UNIDAD 1

Which of the following statements describes macroeconomics?

• a.)It looks at how individuals and entities optimize the decisions they make.
• b.)It considers the behavior of individuals and firms on an individual level.
• c.)It looks at the overall ups and downs of the economy.
• d.)It is an academic discipline that looks at variables that affect the quality of human life.

Which of the following best describes arational consumer?

• a.)Uses infinite resources to maximize consumption
• b.)Purchases when thecost is greater than the additional benefit
• c.)Wants to make choices that maximize utility
• d.)Has limited wants and needs

Terry currently works a part-time evening job on campus.With this job, he hasfree time on the weekends to hang out with his friends and catch up on school work. However, a nearby shoe store,Speedy Feet, is hiring for $10/hour. He would be able to earna higher income and a significant discount on running gear that he would be buying anyway.

Terry has to take into consideration which of the following economic principles when deciding whether to forego his current job at the university in favor of a job at the shoe store?

• a.)Production constraints
• b.)Labor/leisure trade-off
• c.)Utility maximization
• d.)Explicit cost

While helping Kyle choose new shoes, the running store owner, Juan, learned that Kyle runs primarily in the evenings and is allergic to formaldehyde, a chemical found in most wool. He also learned that Kyle does not like energy drinks, as they upset his stomach.

Juan recommended that Kyle shouldbuy new shoes every six months, otherwise the tread can wear down quickly and start to cause injuries. Juan suggested that, for only $5,Kyle shouldjoin the store running club,where he can receivemembers-only coupons and achoice of four benefit options.

Determine which of the following options would provide any benefit to Kyle.

• a.)A frequent buyers' store discount card
• b.)A 10% discount on wool sweaters, caps and gloves
• c.)A $10 gift card that can be used toward the purchase of any energy drinks
• d.)A sale on biking shoes at a store down the street

Julie uses socialmedia sites and word-of-mouthas much as she can when advertising for the products in her clothing store. She also sets up a booth at local events, which brings in more customers. It can be time-consuming, yet she can reachher target customers while spending as little money as possible.

Julie is using the strategy known as __________by focusing her efforts on forms of advertising that cost very little, such as social media and word-of-mouth.

• a.)utility maximization
• b.)cost minimization
• c.)profit maximization
• d.)opportunity costs

Which of the following is an example of a labor resource?

• a.)The engineers who designed and created the assembly line for a manufacturing company
• b.)The property on which a clothing factory is located
• c.)The air popper used to make popcorn at a movie theater
• d.)The trucks used to transport refrigerated goods to grocery stores

A firm that produces running shoes is currently manufacturing a line of waterproof shoes at a marginal cost of $50 per pair. During the winter months, they were able to charge a price of $90 per pair. Now that it is summer, the demand has fallen, and they are only able to charge $60 per pair.

Assuming the shoe store is a profit-maximizing firm, which of the following is true?

• a.)The firm should shut down this production line since it is driving down its overall profitability.
• b.)The firm should stop producing the shoes since their profit margin is smaller than before.
• c.)The firm should continue to produce the shoes since the marginal revenue is still greater than the marginal cost.
• d.)The firm should continue to produce the shoes even if the price fell a lot further since that's the only way to maximize revenue.

UNIDAD 2

Which of the following is an example of being labor intensive?

• a.)A plane ticket from New York to Dubai
• b.)Cell phone service
• c.)The wiring for a custom-built house
• d.)Electricity

Becky has recently started running and needs new running shoes. While shopping at the shoe store, she sees a pair that costs $300 and asks theowner if these are the best running shoes.

"Actually, the quality is not any better than this $150 pair," replies the owner. "What you're really paying for is just the brand name."

Given what the owner has said, the more expensive shoes in question are examples of _________ goods.

• a.)Veblen
• b.)Giffen
• c.)inferior
• d.)luxury

Which ofthe following statements about price and demand is FALSE?

• a.)The Law of Demand states that if price increases, the quantity produced will increase.
• b.)The relationship between price and quantity demanded is considered to be inverse.
• c.)The graph of the demand curve slopes downward, indicating that quantity falls as price increases.
• d.)Consumers are willing to buy more of a good if the price of the good falls.

Which of the following is an example of movement along a demand curve?

• a.)Consumers are buying more t-shirts because their incomes have increased.
• b.)The price of burgers hasincreased, so consumers are buying morehot dogs.
• c.)Tomatoes have become more expensive, so consumers are buying fewer tomatoes.
• d.)Consumers are buying less coffee because tea is cheaper

Why does a supply curve slope upward?

