ECON Exam 1
higher subsidies on production _______ supply.
increase
So, when demand increases, the demand curve shifts to the right, the equilibrium price and equilibrium quantity both ...
increase.
An ______ in demand increases the equilibrium price and quantity.
increases
if your costs to produce candy decrease, your supply of candy
increases
A decrease in supply_______ the equilibrium price and _________ the equilibrium quantity.
increases; decreases
when supply decreases, the supply curve shifts to the left, the equilibrium price ________ and the equilibrium quantity ________
increases; decreases
The demand for apples ___________. As a result, the equilibrium price of apples does not change and the equilibrium quantity of apples _____
increases; increases
As your income increases, your demand for _______ goods goes down.
inferior
factors of production
land, labor, capital, entrepreneurship
A grocery store sells a bag of potatoes at a fixed price of $2.30. War is a term used by economists to describe the money received from the sale of an additional bag of potatoes?
marginal revenue
More people prefer 5G smartphones and the technology for 5G smartphones improves . As a result, the equilibrium price of 5G _______ smartphones and the equilibrium quantity of 5G smartphones __________
may increase, decrease or remain unchanged; increases
You decide to take a vacation and the trip costs you $2,000. While you are on vacation, you do not report to work where you could have earned $750. The opportunity cost of the vacation is
$2,750 Opportunity cost includes all explicit (out of pocket) and implicit (non-monetary) costs. The opportunity costs of the vacation is $2,000 + $750 = $2,750.
What's the relationship between the price of one substitute good in production and the supply of the other good? What if the two goods are complements in production?
negative, positive.
The statement Everyone should have free health care is an example of
normative economics
Point A is inside the curve of production, point B is close to Good A, point C is outside the curve of production, point D is closer to Good B. Which point on the production possibilities curve illustrates an unattainable point?
point C
What's the relationship between the price of one substitute good and the demand of the other good? What if the two goods are complements?
positive; inverse.
If the price of an coffee increases, holding all else constant, then the _________coffee__________
quantity demanded of;
Along the supply curve, price and __________ are ___________ related.
quantity supplied; directly
One of the critical assumptions in many economic theories is people behave
rationally
Coffee beans are used to produce coffee. If the price of coffee beans increases, then the__________ coffee ___________.
supply of; decreases
Which of the following causes a movement up along the per-worker production function? A decrease in the amount of labor. An increase in technology. A decrease in productivity. An increase in the amount of capital.
An increase in the amount of capital.
Law of Demand
the claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises
Law of Supply
the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
Mariginal cost
the cost of producing one more unit of a good
An increase in demand and a decrease in supply causes _____
the equilibrium Price to increase and Quantity to increase, decrease or remain unchanged
emperical analysis
the use of data to test a hypothesis
English (open ascending-bid)
In this auction, we generally think of bidders making oral bids in a setting where other bidders are aware of all bids. Each bidder increases their bid until only one highest bidder remains and wins the auction
A production possibilities frontier with a bowed-outward shape indicates:
Increasing opportunity costs as more of one good is produced
What scarcity is NOT
It is not a shortage.It is not the same thing as poverty
Which of the following statements about scarcity is true? Scarcity is only a problem when a country has too large a population. Scarcity only arises when there is a wide disparity in income distribution Scarcity is not a problem for the wealthy. Scarcity refers to the situation in which unlimited wants exceed limited resources.
Scarcity refers to the situation in which unlimited wants exceed limited resources.
Production possibilities assumptions: Resources are fully employed. Production is for a specific time. ___________________ Technology does not change over time
Resources are fixed for the time .
