Unit 1 Challenge 1

Microeconomics focuses mainly on the study of decisions made by __________.

individuals and local governments

individuals and firms

firms and national governments

local and national governments

Macroeconomics studies the behavior of __________.

firms

individuals

households

an economy in its entirety

Which of the following statements describes macroeconomics?

It looks at the overall ups and downs of the economy.

It is an academic discipline that looks at variables that affect the quality of human life.

It looks at how individuals and entities optimize the decisions they make.

It considers the behavior of individuals and firms on an individual level.

Ben was offered a full-time position working on his uncle's construction crew and would be paid $20 per hour.  Instead, Ben chose to take classes at the local college so he could finish his degree. 

In economic terms, this loss of potential income is known as a(n) __________.

utility maximization

opportunity cost

cost/benefit analysis

marginal utility

Which of the following is a characteristic of a rational consumer?

Rational consumers reduce the quantity demanded when prices decrease.

Rational consumers analyze costs and benefits when making decisions.

Rational consumers aim to increase profit when making decisions.

Rational consumers assume unlimited resources when making decisions.

Which of the following best describes a rational consumer?

Uses infinite resources to maximize consumption

Has limited wants and needs

Wants to make choices that maximize utility

Purchases when the cost is greater than the additional benefit

Which of the following statements is true as it relates to labor/leisure trade-off?

Everyone has the same labor/leisure trade-off.

It is necessary to consider the resources necessary for production with a labor/leisure trade-off.

It is the comparison of time spent working to time spent participating in non-work activities.​

If someone works a lot it can be assumed they have a lot of leisure time too.

Terry currently works a part-time evening job on campus.  With this job, he has free 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 earn a 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?

Labor/leisure trade-off

Utility maximization

Production constraints

Explicit cost

Economists assume that all rational consumers will allocate their resources in order to __________.

maximize their income

have the greatest number of choices

maximize their utility

incur the lowest costs

Sarah is deciding between two different pairs of running shoes: The Minimalist 7, which cost $99, and the Sprint XT, which are priced at $155. Although both would meet her needs, Sarah knew that she would get more wear and more support out of the higher-priced Sprint XT shoe.

If she wanted to buy the shoes today, Sarah had the ability to pay $99 for the Minimalist 7s. However, if she wanted to buy the Sprint XTs, she would need to pick up another shift at her job to earn the extra money.

Which of the following statements describes the marginal cost?

Sarah's desire to buy new shoes will decrease, because she will not have as much free time to run.

Sarah must work another night.

Sarah wants the higher-quality shoes.

Sarah does not have $155.

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 should buy new shoes every six months, otherwise the tread can wear down quickly and start to cause injuries. Juan suggested that, for only $5, Kyle should join the store running club, where he can receive members-only coupons and a choice of four benefit options.

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

A frequent buyers' store discount card

A sale on biking shoes at a store down the street

A 10% discount on wool sweaters, caps and gloves

A $10 gift card that can be used toward the purchase of any energy drinks

Paul is deciding between two different types of winter jackets: The Classic, which costs $120, and the Extreme, which is priced at $195. Although both would meet his needs, Paul knows that he would get more wear out of the higher-priced jacket because it includes an extra layer and a hood.

If Paul waits and purchases the more expensive jacket, it will provide more warmth and he will get more wear out of it, which is also known as a __________.

marginal benefit

consumer optimization

marginal cost

constraint

A firm decides to produce 100,000 baseballs. 

Which of the following would be its opportunity cost?

Price of cowhide to produce 100,000 baseballs

Price paid to power their factory

The wages paid to workers

The 50,000 footballs the firm could have produced otherwise

Julie uses social media sites and word-of-mouth as 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 reach her 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.

cost minimization

utility maximization

profit maximization

opportunity costs

Firms want to adopt an output strategy that allows them to __________.

hire the fewest workers

use the most resources

produce the greatest amount possible

maximize their profits

Which of the following is the best example of mechanized capital?

Teachers working in a classroom

Land purchased for a new factory

Dividend on a stock paid to shareholders

An oven utilized in a pizza restaurant

Wage and salary contracts, leases and fixed factory sizing are all examples of __________.

factors of production

short-run production constraints

cost minimization strategies

variable costs

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

The property on which a clothing factory is located

The engineers who designed and created the assembly line for a manufacturing company

The air popper used to make popcorn at a movie theater

The trucks used to transport refrigerated goods to grocery stores

All profit maximizing firms will produce until __________.

all capital is paid for

fixed costs are covered

marginal revenue equals marginal cost

total revenue equals total cost

Which of the following is an example of marginal revenue?

A bicycle shop pays to keep its store open additional hours.

A restaurant makes and sells an additional meal.

A clothing boutique hires an additional worker.

A toy store pays for another shipment of Legos.

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?

The firm should continue to produce the shoes since the marginal revenue is still greater than the marginal cost.

The firm should stop producing the shoes since their profit margin is smaller than before.

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.

The firm should shut down this production line since it is driving down its overall profitability.

Anderson's Running manufactures a hydration belt, which includes two water bottles. These belts are in high demand with runners because of the unique fit of the belt. Anderson's Running produces the hydration belt at its factory, but it purchased the water bottles in bulk from another supplier.

In this scenario, the water bottles are an example of __________ goods and the hydration belt is an example of __________ goods.

intermediate; final

final; intermediate

intermediate; substitute

final; substitute

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

A plane ticket from New York to Dubai

Cell phone service

The wiring for a custom-built house

Electricity

Which of the following is true of capital-intensive and labor-intensive goods?

Technological advancements can move production to be more labor-intensive.

Labor-intensive techniques are best used to produce when capital is inexpensive.

Capital and labor cannot be complements to each other.

