Econ 2102 Test review #1
What is Opportunity Cost?
The most desired goods or services forgone to obtain something else
Define Equilibrium quantity
The quantity bought and sold at the equilibrium price
Define Law of Supply
The quantity of a good supplied in a given time period increases as its price increases, ceteris paribus, and vice versa
What is Economics?
The study of how choices are made based on scarcity.
What are the Three core choices that confront every nation?
What to produce? How to produce? For whom goods and services are produced?
Assuming that automobiles are normal goods, a rise in consumer income, other things being equal, will cause: A) the demand curve for automobiles to shift to the left. B) the demand curve for automobiles to shift to the right. C) a downward movement along the demand curve for automobiles. D) an upward movement along the demand curve for automobiles.
B
Because resources are scarce society must make decisions about all of the following except: A) What to produce B) Whether scarcity exists or not C) How to produce the selected goods and services D) For whom the goods and services are produced
B
Ceteris paribus, which of the following is most likely to cause a decrease in the supply of skateboards? A) An increase in the price of skateboards. B) An increase in the cost of materials used to produce skateboards. C) An improvement in skateboard-making technology. D) All of the above.
B
How would a decrease in consumer income affect the market for new automobiles? A) Demand would decrease, leading to an increase in price and a reduction in quantity sold. B) Demand would decrease, leading to a reduction in price and a reduction in quantity sold. C) Demand would increase, leading to an increase in price and an increase in quantity sold. D) Demand would increase, leading to a reduction in price and an increase in quantity sold.
B
Indicate if the following statement is True or False All output combinations that lie outside a production a production possibilities curve are attainable with available resources and technology. A) True B) False
B
Indicate if the following statement is True or False. If the price of the factors used to produce a good change, both the demand curve and the supply curve of the good will shift. A) True. B) False.
B
Indicate if the following statement is True or False. If a government imposed price ceiling legally sets the price of beef below market equilibrium, there will be a surplus of beef. A) True. B) False.
B
Indicate if the following statement is True or False: An increase in the price of one good can cause the demand for another good to increase if the two goods are complements. A) True B) False
B
Indicate if the following statements is True or False: If the price elasticity of demand for football tickets is estimated to by 4.5, then a 10 percent increase in football ticket prices would be expected to cause a 45 percent increase in quantity demanded. A) True B) False
B
Suppose there are a series of forest fires which affect the lumber industry. The wooden furniture market would experience: A) An increase in price and an increase in quantity B) An increase in price and a decrease in quantity C) A decrease in price and an increase in quantity D) A decrease in price and an indeterminate change in quantity
B
What is Scarcity?
The lack of enough resources to satisfy unlimited human wants
A movement along the demand curve for automobiles is caused by a change in: A) The price of automobiles. B) The price of gasoline. C) The price of steel. D) Consumers' incomes.
A
A paper mill in North Carolina dumps waste into the Pigeon River and as a result, people in Tennessee cannot use the water. What type of market failure is most likely involved? A) Externalities B) Inequity C) Public Goods D) Market power
A
Any imperfection in the market mechanism that prevents optimal outcomes is known as A) Market Failure B) Government Failure C) External cost D) Public Cost
A
Indicate if the following statement is True or False. Quantity supplied will exceed quantity demanded if price is above its equilibrium level. A) True. B) False.
A
Other things being equal, the effect of an increase in the price of Coca-Cola would cause a(n): A) upward movement along the demand curve for Coca-Cola. B) leftward shift in the demand curve for Coca-Cola. C) downward movement along the demand curve for Coca-Cola. D) rightward shift in the demand curve for Coca-Cola.
A
Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10 percent, and as a result, the quantity of the dolls sold increases by 25 percent. This indicates that the price elasticity of t=demand for the dolls over this range is: A) 2.5 B) 0.4 C) 0.50 D) 5.0
A
Define Public Good:
A good or service whose consumption by one person does not exclude consumption by others.
What is a price ceiling?
A legally established maximum price a seller can charge
What is price floor?
A legally established minimum price a seller can be paid?
