ECON EXAM !

c. In the six months following the Japanese earthquake and tsunami in​ 2011, production of automobiles in Japan declined by 20 percent.

1

b. The success of Nike and Adidas athletic shoes leads more firms to begin producing athletic shoes.

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a. To take advantage of high prices for snow shovels during a snowy​ winter, Alexander​ Shovels, Inc., decides to increase output

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The equilibrium quantity of gasoline is _____ million gallons ​(enter a numeric response using a real number rounded to two decimal​ places) and the equilibrium price is ​_______ per gallon. If instead the market price were ​$______​, then there would be a __________ of ____ million gallons.

5; 2.50; 1.75; shortage; 3

According to the law of​ supply,

A and C only

The diagram in panel a as an example of

A demand schedule

Productive efficiency means that

A good or service is produced at the lowest possible price

What do economists mean by market​ equilibrium?

A market outcome where quantity supplied is equal to quantity demanded.

Indicate which of the following could cause a movement from point A to C

A rise in the number of buys A decline in vegetarianism

To be successful as a luxury coffee​ bar, how does Starbucks need to distinguish Starbucks Reserve coffee shops from its standard Starbucks coffee​ shops?

All of the above are ways to distinguish Starbucks Reserve coffee shops from standard Starbucks coffee shops.

When does allocative efficiency​ occur?

Allocative efficiency occurs when production is in accordance with consumer preferences.

Which of the following illustrates the law of​ supply?

An increase in price causes an increase in the quantity​ supplied, and a decrease in price causes a decrease in the quantity supplied.

Which of the following events would cause the supply curve to decrease from S1 to S2?

An increase in the price of inputs

Why might studying economics be particularly good preparation for being the top manager of a corporation or a leader in​ government?

Economics teaches us how to look at the tradeoffs involved in every decision.

Scarcity is central to the study of economics because it implies that?

Every choice involves an opportunity cost

In a market​ system, what determines how goods and services will be​ produced?

Firms determine how goods and services will be produced

Which​ generation(s) do you expect Starbucks Reserve to​ attract: baby boomers​ (ages 53 and​ over), Generation X​ (ages 35 and​ over), or millennials​ (ages 17 and​ over)? Briefly explain.

Generation​ X, because their average incomes are likely to be higher.

Terbia is a closed​ economy, which has been growing at a very slow pace over the last decade. In order to boost economic​ growth, the government removed trade barriers earlier this year and increased its spending on the economy. These moves were expected to generate employment and increase economic growth.​ However, unemployment did not decline as much as expected. Which of the​ following, if​ true, can explain this​ outcome?

Imported varieties of many goods were cheaper than the domestically produced varieties.

Which of the following is a correct statement about a mixed​ economy?

In a mixed​ economy, most economic decisions are made in markets but the government plays a significant role in the allocation of resources.

b. As an​ economist, how can you hope that your analysis of the demand for butter is accurate if you neglect thousands and thousands of other​ variables?

In the model of demand and​ supply, we focus only on the variables that experience has shown are the most important in determining the demand for a​ product: income, price of substitutes and​ complements, taste for the​ good, population, and the expected future price.

The price of fries decreases due to a potato surplus. This will

Increase the demand for McDonald's Big Mac hamburgers

Which of the following statements about microeconomics and macroeconomics is​ correct?

Macroeconomics is the study of the economy as a whole.

Economics use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

Marginal benefit equals marginal cost

A primary difference between macroeconomics and microeconomics is

Microeconomics examines individual markets while macroeconomics examines the economy as a whole.

Which of the following statements about microeconomics and macroeconomics is​ correct?

Microeconomics involves the study of how households and firms make choices.

What type of economic analysis is concerned with the way things ought to​ be?

Normative Analysis

Even though Sri Lankan tea was priced​ competitively, sales in Myanmar turned out to be far lower than expected. Which of the​ following, if​ true, could explain this​ outcome?

People in Myanmar are willing to pay more for their domestic tea brands than for foreign brands.

a. Are PopSockets and similar products substitutes for or complements to​ smartphones?

Phone grips and smartphones are complements because people who buy a smartphone may also buy a phone grip to help reduce the likelihood of dropping the phone.

When does productive efficiency​ occur?

Productive efficiency occurs when a good or service is produced at the lowest possible cost.

As a result of the change in the factor​ above,

The demand curve for RVs shifted to the right

Which of the following statements about the idea that people are rational is​ correct?

The idea assumes that consumers and firms use all available information as they act to achieve their goals.

c. Briefly explain whether the glut in this market is likely to eventually disappear.