A change in quantity demanded causes a movement along the demand curve. T/F
True
Scarcity never truly gets solved T/F
True
Technology and productivity also shift the supply curve T/F
True
if the shifts' relative size (magnitude) is not specified, one equilibrium variable will be unknown or indeterminate T/F
True
Which of the following is a factor of production? Select all the apply: a. A pizza oven b. A waiter at a restaurant c. Gold d. Money e. Time f. A company CEO
aA pizza oven bA waiter at a restaurant cGold fA company CEO
The figure above shows supply curves for soft drinks. The price of soft drinks increases is best shown as moving from points
along the curve
The price oil, which is used to produce gasoline, increases shows
an increase in the equilibrium price of gasoline and a decrease in the equilibrium quantity of gasoline
marginal analysis
analysis that involves comparing marginal benefits and marginal costs
First-price sealed (blind) bid
auctions require bidders to place their bids in a sealed envelope by a specified date and time. After considering all the sealed bids, the highest price bidder wins.
Second-price sealed-bid (Vickrey)
auctions work like a first-price auction, but the highest price bidder pays the second-highest bid. Like an English auction, a Vickrey auction is what economists refer to as incentive compatible.
A decrease in _________________ the equilibrium Price to increase, decrease or remain unchanged and quantity to decrease
both demand and supply cause
Choice | Quantity of Pizza Produced | Quantity of Calzones Produced A 48pza 0cal B 36pza 15cal C 24pza 30cal D 12pza 45cal E 0pza 60cal
constant
In economics, _______ is always a foregone opportunity.
cost
A ___________ in demand decreases the equilibrium price and quantity.
decreases
Higher taxes on production_________ supply
decreases
An increase in supply __________ the equilibrium price and _________ the equilibrium quantity
decreases; increases
when supply increases, the supply curve shifts to the right, the equilibrium price ________ and the equilibrium quantity __________
decreases; increases
Increases in the taxes on consumption decrease ________
demand
increases in subsidies on consumption increase ______
demand
Coffee and tea are substitutes in consumption. If the price of coffee increases, then the _____________ tea ____________
demand for; increases
_____________ are the objects people value and produce to satisfy human wants.
goods and services
A 0.5 percent change in the growth rate has a significant effect on long-run output (real GDP) immediately. does not affect long-run output (real GDP). has a small effect on long-run output (real GDP) over time. has a significant effect on long-run output (real GDP) over time.
has a significant effect on long-run output (real GDP) over time.
An increase in both demand and supply cause the equilibrium Price ___________________and Quantity to increase
to increase, decrease or remain unchanged
Marginal analysis involves undertaking an activity
until its marginal benefits equal marginal costs.
Dutch auctions
use descending prices. The auction starts at a prohibitively high price in which no one wishes to buy the good or service. Then the price is lowered until someone is willing to accept the good or service or reaches a reservation price.
Land and earns rent. Labor earns ______ Capital earns interest. Entrepreneurship earns ______
wages, a profit
When an economy produces more smartphones and fewer cars, it is answering the "______" question.
what
decreasing marginal benefit
when each additional unit of the activity yields less benefit than the previous unit
Allison's Auto Art is a company that applies pinstripes to vehicles. Allison's cost for a basic1-color pinstriping job is $35, and she charges $95 for this service. For a total price of $175, Allison will apply a fancier 3-color pinstripe application to an automobile, a service that adds an additional $40 to the total cost of the package. What is the marginal cost of moving up from the 1-color application to the 3-color application?
$40
Extra Hours OpenTotal Revenue (dollars) 1hr $70 2hr $120 3hr $160 4hr $184 5hr $200 6hr $210 Santiago runs a comic book store in the town of East Arbor. He is debating whether he should extend his hours of operation. Santiago figures that his sales revenue will depend on the number of extra hours the store is open as shown in the table above. He would have to hire a worker for those extra hours at a wage rate of $18 per hour. What is Santiago's marginal benefit if he decides to stay open for an extra two hours instead of one hour?
$50 120-70=50 (do not need to worry about wages)
Suppose your expenses for this term are as follows: tuition: $27,000, room and board:$9,000, books and other educational supplies: $2,000. Further, during the term, you can only work part-time and earn $16,000 instead of your full-time salary of $42,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college?
