When bonus points are offered for class participation more students participate This is an example of Test 1 Question 1 Answer Selected Answer e responding to incentives Correct Answer e responding to incentives Question 2 4 out of 4 points Answer Selected Answer Correct Answer Question 3 0 out of 4 points Answer Selected Answer c rises decreases rises decreases Suppose that the price of lettuce used to produce tacos increases As a result the equilibrium price of a taco and the equilibrium quantity According to the basic economic decision rule the economically efficient crime rate is the rate at which the total cost of crime is lowest the rate at which the additional benefits from a small decrease in the crime rate are just equal to the additional cost of crime prevention Which of the following is correct i A surplus puts downward pressure on the price of a good ii A shortage puts upward pressure on the price of a good iii There is no surplus or shortage at equilibrium Correct Answer b Question 4 4 out of 4 points Answer Selected Answer i ii and iii i ii and iii Correct Answer Question 5 4 out of 4 points Answer Selected Answer Correct Answer d d A Pakistani textile worker can produce 5 yards of denim cloth or 5 pairs of finished denim jeans in one day An American textile worker can produce 75 yards of denim cloth or 15 pairs of finished jeans in one day To maximize the total output of denim cloth and finished jeans the Pakistani worker produces finished jeans and the American worker produces denim cloth the Pakistani worker produces finished jeans and the American worker produces denim cloth As a result of a freeze in south Florida both buyers and sellers expect the price of orange juice to be higher in the near future than it is now What effect does this change in expectations have on the current equilibrium price and quantity of orange juice Question 6 0 out of 4 points Answer Selected Answer Correct Answer Question 7 4 out of 4 points Answer Selected Answer Question 8 4 out of 4 points c d The current equilibrium price increases the current equilibrium quantity is unchanged The current equilibrium price increases the effect on equilibrium quantity cannot be determined The equilibrium price of a good occurs when the quantity of the good demanded equals the quantity of the good supplied Correct Answer quantity of the good demanded equals the quantity of the good supplied Which of the following is not a key idea in the economic way of thinking Answer Selected Answer b Poor people are discriminated against and should be treated more fairly Poor people are discriminated against and should be treated more fairly Economists use the ceteris paribus assumption to isolate the factor of interest and investigate its effects in the clearest possible way to isolate the factor of interest and investigate its effects in the clearest possible way When we say that Kuwait has a comparative advantage over the U S in the production of crude oil we mean that Kuwait can produce crude oil at lower opportunity cost than the U S can produce crude oil at lower opportunity cost than the U S Correct Answer b Question 9 4 out of 4 points Answer Selected Answer b Correct Answer b Question 10 4 out of 4 points Answer Selected Answer e Correct Answer e Question 11 4 out of 4 points Scarcity Answer Selected Answer Correct Answer Question 12 4 out of 4 points a results when the amount of a resource available is insufficient to satisfy society s wants a results when the amount of a resource available is insufficient to satisfy society s wants It is for someone to have a comparative advantage in all activities It is for someone to have an absolute advantage in all activities Answer Selected Answer b not possible possible Correct Answer b not possible possible Question 13 4 out of 4 points Answer Selected Answer c For consumers golf clubs and golf lessons are complements If the price of golf clubs decreases the demand for golf lessons will increase and the demand curve for golf lessons will shift rightward Correct Answer c increase and the demand curve for golf lessons will shift rightward Suppose soap is a substitute in production for shampoo A decrease in the price of soap will the equilibrium price of shampoo and the equilibrium quantity of shampoo d decreases increases decreases increases Correct Answer d Suppose an excise tax is imposed on sellers of soft drinks and at the same time a public relations campaign is launched intended to discourage people from consuming soft drinks The predicted effect of these two events taken together on the market for soft drinks is a d e decrease in equilibrium price but the effect on equilibrium quantity cannot be determined decrease in equilibrium quantity but the effect on equilibrium price cannot be determined Question 14 4 out of 4 points Answer Selected Answer Question 15 0 out of 4 points Answer Selected Answer Correct Answer Question 16 4 out of 4 points Everyday we make many choices We can t avoid making choices because our wants exceed the resources available to satisfy them our wants exceed the resources available to satisfy them As a country that has a bowed out production possibilities frontier increases production of the good in which it has a comparative advantage the opportunity cost of a unit of that good Answer Selected Answer e Correct Answer e Question 17 4 out of 4 points Answer Selected Answer a Correct Answer a increases increases Question 18 4 out of 4 points Answer Selected Answer b The correlation between alcohol abuse and other risky behaviors has led many universities to adopt policies strictly regulating the consumption of alcohol by students A research paper by the National Bureau of Economic Research concludes however that the correlation between alcohol abuse and other risky behaviors may reflect reverse causation rather than cause and effect Which of the following explanations best fits the definition of reverse causation Students who engage in other risky behaviors abuse alcohol to overcome their inhibitions Students who engage in other risky behaviors abuse alcohol to overcome their inhibitions Some individuals enjoy strawberries dipped in chocolate For these individuals a decrease in the price of strawberries will ceteris paribus increase the quantity demanded of chocolate but not the demand increase the demand for chocolate Correct Answer b Question 19 0 out of 4 points Answer Selected Answer b Correct Answer d Question 20 4 out of 4
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