#1 True/False: Reducing unemployment will shift an economy’s production possibilities curve outward.

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#2 How would you graphically determine whether a country is operating at full employment or not?
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#3 What does a straight line production possibilities curve imply?
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#4 True/False: All else equal, if an economy is operating on the PPC, the only way for it to produce more of one good is to give up some of the other.
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#5 A production possibilities curve shows the maximum amounts of two goods that can be produced under what assumptions?
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#6 Why is the production possibilities curve typically concave to the origin (bowed out)? What does this imply about the opportunity cost?
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Refer to this table for questions #7 to #14:

#7 Refer to the above table. If the economy is producing at C, what is the opportunity cost of one more unit of X?
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#8 Refer to the above table. If the economy is producing at point C, what is the opportunity cost of one more Y?
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#9 Refer to the table above. If this economy has a total output of 0X and 20Y, what can we infer from this?
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#10 Refer to the table above. What must happen in order for this economy to produce 8X and 18Y?
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#11 Refer to the table above. Without changing the technology available, how might this economy achieve a total output beyond its PPC?
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#12 Refer to the table above. Without graphing, how can we tell if the opportunity cost in this economy is increasing, decreasing, or constant?
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#13 Refer to the table above. If you were to graph this PPC, what would the curve look like?
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#14 Refer to the table above. At which production alternative will this economy produce at?
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#15 Will an economy achieve faster economic growth by producing more consumer goods or more capital goods?
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#16 All else equal, a sudden population decline will likely do what to a production possibilities curve?
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#17 A new piece of machinery is invented that allows us to produce the same number of goods with fewer resources. What is this considered a change in and what will it do to the PPC?
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#18 What does a convex PPC imply? Would this be likely in the real world?
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#1 A friend points out to you that he sold stocks for \$1000 that he bought a year ago for \$1000. He says that even though he didn’t gain anything, at least he didn’t lose anything. As an economist, would you agree or disagree with him?

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#2 True/False: The concept of opportunity cost can be described as the best forgone alternative.
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#3 Your last final exam is tomorrow. All your friends finished their finals today and are inviting you to go see a movie tonight. What two economic ideas are you confronted by (assuming you want to see this movie)?
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#4 You just graduated from high school. You have the option of taking a full time job that pays \$30,000 a year or going to a 4 year university that would cost you \$10,000 a year. What is the opportunity cost of attending college for one year?
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#5 What does ceteris paribus mean and what why do we use it?
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#6 What concept does economics primarily concern itself with?
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#7 What does microeconomics primarily concern itself with?
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#8 Macroeconomists attempt to understand things from the viewpoint of:
A. Government institutions
B. Big corporations.
C. The entire economy.
D. Individual people.
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#9 Which of these is likely a microeconomics topic?
A. A ten year study of income levels for CEOs of tech startup companies.
B. An analysis of the productive capacity for a new piece of equipment.
C. A forecast of future oil prices.
D. Understanding the amount of satisfaction a person gets from eating a cheeseburger.
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#10 “The unemployment rate fell by two percentage points last month.” This statement likely relates to which economic field of study?
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#11 Normative statements are:
A. Statements of fact.
B. Speculations on the future.
C. Based on value judgments.
D. The best possible explanation with the given information.
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#12 Positive statements are:
A. Statements of fact.
B. Speculations on the future.
C. Based on value judgments.
D. The best possible explanation with the given information.
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#13 True or False: “The amount of money the government spends on welfare is at a good level” is an example of a positive statement.
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#14 What is the difference between positive and normative statements?
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#15 In short, what does the economizing problem deal with?
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Categorize the following resources:
Natural gas
A plumber
Accounting software
Wood pulp used to make paper
An office building
Bill Gates (as the co-founder of Microsoft)
The current CEO of Microsoft (Hint: It’s not Bill Gates)
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#16 Is money considered an economic resource?
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#17 What separates an entrepreneur from a laborer?
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#18 In economics, what does the word investment generally refer to?
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#19 What’s the difference between consumer goods and capital goods?
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Fill in the Blank[break]
#1 The law of demand states that (1)_____ and (2)_____ are inversely related.

