econ chapters 1-3

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the defining feature of a demand curve is that it is ____

downward sloping

economic models

simplify the real world by ignoring minor details

a firm owned by one person with unlimited liability is a

sole proprietorship

the total cost for 15 units is $150 and the cost of the 15th unit set itself is $20. the marginal cost of the 15th unit is

$20

if the demand function is Qd= a-b*p and the supply function is Qs= r+s*p then the equilibrium price is equal to

(a-r)/(s+b)

increased consumption of natural foods by pet owners has led to increased demand for natural foods for their pets. the Colgate-Palmolive company produces and sells hells science diet cat food. suppose that you work for a similar company also producing scientific cat food

-top management could consider rebranding their cat food with a name that emphasizes its natural attributes -top management could shift production toward natural cat foods and use marketing that emphasizes the natural asapects of their products -the demand for scientific cat food decreases, so the demand curve shifts to the left

if the price in a market is less than the equilibrium price, what happens to restore the equilibrium price

-whenever the product is offered for sale, it rapidly sells out -managers find it hard to keep the product in inventory, so they raise the price -the price continues to rise until it reaches the equilibrium price

cigna corporation can sell one of its buildings for $50 million. cignas most profitable investment opportunity has an annual profit of 10%. the building will fall in value to $48 million after a year. cigna could rent the building for an annual rent of $6 million. based on 1-year returns, what is cignas opportunity cost of using the building

50 million * .10 = 5 million

according to the law of demand _____ increases the quantity of tires demanded

a fall in the price of car tires

an increase in the price of dry cleaning results in

a movement up along the dry cleaning supply curve

in a supply function for leather purses, the price of leather will have

a negative coefficients

opportunity cost is hard to measure

but managers who use it have more accurate cost estimates

In Venezuela, residents must stand in long lines to buy diapers in drug stores but can buy then at a much higher price from venders selling them at busy street corners. the most likely explanation for this situation is

a price ceiling that has been set below the equilibrium price

a minimum wage is an example of

a price floor if it is set above the equilibrium wage rate and a price ceiling if it is set below the equilibrium wage rate

the equilibrium price of a loaf of bread in Venezuela is 222 bolivars per loaf, and the government has set a price ceiling of 120 bolivars per loaf. consequently, there is

a shortage of bread

a price floor set above the equilibrium price creates

a surplus

how does an advance in technology affect the supply curve

an advance in technology shifts the supply curve to the right

you are a manager at KB home, a major homebuilder. of the following options, what combination of changes in the market for plywood will increase your costs the most

an increase in demand and a decrease in supply

if small-screen televisions are an inferior good then

an increase in income decreases the demand for small-screen tvs and the demand curve shifts to the left

which of the following changes increase demand and shifts the demand curve to the right

an increase in income if the product is a normal good

a movement upward along the demand curve for tangerines is the result of ____

an increase in the price of tangerines

in the demand function Qd= r-s*p the coefficient(s)

are r and s

which of the following goods are complements

baseball gloves and baseball bats

if a manager chooses the amount of an action that sets the marginal benefit of the action equal to its marginal cost than: i: all the units for which the marginal benefit exceeds the marginal cost are undertaken ii: none of the units for which the marginal benefit is less than the marginal cost are undertaken

both i and ii are correct

according to the definition of a firm, the American cancer society

can be considered a firm

a change in income creates a ___ and ____ the demand curve for cars

change in demand, shifts

which of the following factors does not shift the supply curve of a product

consumers income

under which form(s) of business organization are owners not responsible for the companys debt is the company goes bankrupt

corporation and LLC

a minimum wage set above the equilibrium wage rate

creates unemployment

accounting cost ____ depreciation as the change in market value of the asset and ____ the wages paid workers

does not measure, includes

marginal analysis recognizes that

decisions have both marginal benefits and marginal costs

each hour a store remains open it incurs a marginal cost, if the marginal benefit of staying open does not change but the marginal cost doubles, then the manager will _____ the hours the store remains open

decrease

if people switch their drinking habits from soda to energy drinks, then the quantity of soda ___ and the quantity of energy drinks ___

