Refer to the information provided in Figure 2.4 below to answer the questions that follow. Figure 2.4

Transcription

1 Homework 1 Directions: Please answer the following questions on scantron (green) Due Date: Beginning of class Thursday September 10 th. Late homework will receive a 10 point per day deduction. 1) That which we forgo, or give up, when we make a choice or decision is called A) out-of-pocket cost. B) marginal cost. C) real cost. D) opportunity cost. 2) The amount of education that one has is an important factor in the determination of his or her wage rate. This is best described as A) a positive statement. B) an example of the fallacy of composition. C) a normative statement. D) an example of marginalism. 3) Whenever the Democrats gain control of the Congress, spending on social programs increases; whenever Republicans gain control of the Congress, spending on defense increases. Hence, we know what the next party in control will do. This statement is an example of A) fallacy of inductive reasoning. B) post hoc, ergo propter hoc fallacy. C) fallacy of composition. D) ceteris paribus fallacy. 4) Which of the following would an economist classify as capital? A) a $50 bill B) a corporate bond C) a post office employee D) a guitar used by a musician

2 Refer to the information provided in Figure 2.4 below to answer the questions that follow. Figure 2.4 5) According to Figure 2.4, the point where only motorcycles are produced is A) A. B) B. C) C. D) E. 6) According to Figure 2.4, the optimal point for the economy is A) A. B) B. C) F. D) indeterminate from the information given. Answer: D 7) According to Figure 2.4, which point cannot be produced with the current state of technology? A) A B) B C) C D) F 8) Which of the following is an element of a command economy? A) The market decides distribution. B) The means of production are privately owned. C) Production decisions are centralized. D) The market decides what will be produced. 9) In a laissez-faire economy, what gets produced, how it is produced, and who gets it. A) the behavior of buyers and sellers determines B) the central government authority determines C) firms but not consumers determine D) consumers but not firms determine

3 10) Which of the following will NOT cause a shift in the demand curve for compact discs? A) a change in income B) a change in wealth C) a change in the price of downloadable online music D) a change in the price of compact discs 11) According to the law of demand, as prices rise, ceteris paribus A) demand increases. B) demand decreases. C) quantity demanded decreases. D) quantity demanded increases. Refer to the information provided in Figure 3.2 below to answer the questions that follow. Figure ) Refer to Figure 3.2. Which of the following would be most likely to cause the demand for macaroni and cheese to shift from D1 to D0? A) an increase in the price of macaroni and cheese B) an increase in the price of flour used to make macaroni and cheese C) an increase in income, assuming macaroni and cheese is a normal good D) an increase in the quantity demanded for macaroni and cheese 13) If the demand for sardines increases as income decreases, sardines are a(n) A) normal good. B) inferior good. C) substitute good. D) complementary good.

4 SCENARIO 3.1: Rented DVDs and movies shown in theaters are substitutes. Rented DVDs and plasma TVs are complements. Plasma TVs and movies shown in theaters are normal goods. People watch rented DVDs more often in the winter than in the summer. 14) Refer to Scenario 3.1. Most plasma TVs sold in the United States are imported from Japan. If the United States government reduces the number of plasma TVs that can be imported into the United States, ceteris paribus, what would happen? A) The price of plasma TVs and the rental price of DVDs would decrease. B) The price of plasma TVs would decrease, and the rental price of DVDs would increase. C) The price of plasma TVs would increase, and the rental price of DVDs would decrease. D) The price of plasma TVs and the rental price of DVDs would increase. Refer to the information provided in Figure 3.16 below to answer the questions that follow. Figure ) Refer to Figure The supply curve for hula hoops shifts from S0 to S1. This could be caused by A) an decrease in the price of hula hoops. B) a decrease in the number of firms selling hula hoops. C) a decrease in the demand for hula hoops. D) either B or C. 16) Suppose that video game discs are a normal good. If the income of video game players increases, you predict that in the market for video games, A) both equilibrium price and quantity will fall. B) both equilibrium price and quantity will increase. C) equilibrium price will increase, and quantity will decrease. D) equilibrium price will fall, but quantity will increase.

5 Refer to the information provided in Figure 3.12 below to answer the questions that follow. Figure ) Refer to Figure 3.12 The market is initially in equilibrium at Point A. If demand shifts from D1 to D2, the new equilibrium price will be and the new equilibrium quantity will be. A) $3.00; 250 B) $6.00; 250 C) $4.00; 350 D) $4.00; ) Papayas and grapefruit are substitute goods. A drought in California destroyed a good portion of the grapefruit crop. Ceteris paribus, A) the price of both papayas and grapefruit will increase. B) the price of both papayas and grapefruit will fall. C) the price of grapefruit will increase, and the price of papayas will fall. D) the price of grapefruit will fall, and the price of papayas will increase. Refer to the information provided in Figure 3.18 below to answer the questions that follow.

6 Figure ) Refer to Figure The current price of a bag of pretzels is $1.10. You accurately predict that in this market, A) price tends to remain constant, and quantity supplied increases. B) price, quantity demanded, and quantity supplied decrease. C) price and quantity demanded increase, and quantity supplied decreases. D) price and quantity supplied decrease, and quantity demanded increases. 20) Equilibrium is the condition that exists A) whenever there is no government intervention in the market. B) when the demand curve intersects the price axis. C) when quantity demanded equals quantity supplied. D) when the demand curve intersects the quantity axis.