• a.)Because as prices increase, producers are willing and able to supply more.
• b.)Because there is an inverse relationship between price and quantity supplied.
• c.)Because as prices increase, theopportunity cost of producing goods decreases.
• d.)Because costs of production eventually decrease.

A movement along the supply curve for coffee would occur when __________.

• a.)the cost of growing coffee beans increases
• b.)coffee workers' wages are cut in half
• c.)a new technology for harvesting coffee beans develops
• d.)the price of coffee decreases

Thompson's Shoe Emporiumcan produce and ship 200 pairs of rain bootsby the end of the week at a cost of $80 per pair. Shoe Locker agreed to the cost and placed an order for the shipment. Although they sold the units to Shoe Lockerat $80 per pair,Thompson's Shoe Emporium was willing to produce the shoes at a price as low as $50 per pair.

The difference between the amount that Shoe Locker paid for the shoes ($80) and the lowest amount that Thompson's Shoe Emporiumwould have agreed to receive for the shoes ($50) is known as the __________.

• a.)producer surplus
• b.)consumer surplus
• c.)deadweight loss
• d.)profit maximization

The workers at Anovis can either produce 20 beanie hats or two backpacks in one hour.

The workers at NorthCoast Clothing can either produce 10 beanie hats, or five backpacks, in one hour.

Which of the following is true for the above scenario?

• a.)Anovis has a comparative advantage in both backpack and beanie hat production.
• b.)Anovis has a comparative advantage in backpack production.
• c.)NorthCoast Clothing has a comparative advantage in backpack production.
• d.)NorthCoast Clothing has a comparative advantage in both backpack and beanie hatproduction.

Which of the following is the best example of transitivity?

• a.)Ben preferred Uncle Moe's Family Feedbag and Catering over University Catering. He liked Hob Knob Fine Dining best of all. So he must prefer Hob Knob over University Catering.
• b.)Ben contemplated every possible option given by the catering companies and still could not decide which option he liked best.
• c.)Ben contemplated every possible option given by the catering companies and decided that Hob Knob Fine Dining was the best choice.
• d.)Ben preferred Uncle Moe's Family Feedbag and Catering over University Catering because Uncle Moe's offered more of the same options at the same price.

This graph shows the indifference curves for the different bundles of running socks and shoes that Ben can purchase. Ben's current budget constraint would allow him to purchase either the bundle represented by points 1, 2 or 3.

Which option should Ben select, and why?

• a.)Option 2, because it allows him to purchase a greater number of socks.
• b.)Option 3, because it is on a greater indifference curve.
• c.)Option 1, because it is the least expensive.
• d.)Ben would be equally satisfied with options 1, 2 and 3

Determine a consumer's preference from usingindifference curves and the law of

Which of the following is true using the graph above?

• a.)Point D is attainable.
• b.)Point C is more desirable than points A or B.
• c.)Points A, B and C are all equally desirable.
• d.)Bundle A is preferable to Bundle B

Which of the following will occur when consumer incomes decrease?

• a.)The purchase of inferior goods will increase.
• b.)The optimal utility levels will increase.
• c.)The purchase of normal goods will increase.
• d.)The budget constraint will shift outward.

Which of the following statements is the best example of inelastic demand?

• a.)Tom bought banners sold in town before; they were high quality, so he buys them there again, despite an increase in price.
• b.)Tom followed the trend of others and purchased table cloths from an online website at a lower price.
• c.)Tom chose Pretty/Cheap disposable plates, which were $1 less than Not so Cheap brand.
• d.)Tom chose the less expensive Common Scents to brand candles rather than the Sensational brand.

Jackson is planning a banquet to honor the students who have made the Dean's List this semester. Hereceives a call from an assistant at theoffice of the Dean of Undergraduate Studies who tells him that the budget for thebanquet has been reduced, due to a miscalculation.

This is the original budget constraint, before the phone call:

After the reduction in budget, option __________ would most likely become the optimal choice, while option _________ would no longer be possible.

• a.)B; C
• b.)D; A
• c.)C; B
• d.)A; D

Diet Coke has an elasticity of demand of 1.6, which makes it __________.

• a.)inelastic
• b.)perfectly inelastic
• c.)elastic
• d.)perfectly elastic

One month ago, Olivia purchased 300 pages of printer paper at $1 per sheet. Today she learned that the price of the printer paper had risen to $1.50 per sheet, so she purchased only 100 sheets.

