its revenues and finds that
no one buys ice cream sandwiches anymore.
While there are many pizza places in Curtisville, Pappy’s Pizza is known for
its distinctive deep-dish pizza with an almost pie-like crust, whereas
Momma’s Pizza Pizzazz is comparable to many other restaurants. Pappy’s is
likely to find that it can prices to increase total revenue, and Mommas must
prices to increase total revenue.
The scientific method and the tools of economics are useful in examining
A positive statement
When the price of a basketball is $15, the quantity supplied is 5,000. When
the price increases to $20, the quantity supplied is 10,000. The price

elasticity of supply is
Which of the following will cause the demand curve for burgers to shift the
right?
You have an absolute advantage in producing something whenever
From the accompanying table, we would expect that, for recreational skaters,
the price elasticity of demand for ice skates between $10 and $20 to be than
that of hockey players because
Refer to the accompanying figure. What event would cause the supply curve
to shift out?
The production possibilities frontier (PPF) shows
With no barriers to entry or exit and when firms in a market are operating at
a loss, you can expect other firms to exit, causing the curve to shift to the
and making the equilibrium price and the equilibrium quantity
Google has started a project to scan all books and make those that are not
copyrighted available to people free of charge. Why is it important that only
books without a copyright are available?
According to economists, one reason few professional athletes have PhD’s is
that the
What will happen in a market where a binding price floor is removed?
What would you expect to happen to the price and quantity of Pepsi if the
price of Coke increases and Pepsi develops a new technology that makes its
production process more efficient?
Which statement best describes the absolute advantage as shown in the
graphs?

follow. What is DiNozzo’s opportunity cost for solving a crime?
Ceteris paribus, if a society is producing at a point on the production
possibilities frontier (PPF), it can only increase the production of one good by
In the accompanying table, assume that the price of ice skates increases from
$10 to $20 per pair. Using the midpoint method, calculate the price elasticity
of demand for ice skates for hockey players.
Refer to the following figure for the questions that follow. As you move from
points N to M to L, the opportunity cost of additional apple pie
Assume that the market for pencils is in equilibrium and that demand is very
price elastic. The popularity of digital tablets and electronic pens increases
and demand for pencils declines. The equilibrium change in quantity
demanded is
Refer to the accompanying figure. When the price changes from P1 to P2, we
will see a(n)
Use the following scenario to answer the questions that follow. Dairy Dream,
a local ice cream store, finds that it sells out of ice cream sandwiches at the
current price of $1. It raises the price to increase its revenues and finds that
no one buys ice cream sandwiches anymore. The owners raised the price
because they believed that the demand for ice cream sandwiches is
Spam is considered an inferior good. What would happen to the equilibrium
price and quantity of Spam if income decreased and more firms started
producing Spam?
Refer to the accompanying table to answer the questions that follow. The
price of erasers increases from $0.50 to $1.00 per eraser. Use the midpoint
method to calculate the cross-price elasticity of demand between pencils
and erasers.

Question1
Economics is the study of:
Select one:
a. markets
b. How to make workers more productive and firms more profitable.
c. How to allocate resources to satisfy wants and needs.
d. How to make money.
e. Capitalism
Question2
An example of a direct positive incentive is:
Select one:
a. Threatening to fire those who do not perform well.
b. Unemployment insurance for those who are laid off.
c. A prison sentence for committing a crime.
d. Providing a workplace safety program.
e. Providing a commission for sales.
Question3
A health insurance company may offer its policyholders a discount on their premiums if they prove
that
they have stopped smoking. What type of incentive is the health insurance company offering?
Select one:
a. an unintended incentive.
b. A neutral incentive.
c. complementary incentive.
d. A direct incentive.
e. An indirect incentive.
Question4
The cost of a trade-off is known as the ________ of that decision.
Select one:
a. opportunity cost
b. marginal cost
c. net cost
d. comparative cost
e. explicit cost
Question5
Instead of taking an economics course, you could have taken a history course that meets at the exact
same time. The total cost of taking the economics course would be:
Select one:
a. the fact that you could not take the history course at the same time.
b. the tuition cost, the cost of the textbook and notebook, and the fact that you could not take the
history
course at the same time.
c. the tuition cost for the economics course plus the price of the textbook and a notebook for the
economics course.
d. the price of the textbook and a notebook for the economics course.
e. the tuition cost for the economics course.
Feedback
Question6
The opportunity cost of working rather than going to school is:
Select one:
a. zero because the person is earning an income by working.
b. the cost of clothing and transportation.
c. the higher wages that come with additional education.
d. the cost of food and housing.
e. the annual wages earned by working.
Question7
On the television show “MythBusters,” the hosts design experiments, collect data, and test theories

based
on popular myths. This is an example of:
Select one:
a. the scientific method as used in economics.
b. economic growth.
c. absolute advantage.
d. gains from trade.
e. production possibilities.
Question8
The area inside (within) the production possibilities frontier (PPF) contains:
Select one:
a. normative points.
b. inefficient points.
c. efficient points.
d. positive points.
e. high opportunity cost points.
Question9
How will a reduction in the national unemployment rate affect a nation’s production possibilities
frontier
(PPF)?
Select one:
a. It will move society to a point farther inside the PPF.
b. It will cause the PPF to shift inward.
c. It will move society outward to a point closer to or on the PPF.
d. It will push society to a point outside its PPF.
e. It will cause the PPF to shift outward.
Question12
The movie Saving Private Ryan is about a military mission to find and recover a particular soldier—
Private Ryan. The movie is predominantly about how much was given up in an effort to save this one
particular soldier. The main economic theme of the movie is:
Select one:
a. opportunity cost.
b. comparative advantage.
c. positive advantage.
d. normative analysis.
e. absolute advantage.
Question15
Consider the following scenario to answer the questions that follow: Two friends, Rachel and Joey,
enjoy
baking bread and making apple pies. Rachel takes two hours to bake 1 loaf of bread and one hour to
make 1 pie. Joey takes four hours to bake 1 loaf of bread and four hours to make 1 pie.
What is Joey’s opportunity cost of baking 1 loaf of bread?
Select one:
a. 1 loaf of bread
b. 1/2 loaf of bread.
c. 1 pie
d. 2 pies
e. 4 pies
Question16
Consider the following scenario to answer the questions that follow: Two friends, Rachel and Joey,
enjoy
baking bread and making apple pies. Rachel takes two hours to bake 1 loaf of bread and one hour to
make 1 pie. Joey takes four hours to bake 1 loaf of bread and four hours to make 1 pie.
What is Rachel’s opportunity cost of baking 1 pie?
Select one:

a. 1 pie
b. 2 pies
c. 2 loaves of bread.
d. 1 loaf of bread
e. 1/2 loaf of bread
Question17
The ability of one producer to create more of a good than another producer using the same quantity of
resources is called:
Select one:
a. a positive-sum game.
b. absolute advantage.
c. gains from trade
d. the law of increasing relative cost.
e. comparative advantage.
Question18
The ability of one producer to produce a good at a lower opportunity cost than another producer is
called:
Select one:
a. absolute advantage.
b. a zero-sum game.
c. comparative advantage.
d. a normative statement.
e. the law of increasing relative cost.
Question19
For both parties to benefit from specialization and trade, the trading parties must agree on:
Select one:
a. the appropriate level of investment for the future.
b. the source of comparative advantage.
c. who has the absolute advantage in production.
d. a plan not to trade with other parties.
e. a price somewhere between their opportunity costs of production.
Question20
Why do economists use models?
Select one:
a. Models allow us to control exogenous factors.
b. Models allow us to study a simplified version of a complex world.
c. Models make the world harder to understand.
d. Models allow us to examine more factors than what actually exists in our world.
e. Models are used to add complexity to a simple world.
The basic goal of economics is:
The patent system acts as:
Economics is concerned with the trade-offs that emerge because of scarcity. The term
"trade-offs" refers to:
An opportunity cost is the:
How are changes in opportunity cost related to decision-making behavior?
Why would economists find it surprising if the CEP of a large company does his or her
own housework?
Economists believe that optimal decisions are made up to the point where:
One way to promote a new business is to offer free items. If you were to open a new
restaurant and offer free food, you likely would have a line out the door. How would
economists understand the behavior of those standing in line?
Many stores are open 24 hours a day. When store managers make the decision to stay
open 24 hours, it must be the case that:

More oranges are grown in Florida than North Dakota because Florida's warm climate
gives it a ___________ in growing organges
Which of the following is a normative statement?
a) you should wear a helmet when cycling
b) the sky is blue
c) a bicycle has two wheels
d) a unicycle has five wheels
e) electricity follows the path of least resistance
The area inside (within) the production possibilities frontier (PPF) contains:
Think of the production possibilities frontier (PPF) model. When society is producing the
largest possible output from its resources, it is operating:
a) inefficiently
b) efficiently
c) with no opportunity cost
d) inside (within) the PPF
e) beyond its opportunity cost
Suppose you find a production possibilities frontier (PPF) that is shaped like a straight-
line. What can you determine about the production of the two goods?
A monopoly:
Imperfect markets:
a) do not exist in democracies
b) always result in supply exceeding demand
c) always result in demand exceeding supply
d) occur when the buyer or seller has an influence on the price
e) can't occur if there are many buyers and many sellers
Two goods that are used together are called:
When the price of ground beef increases and all else is held constant, we would expect
the supply of hamburgers to ________, causing the price to ________
If the number of buyers in a market increases from 50 to 100, you would expect the
equilibrium price to ________ and the equilibrium quantity to _________, holding all else
constant
Why does surplus exist under a binding price floor?
Suppose you live in a community with no price controls. What do you expect will happen
if your town borders a community where there is a binding price ceiling on most products?
Suppose you live in a community with no price controls. What do you expect to happen if
your town borders a community where there is a binding price floor on most products?
What will happen in a market where a nonbinding price floor is removed?
A tax on consumers of a good would shift the _______ curve down and cause the price
paid by consumers to ________
The net cost to society from the imposition of a tax is also known as:
If a tax is imposed on a good with a perfectly inelastic demand, the burden of the tax will
be borne:
a) by both consumers and producers equally
b) by consumers alone
c) by producers alone
d) mostly by consumers but partially by producers
e) mostly y producers but partially by consumers
To evaluate the change in average living standards over time, it is best to use:
When John buys new tires for his car it ________, and when Ford buys tires to put on
new cars it _________
Net exports can be defined as:

Real GDP is equal to:
Real GDP is GDP measured in:
a) current prices
b) base year prices
c) average prices
d) marginal prices
e) nominal prices
Real GDP can be calculated as:
GDP increases if prices decrease by _______ and quantities produced increase by
________
Between two given years, if real GDP and nominal GDP grow at the same rate, then:
If real GDP grew by 2% and the inflation rate was 2%, then nominal GDP grew by:
Real GDP would be better measure of economic well-being if it included the value of:
Official unemployment is identified as when:
Jamal works in a factory in Lake Zurich, Illinois, assembling toy trains. The factory owner
updates the current equipment and installs new robots that can do Jamal's job. As a
result, Jamal is laid off and is now unemployed. Jamal would be considered:
Unemployment caused by delays in matching available jobs and workers is called:
Government policies such as unemployment compensation and government regulations
related to hiring and firing employees results in:
An unemployment rate that is above the natural rate indicates _________, and we say
that economy is producing at ___________
A member of the labor force is defined as:
The unemployment rate is:
Discouraged workers are defined as:
One shortcoming of the official unemployment rate is that:
Inflation occurs when:
Typically the largest percentage category in the consumer price index (CPI) is:
If 51% of all goods in the consumer price index (CPI) became more expensive and 49%
became chapter:
How do you convert a price of a good from an earlier time into today's price?
Typically if real wages fall, the quantity demand of labor rises. If workers agree to 3%
wage increases for a four-year period and inflation is more than 3% then, based on this
information alone:
A price confusion problem is best described as:
The notion of the loanable funds market is:
Borrowers in the loanable funds market consist of:
The demand for loanable funds is:
Gross domestic product requires:
A bond is an instrument that allows the bearer to earn interest. The bearer would be best
described as:
If interest rates rise:
If real wages were higher than nominal rates in 2009, the implication is that:
Typically a college degree is "worth it", but it requires:
a) high time preferences
b) low time preferences
c) smoothed consumption
d) variable correlated consumption
e) the supply of loanable funds to be large
One would correctly argue that higher capital productivity:

The demand for loanable funds decreases while the supply simultaneously increases.
This would cause:
Firms that help to channel funds from savers to borrowers are known as:
The sellers (or lenders) in financial markets are:
The two different paths through the loanable funds market are:
A security is:
A bond is:
The maturity date of a bond is:
The par value of a bond is:
Bonds contain three important pieces of information. These three pieces are:
The interest rate of a bond is equal to:
The risk that the borrower will not pay the face value of a bond at the maturity date is
called the:
All else equal, the greater the default risk:
Typical individuals have difficulty judging the default risk of any one company, let alone
the thousands of firms that sell bonds in a developed economy. To address this problem:
Stocks are:
A shareholder who owns more than 50% of the shares of the firm is called the:
A majority shareholder:
Which of the following is a secondary stock market?
a) North American Stock Exchange
b) The S&P 500
c) New York Stock Exchange
d) The Dow Jones Industrial Average
e) The United States Stock Exchange
The two largest foreign holders of U.S. Treasury securities are:
A home mortgage loan is:
Economic growth is defined as:
Real per capita gross domestic product (GDP) is defined as:
Average world income began to increase rapidly during:
Which of the following are the three major categories of resources?
All countries have some resources and technology available to them. The ones that grow
faster are the ones that:
Which of the following is an example of an institution that promotes economic growth?
a) private property
b) bartering as a means of trade
c) high barriers to international trade
d) constant war and conflict
e) collective property ownership
According to modern growth theory, the key to economic growth is:
Economic growth is determined by:
A restaurant's production function would show the relationship between:
If capital is increasing, then:
a) the production function will shift upward
b) the production function will shift downward
c) there is an upward movement along the production function
d) there is a downward movement along the production function
e) there is an upward shift of the production function and an upward movement along the
production function
If net investment is positive then:
If a country experiences an epidemic that reduces human capital, then:

Consider a country that improves its educational system such that a greater percentage
of workers become college educated. It is reasonable to expect:
If more natural resources are discovered, then:
There are diminishing returns to:
According to the Solow growth model, growth will eventually:
Modern growth theory views technological innovation as __________, whereas Solow
growth theory views technological change as ________
Consider a country that suffered through five years of civil war, but now has a stable
government that has the support of the majority of the people. In this country, we are
likely to observe:
A type of policy that would be advocated by modern growth theory would be to:
The term ________ is a popular way to describe the recession-expansion pattern
followed by the economy
Aggregate demand is determined by adding up the spending of:
Consider the wealth effect, interest rate effect, and international trade effect. Of these,
the ________ effect is the most significant and the _______ effects is the least
significant
The aggregate demand curve slopes downward because:
An increase in the price level that reduces the real value of wealth is likely to _______
consumption and _______ saving
Suppose that an increase in the price level reduces the value of real wealth, which then
causes a reduction in consumption but no change in saving. In this case:
A rise in the price level that leads to a change in the interest rate, and therefore to a
change in the quantity of aggregate demand, will cause:
If people expect higher income in the future, then spending today ___________ and
aggregate demand _________
When foreign income rises, U.S. aggregate:
The long run is best defined as a period of time such that:
When prices in the economy have not fully adjusted, we say that:
When inflation pushes up prices in the economy, input prices are _________ and
revenues _________ in the short run
Suppose new drilling techniques increase the world oil supply. In the long run, output will
______ and the price level will _______
An increase in the general price level will lead to:
An upward movement along the short-run aggregate supply
If inflation turns out to be higher than expected, this will:
The economy is in short-run equilibrium when:
An economist's use of experiments and real-world data to test a theory is an example of:
a. the scientific method in economics.
b. macroeconomics.
c. economic growth.
d. normative analysis.
e. comparative advantage.
Economists use the scientific method and the tools of economics to study:
a. only the decisions of individuals.
b. only the decisions of business firms.
c. only economic growth and gross domestic product (GDP).
d. only the production possibilities curve.
e. anything around them; the world is the economist's laboratory.