$55,000 difference between full time and part time = 42,000-16,000 = 26,000 tuition + supplies = 29,000 29,000+26,000=55,000
Allison's Auto Art is a company that applies pinstripes to vehicles. Allison's cost for a basic1-color pinstriping job is $35, and she charges $95 for this service. For a total price of $175, Allison will apply a fancier 3-color pinstripe application to an automobile, a service that adds an additional $40 to the total cost of the package. What is Allison's marginal benefit if she sells a basic 1-color job?
$95
In studying the problem of scarcity, economists also summarize economics with three basic scarcity questions
. 1) What to produce? 2) How to produce? 3) For whom (?) will goods and services get produced?
The night before a midterm exam, you decide to go to the movies instead of studying for the exam. You score 60 percent on your exam. If you had studied the night before, you'd have scored 70 percent. The opportunity cost of your evening at the movies is ______ percent.
10 Opportunity cost is the marginal cost of the difference between the two scores: 70% (studying) - 60% (going to the movies) = 10%.
Which of the following is a microeconomic question? Choose all that apply. 1. What are the costs of inflation? 2. Will taxing pizza increase the amount of pizzas sold? 3. What is the effect on an increase in discouraged workers on unemployment? 4. Will a shortage of electricians lead to an increase in their wages?
2. Will taxing pizza increase the amount of pizzas sold? & 4. Will a shortage of electricians lead to increase in their wages?
The Coffee Nook sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each. What is the opportunity cost of buying a Russian tea cake? A) 2 1/2 cappuccinos B) 2/5 of a cappuccino C) $2.50 D) $1.00
2/5 of a cappucio 1 cappucino = 2.5 cakes 1 cake = 2/5 cappucino
Suppose two countries have a per capita real GDP of $25,000 in 2016. Econoland has a growth rate of 4 percent and Micropolis has a growth rate of 5 percent. By 2019, the per capita real GDPs for Econoland is $________ and Micropolis is $_________ .
28,121.60, 28,940.63 Econland = 25,000 x (1 + .04)^(2019-2016) Micropolis = 25,000 x (1 + .05)^(2019-2016)
Extra Hours Open Total Revenue (dollars) 1hr $70 2hr $120 3hr $160 4hr $184 5hr $200 6hr $210 Santiago runs a comic book store. He is debating whether he should extend his hours of operation. Santiago figures that his sales revenue will depend on the number of extra hours the store is open as shown in the table above. He would have to hire a worker for those extra hours at a wage rate of $18 per hour. Using marginal analysis, by how many hours should Santiago extend his store's hours of operations? Hint: His marginal cost of staying open an additional hour is the extra wages he would pay to his single worker
4 70-18=52 120-(18*2)=84 160-(18*3)=106 184-(18*4)=112 200-(18*5)=110 210-(18*6)=102
Which of the following is a positive statement? My economics class should last for two terms because it is my favorite class. Given their negative impact on productivity, the government should eliminate labor unions. Taxes should be lower because then people get to keep more of what they earn. A 10 percent increase in income leads to a 4 percent increase in the consumption of beef.
A 10 percent increase in income leads to a 4 percent increase in the consumption of beef.
what causes this outward shift on the PPC?
A break in the assumptions of the PPC, like an increase in technology or the number of resources (capital)
___________________ cause the equilibrium Price to decrease and Quantity to increase, decrease or remain unchanged
A decrease in demand and an increase in supply
Which of the following will NOT shift the demand curve for Coke? An increase in income. An increase in the price of Coke. A decrease in the number of Coke drinkers. An increase in taxes on all soda buyers. None of the above.
A decrease in the number of Coke drinkers.
economic theory
A generalization that summarizes what we think we understand about the economic choices economic agents make.
The Great Depression of the 1930s, with a large number of workers and factories unemployed, would be represented in a production possibilities frontier by _____.