decreases, increases

the ____ shows the maximum price consumers are willing to pay for each until of a product

demand curve

accounting cost and opportunity cost differ when it comes to measuring

depreciation

using the demand and supply functions, once the equilibrium price is known the equilibrium quantity can be determined by using the equilibrium price in

either the supply function or the demand function

at the equilibrium price, the equilibrium quantity is

equal to the quantity supplied and to the quantity demanded

total revenue

equals P*Q, where P is the price and Q is the quantity sold

suppose you are a manager for SolarWorld, and you know that over the next two years more companies will start producing solar panels. as a result, your planning is based on the prediction that the price of solar panels will ___ over the next two years

fall

white bread contains a lot of simple carbohydrates, so if more people limit their intake of simple carbohydrates, the equilibrium price of a loaf of white bread ___ and the equilibrium quantity ___

falls, decreases

if both the supply and demand for rice increase and the increase in supply exceeds the increase in demand, then the equilibrium price of rice ____ and the equilibrium quantity ____

falls, increases

if the supply of corn increases, then the equilibrium price of a ton of corn ___ and the equilibrium quantity ___

falls, increases

if the supply of lobster increases while the demand for lobster decreases, and the change in supply exceeds the change in demand, then the equilibrium price of lobster ____ and the equilibrium quantity ____

falls, increases

ArcelorMittal is the worlds largest steel producer and Netflix is a streaming video service. ArcelorMittal is a firm because it produces a good, but Netflix is not a firm because it doesn't produce a good

false

a change in the "state of nature" affects only the supply of agricultural products

false

a price ceiling set above the products equilibrium price creates a surplus of the product

false

a price ceiling set below the equilibrium price decreases the cost of searching for the product because the price ceiling makes the product less expensive

false

a shift to the right of the supply curve causes the demand curve to shift right

false

a supply curve slopes upward because the increase price, the greater the quantity demanders are willing to buy

false

according to the law of demand, an increase in the demand for a product increases the equilibrium price and decreases the equilibrium quantity

false

an increase in income always shifts the demand curve to the right

false

an increase in income increases both the supply and demand for normal goods, thereby making the change in price ambiguous

false

an increase in income shifts the supply curve of appliances to the right

false

an increase in the cost of producing airplanes is similar to an advance in the technology of producing them: both raise the price of airplanes

false

an increase in the cost of producing honey results in a movement up along the supply curve of honey

false

an increase in the expected future price of oil increases the current supply of oil

false

auto producers can manufacture either heavy trucks or hybirds. an increase in the price of hybirds decreases the equilibrium price of heavy trucks

false

demand curves must be downward sloping straight lines

false

economists call the opportunity cost of using an item in inventory the sunk cost because the cost is already "sunk" into the value of the asset

false

financial market conditions have no effect on the demand for goods

false

if the expected future price of gas falls, the current demand for gas is unaffected

false

in a perfectly competitive market, the consumer surplus is equal to the total surplus

false

in a perfectly competitive market, the producer surplus is always equal to zero because the firms cannot set their own prices

false

in the demand function for skirts, the coefficient on the population will be negative

false

income should be included as a factor in the supply function for computer chips because income affects the demand for these chips

false

managers can rarely use economic models to make business decisions because the models are so simplified

false

marginal analysis concludes that managers should undertake actions as long as the difference between the marginal benefit and marginal cost is increasing

false

producing more than the efficient quantity of a product never creates a deadweight loss for society

false

regardless of any actions the owners take, the managers of for-profit firms always find it in their self-interest to make decisions that maximize the firms profit

false

the accounting cost of depreciation for a machine tool are always larger than the opportunity cost of using the machine tool

false

the equilibrium price is determined using only the demand function, and the equilibrium quantity is determined using only the supply function

false

the equilibrium quantity increases whenever the supply increases, no matter what change might affect the demand

false

the law of supply refers to the joint behavior of both demanders and suppliers

false

the marginal benefit of an action is the same as the total benefit of an action

false

the only difference between accounting cost and opportunity cost is that accounting cost uses no implicit costs