The rental price of offices will eventually fall until the quantity of offices supplied equals the quantity of offices​ demanded, eliminating the glut.

Which of the following best describes scarcity?

Unlimited wants exceed the limited resources available

Which of the following best describes​ scarcity?

Unlimited wants exceed the limited resources available.

The three economic questions that every society must answer are

What goods will be​ produced, how will they be​ produced, and who will receive the​ goods?

According to the law of demand, there is an inverse relationship between price and quantity demanded. That​ is, the demand curve for goods and services slopes downward

When the price of a good​ increases, consumers' purchasing power​ falls, and they cannot buy as much of the good as they did prior to the price change.

The law of demand holds in the market for three​ goods, X,​ Y, and Z. An increase in the price of X causes an increase in the price of Y. A decrease in the price of X causes a decrease in the demand for Z. Which of the following conclusions is most strongly supported by the information given​ above?

Z is a substitute for input X in the production of Y.

Which of the following would not shift the demand curve for a good or​ service?

a change in the price of the good or service

The movement from point A to B on D1 is caused by

a decrease in the price of baskets of traditional wings.

Productive efficiency means that

a good or service is produced at the lowest possible cost.

McDonald's distributes ​$1.00 off coupons. This will cause

a movement along the demand curve for​ McDonald's Big Mac hamburgers.

A good for which demand increases as income rises is​ ________, and a good for which demand increases as income falls is​ ________.

a normal​ good; an inferior good

Show how an increase in the price of jiffy peanut butter affects the demand for Smucker's strawberry jam. When the price of a related good changes, this will result in ___________. In particular, when the price of Jiffy peanut butter increases, the demand curve for Smucker's strawberry jam will shift to the _________.

a shift in demand curve; left

If a surplus exists in a​ market, we know that the actual price is

above the equilibrium​ price, and the quantity supplied is greater than the quantity demanded.

What do economists mean when they use the Latin expression ceteris paribus​?

all else equal

Government policymakers use economic principles to make​ decisions, such as

all of the above

Which of the following would cause a shift in the demand curve from point A to point B

all of the above

Economics is a social science because

all of the above.

When economists speak of a surplus​, they mean a situation in which

all of the above.

If a shortage exists in a​ market, we know that the actual price is

below the equilibrium​ price, and the quantity demanded is greater than the quantity supplied.

Relative to a market​ economy, a​ centrally-planned economy would be expected to be

better at neither productive efficiency nor allocative efficiency because the absence of​ market-imposed competition negates the need of firms to satisfy consumer wants or produce using the​ lowest-cost methods.

Consider the market for​ Hewlett-Packard (HP)​ printers, depicted in the figure to the​ right, where the supply of HP printers has increased from S1 to S2 . What would cause the supply curve for HP printers to shift to the​ right?

both a and b

As a forecaster working for​ Allbirds, you should be concerned about point​ (a) and​ (b) because

both limit the size of the market. On the other​ hand, increased everyday comfort brought from the shoes may increase the demand for the​ shoe, causing an increase in sales.

​Trade-offs force society to answer questions such as what goods and services will be​ produced, how will the goods and services be​ produced, and who will receive the goods and services produced. Which of the following countries has an economy where households and firms makes these decisions?

canada

Societies organize their economies in two main ways to answer the three questions of​ what, how, and who. A society can have a _________ economy in which the government decides how economic resources will be allocated. Or a society can have a _________ economy in which the decisions of households and firms interacting in markets allocate economic resources.

centrally planned; market

On the diagram to the​ right, a movement from A to C represents a

change in demand

On the diagram to the​ right, a movement from B to C represents

change in supply

Complete the following​ statement: ​"When there is a shortage of a good

consumers compete against one another by bidding the price upward.

The glut in the market will result in the ________ in the equilibrium price of office space in this market. This ______ rental price of office space will result in ________ opportunities for office tenants.

decline; lower; greater

This will result in the equilibrium price of soybeans _________ and the equilibrium quantity ___________

decreasing; increasing

The price of Burger​ King's Whopper hamburger declines. This will cause

demand for​ McDonald's Big Mac hamburgers to decrease

The U.S. economy enters a period of rapid growth in incomes. This will cause

demand for​ McDonald's Big Mac hamburgers to shift to the left if they are inferior goods

Suppose the demand curve shifts to the right. The new demand curve should be __________. ​Furthermore, the new demand curve should _________ the original demand curve. With this​ shift, equilibrium price will __________ and equilibrium quantity will __________

downward sloping; not intersect; increase; increase;

Suppose, in an effort to prevent the population from​ declining, Italy begins offering new mothers extended periods of paid family leave from work​ and, consequently, the birthrate per woman increases. If​ so, then this could best be characterized as an example of people responding to

economic incentives.