A positive statement:
a. is a claim that can be tested.
b. is a statement about what ought to be.
c. is a declaration of opinion.
d. is a claim that cannot be tested.
e. cannot be evaluated using the scientific method.
a. The sky is blue.
b. The sky is green with pink polka dots.
c. Points on the production possibilities frontier (PPF) are efficient.
d. Points outside the PPF are unattainable with current resources.
e. We should strive to push the PPF outward.
a. You should wear a helmet when cycling.
b. The sky is blue.
c. A bicycle has two wheels.
d. A unicycle has five wheels.
e. Electricity follows the path of least resistance.
Which of the following is a positive statement?
a. Winters in Arkansas are too cold.
b. Everyone should work in a bank to understand the true value of money.
c. Harvard University is the top education institution in the country.
d. On average, people save 15% when they switch to GEICO.
e. Everyone ought to have a life insurance policy.
The important act of holding all other variables constant while examining a particular
variable is known as:
a. endogeneity.
b. a normative statement.
c. a positive statement.
d. macroeconomics.
e. ceteris paribus.
Which of the following is necessary to build a good economic model?
a. normative statements
b. assumptions
c. opinions
d. complex math
e. realism
Why do economists use models?
a. Models are used to add complexity to a simple world.
b. Models allow us to study a simplified version of a complex world.
c. Models allow us to control exogenous factors.
d. Models make the world harder to understand.
e. Models allow us to examine more factors than what actually exists in our world.
Variables that are controlled for in a model are called:
a. normative statements.
b. positive statements.
c. endogenous factors.
d. exogenous factors.
e. the scientific method.
When testing a paper airplane on your campus quad, which of the following would be an
exogenous factor?

a. the weight of the paper used in making the plane
b. the ratio of wingspan to plane length
c. the height of the body of the plane
d. the level of wind encountered
e. the number of folds in the wings
Car companies build wind tunnels to test the aerodynamics and the handling capabilities
of their car designs. The many variables that can be precisely controlled inside the wind
tunnel are considered:
a. normative factors.
b. positive factors.
c. comparative factors.
d. endogenous factors.
e. exogenous factors.
A model without any simplifying assumptions:
a. is highly complex and likely unworkable.
b. excludes important predictive variables.
c. is very helpful for solving tough, real-world problems.
d. does not look like the real-world problem it is meant to address.
e. provides simplified solutions to complex problems.
A graph that shows the maximum attainable combinations of two goods when society
efficiently uses its productive resources is called:
a. a production possibilities frontier (PPF).
b. a supply curve.
c. opportunity cost.
d. a consumer demand curve.
The _________ illustrates the various combinations of output that a society can produce
if all of its resources are being used efficiently.
a. concept of absolute advantage
b. law of positive statements
c. law of demand
d. production possibilities frontier (PPF)
e. principle of comparative advantage
Ceteris paribus, if a society is producing at a point on the production possibilities frontier
(PPF), it can only increase the production of one good by:
a. also increasing the production of the second good.
b. decreasing the production of the second good.
c. increasing the price of the second good.
d. decreasing the price of the second good.
e. reducing the resources available for production.
On a production possibilities frontier (PPF) that shows the trade-off between consumer
goods and capital goods given a fixed amount of labor, unemployment is illustrated by:
a. movement from a point within the frontier to a point on the frontier.
b. a point outside the frontier.
c. a point within the frontier.
d. movement from a point on the frontier to another point on the frontier.
e. a point on the frontier.
Think of the production possibilities frontier (PPF) model. When society is producing the
largest possible output from its resources, it is operating:
a. inefficiently.
b. efficiently.

c. with no opportunity cost.
d. inside (within) the PPF.
e. beyond its opportunity cost.
When the opportunity cost of producing a good rises as you produce more of it, you
experience:
a. normative economics.
b. increasing relative costs.
c. downward-sloping demand.
d. inferior goods.
e. increasing marginal utility.
Suppose you are studying a production possibilities frontier (PPF) that has a bowed-out
shape relative to the origin. What causes this shape?
a. economic growth
b. the law of increasing relative cost
c. absolute advantage
d. normative economics
e. more resources
Suppose you find a production possibilities frontier (PPF) that is shaped like a straight
a. Production of the two goods is subject to decreasing relative cost.
b. Production of the two goods is subject to increasing relative cost.
c. Production of the two goods is subject to constant opportunity cost anywhere along the
PPF.
d. One producer must have an absolute advantage in production.
e. More resources will not cause the PPF to shift.
Specialization and trade allow individuals to:
a. consume outside their own production possibilities frontier (PPF).
b. shift their PPF outward.
c. produce more goods with less technology.
d. eliminate scarcity.
e. produce fewer goods with less technology.
When one producer can create more of a good than another producer using the same
quantity of resources, the first producer has:
a. a zero-sum game.
b. gains from trade.
c. an absolute advantage.
d. a comparative advantage.
e. increasing relative costs.
If Elaine can produce more output from a set amount of resources than Jerry can, you
know that:
a. Elaine has a comparative advantage.
b. Jerry has a comparative advantage.
c. Elaine has an absolute advantage.
d. Jerry has an absolute advantage.
e. Elaine has a normative advantage.
The ability of one producer to produce a good at a lower opportunity cost than another
producer is called:
a. a normative statement.
b. a zero-sum game.
c. absolute advantage.

d. comparative advantage.
e. the law of increasing relative cost.
You have a comparative advantage in producing a good whenever:
a. you enjoy producing that good.
b. you can produce more of the good than someone else can using the same resources.
c. your opportunity cost is constant.
d. your opportunity cost of producing that good is lower than that of other producers.
e. you have specific training in the production of that good.
If Jim can sell paper at a lower opportunity cost than Dwight can, then:
a. Jim has an absolute advantage in paper sales.
b. Dwight has an absolute advantage in paper sales.
c. Jim has a positive advantage in paper sales.
d. Jim has a comparative advantage in paper sales.
e. Dwight has a comparative advantage in paper sales.
Consider the following scenario. Two friends, Rachel and Joey, enjoy baking bread and
making apple pies. Rachel takes two hours to bake one loaf of bread and one hour to
make one pie. Joey takes four hours to bake one loaf of bread and four hours to make
one pie. If Rachel and Joey decide to specialize in order to maximize their combined
output, who should produce what?
a. Joey should specialize in making pies because he has an absolute advantage.
b. Rachel should specialize in making pies and Joey should specialize in making bread.
c. Joey should specialize in making pies and Rachel should specialize in making bread.
d. Rachel should specialize in making bread and pies because she has a comparative
advantage in both.
e. Rachel should not specialize because she is better at producing both.
Consumer goods:
a. are produced today to be used to produce more goods in the future.
b. are produced today to be consumed at some point in the future.
c. are invested today in order to consume more today.
d. are produced today to be consumed today.
e. generate economic growth.
Goods that are produced for current consumption are called:
a. capital goods.
b. consumer goods.
c. investment goods.
d. normal goods.
e. opportunity goods
Forgoing current consumption so that those resources can be used to produce new
capital is called:
c. investment.
d. scarcity.
e. saving.
The process of using current resources to create new capital is:
c. specialization.
d. investment.
e. free.

Over the last 20 years, countries such as India and China have:
a. consumed heavily with little regard for the future.
b. invested heavily and enjoyed significant economic growth.
c. eliminated the problem of scarcity.
d. produced outside their production possibilities frontier (PPF).
e. produced wholly for current consumption.
Greater investment in capital goods today leads to:
a. greater growth in the production possibilities frontier (PPF) in the future.
b. greater consumption today.
c. the end of scarcity.
d. less opportunity cost.
e. scarcity.
Georgia institutes a new gas tax to discourage the purchase of "low-gas-mileage" cars.
As a result, Kris does not fill his gas tank when he knows he will be visiting friends in S.
Carolina (lower gas tax) the coming weekend. This is an example of...
The opportunity cost of a purchase is:
You are deciding whether to pay movers $250 or to move yourself. It would be
economically rational to hire movers if:
Although you are feeling full after a large dinner at Bolton, you are considering getting a
milkshake. As an economic thinker, you will get a milkshake if:
A. You should wear a helmet when cycling.
B. The sky is blue.
C. A bicycle has two wheels.
D. A unicycle has five wheels.
E. Electricity follows the path of least resistance.
Suppose that as a result of newly patented machinery, Dell can make computers with
less material and less time. Ceteris paribus, this should make the price of Dell computers
go down because of:
Jamal is willing to pay $85 for a new jacket that sells for $70. Eddie is willing to pay $65
for that same jacket. What is the total consumer surplus for Jamal and Eddie?
If supply shifts to the left and demand shifts to the right, what can we predict absolute
confidence?
In the market for pizza, a tax is imposed on wheat, an input for making pizza.What
happens in the pizza market?
Price "gouging laws implemented in relevant markets after nature disaster are examples
of...
Certain US cities have higher than average minimum wages laws, but comparable
unemployment levels. This suggests...
James specializes in college-level economics tutoring. He knows that, during the two
weeks before finals, he can charge more for an hour of private tutoring. Expecting this
price increases later, James will:
In most cases, taxes reduce economic efficiency because...
Total revenue is defined as TR = (P)(Q), where P is the equilibrium price and Qis the
equilibrium quantity. For a business, which strategy is more likely to increase total
revenue?
The local city council establishes a law of maximum rent for apartments in your city.
Which of the following is most likely to happen:
Taxes will almost always cause consumer prices to increase. How much they increase
depends on...