Using the graph of printer paper elasticity below and the midpoint formula, the own-price elasticity is __________.

• a.)0.5
• b.)1.25
• c.)-2.5
• d.)-1

Juan raised the price of a certain brand of running shorts in his store from $30 to $35. Once he did this, Juan noticed that customers were purchasing fewer shirts to go with the shorts. Last week, he sold 40 shirts, which decreased to 20 after the price increase with the shorts.

Using the mid-point formula, the cross-price elasticity is __________ and the goods are __________.

• a.)0.05; substitutes
• b.)-4.33; complements
• c.)-0.23; complements
• d.)1.04; substitutes

On his most recent trip to the running store, Andy noticed that the water bottles for his favorite hydration belt were on sale. They were usually priced at $8, but they were on sale for $5.

The store owner told Andy that he was surprised that people were not only buying more water bottles due to the sale, but also more of the hydration belt, even though the belts were not on sale.

Based on the scenario above, what type of goods are the water bottles and hydration belts?

• a.)Complements
• b.)Normal
• c.)Substitutes
• d.)Inelastic

Which of the following would be considered an inferior good?

• a.)New professional clothes that can be bought with a higher income
• b.)Eating at high-end restaurants
• c.)A flight to the beach for a week-long spring break vacation
• d.)A used car that can be tradedin for a newer and better one

Ashley received a raise at work that increased her monthly income from $1,000 to $1,250. Last year, Ashley bought 20 slices of cheesecake for her birthday party. Due to her increase in income, she is able to buy 24 slices for her birthday this year.

Using the mid-point formula, the income elasticity is _________ and the cheesecake slices are __________ goods.

• a.)0.5; normal
• b.)1.3; luxury
• c.)1.2; luxury
• d.)0.8; normal

Which of the followingsstatements regarding perfectly competitive markets is true?

• a.)Most markets lie somewhere between perfect competition and monopoly.
• b.)Perfectly competitive markets are common in the real world.
• c.)Perfect competition involves barriers in the flow of information.
• d.)Firms in perfectly competitive markets have control over price.

Which of the following examples is acharacteristic necessary for a diamond firm to run as a monopoly?

• a.)The cost to enter the diamond industry is inexpensive and there are many mines available for purchase.
• b.)The firm has complete control over price and is known as a price-maker.
• c.)Companies differentiate their diamonds by the use of advertising.
• d.)Consumers have access to the production costs of diamond mining.

When buying a new purse,Kelly prefers to purchase the brandSouthPlace because they have a cute symbol on the front of the bag and the material is durable.

Which of the following characteristics of monopolistic competition is being exhibited by SouthPlace?

• a.)One seller
• b.)Imperfect information
• c.)Differentiated product
• d.)Advertising expenditures

Oligopolistic industries maintain __________.

• a.)market prices set by the government
• b.)barriers to entry
• c.)diseconomies of scale
• d.)low start up and operating costs

Carrie's Cakes charges $15 per cake and she sells 10 cakes each day. Carrie's costs of production is $80 total each day.

Based on this information,Carrie's accounting profit per day would be __________.

• a.)$70
• b.)$220
• c.)$65
• d.)$150

When a firm opts to produce burgers instead of hot dogs, their opportunity cost is __________.

• a.)the expected profit from selling hot dogs
• b.)the time it takes to retrain their employees
• c.)the inventory cost of hot dog buns
• d.)the price of the burgers

An investor, who had $75,000 to contribute, was choosing between a boutique and a local shoe shop. After careful deliberation, the investor chose the boutique.

In the first year, the boutique generated enough profit to pay the investor $15,000 (an agreed percentage of profits to be paid to the investor). The investor found out that if he had invested in the local shoe shop he would have received $9,000 (an agreed percentage of profits to be paid to the investor).

The investor's economic profit was __________.

• a.)$15,000
• b.)$24,000
• c.)$6,000
• d.)$51,000

Which of the following is a variable input for a transportation company?

• a.)Lease for the sales office downtown
• b.)Garage space rented to house buses
• c.)Wages for drivers, who are paid per trip
• d.)Interest paid on the loan taken out to purchase a group of buses

For perfectly competitive firms, the price effect is zero because __________.

• a.)the marginal revenue is equal to the price
• b.)the demand curve is inelastic
• c.)the marginal revenue is lower than marginal cost
• d.)the price increases as we sell more units

The following table showsaverage costs and revenues at different levels of production.

