Econ 2301 Exam 1

Another term for goods and services is a. output. b. inputs. c. factors of production. d. resources.

a. output.

Fundamentally, economics deals with: a. scarcity. b. money. c. poverty. d. banking.

a. scarcity.

Price (Dollars per unit) Quantity Demanded (Units) Quantity Supplied (Units) 5308044065350502603517020 ​​ Refer to Table 4-6. The equilibrium price and quantity, respectively, are a. $2 and 65 units. b. $3 and 50 units. c. $3 and 60 units. d. $4 and 50 units.

b. $3 and 50 units.

Where can an economy not produce? a. Inside its production possibilities frontier b. On its production possibilities frontier c. Outside its production possibilities frontier d. At the endpoints of its production possibilities frontier

c. Outside its production possibilities frontier

Cross-price elasticity of demand measures how a. the price of one good changes in response to a change in the price of another good. b. the quantity demanded of one good changes in response to a change in the quantity demanded of another good. c. the quantity demanded of one good changes in response to a change in the price of another good. d. strongly normal or inferior a good is.

c. the quantity demanded of one good changes in response to a change in the price of another good.

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a a. 0.50 percent decrease in the quantity demanded. b. 100.00 percent decrease in the quantity demanded. c. 2.00 percent decrease in the quantity demanded. d. 50.00 percent decrease in the quantity demanded.

d. 50.00 percent decrease in the quantity demanded.

Supertown's Production PossibilitiesToysGlasses40003006002001,1001001,50001,800 ​ Refer to Table 2-2.What is the opportunity cost to Supertown of increasing the production of toys from 200 to 300? 400 glasses 300 glasses 500 glasses 600 glasses

500 glasses

Refer to Figure 1. Which arrow represents the flow of spending by households? C A B D

A

efer to Figure 1. Which arrow represents the flow of spending by households? B A C D

A

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars. True False

True

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change. True False

True

Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's productivity. True False

True

Good Price Elasticity of Demand A1.9B0.8​ ​ Refer to Table 2.Which of the following is consistent with the elasticities given in Table 5-1? a. A is a luxury and B is a necessity. b. A is a good after an increase in income and B is that same good after a decrease in income. c. A has fewer substitutes than B. d. A is a good immediately after a price increase and B is that same good three years after the price increase.

a. A is a luxury and B is a necessity.

For which of the following goods is the income elasticity of demand likely lowest? a. Clothing b. You Answered Apples c. Diamond earrings d. Limousines

a. Clothing

Which of the following is true: a. Efficiency refers to the size of the economic pie; equality refers to how the pie is divided. b. Government policies usually improve upon both equality and efficiency. c. As long as the economic pie continually gets larger, no one will have to go hungry. d. Efficiency and equality can both be achieved if the economic pie is cut into equal pieces.

a. Efficiency refers to the size of the economic pie; equality refers to how the pie is divided.

Savion is restoring a car and has already spent $4,000 on the restoration. He expects to be able to sell the car for $5800. Savion discovers that he needs to do an additional $2,400 of work to make the car worth $5,800 to potential buyers. He could also sell the car now, without completing the additional work, for $3,800. What should he do? a. He should sell the car now for $3,800. b. He should keep the car since it wouldn't be rational to spend $6,400 restoring a car and then sell it for only $5,800. c. He should complete the additional work and sell the car for $5,800. d. It does not matter which action he takes since the outcome will be the same either way.

a. He should sell the car now for $3,800.

Which of the following statements is valid when the market supply curve is vertical? a. Market quantity supplied does not change when the price changes. b. Supply is perfectly elastic. c. An increase in market demand will increase the equilibrium quantity. d. An increase in market demand will not increase the equilibrium price.

a. Market quantity supplied does not change when the price changes.

After much consideration, you have chosen Ireland over Spain for your Study Abroad program next year. However, the deadline for your final decision is still months away and you may reverse this decision. Which of the following events could prompt you to reverse this decision? a. The marginal benefit of going to Spain increases. b. The marginal cost of going to Spain increases. c. The marginal benefit of going to Ireland increases. d. The marginal cost of going to Ireland decreases.

a. The marginal benefit of going to Spain increases.

Dee is an accomplished actress and a homeowner who pays a landscaper to maintain her lawn rather than do it herself. Dee has determined that she can earn more in the hour it would take her to work on her lawn than she must pay her landscaper. This scenario is an example of which principle of economics? a. Trade can make everyone better off. b. Markets are usually a good way to organize economic activity. c. Governments can sometimes improve market outcomes. d. Prices rise when the government prints too much money.

a. Trade can make everyone better off.

