Econ 102 Test 1

Which of the following is NOT a reason why the supply curve is upsloping

There are diminishing marginal benefits in consumption

In employing the marginal principle, a seller may

DECIDE WHETHER TO SUPPLY ONE MORE UNIT OF A GOOD OR SERVICE

Marginal Principle

Increase the level of an activity as long as its marginal benefit exceeds its marginal cost

Summarizes selling plans of a business

Individual supply curve

Scarcity Principle

asserts that opportunities seem more valuable when their availability is limited

Taken together, the cost-benefit principle and the opportunity cost principle say that a decision is worth making if the benefits it yields are

at least as great as the opp cost

In the market for grades, students are on the ___ side.

demand

According to the law of _____, at _____ prices individuals will purchase fewer items.

demand ; higher

shifts in supply curve

1. input prices 2. technology 3. expectations 4. number of sellers

If an oil refinery can supply 2 million gallons per week when the price is $2 per gallon, what will be the market quantity supply for 50 refineries having the same supply decisions?

100 mill gl

If an oil refinery can supply 2 million gallons per week when the price is $3 per gallon, what will be the market quantity supply for 10 refineries having the same supply decisions?

20 mill

If an oil refinery can supply 5 million gallons per week when the price is $1 per gallon, what will be the market quantity supply for 40 refineries having the same supply decisions?

200 mill

If your competitor raises their prices, what is going to happen to your demand curve ?

A SHIFT FROM THE OLD CURVE TO THE RIGHT TO THE NEW CURVE

perfectly competitive market

A market that meets the conditions of (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.

For a normal good, an increase in income would result in

AN INCREASE IN THE EQUILIBRIUM PRICE AND QUANTITY

Shifts in the market demand curve occur

BECAUSE OF ALL THE FACTORS THAT SHIFT INDIVIDUAL DEMAND CURVES, ALONG WITH THE CHANGES IN THE TYPES AND NUMBER OF BUYERS

The cost-benefit principle evaluates ____ costs and benefits, and willingness-to-pay considerations quantify ____ costs and benefits.

BOTH MONETARY AND NONMENTARY; ONLY MONETARY

How is an increase in productivity represented on the graph of a production possibility frontier?

BY THE ENTIRE FRONTIER BEING PUSHED OUTWARD

The demand curve for meals at a local Chick-fil-A will shift to the left if

CHICK-FIL-A OFFERS A FREE SANDWICH TO PEOPLE WHO SIGN UP FOR THEIR NEW REWARDS APP

What would shift the market supply curve for milk

EXPECTATIONS OF FUTURE DECLINE IN THE PRICE OF MILK

market economy

Economic decisions are made by individuals or the open market.

The difference between a centralized economy and a market economy is that

GOVERNMENTS MAKE PRODUCTION DECISIONS IN A CENTRALIZED ECONOMY, AND INDIVIDUALS MAKE PRODUCTION DECISIONS IN A MARKET ECONOMY

What would cause the demand for housing to shift left

Government cuts tax deductions for mortgage interest rates

When there is a shortage of highly skilled workers in a particular region

HIGHLY SKILLED WORKERS CAN NEGOTIATE HIGHER SALARIES

Matthew has been diagnosed with cancer and doctors estimate that he has roughly 5 months to live. From an economic standpoint, which BEST explains why Matthew might be more likely than a healthy person to take a risky experimental drug?

HIS OPPORTUNITY COST IS LOWER THAN THAT OF HEALTHY PEOPLE

On a price and quantity graph, an upward movement to the right is caused by a

INCREASE IN THE PRICE OF THE ITEM

How does "queuing" raise the effective price of a good ?

IT COSTS TIME IN ADDITION TO THE ACTUAL NOMINAL PRICE OF THE GOOD

How is the economic surplus generated by a decision calculated ?

IT IS THE TOTAL BENEFIT MINUS TOTAL COSTS ARISING FROM THE DECISION

rational rule

If something is worth doing, keep doing it until your marginal benefits equal your marginal costs.

Following the Rational Rule, the maximum economic surplus occurs when

MARGINAL BENEFITS EQUAL MARGINAL COSTS

Ppl liked cartoons, but are now less common. If the cost of cartoon is comparable to dramas, the most likely explanation for their disappearance is that

MARKET DEMAND CURVE FOR CARTOONS SHIFTED TO THE LEFT

Network effects occur when a good becomes

MORE USEFUL BECAUSE OTHER PEOPLE USE IT

Company delivers food to houses once per week. Holding other things constant, what would happen if the company found a more efficient way to deliver food ?

