Economics Exam

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➢ TEST 1

1. Which of the following topics typifies microeconomics as opposed to macroeconomics?
An individual's decision about which goods to buy with his or her income.

2. If the number of workers unemployed in an economy decreases, then the economy moves from a point inside its PPF to a point closer to its PPF.

3. An economy is said to be efficient if
it is not possible to produce more of one good without producing less of another.

4. Technological progress tend to cause the production possibility frontier to shift ________. The expansion of capital resources tends to cause the production possibility frontier to shift ________.

outward; outward.

Refer to the following diagram to answer questions #5, #6 and #7.


5. Suppose the economy is producing at point B. Which of the following statements would best explain this situation?
Some of the economy's factors of production are going unused.

6. If the above economy moves from point A to point D, the opportunity cost of one additional toothbrush over that range is
2/3 toasters for each toothbrush.

7. Along the bowed out PPF shown above, the opportunity cost of producing an additional toothbrush is
higher at point D than point A, because the opportunity cost of producing an additional toothbrush increases as more toothbrushes are produced.

Refer to the following diagram to answer questions #8, and #9.


8. If the price is currently $12,
buyers wish to purchase less than sellers wish to sell, and the price will eventually fall.

9. At a price of $8, there would be a ______, which would exert _______ pressure on the price.
shortage of 20 units; upward

10. According to the law of supply,
when the price of a good falls, the quantity supplied of the good falls.

11. Which of the following would NOT shift the supply curve for apples? An increase in the average income of apple consumers.

Refer to the following graphs to answer questions #12 and #13.


12. Which of the four graphs would represent changes in the market for gasoline if the price of crude oil increased?

13. Which of the four graphs would represent events in the market for Pepsi if the price Coke decreased?

14. The equilibrium price will fall and the equilibrium quantity may increase, decrease, or stay the same when the
demand for a good decreases and the supply of it increases.

15. A technological improvement lowers the price of microchips, and therefore lowers the cost of producing computers. As a result, the equilibrium price of a computer _______ and the equilibrium quantity of computers ________. falls; increases

16. Suppose buyers in the market for houses develop an expectation that housing prices will increase in the future. As a result, the current equilibrium price of houses _____ and the current equilibrium quantity of houses ______. increases; increases

17. Suppose that the price of wool shirts decreases, and, at the same time, the price of raw cotton decreases. What is the combined effect of these two changes on the equilibrium in the market for cotton shirts?

The equilibrium price decreases, and the equilibrium quantity could increase, decrease, or stay the same.

18. If a good is "inferior," then a decrease in income among consumers of the good will result in
a higher equilibrium price and a higher equilibrium quantity of the good.

19. A car manufacturer in Detroit buys new manufacturing machinery produced in North Carolina by a Japanese company. As a result,
U.S. investment (I) and U.S. GDP both increase.

20. Suppose the total market value of all final goods and services produced in the country of Halloranland was $12 billion in 2005 (measured in 2005 prices) and $11 billion in 2006 (measured in 2006 prices). Which of...
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