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#2 The difference between supply and quantity supplied is that supply refers to the entire (1)_____ while quantity supplied refers to a specific (2)_____.
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#3 Price ceilings are only effective if they are placed (1)_____ the equilibrium price and price floors are only effective if placed (2)_____ the equilibrium price.
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#4 The law of supply states that price and quantity are (1)_____ related.
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#5 If at the current market price of \$8, quantity demanded is 8,000 and quantity supplied is 3,500, then we have a (1)_____ of (2)_____.
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#6 Graphically, to get a market demand curve from individual demand curves, we (1)_____ up the individual demand curves.
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#7 If two goods are substitutes and the price increase for one, the demand will (1)_____ for the other.
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#8 New sellers entering the market will cause supply to (1)_____.
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#9 An increase in supply will cause the market price to (1)_____ and the market quantity to (2)_____.
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#10 If two goods are complements and the price decreases for one, the demand will (1)_____ for the other
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#11 When graphing demand, economists conventionally place (1)_____ on the Y-axis and (2)_____ on the X-axis.
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#12 When graphing supply, economists conventionally place (1)_____ on the Y-axis and (2)_____ on the X-axis.
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#13 Demand for normal goods varies (1)_____ with income while inferior goods vary (2)_____ with income.
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#14 Graphically, to get a market supply curve from individual supply curves, we (1)_____ up the individual supply curves.
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#15 An increase in taxes for a good will (1)_____ supply while an increase subsidies will (2)_____ supply.
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#16 A decrease in demand will cause the equilibrium price to (1)_____ and the equilibrium quantity to (2)_____.
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Multiple Choice[break]
#1 What are might be two possible reasons a consumer buys less of a product when the price has increased?
A. Income and the price of substitute goods have changed.
B. There have been changes in taxes and subsidies.
C. The Coriolis effect and the Magnus effect.
D. The income effect and the substitution effect.
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#2 Which of the following are economists referring to when talking about supply?
A. The various quantities of a good or service that consumers are willing and able to purchase over a range of prices during a specified period of time.
B. The various quantities of a good or service that producers are willing and able to sell over a range of prices during a specified period of time.
C. All else equal, as price increases, quantity demanded decreases and as price decreases, quantity demanded increases.
D. All else equal, as price increases, quantity supplied increases and as price decreases, quantity supplied decreases.
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#3 What effect will surpluses have on the market for a good?
A. Increase supply and increase demand of the good until the equilibrium price and quantity is reached.
B. Reduce supply and reduce demand of the good until the equilibrium price and quantity is reached.
C. Put pressure on prices to fall.
D. No effect
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#4 Which of the following are economists referring to when talking about demand?
A. The various quantities of a good or service that consumers are willing and able to purchase over a range of prices during a specified period of time.
B. The various quantities of a good or service that producers are willing and able to sell over a range of prices during a specified period of time.
C. All else equal, as price increases, quantity demanded decreases and as price decreases, quantity demanded increases.
D. All else equal, as price increases, quantity supplied increases and as price decreases, quantity supplied decreases.
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#5 Which of the following will not cause the supply of corn to change?
A. The price of wheat changes.
B. The number of people buying corn changes.
C. The government subsidization of corn changes.
D. The efficiency of corn harvesting changes.
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#6 Which of the following will not cause the demand for blueberries to change?
A. The price of blackberries fall.
B. A blueberry diet craze sweeps the nation.
C. The price of blueberries is expected to change.
D. The price of blueberries changes.
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#7 Which of the following represents an increase in quantity supplied in this graph?

A. S1 to S2.
B. S2 to S1.
C. Point a to point b.
D. Point b to point a.
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#8 You notice that the price of your favorite brand of cereal has risen. Which of the following might be a cause of the price rise?
A. The cost of producing cereal has fallen.
B. The prices of other similar cereals have risen.
C. Fewer people seem to be buying this brand.
D. The price of milk has risen.
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#9 What are the market effects of increasing demand and decreasing supply at the same time?
A. Price increases, quantity decreases.
B. Price is indeterminate, quantity increases.
C. Price increases, quantity is indeterminate.
D. Price decreases, quantity increases.
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#1 What are the determinants of demand?
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#2 What are the determinants of supply?
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#3 What are the two endogenous variables in the demand model?
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#4 What do economists call the ability for markets to be able to reach the market clearing price on its own?
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#5 As a consumer, a rising product price makes purchasing other similar products relatively cheaper to me. What effect am I describing?
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#6 Find the equilibrium price and quantity. If the government instituted a market price of \$5, would this be a price ceiling or a price floor? What would be the resulting surplus or shortage?

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#7 How will improvements in production techniques affect supply? Why?
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#8 What is the equation of this line? Is this line more likely to be a demand curve or a supply curve?

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#9 What is the equation of this line? Is this line more likely to be a demand curve or a supply curve?

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#10 As a consumer, a falling product price allows me to purchase more things with my given level of income. What effect am I describing?
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#11 Computers and software are examples of what kind of goods?
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#12 Fill in the following table. What is the equilibrium price and quantity?

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#13 Your friend says to you, “In the market, when demand increases, price increase causing the quantity to increase. But the law of demand states that as prices go up, quantity should go down. Therefore, law of demand must be wrong.” Explain the flaw in his reasoning.
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#14 Chicken and beef are examples of what kind of goods?
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#15 What are the two endogenous variables in the supply model?
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#16 Cell phone plans and butter are examples of what kind of goods?
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#17 What effect will a change in resource prices have on supply? Why do resource prices affect supply at all?
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#18 Suppose you are hired as an economist to analyze the market L-shaped couches. You notice that every year for the past five years, more and more L-shaped couches have been sold at lower and lower prices. What might be a possible explanation for this?
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#19 Used cars are an example of what kind of goods?
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#20 How do you know if a variable is endogenous or exogenous?
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#21 What effect will a change in producer expectations have on supply?
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#22 Suppose we are at the equilibrium level for some good. If the consumers of this product have their incomes increase, what will happen to the equilibrium price?
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#23 Given the demand equation $P=-1/3Q_{D}+25$ and the supply equation $P=2/3Q_{S}+4$, find the equilibrium price and quantity without graphing.
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#24 Using the info above, if the government instituted a market price of \$10, do we have a shortage or surplus? Of how much? Is this a price ceiling or price floor?
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#25 Graph $P=-1/3Q_{D}+25$ and $P=2/3Q_{S}+4$ and the price ceiling of \$10. Does the information from the graph match the answers you got earlier?
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#26 Lobster is an example of what kind of goods?
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#27 What effects do a change in the prices of other goods have on supply of a good?
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#28 Identify the four complex demand and supply cases and their resulting effects on the market price and quantity.
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True/False[break]
#1 Supply curves have a positive slope.
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#2 Demand and supply curves can never be straight, otherwise we wouldn’t call them curves.
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#3 One explanation for why demand slopes downward is because of a concept called diminishing marginal cost.
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#4 Economists conventionally label the X-axis price and the Y-axis quantity when graphing demand and supply.
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#5 Demand for normal goods varies directly with income.
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#6 We can determine the market price and quantity is for a good or service just by looking at the supply curve.
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#7 All else equal, an improvement in production technology causes the equilibrium price to fall.
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