MOVEMENT DOWN THE MARKET DEMAND CURVE

If the price of jet fuel rises, the

QUANTITY OF JET FUEL SUPPLIED WILL INCREASE

You sell tvs at your store. As the market price of tvs decrease, the

QUANTITY OF TVS SUPPLIED DECREASES

When plotting a supply curve, you measure

QUANTITY SUPPLIED ON THE HORIZONTAL AXIS

Tina wants to purchase a new all-in-one air fryer. The air fryer is on sale right now for $250 and the marginal benefit Tina will receive from the air fryer is $275. Tina can also purchase accessories for the air fryer for $50 and receive a marginal benefit of $75. According to the _____, Tina should _____ and her marginal benefit would be $_____.

RATIONAL RULE FOR BUYERS;PURCHASE THE AIR FRYER AND THE AIR FRYER ACCESSORIES;350

A central and fundamental theme in economics is that

RESOURCES ARE LIMITED AND CANNOT SATISFY ALL THE WAYS A SOCIETY WANTS TO USE THEM

Dependencies over time reflect the fact that

RESOURCES CAN BE SPREAD SCROSS TIME

Chocolate chip cookie price falls. You expect to see a(n)

RISE IN THE QUANTITY DEMANDED OF CHOCOLATE CHIP COOKIES

Diminishing marginal product leads to

RISING MARGINAL COSTS FOR A SELLER

A decrease in the price of an item will cause the movement on the price/quanitity graph to

SHIFT DOWNWARD

The Rational Rule for Sellers is important but does NOT

TELL SELLERS HOW TO SET THE PRICE AGAINST THE COMPETITORS

The supply curve is upward-sloping because

THE MARGINAL COST CURVE IS UPWARD-SLOPING

The interdependence principle states that your best choice today depends on all of these EXCEPT

THE PAST DECISIONS YOU HAVE MADE

The law of supply refers to the

THE POSITIVE RELATIONSHIP BETWEEN PRICE AND QUANTITY SUPPLIED

If prices are rising, what can be stated about the observed market ?

THE QUANTITY DEMANDED EXCEEDS THE QUANTITY SUPPLIED

We expect that price will fall when

THE QUANTITY SUPPLIED IS GREATER THAN THE QUANTITY DEMANDED

scarcity

The study of economics arises because of the necessity of choice, and the necessity of choice arises because of the fundamental problem of

What does "holding other things constant" mean when we graph an individual demand curve?

WE ASSUME THAT OTHER FACTORS STAY THE SAME

When are out-of-pocket costs also opportunity costs?

WHEN THE OUT-OF-POCKET COSTS DO NOT EXIST IN THE NEXT BEST ALTERNATIVE

An equilibrium in a market occurs

WHEN THE QUANTITY SUPPLIED EQUALS THE QUANTITY DEMANDED

Which is most consisten with a market experiencing a surplus

We should expect prices to fall

Why might you underestimate the increase in market quantity demanded when you lower your price ?

YOU MAY NOT TAKE INTO ACCOUNT POTENTIAL NEW CUSTOMERS ATTRACTED BY THE LOWER PRICE

In which scenario are you NOT part of a market transaction?

YOU TAKE A PHOTO OF FLOWERS - NO BUYING OR SELLING OCCURS

interdependence principle

Your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future

sunk cost

a cost that has already been committed and cannot be recovered

planned economy

an economic system directed by government agencies

shifts in the demand curve =

anything that is not price

substitutes in production

are alternative uses of your production capacity

law of demand

as price goes down, demand goes up

diminishing marginal benefit

as you consume more of a good, your willingness to pay for an additional unit declines

bundling

buying extras so you can get the thing you want, raising price of original thing

changes in demand WILL NOT

cause a shift in the market demand curve

You sell pumpkins, with more pumpkins you start selling them as decor too, to you pumpkins and decorative ones are

complements in production

Over the past several years, sushi has become increasingly popular among consumers. This means that the __ has ___

demand for sushi ; increased

Supply and demand can also be thought of as :

cost and benefit

A shift of the supply curve to the right means that there is a/an _____ in price and a/an _____ in supply.

decrease ; decrease

Your supply of a good will _____ if the price of a complement-in-production _____, decreasing quantity supplied.