The term market failure refers to a. a situation in which the market on its own fails to allocate resources efficiently. b. an unsuccessful advertising campaign which reduces demand for a product. c. a situation in which competition among firms becomes ruthless. d. a firm that is forced out of business because of losses.

a. a situation in which the market on its own fails to allocate resources efficiently.

The price elasticity of demand measures a. buyers' responsiveness to a change in the price of a good. b. the extent to which demand increases as additional buyers enter the market. c. how much more of a good consumers will demand when incomes rise. d. the movement along a supply curve when there is a change in demand.

a. buyers' responsiveness to a change in the price of a good.

Making rational decisions at the margin means that people a. compare the marginal costs and marginal benefits of each decision. b. always calculate the dollar costs for each decision. c. make those decisions that do not impose a marginal cost. d. evaluate how easily a decision can be reversed if problems arise.

a. compare the marginal costs and marginal benefits of each decision.

Cadence says that she would smoke one pack of cigarettes each day regardless of the price. If she is telling the truth, Cadence's a. demand for cigarettes is perfectly inelastic. b. price elasticity of demand for cigarettes is infinite. c. income elasticity of demand for cigarettes is 0. d. demand for cigarettes is unit elastic.

a. demand for cigarettes is perfectly inelastic.

Pizza is a normal good if the demand a. for pizza rises when income rises. b. for pizza rises when the price of pizza falls. c. curve for pizza slopes upward. d. curve for pizza shifts to the right when the price of burritos rises, assuming pizza and burritos are substitutes.

a. for pizza rises when income rises.

Refer to Figure 1. If the price decreased from $36 to $12, total revenue would a. increase by $4,800, and demand is elastic between points X and Z. b. increase by $7,200, and demand is elastic between points X and Z. c. decrease by $4,800, and demand is inelastic between points X and Z. d. decrease by $7,200, and demand is inelastic between points X and Z.

a. increase by $4,800, and demand is elastic between points X and Z.

If the demand for donuts is elastic, then a decrease in the price of donuts will a. increase total revenue of donuts sellers. b. not change total revenue of donuts sellers. c. change total revenue of donuts sellers but in an unknown way without more information. d. decrease total revenue of donuts sellers.

a. increase total revenue of donuts sellers.

If the demand for donuts is elastic, then a decrease in the price of donuts will a. increase total revenue of donuts sellers. b. decrease total revenue of donuts sellers. c. not change total revenue of donuts sellers. d. change total revenue of donuts sellers but in an unknown way without more information.

a. increase total revenue of donuts sellers.

Warrensburg is a small college town in Missouri. At the end of August each year, the market demand for fast food in Warrensburg a. increases. b. decreases. c. remains constant, but we observe a movement downward and to the right along the demand curve. d. remains constant, but we observe a movement upward and to the left along the demand curve.

a. increases.

Market power refers to the a. power of a single person or small group to influence market prices. b. ability of a person or small group to successfully market new products. c. power of the government to regulate a market. d. importance of a certain market in relation to the overall economy.

a. power of a single person or small group to influence market prices.

For a good that is a luxury, demand a. tends to be elastic. b. has unit elasticity. c. cannot be represented by a d. demand curve in the usual way. tends to be inelastic.

a. tends to be elastic.

Income elasticity of demand measures how a. the quantity demanded changes as consumer income changes. b. consumer purchasing power is affected by a change in the price of a good. c. the price of a good is affected when there is a change in consumer income. d. many units of a good a consumer can buy given a certain income level.

a. the quantity demanded changes as consumer income changes.

Refer to Figure 2-3. If this economy devotes all of its resources to the production of washers, then it will produce a. 80 dryers and 0 washers. b. 0 dryers and 100 washers. c. 50 dryers and 40 washers. d. 60 dryers and 80 washers.

b. 0 dryers and 100 washers.

Price (Dollars per unit) Quantity Demanded (Units) 200016030120608090401200150 Refer to Table 1.Using the midpoint method, if the price falls from $160 to $120, the absolute value of the price elasticity of demand is a. 0.43. b. 2.33. c. 0.29. d. 0.67.

b. 2.33.

