MICROREVIEW FOR TEST No. 1
Study everything, but focus especially on the topic listed below. The practice test below is to give you an idea of what the questions are like. Go back to your booklet and the in-class quizzes.
CHAPTER ONE
Scarcity
Resource Categories
Normative Economics
Positive Economics
CHAPTER TWO
What to produce, How to produce, for Whom to produce
When is the Economy Efficient? PPF/PPC - every thing on it.
Opportunity Cost
Marginal Analysis
Law of Increasing Opportunity Cost
Six factors leading to economic growth
CHAPTER THREE
Law of Demand
Non-price Determinants of Demand
Law of Supply
Non-price Determinants of supply
Equilibrium vs. Disequilibrium (Surpluses and Shortages)
Practice Questions
1. The 5 ingredients that make up an economy are land, capital, labor, entrepreneurship, and technology.
2. Figure out the overall cost for the first two years for a woman starting her own business:For the first year her costs are $40,000 and for the subsequent year $35,000. Keep in mind that she has to quit her job that pays $36,000 net per year, plus a guaranteed raise of 3% the following year. In addition, this woman will lose her health care benefits which happen to average $2000 per year in expenses.
a. $75,000
b. $77,000
c. $143,000
c. $151,000
d. $152,080
3. Still working with numbers from question #2, what is the opportunity cost for the lady if with her start-up fund she had the option of buying fun vehicles, which include a boat for $42,000, a motorcycle for $17,000, and a snowmobile for $6,000?
4. Which of the following would increase the price of dairy products?
a. An increase in the price of corn and other animal feeds
b. Cheaper cereal, flour and sugar
c. More expensive soy and almond milk and cheeses
d. A greater number or cows, sheep and goats
e. A, B & C only
f. All of the above
5. How would the following shift the US PPC?
a. Increased human capitalleftright
b. Nano technologyleft right
c. A smaller labor forceleft right
6. If price increases then demand would decrease.
7. If price decreases then quantity supplied would decrease.
8. Which of the following would decrease demand (shift it to the left). Circle all that apply.
a. Smaller number of buyers
b. Higher income
c. Increase in price
d. Lower future price expectation
e. Cheaper substitute
f. Lower price
g. Cheaper complement
9. Which of the following would increase supply (shift it to the right). Circle all that apply.
a. Greater number of sellers
b. Higher resource prices
c. Higher prices
d. Lower future price expectation
e. Another product seller can produce or sell that possesses a lower price and lower
profits
f. Lower taxes
g. Lower prices
10. Which of the following has a higher OC?
a. Selling surf boards in Iowab. opening an upscale restaurant in Boston
11. Espresso and milk are complements. If the price of espresso decreases, then:
a. Demand for espresso increasesc. Demand for espresso decreases
b. Demand for milk increasesd. Demand for milk decreases
12. What would increase quantity demanded and decrease quantity supplied?
a. Increase in priceb. Decrease in pricec. Increase in number of buyers
13. What would cause the price of anything to decrease?
a. An increase in Demand or decrease in Supply
b. A decrease in Demand or increase in Supply
14. What is the overall cost for a man who earns $900 per week with an employer who does not offer paid vacations, if he must spend $3,000 to go on a 7-day cruise, plus arrange to kennel his dog for $25 per day?
a. $3,025
b. $3,175
c. $4075
d. None of the above
15. OC is fiercest when an economy is efficient, because the production of one more thing can only come at the expense of something else.
16. We continue production so long MB > MC and stop when they’re equal.
17. Public goods are necessary because all can benefit regardless of income and tax contribution.
18. The maturity stage of a product or company best demonstrates the Law of Increasing OC.
19. When the price of a product or service changes, then the quickest and cheapest solution for a business is to ______
20. Explain the six factors that would bring about economic growth?
21. A decrease in supply graphically means that a decrease in total quantity supplied (a change in the range) has occurred, perhaps a reduction in prices as well.
22. Stating that “California has the ninth largest economy in the world” is an example of positive economics.
23. Mass customization sacrifices volume for the sake of products and services tailored to individual tastes and preferences.
24. A mismatch between capacity of capital for a firm and the number of workers required to operate it at optimal levels leads to increased opportunity cost.
25. What can eliminate scarcity permanently?
26. Looking at the graph below, what is the opportunity cost of producing 12 units of x?
Note this chart, study what is and what is not attainable.
Additional Points:
1. Suppose that you have a marginal benefit of $200 per month should you rent your basement, then according to Marginal Analysis, you should rent your basement if:
a. Your net worth is negative
b. Your marginal cost is $50 (why? Because the $200>$50)
c. Your marginal cost is $250
d. The basement is not needed for storage
2. How does the following change Demand or Supply?
a. Business taxes are decreased on the textile Industry.
b. Capital becomes readily available for grain growers.
c. A new study reveals that legumes reduce bad cholesterol.
d. Price of home heating oil is expected to increase in the future.
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