The average cost at the second level of production is __________.

The marginal cost at the fourth level of production is _________.

• a.)$3.00; $1.00
• b.)$3.00;$0.96
• c.)$2.59; $1.00
• d.)$2.59; $0.96

When a firm uses three machines, it can produce 200 units daily. A fourth machine allows the firm to produce 350 units.

Which of the following statements is true regarding production?

• a.)The marginal product of the fourth machineis 150 units.
• b.)The average product is 150 units.
• c.)The marginal revenue product of the fourth machine is 150 units.
• d.)The total product is 150 units.

All profit maximizing firms will produce where __________.

• a.)the average total cost is at its lowest point
• b.)the marginal revenue equals the marginal cost
• c.)the total cost is lowest
• d.)the price per unit is at its highest point

If the price of the product is $4 and the cost of each employee is $20, how many employees should the firm hire to maximize their profit?

• a.)One employee
• b.)Five employees
• c.)Two employees
• d.)Three employees

A profit-maximizing, perfectly competitive firm's short-run supply curve would start at which output level?

• a.)20 units
• b.)25 units
• c.)30 units
• d.)15 units

Which of the following is NOT true of a long-run average cost curve?

• a.)It is comprised of the lowest points of each short-run average cost curve.
• b.)Long-run average cost curves are almost always U-shaped.
• c.)The curve falls because of economies of scale.
• d) did must always be equal to or lie above any short-run average cost curve.

Party Supply Value's average cost went from $0.90 per balloon when they produced 1,000 units to $0.87 per balloon when they produced 3,000 units.

Which of the following describes this scenario?

• a.)Economies of scale
• b.)Constant scale
• c.)Diseconomies of scale
• d.)Both diseconomies and economies of scale

Which of the following describes this scenario?

• a.)Natural monopoly
• b.)Diseconomies of scale
• c.)Collusion
• d.)Price setting

Rent control is a type of __________ that lowers the price of rent below market value. This creates a __________of affordable apartments, as more people want apartments at this price, and fewer landlords are willing and able to offer them.

• a.)price ceiling; producer surplus
• b.)price ceiling; shortage
• c.)price floor; shortage
• d.)price floor; producer surplus

Coincident Indicators __________.

• a.)show us where the economy is heading
• b.)show us where the economy has been
• c.)indicate where the economy is currently
• d.)predict the future of the economy

However, the elements and use create damage over time, which make them somewhat rivalrous, making them more of a __________.

• a.)public good
• b.)private good
• c.)common good
• d.)club good

Which of the following statements relates to a market economy?

• a.)Little to no private sector exists.
• b.)A central authority makes almost all production and distribution decisions.
• c.)Economic efficiency is lacking, since government agencies do not have the profit motive that private industries do.
• d.)Consumers and producers determine what to produce, how to produce and to whom the output will go.

All of the following are examples of government regulation to correct a market failure EXCEPT __________.

• a.)the corporate income tax
• b.)emissions testing on cars
• c.)placing a tax on cigarettes
• d.)selling pollution credits to chemical companies

The bribery of corrupt government officials is an example of __________.

• a.)negative externalities
• b.)information asymmetry
• c.)regulatory intervention
• d.)principal-agent problems

Considering how much money will be involved in cleaning up a polluted site as well as what it will take for a business to comply with government regulations is an aspect of which of the following methods?

• a.)Hedonic pricing
• b.)Cost-benefit analysis
• c.)Healthcare costs
• d.)Contingent valuation

The local art critic for the newspaper in the city was let go as the newspaper cut about half of its staff in order to avoid closing completely. The paper had been suffering revenue short-falls related to increased Internet competition.

The critic's type of unemployment is __________.

• a.)classical unemployment
• b.)frictional unemployment
• c.)structural unemployment
• d.)cyclical unemployment

Which of the following statements regarding climate change is FALSE?

• a.)Economists believe that the long term effects of anthropomorphic climate change remain uncertain.
• b.)Industrial pollution is a factor in the creation of anthropomorphic climate change.
• c.)Climate change has resulted in decreased weather volatility.
• d.)Weather volatility has had an impact on the cost of insurance.

Which of the following rolescorresponds with an investor?

• a.)Views stock performance as indicative of success for their financial commitment
• b.)Maintain high quarterly performance for the company
• c.)Depends on the Board of Directors for support
• d.)Has a fiduciary responsibility