Supertown's Production PossibilitiesToysGlasses40003006002001,1001001,50001,800 ​ Refer to Table 2-2. What is the opportunity cost to Supertown of increasing the production of toys from 200 to 300? a. 600 glasses b. 500 glasses c. 400 glasses d. 300 glasses

b. 500 glasses

Which of the following changes would not shift the supply curve for a good or service? a. A change in production technology b. A change in the price of the good or service c. A change in expectations about the future price of the good or service d. A change in input prices

b. A change in the price of the good or service

Which of the following changes would not shift the demand curve for a good or service? a. A change in income. b. A change in the price of the good or service. c. A change in expectations about the future price of the good or service. d. A change in the price of a related good or service.

b. A change in the price of the good or service.

Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good? a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

b. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

Which of the following events could cause an increase in the supply of ceiling fans? a. There is an increase in the price of air conditioners, and consumers regard air conditioners and ceiling fans as substitutes. b. The number of sellers of ceiling fans increases. c. The average temperature rises over time. d. There is an increase in the price of the motor that powers ceiling fans.

b. The number of sellers of ceiling fans increases.

Which of the following is not held constant in a supply schedule? a. Production technology b. The price of the good c. The prices of inputs d. Expectations

b. The price of the good

Refer to Figure 4-1. The movement from point A to point B on the graph is caused by a. an increase in price. b. a decrease in price. c. a decrease in the price of a substitute good. d. an increase in income.

b. a decrease in price.

Suppose scientists provide evidence that people who drink energy drinks are more likely to have a heart attack than people who do not drink energy drinks. We would expect to see a. no change in the demand for energy drinks. b. a decrease in the demand for energy drinks. c. an increase in the demand for energy drinks. d. a decrease in the supply of energy drinks.

b. a decrease in the demand for energy drinks.

Refer to Figure 2-4, Graph (a) and Graph (b). A shift of the economy's production possibilities frontier from Graph (a) to Graph (b) could be caused by a. unemployment. b. an improvement in DVD production technology. c. an improvement in book production technology. d. an improvement in both DVD and book production technology.

b. an improvement in DVD production technology.

Suppose your finance professor has been offered a corporate job with a 25 percent pay increase. He has decided to take the job. For him, the marginal a. cost of leaving was greater than the marginal benefit. b. benefit of leaving was greater than the marginal cost. c. benefit of teaching was greater than the marginal cost. d. benefit of teaching was negative.

b. benefit of leaving was greater than the marginal cost.

The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that a. equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs. b. equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources. c. equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits. d. equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits.

b. equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.

At the equilibrium price, the quantity of the good that buyers are willing and able to buy a. is greater than the quantity that sellers are willing and able to sell. b. exactly equals the quantity that sellers are willing and able to sell. c. is less than the quantity that sellers are willing and able to sell. d. could be greater or less than the quantity that sellers are willing and able to sell.

b. exactly equals the quantity that sellers are willing and able to sell.

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the a. further to the right the demand curve will sit. b. flatter the demand curve will be. c. closer to the vertical axis the demand curve will sit. d. steeper the demand curve will be.

b. flatter the demand curve will be.

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the a. steeper the demand curve will be. b. flatter the demand curve will be. c. further to the right the demand curve will sit. d. closer to the vertical axis the demand curve will sit.

b. flatter the demand curve will be.

Microeconomics is the study of a. how money affects the economy. b. how individual households and firms make decisions. c. how government affects the economy. d. how the economy as a whole works.

b. how individual households and firms make decisions.

The "invisible hand" refers to a. how central planners made economic decisions. b. how the decisions of households and firms lead to desirable market outcomes. c. the control that large firms have over the economy. d. government regulations without which the economy would be less efficient.

b. how the decisions of households and firms lead to desirable market outcomes.

If the price elasticity of supply is 0.7, and price increased by 24 percent, quantity supplied would a. increase by 34.29 percent. b. increase by 16.80 percent. c. decrease by 34.29 percent. d. decrease by 16.80 percent.

b. increase by 16.80 percent.

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will a. raise both price and total revenues. b. lower both price and total revenues. c. raise price and lower total revenues. d. lower price and raise total revenues.

b. lower both price and total revenues.

Suppose there are six bait and tackle shops that sell worms in a lakeside resort town in Minnesota. If we add the respective quantities that each shop would produce and sell at each of the six bait and tackle shops when the price of worms is $2 per bucket, $2.50 per bucket, and $3 per bucket, and so forth, we have found the a. market demand curve. b. market supply curve. c. equilibrium curve. d. surplus or shortage depending on market conditions.

b. market supply curve.