Scarcity is central to the study of economics because it implies that

every choice involves an opportunity cost.

Allocative efficiency means that

every good or service is produced up to the point where marginal benefit is equal to marginal cost

Allocative efficiency means that

every good or service is produced up to the point where marginal benefit is equal to marginal cost.

In a competitive​ market, firms can dictate what the equilibrium price of a good or a service will be.

false

Consider the supply of crude oil on the world market. In August​ 2011, the price of oil was roughly​ $80 per barrel. Which of the following changes would increase the supply of​ oil? The oil supply curve would shift to the right if

future oil prices were expected to be lower

Centrally planned economies allocate resources based on decisions by ____________ while market economies answer these questions through decisions made by ___________

government; households and firms

Microeconomics is the study of

how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices.

Macroeconomics is most likely to include the study of

inflation

Goods X and Y are perfect substitutes. When the market price of good X is​ $5/unit, firm F produces 500 units of X. When the price of Y​ rises, 100 consumers of Y shift to the consumption of good X. This causes industry analysts to think that firm F will increase quantity supplied of X to match this increased demand. This conclusion is flawed because

it assumes that firm F is the only producer of good X.

The level of total investment by firms in new machinery and equipment helps to determine how rapidly the economy grows. This is a ___________ issue. ​However, to understand how much new machinery and equipment firms decide to​ purchase, one must analyze the incentives individual firms​ face, which is a ___________ issue.

macroeconomic; microeconomic

Which of the following areas of economics studies issues such as whether government intervention is capable of reducing the severity of​ recessions?

macroeconomics

Which of the following covers the study of topics such as inflation or​ unemployment?

macroeconomics

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

marginal benefit equals marginal cost.

Which of the following areas of economics studies issues such as ways to reduce teenage​ smoking?

microeconomics

Refer to the graph. A change in demand is illustrated by the move from​ ________, and a change in quantity demanded is illustrated by a movement from​ ________.

point C to point A​; point A to point B

Canada has a market economy. As​ such, Canada​'s economy​ (relative to centrally planned​ economies) tends to result in

productive efficiency and allocative efficiency but not necessarily equity.

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a really economist calls

scarcity

A decline in the demand for corn will

shift the soybean supply curve to the right.

The distinction between substitutes and complements is

substitute goods are used for the same purposes while complementary goods are used together.

Suppose instead that the price of LCD TVs is ​$2000.00. This will result in a _________ , which will place _________ pressure on the price.

surplus; downward

a. What does the article mean by a​ "glut"? What does a glut imply about the quantity of offices demanded relative to the quantity​ supplied? A glut is another term for a _________. When a market experiences a​ glut, the quantity supplied is ___________ the quantity demanded at the current price.

surplus; greater than

a. What approach to analyzing demand curves is Becker​ describing?

the ceteris paribus condition

Which one is best suited to find the quantity demanded at a price of​ $4.00?

the demand schedule

Macroeconomics is the study of

the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.

Equity is

the fair distribution of economic benefits.

Goods X and Y are perfect substitutes. When the market price of good X is​ $5/unit, firm F produces 500 units of X. When the price of Y​ rises, 100 consumers of Y shift to the consumption of good X. This causes industry analysts to believe that firm F has increased quantity supplied of X by 100 units to meet the higher demand for it. To arrive at this​ conclusion, the industry analysts are assuming that

the new buyers of good X​ will, on​ average, consume one unit each.

The difference between a change in supply and a change in the quantity supplied is that the latter is

the product's own price while the former is caused by a variety of variables other than the product's price.

The law of demand is the assertion that

the quantity demanded of a product is inversely related to its price.

An increase in the price of a product causes a decrease in quantity demanded because of the income and substitution effects. More​ specifically,

the substitution effect is the decrease in quantity demanded because the product is more expensive relative to other goods and the income effect is the decrease in quantity demanded owing to the decline in​ consumers' purchasing power.

According to the law of​ demand,

there is an inverse relationship between price and quantity demanded.

Economists assume that people are rational in the sense that

they use all available information as they take actions intended to achieve their goals.

The distinction between a normal and an inferior good is

when income​ increases, demand for a normal good increases while demand for an inferior good falls.

A perfectly competitive market is 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.

​"An increase in supply decreases the equilibrium price. The decrease in price increases​ demand. The statement is

​false: decreases in price affect the quantity​ demanded, not demand.

Goods and services that can be used for the same purpose are​ ________, and goods and services that are used together are​ ________.

​substitutes; complements