In general, macroeconomics is the study of _____.
If a macroeconomist were to research a topic for a potential paper in the "Big-Wig Fancy-
Shmancy Macroeconomist Journal", it would likely be about ______.
Economist study the world around us, so which of the following statements is true (or
best option)?
"Lowering the home mortgage tax on first time homeowners will increase building in the
housing sector of the economy." This is a ______ statement because it is ________.
You, a famous UGA economist, are asked to give a talk at the Georgia statehouse to the
governor. You are asked to report on the current data of the economy. You are then
asked to give a policy suggestion to improve the economy. Your report on the current
data will likely be described as _______ statements and your policy advice can be
described as ________ statements.
When creating models economist make use of the following:
A model can be described by which of the following?
Suppose the government increased aid-payments to low income parents for each
additional child to ensure the parents had enough funds to support a larger family. In the
following year, suppose, on average, low income families had more children. This would
be an example of a(n) _____________.
We are not able to produce all the goods and services that everyone would like to have.
That means we live in a world of
Generally speaking, a market economy rewards people according to their ________.
According to Adam Smith, people provide you goods and services because _______
A certain production possibilities frontier shows production possibilities for two goods:
wheat and shirts. concepts cannot be illustrated in this model?
Suppose a Mary produces both turnips and corn in her garden. If she must give up 15
bushels of corn to get 4 bushels of turnips, then her opportunity cost of 1 bushel of
turnips is
The Production Possibilities Curve (PPC) shows the different combinations, assuming a
two good world, that an economy _____.
Assumption in a PPC model
In our PPC model, an economy is considered to be efficient if ____
The PPC model demonstrates what economic concept?
A curve PPC model would indicate which of the following
The benefit to those that specialize and trade means they are able to
The ______ is responsible for measuring and reporting the unemployment rate.
In the most commonly reported "Unemployment Rate" which of these is not a category a
worker would be placed?
Paul works for his dad's company and is unpaid. Paul is considered
Which of the following is included in the labor force?
A. Phil just lost his job at Dunkin' Donuts but has a second job.
B. Barney has been filling out job applications for more than 6 months but still know luck.
C. Alice works at Jimmy John's but only 10 hours a week.
D. Only A and C are correct.
E. A, B, and C are correct.
Joe is a professional mullet stylist and is currently not working. There are several salons
in Gainesville, Florida looking for a mullet stylist but they do not know how to "work the
internet", and Joe is not aware of the openings yet. Joe would be considered ______
unemployed.
The L.F.P.R. gives us the % of the population that
Ce-Lo gets fired from a TV show and then decides to go back to college for an acting
degree. He will not work while in college.

The B.L.S. reported in the small country of UGA-tonia the population of 16 years and
older of potential workers is 60 million. 36 million are working and 2 million are
unemployed. What is the LFPR and U-Rate?
Any variation away from the natural rate of unemployment is referred to as
High school graduates as compared to high school drop-outs generally have
Which of the following is a rationale (explanation) for frictional unemployment?
A market economy is described using supply and demand which
The following is a determinant of changes in the demand function except
A. Consumer tastes
B. Future Expectations
C. Prices of Substitutes
D. Technology improvements
E. All of the above can change the demand function
A likely example of complementary goods for most people would be
Which of the following demonstrates the law of demand?A. Tom buys more "Dunkin'
Donuts" doughnuts at $0.75 per doughnut than at $1.25 per doughnut, all else the same.
B. Relative to last month, Russell buys more doughnuts at $1.50 per doughnuts since he
got a raise at work last year.
C. Shorty buys fewer "Dunkin' Donuts" muffins at $1 per muffin than at $2 per muffin, all
else the same.
D. Kim buys fewer D.D. Doughnuts at $1 per doughnut after the price of Krispy Kreme
doughnuts fall to $0.75.
E. Both B and C are correct.
If a decrease in your salary result in you buying more, then the good is
When the number of buyers in a market increases,
A. the market demand curve shifts to the right.
B. the demand curves of the individual demanders in the market are unaffected.
C. the market demand for the good in question increases.
D. All of the above are correct.
Steak is a normal good if
A. the demand for steak shifts to the right when income rises.
B. the demand for steak rises when the price of steak falls.
C. the demand curve for steak slopes upward.
D. the demand curve for steak shifts to the right when the price of burritos falls, assuming
steak and burritos are substitutes.
E. None are correct.
Suppose that the demand for a good increases, while at the same time, supply of the
good decreases. What would happen in the market for the good?
What will happen to the equilibrium price and quantity of new cars if the price of gasoline
rises, the price of steel rises, public transportation becomes cheaper and more
comfortable, and auto-workers negotiate higher wages?
You love peanutbutter. You hear on the news that 50% of the peanut crop in the South
has been wiped out by drought, and that this will cause the price of peanuts to double by
the end of the year. As a result,
Whichofthefollowingoptionswouldnotshiftthedemandcurveforagood?
A. a change in income
B. a change in the price of the good
C. a change in expectations about the future price of the good
D. a change in the price of a related good or service
E. Both A and D are correct
If the number of firms in a market doubles, then you can expect

Assume there is an increase in steel prices in the world market. You can expect the
supply curve for steel train cars to...
If a surplus exists in a market for live lobster, we know that the actual price is...
Rent-control laws dictate
The presence of a price control in a market for a good or service usually is an indication
that
Which of the following is the most likely explanation for the imposition of a price ceiling
on the market for milk?
A price ceiling is binding when it is set...
Consumer surplus
On a graph of a market in competitive equilibrium, the are below a demand curve and
above the price measures
On a graph of a market with a tax, deadweight loss is represented by the area...
In a market, the marginal buyer is the buyer
To say that a price ceiling is binding is to say the the price ceiling
If a binding price ceiling is imposed on the computer market, then
A. The quantity of computers demanded will increase
B. The quantity of computers supplied will decrease
C. A shortage of computers will develop
D. The Market will be below equilibrium price
E. all of the above are correct
A demand curve reflects:
If the government wants to reduce smoking, it should impose a tax on
When a tax is place on the sellers of a product...
When a tax is place on the sellers of cell phones...
When a country cannot produce every good people wish to have we say this country
facing
A good is _______ if it takes even a small amount of time, energy, or money to acquire.
Kramer makes great non-fat frozen yogurt and George makes awesome calzones.
Kramer and George both enjoy frozen yogurt and calzones. Of the following options, in
which is it impossible for both Kramer and George to benefit from trade?A. George can't
make soup and Kramer can't make calzones.
B. George is better than Kramer at making calzones. Kramer is better at making frozen
yogurt than George.
C. Kramer can make better frozen yogurt and calzones than George.
D. None of the above is correct.
If labor in the Dominican Republic is less productive than labor in the United States in all
areas of production,
If the government wanted to give people a negative direct incentive not to save money,
what would be the appropriate policy?
A car insurance company is willing to offer accident-free drivers a discount. This is an
example of:
The U.S. federal government offers homeowners a tax deduction for their home loan
interest payments. This reduction in taxes may have encouraged too many people to
own a home. If the tax deduction caused people who otherwise would have rented
to own, the tax deduction serves as a(n):
The opportunity cost of a purchase is:
Economists believe that optimal decisions are made up to the point where:
A graph that shows the maximum attainable combinations of two goods when society
efficiently uses its productive resources is called:

When the opportunity cost of producing a good rises as you produce more of it, you
experience:
Goods that produced for current consumption are called:
When the price of an hour of tutoring increases,
Changes in population can:
When a hurricane rips through Florida, the price of oranges rise because the:
when both supply and demand decrease, the equilibrium price:
Many states have laws that limit the maximum amount of interest that a lender can
charge a borrower. Such a law is an example of:
What will happen in a market where a binding price ceiling is removed?
If the local government tells gas stations that they are not allowed to change the price of
gas for three weeks during hurricane season, what will be the consequence?
The consequence of a price floor set below the equilibrium is:
Holding all else constant, when the price of a good increases
All else held constant, a decrease in the price of a good would necessarily:
Social welfare (i.e., the sum of producer and consumer surplus) is maximized when:
When the price is _________ the equilibrium price, we would expect there to be a
_________, causing the market to put _________ pressure on the price until it went
back to the equilibrium price
Suppose that Dwight and Jim can either make salads or grill steaks. Their maximum
output per hour is listed in the following table. Given the same quantity of resources,
at what terms of trade (relative price ratio) could they specialize and trade so that
both consume outside their own production possibilities frontier (PPF)?
What would you expect to happen to the price of bagels if the price of flour
To determine which of two producers has a comparative advantage, you would need
to know their
The area inside (within) the production possibilities frontier (PPF) contains
Economics professors are well aware of the importance of incentives. Which of the
following situations shows the use of a positive incentive
Which one of the following pairs of goods is likely to have a negative cross-price
elasticity of demand?
The accompanying figures depict the production possibilities frontiers (PPFs) for two
people who can allocate the same amount of time between making pizzas and
making stromboli. If Jim and Pam were to specialize and trade, at what exchange
rate would they find some quantity of trade to be mutually beneficial?
Use the following table to answer the questions that follow.
What is the surplus when the price floor is $0.75 in the market for public
transportation?
Why are binding price ceiling laws passed?
follow. Which statement best describes absolute advantage?
Which of the following will cause a movement along a good’s supply curve?
What would happen in the market for SUVs if the government started to subsidize
the production of SUVs that get very few miles per gallon and the price of gasoline
went up?

If the percentage change in the quantity consumed of pizza is 8% and the
percentage change in income is 2%, what is the income elasticity of demand for
pizza?
If the price and quantity for a normal good, Good X, is $8 and 6 units at the original
equilibrium, what is one possibility for the new equilibrium of Good X if we see
income increase and all other factors stay constant?
Chris runs a sporting goods store and knows that the price elasticity of demand for
his sports clothing line is –1.5. He is planning to lower prices by 10%. The
percentage change in quantity demanded will be:
If the cross-price elasticity of demand for two goods is zero, the two goods are
The price of peanut butter increases from $2.50 to $3.00 and the quantity of jelly demanded
falls from 30 jars to 24 jars. Calculate the cross-price elasticity of
During the winter months, many elderly persons leave their homes in northern New
York and travel south to Florida or Arizona. What would you expect to happen to the
equilibrium price and quantity of items most used by the elderly in northern New York?
When Heavenly Cookies prices its sugar cookies at $1.00, they sell 75 cookies. They
lowered the price to $0.50 and sold 200 cookies. Their total revenue ________
because the price elasticity of demand for sugar cookies is ________.
For a market to be competitive:
If a good is subject to a binding price ceiling and you purchase it on the black market,
what do you expect to happen to the price over time?
Use these production possibilities frontier (PPF) curves, which compare the
ancient production of agricultural products to art and literature, to answer the
questions that follow. Suppose a great plague wipes out half of the society’s
population. Which of the following graphs best depicts how this would affect the PPF?
In the first few months of 2012, the price of gasoline increased by approximately
15%. Because of this increase, we would expect the _________ curve in the market
for hybrid cars to _________.
An increase in general resources that affects the production of both goods on a
production possibilities frontier (PPF) would cause an
Use the following scenario to answer the questions that follow: Dairy Dream, a
local ice cream store, finds that it sells out of ice cream sandwiches at the current
price of $1. It raises the price to increase its revenues and finds that no one buys
ice cream sandwiches anymore. The demand for ice cream sandwiches is:
While there are many pizza places in Curtisville, Pappy’s Pizza is known for its
distinctive deep-dish pizza with an almost pie-like crust, whereas Momma’s Pizza
Pizzazz is comparable to many other restaurants. Pappy’s is likely to find that it can
________ prices to increase total revenue, and Mommas must ________ prices to
increase total revenue.
The scientific method and the tools of economics are useful in examining:
A positive statement:
When the price of a basketball is $15, the quantity supplied is 5,000. When the price
increases to $20, the quantity supplied is 10,000. The price elasticity of supply is:
Which of the following will cause the demand curve for burgers to shift the right?
You have an absolute advantage in producing something whenever:
From the accompanying table, we would expect that, for recreational skaters, the
price elasticity of demand for ice skates between $10 and $20 to be ________ than
that of hockey players because ________.
Refer to the accompanying figure. What event would cause the supply curve to shift

out?
The production possibilities frontier (PPF) shows:
With no barriers to entry or exit and when firms in a market are operating at a loss,
you can expect other firms to exit, causing the _________ curve to shift to the
_________ and making the equilibrium price _________ and the equilibrium quantity
_________.
Google has started a project to scan all books and make those that are not
copyrighted available to people free of charge. Why is it important that only books
without a copyright are available
According to economists, one reason few professional athletes have PhD’s is that
the
What will happen in a market where a binding price floor is removed?
What would you expect to happen to the price and quantity of Pepsi if the price of
Coke increases and Pepsi develops a new technology that makes its production
process more efficient?
Which statement best describes the absolute advantage as shown in the graphs?
follow. What is DiNozzo’s opportunity cost for solving a crime?
Ceteris paribus, if a society is producing at a point on the production possibilities
frontier (PPF), it can only increase the production of one good by:
In the accompanying table, assume that the price of ice skates increases from $10 to
$20 per pair. Using the midpoint method, calculate the price elasticity of demand for
ice skates for hockey players.
Refer to the following figure for the questions that follow. As you move from points
N to M to L, the opportunity cost of additional apple pie:
Assume that the market for pencils is in equilibrium and that demand is very price
elastic. The popularity of digital tablets and electronic pens increases and demand
for pencils declines. The equilibrium change in quantity demanded is:
Refer to the accompanying figure. When the price changes from P1 to P2, we will
see a(n):
Use the following scenario to answer the questions that follow: Dairy Dream, a
local ice cream store, finds that it sells out of ice cream sandwiches at the current
price of $1. It raises the price to increase its revenues and finds that no one buys
ice cream sandwiches anymore. The owners raised the price because they
believed that the demand for ice cream sandwiches is:
Spam is considered an inferior good. What would happen to the equilibrium price
and quantity of Spam if income decreased and more firms started producing Spam?
Refer to the accompanying table to answer the questions that follow. The price of
erasers increases from $0.50 to $1.00 per eraser. Use the midpoint method to
calculate the cross-price elasticity of demand between pencils and erasers.
Question 1
Which of the following concepts do economists focus their study on when explaining how
humans behave?

Question 2
If you don’t like changing the oil in your car and pay your father to do it for you, you have
provided him with a(n):
Question 3
What is the opportunity cost of taking this exam?
Question 4
The opportunity cost of working rather than going to school is:
Question 5
The term ________ means “additional.”
Question 6
Saudi Arabia has a comparative advantage in producing oil because it:
Question 7
Ceteris paribus means:
Question 8
A graph that shows the maximum attainable combinations of two goods when society efficiently
uses its productive resources is called:
Question 9
On a production possibilities frontier (PPF) that shows the trade-off between consumer goods and
capital goods given a fixed amount of labor, unemployment is illustrated by:
Question 10
Consider the production possibilities frontier (PPF) shown in the figure below to answer the
questions that follow.
The set of efficient points is best described as:
Question 11

The figures below depict the production possibilities frontiers (PPFs) for two people who can
allocate the same amount of time between building wooden boats and solving crimes. Refer to
these figures to answer the questions that follow.
What is Gibbs’s opportunity cost of solving a crime?
Question 12
The figures below depict the production possibilities frontiers (PPFs) for two people who can
allocate the same amount of time between making pizzas and making stromboli. Refer to these
figures to answer the questions that follow.
What is Jim’s opportunity cost of making 1 pizza?
Question 13
Question 14
Refer to the following table to answer the questions that follow.
Suppose that Alicia Keys and Jay-Z could each make either New York–style pizza or Philly
cheesesteaks. Given an eight-hour workday, which of the following would permit them to
consume outside their respective production possibilities frontiers (PPFs)?
Question 15
Suppose that, on a particular Saturday, Mark Zuckerberg and Bill Gates can either plant trees or
spread mulch in their gardens. Their maximum output per day is listed in the following table,
along with blanks where you can calculate the opportunity cost. At what terms of trade (relative
price ratio) could they specialize and trade with one another so that both have more trees
planted and mulch spread than they could accomplish on their own?
Question 16
Something is a normal good if the demand for the good:
Question 17
The demand curve for a good will shift to the right if, holding all else constant,