false

the opportunity cost of the owners time is always an implicit cost

false

the terms total revenue and total profit mean the same thing

false

when the price of a good rises, its demand curve shifts to the right

false

whenever both the demand and supply curves shift, without information about the relative size of the shifts, the effect on both the price and quantity are always ambiguous

false

you are a manager at 84 Lumber, a large retailer of wood used to construct houses. if you expect credit market conditions to worsen, your planning should be on the basis of a rise in the price of lumber

false

economic models are useless because they are so abstract and so simple

false because economic models eliminate the confusing clutter of relatively insignificant details

young adult males drink more beer than other age and gender groups. executives at breweries track the demographics of the various nations in which they operate so as to

forecast demand for their product

managerial economics

helps executives manage their firms more efficiently

an ___ cost is defined as a cost that does not involve an outflow of cash

implicit

a technological advance in the production of computer chips

increase the supply of computer chips

an increase in the number of corn producers ____ the supply of corn and shifts the supply curve to the ____

increase, right

older people use more pharmaceutical drugs than younger people. as the number of older people in the U.S. increases, the demand for pharmaceutical drugs ____, thereby causing the price of these drugs to ___

increase, rise

hair stylings are a normal good. in the demand function for hair stylings, the coefficient for income is 50 hair stylings per dollar of income. consequently, a $100 increase in family income

increases the equilibrium quantity by less than (50 hair stylings per dollar) * 1,000 = 50,000 hair stylings

according to the law of supply, a rise in the price of a product

increases the quantity supplied

if the equilibrium price of ammonia is $600 per metric ton and the actual price is $560 per metric ton, the quantity demanded ____ the quantity supplied

is greater than

in a supply function, the coefficient on the price of the product

is positive

an increase in the expected future price shifts the supply curve to the ____ and decreases in the expected future price shifts the supply curve to the ____

left, right

an increase in the price of a substitute in production shifts the supply curve to the ____ and an increase in the price of a complement in production shifts the supply curve to the ____

left, right

over the years, people have decided that it is healthier to eat less beef and more chicken. this belief has shifted the demand curve for beef to the ____ and the demand curve for chicken to the ____

left, right

a price ceiling creates a shortage when it is set

lower than the equilibrium price

a technological advance in the production of computer chips ___ the price of these chips and ___ quantity

lowers, increases

a decrease in demand combined with an increase in supply ___ the price and ___ the quantity

lowers, might increase, decrease, or not change

a decrease in demand combined with a decrease in supply ___ the price and ___ the quantity

might raise, lower, or not change, decreases

an increase in demand combined with an increase in supply ___ the price and ____ the quantity

might raise, lower, or not change, increases

Bauxite is used to produce aluminum. you are a manager for rio tinto alcan, a major aluminum producer. if you think that the demand for bauxite and the supply of bauxite will both increase but you do not know the relative sizes, then you expect that the cost of bauxite

might rise, fall, or not change

if both the supply and demand increase, then the equilibrium price ____ and the equilibrium quantity ___

might rise, fall, or not change, increases

the term change in the quantity supplied refers to a ____ and the term change in supply refers to a ____

movement along the supply curve, shift of the supply curve

in the demand function for movies shown in theaters, if the coefficient on the price of Netflix is positive then

movies and netflix must be substitutes

according to the law of supply, supple curves ____ upward sloping and ____ linear

must be, might be

nearly all large firms are organized as corporations because they

need a perpetual life and limited liability to attract investors

the labor market differs from product markets (such as the market for steel) because in the labor market

none of the above answers are correct

which form(s) of business organization have their profits taxed twice

only corporations

economists assume that the paramount goal(s) of managers of profit-seeking firms is

only profit maximization

an ____ cost is defined as the return from the best-alternative use of a resource

opportunity

managers should use ____ cost when making managerial decisions because it considers the return from alternative uses of the firms resources

opportunity

if coffee is a normal good, then in the demand function for coffee Qd= a-b*p+c*income the coefficient c is

positive

in the demand function for a good, then coefficient on the number of demanders is

