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Thomas Edison State ECO 112 Quiz 1

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Question;Question 1 4 points Save A country's consumption possibilities frontier can be outside its production possibilities frontier if additional resources become available. there is an increase in the level of technology. the country engages in trade. All of the above are correct. Question 2 4 points Save The principle of comparative advantage as we know it today was developed by Harry Truman. David Ricardo. John Maynard Keynes. Adam Smith. Question 3 4 points Save A rational decision maker ignores marginal changes and focuses instead on "the big picture." takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. ignores the likely effects of government policies when he or she makes choices. takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions. Question 4 4 points Save Economists consider normative statements to be descriptive, making a claim about how the world is. statements about the normal condition of the world. statements that establish production goals for the economy. prescriptive, making a claim about how the world ought to be. Question 5 4 points Save The burden of a luxury tax falls more on the rich than on the middle class. more on the poor than on the rich. more on the middle class than on the rich. equally on the rich, the middle class, and the poor. Question 6 4 points Save A technological advancement will shift the demand curve to the right. demand curve to the left. supply curve to the right. supply curve to the left. Question 7 4 points Save If demand is price inelastic, then buyers respond substantially to a change in price, but the response is very slow. buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes. the demand curve is very flat. the demand curve is very flat. buyers do not respond much to a change in price. Question 8 4 points Save Price controls are usually enacted as a means of raising revenue for public purposes. when policymakers detect inefficiencies in a market. when policymakers believe that an insufficient quantity of a good is being produced. when policymakers believe that the market price of a good or service is unfair to buyers or sellers. Question 9 4 points Save Which of these statements does NOT apply to market economics? Prices ensure that what needs to get done does in fact get done. Prices coordinate the actions of millions of people with varying abilities and desires. Prices prevent decentralized decision making from degenerating into chaos. Prices ensure that anyone who wants a product can get it. Question 10 4 points Save For an economist, the idea of making assumptions is regarded generally as a bad idea, since doing so leads to the omission of important ideas and variables from economic models. bad idea, since doing so invariably leads to data-collection problems. good idea, since doing so helps to simplify the complex world and make it easier to understand. good idea, since economic analysis without assumptions leads to complicated results that the general public finds hard to understand. Question 11 4 points Save The Federal Insurance Contribution Act (FICA) tax is an example of a payroll tax. a sales tax. a farm subsidy. an income subsidy. Question 12 4 points Save Which is the best statement about the way economists study the economy? They study the past, but do not try to predict the future. They use a probabilistic approach based on correlations between economic events. They devise theories, collect data, then analyze the data to test the theories. They use controlled experiments in much the same way a biologist or physicist does. Question 13 4 points Save A monopoly is a market with one seller, and that seller is a price taker. with one seller, and the seller sets the price. with one buyer, and that buyer is a price taker. with one buyer, and that buyer sets the price. Question 14 4 points Save Cross-price elasticity of demand is calculated as the percentage change in quantity demanded of good 1 divided by the percentage change in the price of good 2. total percentage change in quantity demanded divided by the total percentage change in price. percentage change in quantity demanded divided by the percentage change in income. percentage change in the price of good 1 divided by the percentage change in the price of good 2 Question 15 4 points Save Economics deals primarily with the concept of poverty. scarcity. banking. money. Question 16 4 points Save An example of an externality is the impact of bad weather on the income of farmers. the personal income tax on a person's ability to purchase goods and services. pollution from a factory on the health of people in the vicinity of the factory. increases in health care costs on the health of individuals in society. Question 17 4 points Save Demand is said to be price elastic if the price of the good responds substantially to changes in demand. demand shifts substantially when income or the expected future price of the good changes. buyers respond substantially to changes in the price of the good. buyers do not respond much to changes in the price of the good. Question 18 4 points Save When society requires that firms reduce pollution, there is a tradeoff only if some firms are forced to close. no tradeoff, since everyone benefits from reduced pollution. no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements. a tradeoff because of reduced incomes to the firms' owners and workers. Question 19 4 points Save At the equilibrium price, the quantity of the good that buyers are willing and able to buy is greater than the quantity that sellers are willing and able to sell. exactly equals the quantity that sellers are willing and able to sell. is less than the quantity that sellers are willing and able to sell. None of the above are correct. Question 20 4 points Save If an economy is producing efficiently, then there is no way to produce more of one good without producing less of another good. it is possible to produce more of both goods without increasing the quantities of inputs that are being used. it is possible to produce more of one good without producing less of another good. it is not possible to produce more of any good at any cost. Question 21 4 points Save In the case of perfectly inelastic demand, quantity demanded stays the same whenever price changes. the change in quantity demanded equals the change in price. the percentage change in quantity demanded equals the percentage change in price. infinitely-large changes in quantity demanded result from very small changes in the price. Question 22 4 points Save Which of the following is correct? Rent control and the minimum wage are both examples of price ceilings. Rent control is an example of a price ceiling, and the minimum wage is an example of a price floor. Rent control is an example of a price floor, and the minimum wage is an example of a price ceiling. Rent control and the minimum wage are both examples of price floors. Question 23 4 points Save Refer to the tables shown. England has an absolute advantage inLabor hours needed to make one unit of: Cheese Bread England 1 4 Spain 4 8 Amount produced in 40 hours: Cheese Bread England 40 10 Spain 10 5 cheese and Spain has an absolute advantage in the production of bread. bread and Spain has an absolute advantage in the production of cheese. both goods and Spain has an absolute advantage in the production of neither good. neither good and Spain has an absolute advantage in the production of both goods. Question 24 4 points Save If the number of sellers in a market increases, then the demand in that market will increase. supply in that market will decrease. supply in that market will increase. demand in that market will decrease. Question 25 4 points Save Comparative advantage is based on capital cost. labor cost. opportunity cost. dollar price.

 

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