Question 18
Refer to the accompanying figure. When the price changes from P1 to P2, we will see a(n):
Question 19
If the price of Gatorade increases, the
Question 20
Which of the quantity (Q) and price (P) combinations in the accompanying figure represents the
market at competitive equilibrium?
Question 21
According to the supply and demand model, when the cotton gin was invented and if all else was
held constant, we would expect the equilibrium price of cotton to _________ and the equilibrium
quantity of cotton to _________.
Question 22
When the price of scooters drops by 5%, the quantity demanded changes by 20%. You know that
the price elasticity of demand for scooters is:
Question 23
Refer to the accompanying table. When the price drops from $5 to $3, price elasticity of demand
for sushi (using the midpoint method) at an income of $30,000 is:
Question 24
While there are many pizza places in Curtisville, Pappy’s Pizza is known for its distinctive deep-
dish pizza with an almost pie-like crust, whereas Momma’s Pizza Pizzazz is comparable to many
other restaurants. Pappy’s is likely to find that it can ________ prices to increase total revenue, and
Mommas must ________ prices to increase total revenue.
Question 25
A binding price ceiling will have the following consequences:
Question 26
Refer to the accompanying figure to answer the questions that follow.

The market is currently at market equilibrium. If a binding price ceiling of P1 is imposed, by how
much would the quantity demanded change?
Question 27
Refer to the accompanying figure to answer the questions that follow.
If there is a $180 price ceiling imposed on a textbook, what will be the disequilibrium amount?
Question 28
Refer to the accompanying table to answer the questions that follow.
At what price level does the apartment market reach equilibrium?
Question 29
Use the following information to answer the questions that follow.
Market for flat-screen TVs:
Demand: Qd = 2,600 – 5 P
Supply: Qs = –1,000 + 10 P
What would be the quantity demanded if a price floor is set at $300?
Question 30
Use the following table to answer the questions that follow.
At what price level does the labor market experience its largest shortage?
Select one:
a. Increases in the minimum wage cause unemployment.
b. We ought to deregulate the mortgage market.
c. An economist should test every theory at least twice.
d. We should forgo some current consumption in order to invest in the future.

e. The government must provide unlimited health care to citizens.
Select one:
a. All dogs should be required to wear leashes at all times.
b. You should take your dog to the veterinarian once a year for a checkup.
c. Legally requiring dogs to have rabies shots will reduce the number of rabid
dogs.
d. Chihuahuas are cuter than bulldogs.
e. My dog should lose some weight.
Consider a production possibilities frontier (PPF) that compares the production of
agricultural products to art and literature. Now suppose the printing press is
invented. Which graph best depicts how this would affect the PPF?
Select one:
a. graph d
b. graph b
c. graph e
d. graph c
e. graph a
Economic growth is represented on a production possibilities frontier (PPF) by:
Select one:
a. the PPF getting flatter.
b. the PPF rotating downward.
c. the PPF shifting outward.
d. the PPF shifting inward.
e. the PPF getting steeper.
Refer to the figure below. Unemployed resources are evident at ____.
Select one:
a. point C.
b. point D.
c. point B.
d. point A.
e. points B, C, and E.

Refer to the figure below. What is the most preferred consumption point for a
pieappreciating society?
Select one:
a. Point E.
b. Point A.
c. Point C.
d. Point D.
e. Point B.
Referring to the graph below, this society could reach point F when there is:
Select one:
a. an increase in the monetary price of apple pie.
b. an increase in technology that makes pie bakers more efficient.
c. a credible new study that shows blueberries reduce the risk of heart attack.
d. a new regulation that makes pie baking more costly.
e. an increase in the monetary price of blueberry pie.
Please refer to the accompanying table. Given an eighthour workday, to
experience gains from trade,
Select one:
a. Alicia should produce both pizzas and cheesesteaks.
b. Each should make their own cheesesteaks and pizzas.
c. Alicia should make cheesesteaks and JayZ should make pizzas.
d. Alicia should make pizzas and JayZ should make cheesesteaks.
e. JayZ should produce both pizzas and cheesesteaks.
Feedback
Suppose that on a particular Saturday Mark Zuckerberg and Bill Gates can either
plant trees or spread mulch in their gardens. Their maximum output per day is
listed in the following table, along with spaces where you can calculate the
opportunity cost. Who has an absolute advantage in spreading mulch?
Select one:
a. Gates has the advantage because he gives up fewer trees each time he spreads
1 cubic yard of mulch.
b. Zuckerberg has the advantage because he gives up fewer trees each time he

spreads 1 cubic yard of mulch.
c. Zuckerberg has the advantage because he gives up more trees each time he
spreads 1 cubic yard of mulch.
d. Neither has an absolute advantage in spreading mulch.
e. Both parties have an absolute advantage in planting trees.
Forgoing current consumption so that those resources can be used to produce
new capital is called:
Select one:
a. scarcity.
b. investment.
c. comparative advantage.
d. absolute advantage.
e. saving.
Select one:
a. You should wear a helmet when cycling.
b. The sky is blue.
c. A bicycle has two wheels.
d. A unicycle has five wheels.
e. Electricity follows the path of least resistance.
An economist’s use of experiments and realworld data to test a theory is an
example of: the scientific method in economics.
Select one:
a. comparative advantage.
b. normative analysis.
c. macroeconomics.
d. economic growth.
The opportunity cost of increasing the production of apple pies from 12 to 14
pies is:
Select one:
a. 2 apple pies.
b. 4 blueberry pies.

c. 7 blueberry pies.
d. 2 blueberry pies.
e. 14 apple pies.
Which point in the corresponding figure shows that productive resources are not
fully employed?
Select one:
a. point B
b. point E
c. point C
d. point A
e. point D
The opportunity cost of increasing production of blueberry pies from 7 to 11 pies
is:
Select one:
a. 2 apple pies.
b. 7 blueberry pies.
c. 2 blueberry pies.
d. 14 apple pies.
e. 4 apple pies.
The ___________ states that the opportunity cost of producing a good always rises
as you produce more of it.
Select one:
a. law of demand
b. law of positive economics
c. production possibilities frontier (PPF) model
d. law of increasing relative cost
e. zerosum game
You have a comparative advantage in producing a good whenever:
Select one:
a. you have specific training in the production of that good.
b. your opportunity cost of producing that good is lower than that of other
producers.

c. you can produce more of the good than someone else can using the same
resources.
d. your opportunity cost is constant.
e. you enjoy producing that good.
The figure below depicts the production possibilities frontiers (PPTs) for two
people who can allocate the same amount of time between making pizzas and
making stromboli. Which statement best describes the absolute advantage
evidenced in the graph?
Select one:
a. Pam has an absolute advantage in the production of both.
b. Jim has an absolute advantage in the production of both.
c. Pam has an absolute advantage in the production of pizzas and Jim has an
absolute advantage in the production of stromboli.
d. They both have an absolute advantage in the production of stromboli.
e. Jim has an absolute advantage in the production of pizzas and Pam has an
absolute advantage in the production of stromboli.
Goods that are produced now so that they can be used to produce other goods
in the future are called:
Select one:
a. investment goods.
b. normal goods.
c. consumer goods.
d. capital goods.
e. opportunity goods.
1.Economics is the study of:
a. how to make money.
b. how to allocate resources to satisfy wants and needs.
c. capitalism.
d. how to make workers more productive and firms more profitable.
e. markets.
2.Suppose that, on a particular Saturday, Mark Zuckerberg and Bill Gates can either plant
trees or spread mulch in their gardens. Their maximum output per day is listed in the

following table, along with spaces where you can calculate the opportunity cost. Who
has an absolute advantage in spreading mulch?
Trees Planted
Opportunity
Cost of 1 Tree
Amount of
Mulch Spread
(in cubic yards)
Opportunity
Cost of
Spreading 1
Cubic Yard of
Mulch
Zuckerberg 20 30
Gates 15 30
a. Zuckerberg has the advantage because he gives up fewer trees each time he spreads
1 cubic yard of mulch.
b. Gates has the advantage because he gives up fewer trees each time he spreads 1
cubic yard of mulch.
c. Zuckerberg has the advantage because he gives up more trees each time he spreads
cubic yard of mulch.
d. Neither has an absolute advantage in spreading mulch.
e. Both parties have an absolute advantage in planting trees.
3. A car insurance company is willing to offer accidentfree drivers a discount. This is an
example of:
a. a positive incentive.
b. a negative incentive.
c. an opportunity cost.
e. scarcity.
4. Google has started a project to scan all books and make those that are not
copyrighted available to people free of charge. Why is it important that only books
without a copyright are available?
a. If all books were scanned and available free of charge, copyright holders would face
positive incentive to continue writing and publishing books.

