Economics Short Answers

1. Microeconomics focuses on (Points : 2)

        the religious decisions that a business manager makes
        the monetary policy made by the Federal Reserve Bank
        the purchasing decisions that an individual consumer makes
        the fiscal decisions made by the government.

2. If resources are “scarce,” it means that they: (Points : 2)

        cannot provide enough goods or services to satisfy all human material wants and needs.
        have no opportunity cost.
        are probably not valued by consumers.
        have an unlimited supply

3. The importance of an economic model is that it allows us to (Points : 2)

        build a complex and accurate model of the economy.
        build an accurate mathematical model of the economy.
        focus on the effects of only one change at a time.
        avoid opportunity costs.

4. A college student is faced with a difficult decision of how to spend one hour tonight. She could babysit her professor’s child at an hourly wage of $7, she could work at the college library at a wage of $6, or she could finish her economics homework assignment. If she chooses to complete her homework assignment, she has incurred an opportunity cost equal to (Points : 2)

        $7
        $6
        $13
        $0

5. Which of the following is a normative economic statement? (Points : 2)

        Government has grown too large and should be reduced.
        There has been an increase in the rate of inflation.
        Government is subject to the same rules as all other institutions.
        The money supply grew by 3% last year.

6. An example of a positive statement is: (Points : 2)

        the rate of unemployment should be 4%.
        a high rate of economic growth is good for the country.
        the federal government spends half of its budget on national defense.
        everyone in the country should be covered by national health insurance.

7. The typical supply curve illustrates that: (Points : 2)

        other things equal, the quantity supplied for a good is inversely related to the price of a good
        other things equal, the supply of the good creates its own demand for the good
        other things equal, the quantity supplied for a good is positively related to the price of a good
        price and quantity supplied are unrelated.

8. Which of the following examples illustrates the law of demand? (Points : 2)

        An increase in tuition encourages more students to enroll in college because the quality of education has risen.
        Consumers buy more personal computers because prices have fallen.
        Oil companies drill for new sources of oil because oil prices are higher
        Fewer people play golf because incomes are lower

9. An improvement in production technology that reduces costs will: (Points : 2)

        increase the price of equilibrium.
        shift the supply curve to the left.
        shift the supply curve to the right.
        shift the demand curve to the left.

10. In much of the country, homeowners choose to heat their houses with either natural gas or home heating oil. Which of the following would cause a change in the demand for natural gas? (Points : 2)

        a change in the price of home heating oil.
        a change in income.
        an increase in consumer tastes for natural gas as an energy source.
        all of the above

11. The table for Market for Chocolate-Covered Peanuts is given below:

Price (per bag)

Quantity Demanded (bags per month)

Quantity Supplied (bags per month)

$.90

70

280

  .80

105

245

  .70

140

210

  .60

175

175

  .50

210

140

  .40

245

105

  .30

280

  70

Based on the table given above, the equilibrium quantity and the equilibrium price are ________ bags and ________. (Points : 2)

        140; $0.40
        175; $0.60
        175; $0.80
        210; $0.50

12. The table for Market for Chocolate-Covered Peanuts is given below:

Price (per bag)

Quantity Demanded (bags per month)

Quantity Supplied (bags per month)

$.90

70

280

.80

105

245

.70

140

210

.60

175

175

.50

210

140

.40

245

105

.30

280

70

Based on the table given above, a surplus of 210 bags of chocolate-covered peanuts exists if the price is ________ per bag.
(Points : 2)

        $0.90
        $0.80
        $0.60
        $0.40

13. If the supply and demand curves intersect at a price of $47, then any price above that would result in: (Points : 2)

        a shortage
        a surplus
        equilibrium
        an increase in demand

14. If chicken and beef are substitutes, then a fall in the price of chicken will bring about (Points : 2)

        an increase in the demand for beef
        a decrease in the demand for beef.
        a decrease in the quantity demanded of beef.
        no change in the demand for beef

15. Which of the following will most likely result from a destruction of half of the Florida orange crop due to a hard freeze? (Points : 2)

        a decrease in the demand for oranges (shift to the left)
        an increase in the supply of oranges (shift to the left)
        an increase in the quantity of oranges bought and sold
        an increase in the price of oranges

17.  
The Producer Surplus in this graph is (calculate the area of the respective triangle) (Points : 2)

        $140
        $60
        $40
        $20

18. Consider that the market for shoes is at equilibrium. If the supply of shoes increased, what would be the effect on the equilibrium price and quantity?
(Points : 2)

        price would increase and quantity would increase
        price would decrease and quantity would decrease
        price would increase and quantity would decrease
        price would decrease and quantity would increase

19. Assume that Velcro is becoming more and more popular for a variety of uses, including as fasteners for shoes. What should happen to the equilibrium price and quantity for shoelaces as a result?
(Points : 2)

        Both price and quantity will increase
        Both price and quantity will decrease
        Price will increase and quantity decrease
        Price will decrease and quantity increase

20. Kelly is an attorney and also an excellent typist. She can type 60 pages per hour and charges attorney fees at $100 per hour. There is a 60 page document that needs to be typed and Todd wants to do it. He can type 30 pages per hour and would like to convince Kelly to accept his services. 
Explain why Kelly will accept Todd’s offer if he says: Kelly, I will help you if you pay me $45 per hour” but will reject it if Todd says: “Kelly, I will help you if you pay me $51 per hour.”
(Points : 6)

21. While waiting in line to buy two tacos at 75 cents each, and a medium drink for 80 cents, Jordan notices that the restaurant has a value meal containing three tacos and a medium drink all for $2.50. 
What would be the cost of getting the 3rd taco for Jordan?  (in other words, what is the incremental cost of getting the 3rd taco?
Include your logic and calculations in your answer
(Points : 6)