Capital and labor can be substitutes for each other.

Laura has started working more hours at her part-time job, giving her a higher income. She decided to purchase a higher-quality purse to replace her older bag that she currently carries. Laura visits the boutique near her job the following day.

Keeping Laura's situation in mind—her recent increase in income and her desire for a higher-quality purse—the type of goods that describe the purses that are sold at the boutique are called _________ goods.

luxury

inferior

complement

Giffen

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 the owner 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.

Veblen

luxury

inferior

Giffen

Due to his recent increase in income, Peter is going to buy a quality pair of winter gloves from a specialty shop rather than a bargain set from a discount shop.

The bargain gloves are now considered a(n) __________ good.

luxury

Veblen

normal

inferior

Which choice below is a reason why a demand curve is downward sloping?

For certain goods, demand increases as the price increases.

As price increases, producers will supply more of a good.

Changes in income can cause the demand curve to shift.

As price increases, consumers will purchase less of a product.

Which of the following would NOT be an example of ceteris paribus as it relates to the Law of Demand?

As the price per gallon of gasoline decreases, people purchase more gasoline.

As the cost of tuition goes up, the quantity demanded of four-year degrees decreases.

As the price of beef increases, buyers purchase less beef.

Due to the threat of a hurricane, the demand for generators increases.

Which of the following statements about price and demand is FALSE?

The graph of the demand curve slopes downward, indicating that quantity falls as price increases.

The relationship between price and quantity demanded is considered to be inverse.

The Law of Demand states that if price increases, the quantity produced will increase.

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 has increased, so consumers are buying more hot dogs.

·        C.)

Tomatoes have become more expensive, so consumers are buying fewer tomatoes.

·        D.)

Consumers are buying less coffee because tea is cheaper.

A specific pair of orange shoes were the trademark shoe of a famous runner and used to be so popular that a store would sell out as soon as the shoes came in. However, the famous runner got caught in a doping scheme and now no one wants to buy these shoes at all.

Which answer best describes in economic terms what happened with the orange shoes?

The situation created an increase in supply, causing movement along the supply curve.

There was an increase in the quantity demanded.

The price changed, causing movement along the demand curve.

A variable unrelated to the price of the shoe caused a shift in demand.

The state university closed access to the nearby wooded trails five months ago because it was deemed unsafe. Ever since then, not as many runners have been purchasing trail shoes, leaving many available in the shoe store.

As a result of the trail closing, which of the following occurred?

Shift in demand

Producer surplus

Consumer surplus

Movement along the demand curve

Which of the following is the best example of the Law of Supply?

·        A.)

As the price of scooters increases, firms produce more scooters.

·        B.)

The price of Christmas trees goes up in December.

·        C.)

As the price of apples increases, consumers buy more oranges.

·        D.)

Due to an increase in the price of coffee, more tea is sold.

Which of the following statements about price and supply is FALSE?

·        A.)

The Law of Supply states that consumers will buy less if the price increases.

·        B.)

If the price of a good falls, the producer is willing to supply less.

·        C.)

Quantity rises when the price rises.

·        D.)

The graph of the supply curve slopes upwards.

Why does a supply curve slope upward?

·        A.)

Because costs of production eventually decrease.

·        B.)

Because as prices increase, the opportunity cost of producing goods decreases.

·        C.)

Because as prices increase, producers are willing and able to supply more.

·        D.)

Because there is an inverse relationship between price and quantity supplied.

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

A firm produces more potato chips because the price has increased.

A firm produces more jeans because of the latest technological advancements in the production of jeans.

Wages of auto workers rises, so a car company produces fewer cars.

The cost of ink has increased, so a firm produces fewer posters.

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

the price of coffee decreases

a new technology for harvesting coffee beans develops

the cost of growing coffee beans increases

coffee workers' wages are cut in half

Which of the following would cause an increase in the supply of steak?

Increase in transportation costs to supermarkets

Decrease in the price of feed for cattle

Mad Cow disease

Increase in the price of fish

Thompson's Shoe Emporium can produce and ship 200 pairs of rain boots by 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 Locker at $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 Emporium would have agreed to receive for the shoes ($50) is known as the __________.

profit maximization

deadweight loss

producer surplus

consumer surplus

Jeremy would be willing to pay $8 for a soda at a football game. The price of the sodas is $5, and the vendors sell 1,000 sodas during each game.

What is Jeremy's consumer surplus?

$5

$13

$8

$3

Which of the following is an example of consumer surplus?

Cid sold his movie collection for $30, although he wanted $50 for it.

Tomas was willing to sell his original artwork for $200, but someone offered to buy it for $250.

Minnie paid $20 for a pair of sunglasses, even though she was willing to pay up to $40 for them.

Katie wanted to pay $70 for concert tickets, but purchased them last minute for $130.

Country A can produce either 10 computers or 30 bushels of apples.

Country B can produce either 8 computers or 16 bushels of apples.

Which of the following is true based on the information above?

Country A has the absolute advantage in the production of both computers and apples.

Country B has the absolute advantage in the production of both computers and apples.

Country A has the absolute advantage in the production of only apples.

Country B has the absolute advantage in the production of only computers.

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?

Anovis has a comparative advantage in both backpack and beanie hat production.

NorthCoast Clothing has a comparative advantage in backpack production.

Anovis has a comparative advantage in backpack production.

NorthCoast Clothing has a comparative advantage in both backpack and beanie hat production.

Each worker at Palona can produce 10 pairs of pants in an hour, while the workers at Lakeshore Clothing produce eight pairs of pants in one hour.

Which of the following best describes the situation between the two competing companies?

Comparative advantage

Two-Factor Model

Lower average cost

Absolute advantage

 

 

 

 

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