b. If all books were scanned and available free of charge, copyright holders would face a
negative incentive to continue writing and publishing books.
c. If only copyrighted texts were scanned and available free of charge, copyright holders
would face an indirect incentive to continue writing and publishing books.
d. If only noncopyrighted books were scanned and available free of charge, copyright
holders would face a negative incentive to continue writing and publishing books.
e. If only noncopyrighted books were scanned and available free of charge, copyright
holders would face an indirect incentive to continue writing and publishing books.
5. Indirect incentives create:
a. positive consequences.
b. negative consequences.
c. indirect consequences.
d. direct consequences.
e. unintended consequences.
6. The cost of a tradeoff
is known as the ________ of that decision.
a. marginal cost
b. net cost
c. opportunity cost
d. comparative cost
e. explicit cost
7. An opportunity cost:
a. can be measured only when the decision involves expenditures of money.
b. can be measured only when the decision involves spending time on one thing and not
on another.
c. is impossible to measure.
d. is equal to the value of what is given up to make a purchase or take an action.
e. exists for every decision made by individuals and businesses, but not by the
government.
8.Instead of taking an economics course, you could have taken a history course that
meets at the exact same time. The total cost of taking the economics course would be:
a. the tuition cost for the economics course.
b. the fact that you could not take the history course at the same time.
c. the tuition cost for the economics course plus the price of the textbook and a
notebook for the economics course.

d. the tuition cost, the cost of the textbook and notebook, and the fact that you could
not take the history course at the same time.
e. the price of the textbook and a notebook for the economics course.
9. The opportunity cost of working rather than going to school is:
a. the cost of food and housing.
b. the cost of clothing and transportation.
c. zero because the person is earning an income by working.
d. the higher wages that come with additional education.
e. the annual wages earned by working.
10. The opportunity cost to free trade is:
a. economic growth.
b. government involvement.
c. a gain of domestic jobs.
d. lower prices.
e. greater efficiency.
11. On the television show “MythBusters,” the hosts design experiments, collect data,
and test theories based on popular myths. This is an example of:
a. the scientific method as used in economics.
b. economic growth.
c. gains from trade.
d. production possibilities.
12. Which of the following is a positive statement?
a. An economist should test every theory at least twice.
b. Increases in the minimum wage cause unemployment.
c. We ought to deregulate the mortgage market.
d. The government must provide unlimited health care to citizens.
e. We should forgo some current consumption in order to invest in the future.
13. Which of the following is a normative statement?
a. The current exchange rate is 0.7 British pounds per U.S. dollar.
b. In January, the average temperature in Fargo, North Dakota, is 56 degrees.
c. Winters in Arkansas are too cold.
d. On average, people save 15% when they switch to GEICO.
e. University of Virginia graduates earn more than Duke University graduates.
14. The process of examining a change in one variable in a model while assuming that

all the other variables remain constant is called:
a. exogenous factors.
b. ceteris paribus.
c. normative analysis.
d. positive analysis.
e. faulty assumptions.
15. Variables that are not accounted for in a model are called:
a. endogenous factors.
b. exogenous factors.
c. normative statements.
d. positive statements.
e. the scientific method.
16. You are considering the “dress well, test well” theory, which argues that you perform
better on exams when you dress nicely than you do when you wear sweatpants. If you
want to test this theory over the course of the semester, which of the following would be
an endogenous factor in your experiment?
a. your innate ability in the subject
b. the difficulty of the exam
c. the relative mix of multiplechoice and shortanswer questions
d. your clothing choice for the exam
e. the amount of time you spend studying for the exam
17. The area inside (within) the production possibilities frontier (PPF) contains:
a. normative points.
b. positive points.
c. efficient points.
d. inefficient points.
e. high opportunity cost points.
18. How will a reduction in the national unemployment rate affect a nation’s production
possibilities frontier (PPF)?
a. It will cause the PPF to shift inward.
b. It will cause the PPF to shift outward.
c. It will move society to a point farther inside the PPF.
d. It will move society outward to a point closer to or on the PPF.
e. It will push society to a point outside its PPF.
19. Which of the following is NOT an assumption that economists make when

developing a production possibilities frontier (PPF)?
a. We live in a world with only two goods.
b. There are no increases in technology.
c. There is no change in available resources.
d. Society will always be producing somewhere on the PPF.
e. There are no decreases in technology.
Consider the production possibilities frontier (PPF) shown in the figure below to answer
the next three questions.
20. Given current resources and technology, the attainable range is best described as:
a. only area O: points outside the PPF.
b. points on the PPF only.
c. only area I: points inside the PPF.
d. area I: points inside the PPF and points on the PPF.
e. Area O: points outside the PPF and points on the PPF.
21. The set of efficient points is best described as:
d. area I: inside the PPF and points on the PPF.
e. area O: outside the PPF and points on the PPF.
22 At current resources and technology, the unattainable range is best described as:
d. area I: inside the PPF and points on the PPF.
e. Area O: outside the PPF and points on the PPF.
23.The _________ states that the opportunity cost of producing a good always rises as you
produce more of it.
a. law of increasing relative cost
b. law of positive economics
c. law of demand
d. production possibilities frontier (PPF) model
e. zerosum game
24.As you move from one efficient point on the production possibilities frontier (PPF) to
another efficient point on the PPF, you experience:

a. decreasing relative cost.
b. opportunity cost.
c. macroeconomics.
d. unlimited resources.
e. unattainable combinations.
25.Suppose you find a production possibilities frontier (PPF) that is shaped like a straight
a. Production of the two goods is subject to decreasing relative cost.
b. Production of the two goods is subject to increasing relative cost.
c. Production of the two goods is subject to constant opportunity cost anywhere along
the PPF.
d. One producer must have an absolute advantage in production.
e. More resources will not cause the PPF to shift.
Michael and Angelo are both artists who can create sculptures or paintings each day.
The following table describes their maximum outputs per day. Use this table to answer
the next two questions.
Sculptures Paintings
Michael 10 5
Angelo 6 2
26. What is Michael’s opportunity cost of a sculpture?
a. 2 paintings
b. 1/2 painting
c. 3 paintings
d. 1/3 sculpture
e. 1/2 sculpture
27. What is Angelo’s opportunity cost of a sculpture?
a. 1/2 painting
b. 1/3 painting
c. 3 paintings
d. 1/3 sculpture
e. 6/10 sculpture
28. When one producer can create more of a good than another producer using the
same quantity of resources, the first producer has:
a. a zerosum game.
b. gains from trade.

c. an absolute advantage.
e. increasing relative costs.
29. Michael and Angelo are both artists who can create sculptures or paintings each day.
The following table describes their maximum outputs per day. Does either one have a
comparative advantage?
Sculptures Paintings
Michael 10 5
Angelo 6 2
a. Yes, Michael has a comparative advantage in both sculptures and paintings.
b. Yes, Angelo has a comparative advantage in both sculptures and paintings.
c. Yes, Michael has a comparative advantage in paintings, and Angelo has a comparative
advantage in sculptures.
d. Yes, Michael has a comparative advantage in sculptures, and Angelo has a
comparative advantage in paintings. e. No, neither has a comparative advantage.
30. An increase in the labor force would be reflected in a society’s production
possibilities frontier (PPF) by an:
a. increase in opportunity cost.
b. inward shift of the PPF.
c. outward shift of the PPF.
d. outward rotation along the x axis.
e. outward rotation along the y axis.
31. Suppose that Dwight and Jim can either make salads or grill steaks. Their maximum
output per hour is listed in the following table. Given the same quantity of resources, at
what terms of trade (relative price ratio) could they specialize and trade so that both
consume outside their own production possibilities frontier (PPF)?
Maximum
Number of
Salads
Opportunity
Cost of 1 Salad
Maximum
Number of
Steaks
Opportunity