decrease ; falls

A governor asking for votes is playing the market role of :

demander

production possibilities frontier

different sets of output that are attainable with your scarce resource. Illustrates trade-offs from how you allocate your scarce resource. opportunity cost is the slope of this

When graphing the supply curve, we focus on how a price and quantity supplied have a(n) _____ while other variables _____.

direct relationship ; remain constant

the market demand curve is a

downward sloping

What factor can shift BOTH supply and demand :

expectations

marginal cost

extra cost from one extra unit

queuing

extra time you spend, raised price costing you both time and money

When your suppliers increase the prices of your inputs, they increase your _____, and this will shift your supply curve to the _____.

mc ; left

individual demand curve

graph that plots the quantity of an item that an individual plans to purchase at each price - holding all other factors constant

When your suppliers decrease the prices of your inputs, they decrease your _____, and this will shift your supply curve to the _____.

mc ; right

Gas purchased tomorrow is a substitute for gas purchased today, and a _____ price expected tomorrow _____ demand for gas purchased today.

higher ; increase

framing effect

how a decision is affected by how a choice is described

shifts in demand curve

income, prices of related goods, tastes, expectations, number of buyers

A(n) _____ in supply causes the supply curve to shift to the right while a(n) _____ in supply causes the supply curve to shift to the left.

increase ; decrease

marginal product

increase in output that is produced when a business hires an additional worker.

A business owner is thinking about how many workers she should hire. She also thinks about whether she should purchase a larger building for these workers. Taking into account both of these decisions together is the essence of the _____ principle

interdependence

Changes in prices and opportunities in one market affect the choices a person might make in another market. This is pointed out in the _____ principle

interdependence

When you confront a problem, which of the four economic principles should you consider last?

interdependence principle

marginal product

is the increase in output that arises from an additional unit of an input, like labor

demand curve is the same as

marginal benefit curve

The rational rule is the most powerful application of the

marginal principle

When you apply the Rational Rule for Buyers, you can _____ your economic surplus by continuing to buy until price equals _____.

maximize ; marginal benefit

The answer to the question, "Should I produce one more unit?" depends on the balance of _____ and _____.

mb ; mc

You have paid $75 for a Costco membership and are trying to decide where to go grocery shopping today. You could go to Costco, but it will take 30 minutes longer than a trip to Vons. The prices for what you want to buy are about 10% lower at Costco. Which costs should you NOT consider when making your decision on where to 80?

membership fee

prices change the quantity demanded for

old and new customers

Evie, a receptionist at a car dealership, asks herself the question, "Should I go back to school, or should I continue to work at the dealership?" The fact that she is comparing the idea of going to school with her next best option indicates that she is applying the _____ principle

opportunity cost

what constitutes a market

people with both the desire and the ability to buy a specific offering

Which of these characterizes a perfectly competitive market?

perfect information

movement along the demand curve is from

price change causing a movement from one point on the curve to another on the same curve

what does not shift the demand curve

productivity and price

price affects

quantity, quantity does not affect price

When there is a decrease in demand for normal goods due to a decrease in income, the demand curve will _____

shift to the left

Cost-Benefit Principle

someone should only take an action if the extra benefits from taking the action are at least as great as the extra costs.

You sell boards used in construction and sawdust, made from the boards. When the board market collapses, causing prices of boards to fall, your ___ will likely ___ .

supply of sawdust ; decrease

If you're selling a good for more than your competitors, you a creating a ___ situation.

surplus

marginal benefit

the extra benefit from one extra unit

secondary market

the market in which previously issued securities are traded among investors

opportunity cost

the most desirable alternative given up as the result of a decision

If an entrepreneur gives up her job to start a new business, the forgone earnings are

the opp cost of the entrepreneur's time

economic surplus

the total benefits minus total costs flowing from a decision. Measuring how much a decision has benefited your well-being

The interdependence principle reminds us that:

things other than price can influence your supply

supply curve is

upward slopping because of increasing marginal cost

To forecast the total quantity supplied, simply locate the price on the _____ and then look across until you hit the supply curve and finally look straight down to the _____ for your answer.

vertical axis ; quantity

shortage

when quantity demanded is greater than quantity supplied

surplus

when quantity supplied is more than quantity demanded

To scale up the quantities demanded by a survey of 500 people to be representative of 20 million people, we should _____.

x by 40k

your own choices are all connected because

you have limited resources

interdependence principle states that your best choice depends on

your other choice choices others make developments in other markets expectations about the future