positive

an increase in the ____ shifts the supply curve of raisins to the left

price of grapes, an input used to produce raisins

in an agricultural market, to maintain a price floor set above the equilibrium price, the government can use all the following policies except

produce additional units of the product

which of the following statements does not describe the social gains from competitive markets

producing any unit less than the equilibrium quantity maximizes society's total surplus of benefit over cost

the substitution effect means that an increase in the price of beef____

raises its price relative to the price of chicken

gasoline and diesel fuel are complements in production, so a fall in the price of gasoline ___ the price of diesel fuel and ___ the quantity of diesel fuel

raises, decreases

an increase In demand combined with a decrease in supply ___ the price and ___ the quantity

raises, might increase, decreases, or not change

the effect of a decrease in the price of the cheese used to produce pizza would be ____ the ____ curve of a pizza

rightward shift, supply

suppose you are a manager for the Mosaic Company, a major producer of fertilizer. you expect that the number of farms will increase. as a result, you predict that the price of fertilizer will ___ over the next two years

rise

you are a manager for 1-800-flowers.com, a major retailer or rosses. if roses are a normal good and you think peoples incomes will increase this year, you expect that the price of roses will

rise

if jet fuel rises in price, the price of an airline ticket ___ and the quantity of travel by air ___

rises, decreases

if the cost of the corn fed to steers increases, then the price of beef ___ and the equilibrium quantity ___

rises, decreases

demand increases when the price of a substitute ____ and when the price of a complement ____

rises, falls

if the demand for iron ore increases, then the equilibrium price of a ton of iron ore ___ and the equilibrium quantity ___

rises, increases

travel by airline is a normal good, and peoples incomes increase. consequently, the equilibrium price of an airline ticket ____ and the equilibrium quantity ____

rises, increases

if the supply of oil decreases and demand for oil increases, then the equilibrium price of oil ___ and the equilibrium quantity ___

rises, might increase, decrease, or not change

the cost of producing chickens rises and simultaneously more people decide that eating chicken is healthy. consequently, the equilibrium price of chicken ___ and the equilibrium quantity ___

rises, might increase, decrease, or not change

grocery stores must allocate shelf space to different brands. safeway, a large grocery store chain, allocates more space to post cereals

safeways opportunity cost of this action is the foregone profit to safeway that could have been earned on other products

suppose there is a change in peoples preferences in favor of wearing jeans. due to this, the demand curve for jeans will ____ and the supply curve for jeans will ____ suppose there is a decrease in the number of producers of jeans. due to this, the demand curve for jeans will ___ and the supply curve for jeans will ___

shift to the right, be unaffected be unaffectedd, shift to the left

in the supply curve for coal, the coefficient on the wages of miner workers is -10 tons per dollar. if the wages of mine workers rise from $44 to $46 then the supply curve for coal

shifts left by 20 tons of coals

in a supply function for rice, a negative coefficient on the price of fertilizer means that an increase in the price of fertilizer

shifts the supply curve to the left

at any price higher than the equilibrium price, there is a ___ and the price will ____

surplus, fall

which of the following is an opportunity cost of production that is omitted in the accounting cost

the competitive return on the owners invested funds

a decrease in demand means that

the demand curve shifts to the left

you know that both the demand and supply of wheat have increased. you observe that the price rises. you conclude that

the demand for wheat increased more than the supply of wheat

suppose that a competitive market is in equilibrium and the firms in this industry employ many workers who are paid the minimum wage congress now raises the minimum wage that the firms must pay their workers

the equilibrium price in the market will increase and output will decrease consumer surplus will decrease

if the demand function for a product includes both the price of the product and households income while the supply function includes both the price and the cost of producing the product then

the equilibrium price will change if either cost or income changes

a price ceiling is a government regulation that sets

the maximum legal price

the law of demand refers to the relationship between ____ and the quantity demanded of the good or service

the price of a good or service

the law of supply refers to the relationship between

the price of a good or service and the quantity supplied of that good or service

the demand curve of a good or service shifts to the left when

the price of a substitute good falls

Thailand is the source of most of the worlds computer hard drives. heavy rains in Thailand are creating floods that are damaging these factories. as a manager of dell in charge of purchasing computer components, you expect