Which of the following is an assumption under which the production-possibilities curve is drawn? A)There is significant unemployment. B)The supply of resources is fixed. C)The price level is changing. D)Technology is changing.
B
Which of the following would most likely cause the demand for veggie burgers to increase? A) A decline in the price of veggie burger. B) An increase in the price of tofu burgers, perceived as a substitute by veggie burger consumers. C) An increase in the price of burger buns. D) A technological innovation that lowers the cost of producing veggie burgers.
B
7. Business firms supply goods and services to ____ and purchase factors of production in ____. A) Factor markets; product markets. B) National markets; factor markets. C) Product markets; factor markets. D) Factor markets; national markets.
C
How would a decrease in the price of the feed grains used to feed cattle affect the market for beef? A) The demand for beef would increase, increasing beef prices. B) The demand for beef would decrease, decreasing beef prices. C) The supply of beef would increase, decreasing beef prices. D) The supply of beef would decrease, increasing beef prices.
C
If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, demand is classified as: A) Stable B) inelastic C) elastic D) unitary elasticity
C
Over time, an increase in a nation's stock of physical capital will: A)shift the production possibilities curve inward. B)cause an economy to operate inside its production possibilities curve. C)shift the production possibilities curve outward. D)eliminate the basic economic problem of scarcity.
C
The law of demand is the principle that there is ____ relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period, ceteris paribus. A) A direct B) No C) An inverse D) Independent
C
What causes the shift?
Caused by a change in determinants of demand.
A completely elastic demand curve has the elasticity coefficient of: A) 0 B) 1 C) less that 1 D) infinity
D
Ceteris paribus, if consumer tastes change so that more people are eating broccoli, then what will happen to the market equilibrium for cabbage, a substitute good for broccoli? A) Price will increase, and quantity will increase. B) Price and quantity will stay the same. C) Price will decrease, and quantity will increase. D) Price will decrease, and quantity will decrease.
D
How will an increase in lumber prices influence the home construction market? A) The demand for newly constructed homes will increase. B) The demand for newly constructed homes will decrease. C) The supply of newly constructed homes will increase. D) The supply of newly constructed homes will decrease.
D
In economics, a public good: A) is any good produced by the government B) Has social costs of production lower than private costs of production C) Is provided in an optimal amount by the market D) Cannot be denied to consumers who have not paid
D
Opportunity cost is: A) Only measured in dollars and cents. B) The dollar cost to society of producing the goods. C) The difficulty associated with using one good in place of another. D) The alternative that must be given up in order to get something else.
D
Which of the following will cause a movement upward along a supply curve? A) Increases in raw-material costs. B) Increases in labor costs. C) Increases in the cost of machinery. D) Increases in the market price of a good, other things being equal.
D
With respect to factors of production, which of the following statements is not true? A) Factors of production are also known as resources. B) In order to produce anything, it is necessary to have factors of production. C) Factors of production include land, labor, capital, and entrepreneurship. D) Only those resources that are privately owned are counted as factors of production.
D
What are the Factors of Production?
Land, Labor, Capital, Entrepreneurship
What are Positive analysis?
Focuses on "what is" Based on facts
What are Normative analysis?
Focuses on "what should be" Based on opinions and judgements
Define Law of Demand:
In a given time period, the quantity demanded of a good increases as its price falls, ceteris paribus
Define Market failure:
The market mechanism did not lead us to the optimal point of the PPC.
Define Market Mechanism
Produces goods and services and yields jobs, wages, and a distribution of income.
Define Quantity Demanded:
Refers to the amount consumers are willing and able to buy at a particular price.
What are the Determinants of Demand?
Tastes, income, prices of other goods, expectations, and number of buyers that can change the PPC.
What are the Determinants of Supply?
Technology, factor costs, taxes and subsidies, expectations, other goods, and number of sellers that can change the PPC.
Define Equilibrium Price
That price at which the quantity demanded equals the quantity supplied
What is demand?
The ability and willingness to buy specific quantities of a good at alternative prices in a given time period, ceteris paribus. (The various amounts of a good consumed at various prices)