Econ 231 - Exam 1 - Chapter 3 & 4 - Practice Problems || A+
Verified Solutions.
According to the law of comparative advantage, a NASCAR driver who is also a good chef
should
devote more time to cooking and less time to racing.
give up NASCAR.
not open a restaurant.
hire a chef if he opens a restaurant. correct answers hire a chef if he opens a restaurant.
The basic principle of production possibilities frontier is that, if there are no idle resources in an
economy,
the marginal cost of production equals the total cost of production.
the production of one good can be increased only if the production of the other good is
decreased.
the increase in the production of one good will increase the profits earned by all firms.
the economy will produce its potential output level and there will be no unemployment. correct
answers the production of one good can be increased only if the production of the other good is
decreased.
The U.S. government imposes tariffs (an import tax) on all imported steel, which is a major input
used in making golf clubs. How will this tariff affect the market for golf balls?
It would have no impact since golf ball production uses no steel in the manufacturing process.
The demand for golf balls would fall, and the price of golf balls will fall.
The supply of golf balls would rise, and the price of golf balls will fall.
The supply of golf balls would fall, and the price of golf balls will rise. correct answers The
demand for golf balls would fall, and the price of golf balls will fall.
The supply curve of a product is a graphical representation of
the quantity of goods that should be produced to maximize profit.
the willingness of sellers to sell the product over time.
the total amount supplied in the market during a specified period of time.
the quantity produced as a function of the price. correct answers the quantity produced as a
function of the price.
If the government decides to impose rent controls in the city of Prunia, it is likely to
increase the demand for apartments.
decrease the number of apartments converted to office spaces.
increase the number of apartments available for rent.
increase the problem of shortage. correct answers increase the problem of shortage.
Suppose that people regard coffee and tea as substitute products. If a freeze occurs in Brazil,
severely damaging the current coffee crop, what will happen to the price of tea?
A fall in the price of tea since tea buyers now must pay more for coffee.
A rise in the price of tea because the supply of tea increases.
, No change since coffee supplies do not affect the tea market.
A rise in the price of tea because the demand for tea increases. correct answers A rise in the price
of tea because the demand for tea increases.
Refer to the following graph that shows the production possibilities curve of an economy that
produces two goods: wine and cheese. If the economy is currently operating at point D,
the opportunity cost of moving to point B is zero.
the economy faces capital constraints and cannot move beyond point D.
the marginal cost of moving to point B is 200 bottles of wine.
the current consumption level in the economy is too high. correct answers the opportunity cost of
moving to point B is zero.
Efficient production occurs
on the points on the production possibilities frontier.
on the production possibilities frontier or at points beyond the production possibilities frontier.
on the production possibilities frontier or inside the production possibilities frontier.
on the points inside the production possibilities frontier. correct answers on the points on the
production possibilities frontier.
Price ceilings tend to create imbalances in the market as
the surplus created by price ceilings leads to very high levels of investment.
quantity demanded exceeds quantity supplied, but price cannot fall to remove the surplus.
quantity demanded exceeds quantity supplied, but price cannot rise to remove the shortage.
the surplus created by price ceilings leads to a problem of disposal. correct answers quantity
demanded exceeds quantity supplied, but price cannot rise to remove the shortage.
Refer to the following table. At a price of $3, there is a
shortage of 100 pairs of socks.
shortage of 600 pairs of socks.
surplus of 600 pairs of socks.
surplus of 100 pairs of socks. correct answers shortage of 600 pairs of socks.
A decrease of which of the following would shift the supply curve of gasoline to the left?
The number of gasoline producers
The price of gasoline
The demand for gasoline
The price of crude oil, which is an input in the gasoline production process correct answers The
number of gasoline producers
Which economist first explained the principle of comparative advantage?
Verified Solutions.
According to the law of comparative advantage, a NASCAR driver who is also a good chef
should
devote more time to cooking and less time to racing.
give up NASCAR.
not open a restaurant.
hire a chef if he opens a restaurant. correct answers hire a chef if he opens a restaurant.
The basic principle of production possibilities frontier is that, if there are no idle resources in an
economy,
the marginal cost of production equals the total cost of production.
the production of one good can be increased only if the production of the other good is
decreased.
the increase in the production of one good will increase the profits earned by all firms.
the economy will produce its potential output level and there will be no unemployment. correct
answers the production of one good can be increased only if the production of the other good is
decreased.
The U.S. government imposes tariffs (an import tax) on all imported steel, which is a major input
used in making golf clubs. How will this tariff affect the market for golf balls?
It would have no impact since golf ball production uses no steel in the manufacturing process.
The demand for golf balls would fall, and the price of golf balls will fall.
The supply of golf balls would rise, and the price of golf balls will fall.
The supply of golf balls would fall, and the price of golf balls will rise. correct answers The
demand for golf balls would fall, and the price of golf balls will fall.
The supply curve of a product is a graphical representation of
the quantity of goods that should be produced to maximize profit.
the willingness of sellers to sell the product over time.
the total amount supplied in the market during a specified period of time.
the quantity produced as a function of the price. correct answers the quantity produced as a
function of the price.
If the government decides to impose rent controls in the city of Prunia, it is likely to
increase the demand for apartments.
decrease the number of apartments converted to office spaces.
increase the number of apartments available for rent.
increase the problem of shortage. correct answers increase the problem of shortage.
Suppose that people regard coffee and tea as substitute products. If a freeze occurs in Brazil,
severely damaging the current coffee crop, what will happen to the price of tea?
A fall in the price of tea since tea buyers now must pay more for coffee.
A rise in the price of tea because the supply of tea increases.
, No change since coffee supplies do not affect the tea market.
A rise in the price of tea because the demand for tea increases. correct answers A rise in the price
of tea because the demand for tea increases.
Refer to the following graph that shows the production possibilities curve of an economy that
produces two goods: wine and cheese. If the economy is currently operating at point D,
the opportunity cost of moving to point B is zero.
the economy faces capital constraints and cannot move beyond point D.
the marginal cost of moving to point B is 200 bottles of wine.
the current consumption level in the economy is too high. correct answers the opportunity cost of
moving to point B is zero.
Efficient production occurs
on the points on the production possibilities frontier.
on the production possibilities frontier or at points beyond the production possibilities frontier.
on the production possibilities frontier or inside the production possibilities frontier.
on the points inside the production possibilities frontier. correct answers on the points on the
production possibilities frontier.
Price ceilings tend to create imbalances in the market as
the surplus created by price ceilings leads to very high levels of investment.
quantity demanded exceeds quantity supplied, but price cannot fall to remove the surplus.
quantity demanded exceeds quantity supplied, but price cannot rise to remove the shortage.
the surplus created by price ceilings leads to a problem of disposal. correct answers quantity
demanded exceeds quantity supplied, but price cannot rise to remove the shortage.
Refer to the following table. At a price of $3, there is a
shortage of 100 pairs of socks.
shortage of 600 pairs of socks.
surplus of 600 pairs of socks.
surplus of 100 pairs of socks. correct answers shortage of 600 pairs of socks.
A decrease of which of the following would shift the supply curve of gasoline to the left?
The number of gasoline producers
The price of gasoline
The demand for gasoline
The price of crude oil, which is an input in the gasoline production process correct answers The
number of gasoline producers
Which economist first explained the principle of comparative advantage?
