Econ 162 Midterm Exam A1

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Questions and Answers

What is the best description of economics?

The study of markets

The study of choices that arise from scarcity (correct)

The study of supply and demand

The study of business decision-making

Which of the following accurately defines 'capital' in economics?

It has a return known as profit

It is solely cash used for transactions

It contributes to economic reduction

It is the physical tools used in production (correct)

What process do economists use to study the world?

Model-building (correct)

Intuition-based analysis

Trial and error

Emphasis on historical events

Why is the production possibility curve (PPC) concave?

Due to the law of increasing costs Signup and view all the answers

What effect does an increase in the price of cashew butter have on peanut butter prices?

It increases the demand for peanut butter Signup and view all the answers

Which of the following is not considered a determinant of supply?

The number of buyers in the market Signup and view all the answers

What occurs when demand increases in a market?

Price increases and quantity increases Signup and view all the answers

What is the result of imposing a price floor in the soybean market?

It creates a surplus in the market for soybeans Signup and view all the answers

What happens when a price floor is set below the equilibrium price?

It is ineffective. Signup and view all the answers

Which statement about the four fundamental economic questions is incorrect?

They only concern the distribution of goods. Signup and view all the answers

What is the total number of fluid ounces of soup available initially for the restaurant?

300 fluid ounces Signup and view all the answers

In the case of negative externalities, what does the private market typically provide?

Too little of the good compared to the social optimum. Signup and view all the answers

If one bowl of soup contains 15 fluid ounces, how many bowls can the restaurant serve with 300 fluid ounces?

15 bowls Signup and view all the answers

Which of the following is considered a public good?

A lighthouse. Signup and view all the answers

Which statement about college opportunity costs is true?

Opportunity costs decrease as one gains age and experience. Signup and view all the answers

What is the opportunity cost of one bowl of soup in terms of cups of soup?

2 cups of soup Signup and view all the answers

Which town has an absolute advantage in issuing speeding tickets?

Johnson City Signup and view all the answers

What effect does immigration have on a Production Possibility Curve (PPC) with agricultural products on the vertical axis?

It increases the horizontal intercept, leaving the vertical intercept unchanged. Signup and view all the answers

What is the likely outcome if both the supply and demand for petroleum fall?

Quantity will fall, but price changes are indeterminate. Signup and view all the answers

If Vestal specializes in snow plowing, what should it trade with Johnson City for speeding tickets?

Tickets per mile plowed Signup and view all the answers

Which of the following is NOT one of the three types of economic systems?

Monopoly Signup and view all the answers

What is the opportunity cost of issuing one ticket for Vestal?

0.5 miles of snow plowing Signup and view all the answers

After receiving additional soup, how will the PPC of the restaurant be affected?

It shifts to the right Signup and view all the answers

What is the total output of miles plowed and tickets issued for Johnson City when maximizing resources?

300 miles, 100 tickets Signup and view all the answers

Study Notes

Economics Concepts

Economics studies choices arising from scarcity, rather than just business decision-making or supply and demand.
Capital includes tools, equipment, machinery and contributes to economic growth, typically associated with investment expenditures.
Economists utilize model-building to examine the world and understand economic phenomena.

Production Possibility Curve (PPC)

A concave PPC reflects the law of increasing costs, indicating resources are not perfect substitutes.
Immigration can shift the PPC's horizontal intercept but not the vertical intercept when productivity is unchanged.

Market Dynamics

An increase in demand raises both price and quantity; a market price floor creates a surplus if set above equilibrium.
Supply determinants exclude consumer population; factors include resource prices, firm numbers, expectations, and technology.
Negative externalities lead to market underproduction, contrary to societal needs.

Public Goods and Market Safety

Public goods are non-excludable and non-rivalrous, with examples such as national defense and lighthouses.
Government prohibition of certain markets may inadvertently increase safety, evident in examples relating to drugs, gambling, and illicit trade.

Economic Systems

Economic systems can be classified into socialism, communism, and capitalism, based on ownership and decision-making.

Opportunity Cost Analysis

As one ages, opportunity costs of college typically rise due to increased career experience; younger individuals may incur lower costs in terms of forgone income.
An understanding of opportunity cost is essential when assessing production trade-offs in municipal activities like snow plowing and ticket issuing.

Specialization and Trade

Towns can benefit from specializing in where they hold absolute advantages, leading to increased efficiency and productivity through trade.
Comparative advantage helps towns determine optimal activities for specialization.

Graphical Representations

PPC graphs illustrate production capacities and help visualize efficient, inefficient, and unattainable points in resource allocation.

Problem Solving in Economics

Exam questions often require application of concepts and graphical representations of economic scenarios, emphasizing analytical skills in evaluating economic situations.

These notes condense key concepts and frameworks that encompass basic economic principles, market operations, and problem-solving methodologies relevant to introductory economic studies.

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Description

This quiz pertains to the Midterm Examination for Econ 162, covering key economic concepts and multiple-choice questions. Designed for students in the Spring 2015 semester, it assesses understanding of essential economic principles. Prepare to challenge your knowledge and readiness for the course material.