A point inside the frontier
Which of the following are characteristics of markets? Choose all that apply. A. Represents a voluntary exchange between buyers and sellers. B. Markets only answer the "for whom" question of scarcity. C. Markets determine the terms of exchange (price) of goods and services. D. Markets require a physical location.
A. Represents a voluntary exchange between buyers and sellers. & C. Markets determine the terms of exchange (price) of goods and services.
In a year, Keisha produces 40 sandwiches or 100 cups of coffee.In a year, Doug produces 30 sandwiches or 90 cups of coffee. To maximize their total output of sandwiches and cups of coffee _________ should specialize in sandwiches and _________ should specialize in cups of coffee .
Comparative advantage determines specialization. Since Keisha has a comparative advantage in sandwiches, while Doug has a comparative in cups of coffee, Keisha should specialize in sandwiches, while Doug should specialize in cups of coffee.
On a production possibilities frontier an outward shift Could be due to a change in consumer's tastes and preferences Could occur because of an influx of immigrant labor Is the result of advancements in food production technology only, with no change in the technology for plastic production Is the result of advancements in plastic production technology only, with no change in food production technology
Could occur because of an influx of immigrant labor
Which of the following are true statements? Economic models are more complex than real world observations. Economists try to isolate cause and effect relationships. Economic models include all known details. Economists use emperical analysis, as well as natural and economic experiments.
Economists try to isolate cause and effect relationships & Economists use emperical analysis, as well as natural and economic experiments.
Price and cost mean the same T/F
FALSE
Determinants of Demand
Factors other than price that determine the quantities demanded of a good or service
Understanding how markets work is not vital to our ability to answer the "what," "how," and "for whom" questions T/F
False
In a year, Keisha produces 40 sandwiches or 100 cups of coffee.In a year, Doug produces 30 sandwiches or 90 cups of coffee. Based on this information, ________ has an absolute value in cups of coffee. _______ has a comparative advantage in
Keisha has an absolute advantage in sandwiches and cups of coffee, since Keisha produces more sandwiches and cups of coffee than Doug. Doug has a comparative advantage in cups of coffee, since Doug's opportunity cost of 1 cup of coffee is 0.33 sandwiches, while Keisha's opportunity cost of 1 cup of coffee is 0.40 cups of coffee. Keisha has a comparative advantage in sandwiches, since Keisha's opportunity cost of 1 sandwich is 2.5 sandwiches, while Doug's opportunity cost of 1 sandwich is 3 sandwiches.
__________ focuses on a country's decisions and issues such as:Inflation, Taxes .Unemployment
Macroeconomics
___________ focuses on small decisions by individuals (or households) and by firms such as:Pollution, Crime, Healthcare, and Education
Microeconomics
if your income increases due to a raise at work, you will demand more _______, such as chicken or pizza, ceteris paribus
Normal goods
new real GDP =
Old Real GDP x (1+growth rate)^N
Point A is inside the curve of production, point B is close to Good A, point C is outside the curve of production, point D is closer to Good B. Which point is a production point that has underutilization of resources?
Point N
The production possibilities frontier model assumes which of the following? The economy produces only two products The level of technology is variable Production of any level of the two products that the economy produces is currently possible Labor, capital, land, and natural resources are unlimited in quantity
The economy produces only two products
opportunity cost
The highest-valued, next-best alternative which must be given up (sacrificed) to attain something or satisfy a want.
Which of the following is a normative statement? You should eat less candy. The price of candy bars is $1.25 each. Popcorn and candy are sold in movie theaters. Candy bars are more expensive than newspapers.
You should eat less candy.
Consider the following statements: a. Consumers buy more MP3 players from an electronics store that sells MP3 players at a lower price than other rival electronics stores in the area. b. Schools take steps to increase security since they believe it is more costly to allow vandalism than to hire additional security guards. c. Citrus growers produce more oranges when the selling price of oranges falls. Which of the above statements demonstrates that economic agents respond to incentives?
a and b
