; 1.Scarcity1.exists because people have wants that are unlimited relative to the availability of resources to satisfy those wants2.creates a need for society to allocate goods according to some set of criteria3.means that society and individuals must make choices4.exists in all societies5.all of the above2.In economics, capital is defined as (Think about the factors of production.)1.natural resources, such as water, oil, and iron ore2.the natural, unskilled abilities of people3.human creations used in the production process4.money and other financial assets5.the willingness of business owners to take risks 3.According to the law of comparative advantage, an individual should produce a good if he or she1.can produce it with the fewest resources2.has an absolute advantage of producing the good.3.has the lowest opportunity cost of producing the good regardless of whether it is produced with the fewest resources4.has the greatest opportunity cost of producing the good regardless of whether it is produced with the fewest resources5.has the greatest opportunity cost of producing the good and produces it with the fewest resources 4.The effect of a decrease in the price of laptop computers, other things constant, is likely to be best represented by which of the following?1.a leftward shift of the demand curve.2.a movement up along the demand curve3.a rightward shift in the demand curve4.a movement down along the demand curve5.a leftward shift in the supply curve 5.Which of the following will not change the demand for movie tickets?1.a change in the cost of babysitting services2.a change in the price of movie tickets3.a change in the quality of television programs4.a change in the income of movie-goers5.a change in the number of consumers 6.Which of the following would be most likely to increase the demand for downtown parking in a large city?1.improved bus service to the downtown area2.lower downtown parking fees3.more downtown parking lots4.more freeways leading to the downtown area5.a major employer moves to the suburbs 7.Attempts are being made to develop a biodegradable plastic using agricultural produce such as potatoes. If these attempts are successful, what will happen to the equilibrium price and quantity of potatoes? (You may want to relate this question to what has recently happened with corn and ethanol.)1.Price will increase and quantity decrease.2.Price will increase and quantity increase.3.Price will decrease and quantity increase.4.Price will decrease and quantity decrease.5.No change in equilibrium and quantity will occur. 8.If an increase in the price of a product from $100 to $200 per unit leads to a decrease in the quantity demanded from 10 to 8 units, then demand is1.elastic2.inelastic3.unit elastic4.05.inferior 9.Two separate groups of people use New York City subways. One group uses them only during rush hour to travel to and from work. The other group uses them only in midday for leisure activity. If New York City wants to increase transit fares with the smallest possible reduction in revenue, for which group should it increase the fare?1.The rush-hour group because its demand for subway service is more elastic than that of the midday group.2.The rush-hour group because its demand for subway service is less elastic than that of the midday group.3.The midday group because its demand for subway service is more elastic than that of the rush-hour group.4.The midday group because its demand for subway service is less elastic than that of the rush-hour group.5.It doesnt matter because both groups have the same elasticity of demand. 10.As price falls along a given demand curve for pretzels,1.quantity demanded, total utility, marginal utility, and consumer surplus increase; consumer expenditure decreases.2.quantity demanded, total utility, and consumer surplus increase; marginal utility and consumer surplus decrease3.quantity demanded, total utility, consumer surplus, and consumer expenditure increase; marginal utility decreases4.quantity demanded, total utility, and consumer surplus increase; marginal utility decreases; consumer expenditure might increase, decrease, or remain constant5.quantity demanded, total utility, marginal utility, consumer surplus, and consumer expenditure all increase 11.Suppose a lawyer leaves his $70,000-a-year job and starts his own firm breeding pit bulls. In the first year, his accounting profits are $90,000. The lawyer finances his new business with $100,000 from his savings account, which had earned 10 percent interest. If this is all of the implicit and explicit revenues and costs his economic profit is1.$10,0002.$60,0003.$70,0004.-$80,0005.-$90,000 12.Farmer Fanny sells her crops in a perfectly competitive market. If she produces 500 bushels for total revenue of $3,000 and if harvesting the 501st bushel would raise her total cost from $2,500 to $2,510, her1.revenue will increase by $4 if she harvests the 501st bushel2.revenue will fall by $4 if she harvests the 501st bushel3.average fixed cost will rise if she harvests the 501st bushel4.profit will fall by $10 if she harvests the 501st bushel5.profit will fall by $4 if she harvests the 501st bushel 13.What is true at the profit-maximizing quantity for a nondiscriminating monopolist but not true of a perfectly competitive firm?1.Price equals marginal cost.2.Price is greater than marginal cost.3.Marginal revenue equals marginal cost.4.Marginal revenue is less than marginal cost.5.Marginal revenue is greater than average revenue. 14.Which of the following is common to all market structures?1.All of the following are correct.2.Each firm must be able to earn sufficient revenue to cover its variable cost in order to continue producing in the short run.3.The demand curve for the firms output and the firms average revenue curve are the same.4.If it can earn a profit, the firm should increase production as long as marginal revenue exceeds marginal cost.5.Each firm must be able to earn sufficient revenue to cover its total cost in order to continue operating in the long run. 15.Which of the following could explain an increase in demand for labor? (Think about our discussions of human capital.)1.additional training that increases the productivity of each unit of labor in this market2.an increase in the amount of risk associated with this job3.a decrease in the amount of risk associated with this job4.an improvement in the working conditions associated with this job5.a decline in the working conditions associated with this job 16.Which of the following affects the interest rate on a loan?1.all of the following2.the duration of the loan3.the tax treatment of the loan4.the administrative cost of the loan5.the risk of default on the loan 17.The marginal social cost of air quality increases as air quality decreases. If the dirtiest production process would create 700 tons of pollutants, then1.eliminating the first 20 tons of pollution is cheaper than eliminating the last 20 tons.2.eliminating the last 20 tons of pollution is cheaper than eliminating the first 20 tons.3.more damage will be done by
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