Cost of 1 Steak
Dwight 9 1/3 steak 3 3 salads
Jim 12 1/2 steak 6 2 salads
a. 1 salad per 1 steak
b. 2 salads per 1 steak
c. 2.5 salads per 1 steak
d. 3 salads per 1 steak
e. 3.5 salads per 1 steak
32. According to the figure below, at the price of $5:
a. the equilibrium quantity is 500.
b. the quantity demanded is 500.
c. the demand is 500.
d. there is a surplus.
e. there is a shortage.
33.If the price of a good increases, holding all else constant,
a. the demand for all of that good’s substitutes will decrease.
b. the quantity demanded for that good will increase.
c. the demand for all of that good’s complements will increase.
d. the demand for all of that good’s substitutes will increase.
e. the demand curve will shift to the left.
34.Companies use advertising to shift consumer demand. Which of the following
demand shifters do you think advertisers most often rely on?
a. changes in income
b. the price of related goods
c. changes in tastes and preferences
d. the number of buyers
e. expectations regarding the future price
35.
The demand curve shift shown in the figure was caused by a(n):
a. increase in the input cost of the good.
b. increase in the price of a substitute of the good.
c. decrease in the number of firms selling the good.
d. decrease in the number of buyers in the market for the good.
e. expectation that the future price of this good will be higher than it is currently.
36. Which of the following is both a shift in supply and a shift in demand?

a. the number of firms in an industry
b. tastes and preferences
c. income changes
d. expectations of future prices
e. the number of buyers
37. Which of the following could cause the supply curve for the market for oranges to
shift to the left?
a. an increase in the income of consumers of oranges
b. a decrease in the cost of workers
c. an increase in the price of orange juice
d. a new study saying that eating oranges will give you heart disease
e. a severe hurricane in Florida
38. On January 30, 2012, Starbucks India announced plans to open 50 cafes. What would
you expect to happen to the market for coffee in India, assuming all other factors are
held constant?
a. The demand for coffee will increase in India.
b. The demand for coffee will decrease in India.
c. Both the supply and demand for coffee will increase in India.
d. The supply for coffee will increase in India.
e. The supply for coffee will decrease in India.
39.According to the accompanying figure, if the price is $10, there is a:
a. shortage of 15 units.
b. surplus of 15 units.
c. shortage of 30 units.
d. surplus of 30 units.
e. surplus of 22 units.
40.If the number of buyers in a market increases from 50 to 100, you would expect the
equilibrium price to _________ and the equilibrium quantity to _________, holding all else
constant.
a. increase; increase.
b. increase; decrease.
c. decrease; decrease.
d. decrease; increase.
e. remain the same; remain the same.
41. Refer to the accompanying diagram. Which of the following scenarios would explain

this change in equilibrium?
a. A number of firms left the market.
b. A number of buyers entered the market, and a number of firms entered the market.
c. The price of a complement of this good increased.
d. The price of a substitute of this good increased.
e. The price of this good decreased.
42.If all else is held constant, what would happen to the equilibrium price and quantity
of iPhones if the price of an Android phone decreased?
a. They would both increase.
b. They would both decrease.
c. One would increase and one would decrease, but we don’t know which would do
what.
d. The price would increase and the quantity would decrease.
e. The price would decrease and the quantity would increase.
43. The market for footballs is perfectly competitive. If all else is held constant and the
price of leather decreases, we would expect that the equilibrium quantity of footballs
would:
a. fall and the equilibrium price would rise.
b. rise and the equilibrium price would fall.
c. fall and the equilibrium price would fall.
d. rise and the equilibrium price would rise.
e. fall and the equilibrium price would remain constant.
44. Refer to the accompanying figure. What event would cause the supply curve to shift
out?
a. Consumers earn higher incomes.
b. Consumers earn lower incomes.
c. The price of an input increased.
d. Firms entered the market.
e. Firms expected the price to rise in the future.
45. If the price and quantity for a normal good, Good X, is $8 and 6 units at the original
equilibrium, what is one possibility for the new equilibrium of Good X if we see income
increase and all other factors stay constant?
a. $10 and 4 units
b. $10 and 8 units
c. $6 and 4 units

d. $6 and 8 units
e. $10 and 2 units
46. When both supply and demand shift to the left, the:
a. equilibrium price always rises.
b. equilibrium price always falls.
c. equilibrium quantity always falls.
d. equilibrium quantity always rises.
e. equilibrium quantity is indeterminate.
47. Spam is considered an inferior good. What would happen to the equilibrium price
and quantity of Spam if income decreased and more firms started producing Spam?
a. Equilibrium price will go up and equilibrium quantity will go down.
b. Equilibrium price will go up and equilibrium quantity will go up.
c. Equilibrium price will go down and equilibrium quantity will be indeterminate.
d. Equilibrium price will be indeterminate and equilibrium quantity will go up.
e. Equilibrium price will go up and equilibrium quantity will be indeterminate.
48. What would you expect to happen to the price of bagels if the price of flour
a. The equilibrium price of bagels will be indeterminate and the equilibrium quantity will
go up.
b. The equilibrium price will go up and the equilibrium quantity will go up.
c. The equilibrium price will go down and the equilibrium quantity will be indeterminate.
d. The equilibrium price will be indeterminate and the equilibrium quantity will go down.
e. The equilibrium price will go up and the equilibrium quantity will be indeterminate.
49. For a market to be competitive:
a. each buyer and seller is small, relative to the whole market; no single decisionmaker
has any influence over the market price.
b. sellers must produce goods and services that are different from their competitors.
c. sellers should have substantial pricing power.
d. all you need are many buyers and many sellers.
e. the price must be a fair price.
50. Many stores are open 24 hours a day. When store managers make the decision to
stay open 24 hours, it must be the case that:
a. the marginal benefit of staying open all day and the marginal cost to remaining open
all day are at least equal.
b. the marginal benefit of staying open all day must always be greater than the marginal

cost to remaining open all day.
c. the marginal cost of staying open all day must always be greater than the marginal
benefit to remaining open all day.
d. the calculation of marginal benefits or marginal costs of remaining open all day play
no role.
e. the marginal benefit of remaining open all day is zero.
True or False: If you decide to buy a Butterfinger candy bar, instead of an equally
priced Almond Joy, the opportunity cost of your purchase is the value you would have
received from that Almond Joy.
True or False: The axes of the production possibilities frontier are labeled price and
quantity.
True or False: Economic growth is represented on a production possibilities frontier as
a shift outward of that frontier.
True or False: The circular flow model of economic activity assumes that resources
are owned by businesses.
True or False: With international trade, a country is able to produce outside its
production possibilities frontier
The opportunity cost of a new city police contract is:
a. The amount of money it takes in order to provide the city with the most highly
qualified personnel.
b. The value of the other goods and services that the city and taxpayers will be forced
to give up in order to pay for the contract.
c. The cost of victims of crimes that the new contract would prevent.
d. The value of the opportunities that city policemen acquire by accepting it.
Which of the following is the best example of an economic resource?
a. A stock certificate.
b. A one-hundred dollar bill.
c. A tractor.
d. A plate of spaghetti and meatballs.
Which of the following is the best example of earning income from human capital?
a. Melody takes a job as an interpreter from the hearing impaired.
b. Josie invests her life savings into her own business, "Jeans by Josephine."
c. Seth toils all day in the hot summer sun as a common laborer, just to earn enough
money to keep food on the table.
d. J.R. kicks up his heels and watches the royalty checks flow in from his oil fields.
A production possibilities frontier shows combinations of
a. Inputs that can produce a specific quantity of output.
b. Outputs that people consume.
c. Outputs that can be achieved as technology improves.
d. Outputs that can be achieved in a given time period with all available resources
employed using current technology.
If a nation's production possibilities indicate that 1,000,000 battle tanks and 6,000,000
houses could be produced, or alternatively, 750,000 tanks and 8,000,000 houses
could also be produced, the opportunity cost of each additional house would be
a. 250,000 tanks.
b. 8 tanks.

Liberty University ECON 213 quiz 2 complete solutions correct answers

Liberty University ECON 213 quiz 2 complete solutions correct answers

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