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Assignment 1

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Question 1 (1 point)
Opportunity cost is best defined as
  1. the money spent once a choice is made.
  2. the sum of all alternatives given up when a choice is made.
  3. the cost of a good, less profits.
  4. the highest valued alternative given up when a choice is made.
  5. the cost of capital resources used in the production of additional capital.
Question 2 (1 point)
production possibilities curve
The production possibilities curve illustrates
  1. the opportunity cost of alternative choices.
  2. tradeoffs facing a society.
  3. that more of one product can be produced if only a little more of the other product is produced.
  4. the maximum output that can be produced with a limited amount of resources.
  5. All of these
Question 3 (1 point)
production possibilities curve
If a nation is operating at a point lying inside its production possibilities curve, that is a sign of which of the following conditions?
  1. The nation is not fully or efficiently utilizing its resources.
  2. The nation has likely just discovered a technological advance in one of its key industries.
  3. The nation is clearly utilizing its resources efficiently.
  4. The nation is producing the maximum output that can be produced with a limited quantity and quality of resources.
  5. The nation is producing the maximum output that can be produced with its unlimited quantity of resources.
Question 4 (1 point)
Petroleum Jelly vs. Bread
An economy that produces only bread and petroleum jelly, operating on a bowed-out PPC, now discovers a new source of oil. Assume oil is an input only in the production of petroleum jelly. Which of the graphs in the figure above depicts the resulting shift of the PPC?
  1. Figure A
  2. Figure B
  3. Figure C
  4. Figures B and C are both possible
  5. None of these
Question 5 (1 point)
Economic growth can be illustrated
  1. by an inward shift of the production possibilities curve.
  2. by a downward movement along the production possibilities curve.
  3. by a movement toward the production possibilities curve.
  4. by an upward movement along the production possibilities curve.
  5. by an outward shift of the production possibilities curve.
Question 6 (1 point)
Marginal opportunity cost is defined to be
  1. the declining ability of a country to correct its balance of trade deficit.
  2. always unchanging.
  3. always decreasing.
  4. less productive resources.
  5. the amount of one good or service that must be forgone to obtain an additional unit of another good.
Question 7 (1 point)
Given the differences in opportunity costs within individual countries, it makes sense for countries
  1. to force protectionism of the most important domestic industries, using tariffs and quotas.
  2. to devalue their currencies at least once a year.
  3. to specialize in activities in which opportunity costs are highest and then avoid trade in order to manage trade deficit.
  4. to insist upon protection against foreign competition through legislation.
  5. to specialize in activities in which opportunity costs are lowest and then trade.
Question 8 (1 point)
Cookies vs. Peppers
In the table above, the opportunity cost of a cookie in Iowa is
  1. 8 chilies.
  2. the same as in Ohio.
  3. 96 chilies.
  4. less than in Ohio.
  5. None of these
Question 9 (1 point)
Good X vs Good Y
A person has a comparative advantage in producing a good if
  1. that person can produce the good at a lower absolute cost than anyone else.
  2. that person can produce the good at a lower opportunity cost than anyone else.
  3. that person spends less money in out-of-pocket expenses than anybody else.
  4. that person can produce the good at a higher opportunity cost than anyone else.
  5. that person can do a better job than anyone else.
Question 10 (1 point)
Germany vs. Korea
In the figure above, which of the following is true?
  1. Korea has a lower opportunity cost for making cars.
  2. Germany has the comparative advantage in cars.
  3. Korea has the comparative advantage in cars.
  4. Germany has the comparative advantage in food.
  5. Germany has a lower opportunity cost for making food.
Question 11 (1 point)
In general, the purpose of markets is to
  1. provide a means for unrecorded payments.
  2. provide a forum for exchange of political benefits.
  3. provide a means for illegal transactions.
  4. facilitate the exchange of goods and services between buyers and sellers.
  5. facilitate the exchange of illegal commodities.
Question 12 (1 point)
Barter refers to exchanges made
  1. without the use of money.
  2. only with the use of money.
  3. within countries who are experiencing foreign currency exchange problems.
  4. only in underdeveloped countries.
  5. barter does not exist in the U.S. economy
Question 13 (1 point)
According to the law of demand, if the price of compact disks decreased, ceteris paribus,
  1. the quantity demanded of compact disks would not change.
  2. the quantity demanded of compact disks would increase.
  3. the demand for compact disks would decrease.
  4. the demand for compact disks would increase.
  5. the quantity demanded of compact disks would decrease.
Question 14 (1 point)
A table or list of the prices and the corresponding quantities demanded of a particular good is called
  1. a demand curve.
  2. a supply schedule.
  3. a production possibilities schedule.
  4. a demand schedule.
  5. a supply curve.
Question 15 (1 point)
Which of the following will not cause the demand for ice cream to change?
  1. A change in the price of ice cream
  2. A change in seasons
  3. A change in consumer preferences
  4. A change in population size
  5. A change in consumer incomes
Question 16 (1 point)
Which of the following would most likely cause an increase in the demand for personal computers?
  1. An increase in the cost of computer paper
  2. An increase in the supply of personal computers, other things equal
  3. An increase in the number of computer manufacturers, other things equal
  4. A requirement by universities that all students buy personal computers
  5. A reduction in the price of personal computers, other things equal
Question 17 (1 point)
The law of supply
  1. asserts that as the price of a good or service rises, the demand curve shifts inward.
  2. asserts that as the price of a good or service rises, the quantity supplied rises.
  3. has very little to do with how prices in a market-based economy are determined.
  4. asserts that as the price of a good or service rises, the quantity supplied declines.
  5. while valid, is almost always ignored in a market-based economy.
Question 18 (1 point)
Assume a revolutionary technological advance is discovered in the production process of automobiles by Ford Motor Company engineers. Which of the following events would you expect to happen?
  1. A movement up along an existing supply curve for Ford automobiles.
  2. A shift outward of the supply curve for Ford automobiles.
  3. A shift inward of the supply curve for Ford automobiles.
  4. A movement down along an existing supply curve for Ford automobiles.
  5. No change in supply.
Question 19 (1 point)
Equilibrium in a market-based economy
  1. doesn't occur because no incentive exists to create it in a market- based economy.
  2. occurs when a surplus of a good during one time period is exactly offset by a shortage of that good the next period.
  3. occurs instantaneously and rarely changes over time.
  4. is established at the point where the quantity that suppliers are willing and able to offer for sale is the same as the quantity that buyers are willing and able to purchase.
  5. is usually forced through government intervention and taxation.
Question 20 (1 point)
Quality vs Price
In the figure above, the initial demand curve is .and the supply curve is . The most likely result of pessimistic producer expectations is
  1. a move from equilibrium A to equilibrium D.
  2. a move from equilibrium A to equilibrium B.
  3. a move from equilibrium A to equilibrium E.
  4. a move from equilibrium B to equilibrium A.
  5. a move from equilibrium A to equilibrium F.
Question 1 (5.00 points)
Explain the law of supply, law of demand, and equilibrium and how they all interrelate.
Question 2 (5.00 points)
What does the saying �There is no such thing as a free lunch� mean?
Copyright 2008, by the Contributing Authors. Cite/attribute Resource . admin. (2009, January 27). Assignment 1. Retrieved January 07, 2011, from Free Online Course Materials — USU OpenCourseWare Web site: http://ocw.usu.edu/economics/introduction-to-microeconomics-1/assignment1.htm. This work is licensed under a Creative Commons License Creative Commons License