ECON 2301 Test 1 - Verified with 100% Correct Answers

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ECON 2301 Test 1 - Verified with 100% Correct Answers Through war, many of the factories in country 1 are destroyed and many of its people are killed. As a result, the country's PPF has shifted to t... he left. Points that lie outside (or beyond) the PPF are unattainable. The economy moves from point A, where it produces 100 units of X and 200 units of Y, to point B where it produces 200 units of X and 150 units of Y. It follows that B and C (point A may be a productive inefficient point; point A may be a productive efficient point.) If there is always a three-for-one tradeoff between goods X and Y, then the PPF between X and Y is Downward-sloping straight line. Points that lie inside (or below) the PPF are Attainable but productive inefficient. If increasingly more units of good Y must be given up as each successive unit of good X is produced, then the PPF for these two goods is downward-sloping curve that is bowed outward. Consider the following combinations of guns and butter that can be produced: 0 guns, 20,000 units of butter; 5,000 guns, 15,000 units of butter; 10,000 guns, 10,000 units of butter; 15,000 guns, 5,000 units of butter, 20,000 guns, 0 units of butter. The PPF between guns and butter is downward sloping straight line. A PPF can shift inward or outward. Consider two points on the PPF: point A, at which there are 10 apples and 20 pears, and point B, at which there are 7 apples and 21 pears. If the economy is currently at point A, the opportunity cost of moving to point B is 3 apples Consider two points on the PPF: Point A, at which there are 50 oranges and 100 apricots, and point B, at which there are 51 oranges and 98 apricots. If the economy is currently at point B, the opportunity cost of moving to point A is 1 orange. The point where the PPF intersects the vertical axis is attainable and productive efficient. Suppose the economy goes from a point on its production possibilities frontier to a point below that PPF. Assuming that the PPF has not shifted, this could be due to New law that interferes with economic efficiency An increase in the quantity of resources available shifts the PPF rightward. A decrease in the quantity of resources shifts the PPF leftward Which of the following is an illustration of the law of increasing opportunity costs? As more cars are produced, the opportunity cost of each additional car is greater than for the preceding unit. The PPF between goods X and Y will be a downward-sloping curve that is bowed outward if increasing opportunity costs exist. A PPF is more likely to be a downward-sloping curve that is bowed outward than a downward-loping straight line because most resources are better suited for production of some goods than others. Economic growth causes the PPF to shift rightward. An economy is productive efficient if it produces maximum output with given resources and technology. Refer to Exhibit 2-1. The movement from point A to point B is a movement from productive efficient point to another productive efficient point. Refer to exhibit 2-1. If the economy is at point C, it follows that More guns and more butter could be produced. Refer to Exhibit 2-1. The opportunity cost of moving from point B to A is 20,000 of butter According to the text. farming today in the US is _____ productive compared to a century ago, resulting in there being _____ farmers today that at the turn of the previous century. much more; fewer Refer to exhibit 2-1. The PPF illustrates constant opportunity costs. A PPF is bowed outward as a result of increasing opportunity costs. A PPF is a straight line as a result of constant opportunity costs If there is always a 4-for-1 tradeoff between producing good X and good Y, it follows that the opportunity cost of X (in terms of Y) _____ and the PF for these two goods is _____. always the same; a straight line. What is the reason for the law of increasing opportunity costs? Resources have varying abilities and those with lower opportunity costs of producing a good will be used to produce it before resources with higher opportunity costs produce it Country X has a high unemployment rate. It follows that country X is operating inside (below) PPF Between 1910 and today, the number of farmers in the US _____ dramatically as a result of _____ in farming in the twentieth century. Dropped; technological improvements. Which of the following illustrates the law of demand? a and c. (Jorge buys fewer pencils at $2 per pencil than $1 per pencil, ceteris paribus. Karissa buys fewer sweaters at $50 each than at $35 each, ceteris paribus.) The law of demand states that price and quantity demanded are inversely related, ceteris paribus. At a price of $15 each, Marta buys four books per month. When the price increases to $20, Marta buys 3 books per month. Luz says that Marta's demand for books has decreased. Is Luz correct? No, Luz is incorrect. Quantity demanded decreased, demand has stayed the same. One major reason for the law of demand is that People substitute relatively lower-priced goods for relatively higher-priced goods. A demand schedule is a numerical tabulation of the _____ of a good at different _____. Quantity demanded; prices If Max's demand for hot dogs falls as his income rises, then for Max hot dogs are an inferior good. An increase in the number of buyers in a particular market for a good will result in a _____ for that rightward shift in the demand curve. If the demand curve for a good shifts leftward quantity demanded less at each price. If people begin to favor science fiction novels to a greater degree than previously, the demand curve for science fiction novels shifts rightward. As the price of good X rises, the demand for good Y falls. Therefore, goods X and Y are Complements As the price of good A rises, the demand for good B rises. Therefore goods A and B are Substitutes The law of supply states that price and quantity supplied are directly related, ceteris paribus. Which of the following is true about the relationship between price and quantity supplied? Usually a direct relationship. If the workers of a firm successfully negotiate an increase in wages, which of the following is most likely to happen? Supply curve shifts leftward. Tobacco production is one of the more heavily subsidized industries in the US. Suppose that as a result of intense lobbying from health-related concerns, Congress repeals the tobacco firms' subsidies. Which of the following scenarios would likely occur? Tobacco firms' supply curve shift leftward. Oil producers expect that oil prices next year will be higher than oil prices this year. As a result, oil producers are most likely to place more oil on the market this year, shifting rightward. At a price for which quantity demanded exceeds quantity supplied, a _____ is experienced, which pushes the price _____ toward its equilibrium value. shortage; upward Refer to Exhibit 3-1. Equilibrium price and quantity are _____, respectively. $4 and 250 units Refer to Exhibit 3-1. At a price of $2 there is a shortage of 200 units Refer to Exhibit 3-1. At a price of $6 there is a surplus of 200 units A rightward shift in the demand curve for tennis balls could be caused by fall in price of tennis rackets An increase in the price of good B caused an increase in the demand for good C. This indicates that goods B and C are substitutes. A decrease in the expected price of corn would likely do the following to the current supply and demand for corn increase supply, decrease demand. An "increase in demand" means that demand curve shifted to the right Refer to Exhibit 3-10. $20 is the all of the above (equilibrium price, market-clearing price, and price at which there is neither a surplus nor a shortage) [Show More]

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