Economists make assumptions to a. minimize the number of experiments that yield no useful data. b. simplify the complex world and make it easier to understand. c. provide issues for political discussion. d. develop models when the scientific method cannot be used.

b. simplify the complex world and make it easier to understand.

If the cross-price elasticity of two goods is positive, then the two goods are a. complements. b. substitutes. c. normal goods. d. inferior goods.

b. substitutes.

For a good that is a luxury, demand a. tends to be inelastic. b. tends to be elastic. c. has unit elasticity. d. cannot be represented by a demand curve in the usual way.

b. tends to be elastic.

A baker recently has come to expect higher prices for bread in the near future. We would expect a. the baker to supply more bread now than she was supplying previously. b. the baker to supply less bread now than she was supplying previously. c. the demand for bread to fall. d. no change in the baker's current supply of bread; instead, future supply will be affected.

b. the baker to supply less bread now than she was supplying previously.

In the circular-flow diagram, in the markets for a. goods and services, households and firms are both sellers. b. the factors of production, households are sellers and firms are buyers. c. goods and services, households are sellers and firms are buyers. d. the factors of production, households and firms are both sellers.

b. the factors of production, households are sellers and firms are buyers.

The price elasticity of supply measures how much a. the quantity supplied responds to changes in input prices. b. the quantity supplied responds to changes in the price of the good. c. the price of the good responds to changes in supply. d. sellers respond to changes in technology.

b. the quantity supplied responds to changes in the price of the good.

If something happens to alter the quantity supplied at any given price, then a. the supply curve becomes steeper. b. the supply curve shifts. c. we move along the supply curve. d. the supply curve becomes flatter.

b. the supply curve shifts.

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is a. 1.50, and an increase in price will result in an increase in total revenue for good A. b. 1.50, and an increase in price will result in a decrease in total revenue for good A. c. 0.67, and an increase in price will result in an increase in total revenue for good A. d. 0.67, and an increase in price will result in a decrease in total revenue for good A.

c. 0.67, and an increase in price will result in an increase in total revenue for good A.

A manufacturer produces 350 units when the market price is $10 per unit and produces 460 units when the market price is $14 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about a. 1.23. b. 0.27. c. 0.81. d. 0.33.

c. 0.81.

Which of the following demonstrates the law of demand? a. After Roberto got a raise at work, he bought more pretzels at $1.50 per pretzel than he did before his raise. b. Benjamin buys fewer muffins at $0.75 per muffin than at $1 per muffin, other things equal. c. Ashlyn buys more donut holes at $0.25 per donut hole than at $0.50 per donut hole, other things equal. d. Tiana buys fewer Snickers at $0.60 per candy bar after the price of M&Ms falls to $0.50 per bag.

c. Ashlyn buys more donut holes at $0.25 per donut hole than at $0.50 per donut hole, other things equal.

Suppose there is a flood in St. Louis, Missouri, that destroys several beer bottling facilities. Which of the following would not be a direct result of this event? a. Sellers would not be able to produce and sell as much as before at each relevant price. b. The supply would decrease. c. Buyers would not be willing to buy as much as before at each relevant price. d. The equilibrium price would rise.

c. Buyers would not be willing to buy as much as before at each relevant price.

A hair stylist currently cuts and colors hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand? a. Yes, because cutting hair is profitable. b. No, because he may not be able to sell more services. c. It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients. d. It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients.

c. It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients.

Assume Ren buys coffee beans in a competitive market. It follows that a. Ren has a limited number of sellers from which to buy coffee beans. b. Ren will negotiate with sellers whenever he buys coffee beans. c. Ren cannot influence the price of coffee beans even if he buys a large quantity of them. d. Ren might have trouble finding coffee beans at his local store.

c. Ren cannot influence the price of coffee beans even if he buys a large quantity of them.

Which of the following events would cause the price of oranges to fall? a. There is a shortage of oranges. b. The FDA announces that bananas cause strokes, and oranges and bananas are substitutes. c. The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges. d. At the current price, quantity demanded is greater than quantity supplied.

c. The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges.

The line that relates the price of a good and the quantity supplied of that good is called the supply a. schedule, and it usually slopes upward. b. schedule, and it usually slopes downward. c. curve, and it usually slopes upward. d. curve, and it usually slopes downward.

c. curve, and it usually slopes upward.

