EC101 Exam One Answers
If a frost suddenly destroyed a big portion of this year's crop of oranges, a good with highly elastic demand, what would be the impact on quantity demanded and price?
Quantity demanded would decrease a lot, and price would rise slightly.
Besides the gross domestic product, another measure of how well an economy is doing is
annual household income.
A demand shift affects
buyers' willingness to purchase at various prices.
A table showing how much lemonade consumers are willing to buy at different prices would be best described as a
demand schedule.
The demand curve is the graphical counterpart to the
demand schedule.
Higher interest rates can cause the ________ curve for new cars to ________.
demand; shift to the left
A supply schedule illustrates the quantity supplied at
different selling prices.
The law of demand suggests that most demand curves will be
downward-sloping.
Historically, the most consistent force for economic growth and progress has been
economic competition
The price at which the quantity supplied equals quantity demanded is the
equilibrium price.
PriceQuantity DemandedQuantity Supplied$02000$115040$210080$350120$40160 Refer to the table. If the current price in this market is $2 then there is
excess demand and pressure on the price to rise.
A centrally planned economy encourages investment and innovation.
false
Excess demand generally causes prices to fall.
false
Opportunity cost is defined as the value or benefit of the
next best alternative.
Supply curves are generally
upward-sloping.
The gross domestic product is calculated by adding up the
value of all goods and services produced within the nation.
A laissez-faire economy has
very little government regulation of the economy.
Movement along the demand curve means that the demand schedule ________ and the price ________.
stays the same; changes
Technological change has always been the most critical factor in raising living standards, even going as far back as the development of the
steam engine.
Closed economies generally do __________ open economies, in the __________ run.
worse than; long
The market equilibrium can be found on a supply and demand diagram as the point at which
the demand and supply curves intersect.
Price per PizzaQuantity Demanded$0500$5200$1075 Refer to the table, which shows part of the weekly demand schedule for pizza in a certain town. If one were to plot these three points on a graph, what would the result be?
A downward-sloping demand curve
Who makes decisions and trade-offs in the face of scarce resources?
All of these choices are correct
What phrase do economists use to describe the assumption that everything else about a situation stays the same, allowing only one variable, such as price, to change?
Ceteris paribus
What will happen as a result of a decrease in demand?
Equilibrium price and quantity both fall.
What will happen as a result of an increase in supply?
Equilibrium price falls and equilibrium quantity rises.
Economic competition sometimes has which of the following negative effects on a domestic economy?
It drives down wages and profits.
If at the market price of $10 per lawn Maya is willing to mow 15 lawns, and at the market price of $15 per lawn Maya is willing to mow 25 lawns, what does Maya's supply curve look like?
It slopes up and to the right.
If the quantity of a good that buyers are willing to buy rises sharply when the price falls, this illustrates what principle?
The law of demand
PriceQuantity Demanded$01,000$1400$2200$3100$425 Refer to the table, which shows the number of energy drinks demanded per day by the students at a certain university. What would happen to the quantity of energy drinks demanded at a price of $2 if the university's enrollment were to increase significantly?
The quantity demanded would increase above 200 because the market demand schedule is the sum of individual demand schedules, and more students means more individual demand schedules for energy drinks.
What caused the decline in demand for red delicious apples?
The taste of the apples
Federal taxes have which of the following effects on the economy?
There is no definitive agreement on the effect
In the case of normal goods, higher income for buyers means
a rightward shift of the demand curve.
Ceteris paribus, when used by economists, means
all other things equal.
Globalization is the exchange of __________ among countries.
goods, services, ideas, and people
A demand shift to the right generally leads to
higher prices and higher quantities.
The law of supply says that higher prices tend to ________ the quantity of a good or service ________, assuming no other changes.
increase; supplied
Households are generally buyers in the markets for products and sellers in ________ markets.
labor
Top-down management of an economy by the government generally
leads to low rates of economic growth
Inferior goods are characterized by ________ demand as a result of increased income.
lower
Gross domestic product is
one of many indicators of prosperity, some of which are monetary and some of which are not.
Market equilibrium is the point where quantity supplied and ________ are equal.
quantity demanded
An increase in supply is shown graphically as a ________ shift of the supply curve, and as a result of an increase in supply, equilibrium price will ________.
rightward; decrease
A luxury good is one whose demand ________ as income increases.
rises sharply
A vertical supply curve would mean
the price does not affect the quantity supplied.
Demand is inelastic if
the quantity demanded does not change very much even if the price changes dramatically.
According to the law of demand, when the price of a good falls
the quantity of the good demanded tends to rise.
The market price is
the typical price at which a good or service sells.
In a centrally planned economy, decisions are made by
top-level government officials.
Economics is the study of how individuals, businesses, and governments make decisions and trade-offs in the face of scarce resources.
true