the price of hard drives will rise due to the decrease in the supply

the total surplus on a pound of rice is the marginal benefit to society of the pound minus the marginal cost to society of producing the pound

true

the fact that processing a chicken produces both chicken breasts and chicken wings means that

they are complements in production

in the demand function for beef, the coefficients on income is 0.002 pounds for beef per dollar of income, if consumers income increase by $10,000 then the demand curve for beef shifts

to the right by 20 pounds

a change in the price of bricks creates a movement along the demand curve for bricks

true

a drought in the corn growing areas in Iowa causes the supply curve of corn to shift to the left

true

a minimum wage set above the equilibrium wage rate creates a surplus of labor

true

a price ceiling set below the products equilibrium price can create a black market for the product

true

a rise in the expected future price of petroleum increases the current demand for petroleum

true

accounting depreciation for an asset is an arbitrary number and is not necessarily related to the assets real depreciation

true

an increase in the number of firms producing generic drugs lowers the price of generic drugs

true

at the equilibrium price, the quantity demanded is equal to the equilibrium quantity

true

bakers can use their equipment to produce either bread or cookies so bread and cookies are substitutes

true

for a price floor to change the quantity produced, the price floor must be set above the equilibrium price

true

generic goods are inferior goods, so an increase in income lowers the price of generic goods and decreases their quantity

true

if both the demand and supply of a good decrease, the price falls only if the decrease in demand is larger than the decrease in supply

true

if demand increases by more than supply increases, the equilibrium price rises

true

if gas is a normal good, then in the demand function for gas the coefficient on income must be positive

true

if the actual price is below the equilibrium price, a shortage forces the price to rise to the equilibrium price

true

if the marginal benefit to a store of staying open an extra hour is less than the marginal cost, the managers should decide to not stay open the extra hour

true

in a supply function, if the coefficient for a factor is negative, then an increase in that factor shifts the supply curve to the left

true

in small college towns with highly ranked football teams, the price of a hotel room rises on weekends with home football games

true

in the demand function Qd= a-b*p the value of b is the change in the quantity demanded when the price changes by 1

true

jet skis are a normal good, so an increase in income combined with an increase in the cost of producing jet skis definitely raises the price of a jet ski

true

moving upward along a supply curve, both the price and the quantity supplied increases

true

no matter what the relative size of the changes, if demand for a product decreases and its supply increases, then the price of the product falls

true

producing the efficient quantity of a product maximizes society's total surplus from the product

true

some workers gain from a minimum wage set above the equilibrium wage rate while other workers lose

true

the equilibrium price is the only price at which the quantity demanded equals the quantity supplied

true

the law of demand means that as the price of a good falls, the quantity demanded increases

true

the law of supply means that an increase in the price of almonds will increase the quantity of almonds supplied

true

the presence of consumer surplus means that some consumers are willing to pay a higher price for a product than the price they currently pay

true

the profit of a limited liability company is taxed once

true

using opportunity cost rather than accounting cost enables managers to make more profitable decisions

true

when the demand and supply functions include factors in addition to the price of the product, the equilibrium price is determined by equating the demand function to the supply function that is Qd=Qs

true

you are a manager for Drexel Heritage, a producer of wooden furniture. if you believe that the demand for wood will increase due to a housing boom, you predict that the price of wood will rise

true

you are a manager for Texas instruments, a major producer of systems on a chip (SoC) used in smartphones, tablets, and similar devices. you predict a massive increase in demand for them, so you expect the price of SoCs to rise

true

suppose that you are a marketing manager for the Keebler company, the largest cookie and cracker manufacturer in the U.S. you determine that the marginal benefit from advertising has increased

using marginal analysis, explain how you will change Keeblers marketing budget: the marketing budget should be increased to increase the marginal cost

an increase in the minimum wage is apt to affect teenagers more than other age groups because they are the age group

with the highest proportion of workers earning minimium wage


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