When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. Using the midpoint method, we can conclude that for Heather, macaroni a. and soy-burgers are both normal goods with income elasticities equal to 1. b. is an inferior good and soy-burgers are normal goods; both have income elasticities of 1. c. is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1. d. and soy-burgers are both inferior goods with income elasticities equal to -1.

c. is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1.

Refer to Figure 2-3. This economy cannot currently produce 70 washers and 80 dryers because a. it is not using all of its resources. b. it is not using the most efficient production process. c. it does not have the resources and technology to produce that level of output. d. consumers don't want that many washers and dryers.

c. it does not have the resources and technology to produce that level of output.

An economy's production of two goods is efficient if a. all members of society consume equal portions of the goods. b. the economy is producing at a point on or inside the production possibilities frontier. c. it is impossible to produce more of one good without producing less of the other. d. it is possible to produce more of one good without producing less of another good.

c. it is impossible to produce more of one good without producing less of the other.

The adage, "There ain't no such thing as a free lunch," means: a. even people on welfare have to pay for food. b. the cost of living is always increasing. c. people face tradeoffs. d. all costs are included in the price of a product.

c. people face tradeoffs.

Normative statements are a. descriptive. b. claims about how the world is. c. prescriptive. d. claims about how variables in the economy normally behave.

c. prescriptive.

A rational decisionmaker a. ignores marginal changes and focuses instead on "the big picture." b. ignores the likely effects of government policies when he or she makes choices. c. takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. d. takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions.

c. takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.

If something happens to alter the quantity demanded at any given price, then a. the demand curve becomes steeper. b. the demand curve becomes flatter. c. the demand curve shifts. d. we move along the demand curve.

c. the demand curve shifts.

Demand is said to be inelastic if a. buyers respond substantially to changes in the price of the good. b. demand shifts only slightly when the price of the good changes. c. the quantity demanded changes only slightly when the price of the good changes. d. the price of the good responds only slightly to changes in demand.

c. the quantity demanded changes only slightly when the price of the good changes.

If marijuana were legalized, it is likely that there would be an increase in the demand for marijuana. If demand for marijuana is inelastic and the supply of marijuana is perfectly elastic, this will result in a. higher prices and higher total revenue from marijuana sales. b. higher prices but lower total revenue from marijuana sales. c. the same price and higher total revenue from marijuana sales. d. the same price but lower total revenue from marijuana sales.

c. the same price and higher total revenue from marijuana sales.

Aiden and Zaria charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, six people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have six or five cars parked on their lawn does not affect their costs. From this information it follows that a. they should leave the price at $10. b. it does not matter if they charge $10 or $15. c. they would do better charging $15 than $10. d. they should raise the price even more.

c. they would do better charging $15 than $10.

Central planning refers to a. markets guiding economic activity. Today many countries that had this system have abandoned it. b. markets guiding economic activity. Today many countries that did not have this system have implemented it. c.. government guiding economic activity. Today many countries that had this system have abandoned it. d. government guiding economic activity. Today many countries that did not have this system have implemented it.

c.. government guiding economic activity. Today many countries that had this system have abandoned it.

Price (Dollars per unit) Quantity Demanded(Units)BertErnieGroverOscar0.002016680.501812461.001410251.50128042.0066022.500400​ ​ Refer to Table 4-2.If these are the only four buyers in the market, then the market quantity demanded at a price of $2.00 is a. 6 units. b. 12 units. c. 2 units. d. 14 units.

d. 14 units.

Which of the following steps does an economist not take when studying the economy? a. Devise theories b. Collect data c. Analyze data d. Conduct a laboratory experiment in order to generate data

d. Conduct a laboratory experiment in order to generate data

For which of the following goods is the income elasticity of demand likely highest? a. Toilet paper b. Doctor's visits c. Water d. Diamonds

d. Diamonds

If China decides to trade with France, we know that a. it will not benefit France because workers in China are more productive. b. it will not benefit either country because their cultural differences are too vast. c. France will benefit, but trade with a less developed country could not benefit China. d. France and China can both benefit.

d. France and China can both benefit.

If the price of milk rises, when is the price elasticity of demand likely to be the highest? a. Immediately after the price increase b. One month after the price increase c. Three months after the price increase d. One year after the price increase

d. One year after the price increase

Senator Fujita argues that replacing the federal income tax with a national sales tax would increase the level of output. Senator Watson objects that this policy would benefit the rich at the expense of the poor. a. Both senators' arguments are primarily about equality. b. Both senators' arguments are primarily about efficiency. c. Senator Fujita's argument is primarily about equality, while Senator Watson's argument is primarily about efficiency. d. Senator Fujita's argument is primarily about efficiency, while Senator Watson's argument is primarily about equality.

d. Senator Fujita's argument is primarily about efficiency, while Senator Watson's argument is primarily about equality.

Refer to Figure 4-1. The movement from point A to point B on the graph is caused by a. a decrease in the price of a substitute good. b. an increase in price. c. an increase in income. d. a decrease in price.

d. a decrease in price.

Refer to Figure 4-3. The shift from Da to Db in the market for pita chips could be caused by a. a decrease in the price of pita chips. b. a decrease in income, assuming that pita chips are a normal good. c. an announcement by the FDA that pita chips cause cancer. d. an increase in the price of a popcorn.

d. an increase in the price of a popcorn.

If the demand for a product increases, then we would expect equilibrium price a. and equilibrium quantity both to decrease. b. to decrease and equilibrium quantity to increase. c. to increase and equilibrium quantity to decrease. d. and equilibrium quantity both to increase.

d. and equilibrium quantity both to increase.

The line that relates the price of a good and the quantity demanded of that good is called the demand a. schedule, and it usually slopes upward. b. schedule, and it usually slopes downward. c. curve, and it usually slopes upward. d. curve, and it usually slopes downward.

d. curve, and it usually slopes downward.

Soup is an inferior good if the demand a. for soup falls when the price of a substitute for soup rises. b. for soup rises when the price of soup falls. c. curve for soup slopes upward. d. for soup falls when income rises.

d. for soup falls when income rises.

A circular-flow diagram is a model that a. helps to explain how consumers and the government interact with one another. b. explains how countries trade with each other. c. incorporates all aspects of the real economy. d. helps to explain how the economy is organized.

d. helps to explain how the economy is organized.

A likely example of substitute goods for most people would be a. tennis balls and tennis rackets. b. televisions and subscriptions to cable television services. c. coffee and sugar. d. iced tea and lemonade.

d. iced tea and lemonade.

A decrease in the price of a good will a. increase demand. b. decrease demand. c. decrease quantity demanded. d. increase quantity demanded.

d. increase quantity demanded.

Suppose the cost of operating a 75-room hotel for a night is $6,000 and there are five empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay a. more than $80; because the average benefit will exceed the marginal cost. b. more than $80; because the marginal benefit will exceed the marginal cost. c. more than $40; because the average benefit will exceed the marginal cost. d. more than $40; because the marginal benefit will exceed the marginal cost.

d. more than $40; because the marginal benefit will exceed the marginal cost.

A competitive market is a market in which a. an auctioneer helps set prices and arrange sales. b. there are only a few sellers. c. the forces of supply and demand do not apply. d. no individual buyer or seller has any significant impact on the market price.

d. no individual buyer or seller has any significant impact on the market price.

Minimum-wage laws dictate a. only a maximum wage that firms may pay workers. b. both a minimum wage and a maximum wage that firms may pay workers. c. the exact wage that firms must pay workers. d. only a minimum wage that firms may pay workers.

d. only a minimum wage that firms may pay workers.

Economists make assumptions to a. minimize the number of experiments that yield no useful data. b. develop models when the scientific method cannot be used. c. provide issues for political discussion. d. simplify the complex world and make it easier to understand.

d. simplify the complex world and make it easier to understand.

Efficiency means that: a. society is conserving resources in order to save them for the future. b. society's goods and services are distributed equally among society's members. c. society's goods and services are distributed fairly, though not necessarily equally, among society's members. d. society is getting the most it can from its scarce resources.

d. society is getting the most it can from its scarce resources.

Suppose sunflowers are currently selling for $45 per dozen, but the equilibrium price of sunflowers is $25 per dozen. We would expect a a. shortage to exist and the market price of sunflowers to decrease. b. shortage to exist and the market price of sunflowers to increase. c. surplus to exist and the market price of sunflowers to increase. d. surplus to exist and the market price of sunflowers to decrease.

d. surplus to exist and the market price of sunflowers to decrease.

In most societies, resources are allocated by a. a single central planner. b. a small number of central planners. c. those firms that use resources to provide goods and services. d. the combined actions of millions of households and firms.

d. the combined actions of millions of households and firms.