Econ Test 1

If you are willing to sell an old bicycle for $30, but someone offers you $40 for it, the result of the transaction would yield: a) $10 worth of producer surplus and unknown consumer surplus b) $30 worth of consumer surplus and $10 worth of producer surplus c) $30 worth of producer surplus and $10 worth consumer surplus d) $10 worth of consumer surplus and unknown producer surplus

$10 worth of producer surplus and unknown consumer surplus

Suppose that a customer's willingness to pay for a product is $79, and the sellers willingness to sell is $64. If the negotiated price is $68, how much is the consumer surplus a) $4 b) $11 c) $15 d) $21

$11

A change in quantity supplied is the result of a) a change in the price of the good b) a change in technology c) an increase in the number of sellers d) all of the above

A change in the price of the good

Which of the following will cause the production-possibilities curve to shift inward? a) an increase in population b) a technological advancement c) a decrease in the size of the labor force d) an increase in knowledge

A decrease in the size of the labor force

Which of the following performs the role of both capital and land? a) a manufacturing plant and the property on which it is located b) the equipment used to produce goods c) a mine that has been vacated because it is no longer profitable d) all of the above

A manufacturing plant and the property on which it is located

If the government prevented prices from falling to their equilibrium levels, there would be: a) a shortage b) a surplus c) a price ceiling d) an equilibrium price

A surplus

To calculate market supply we a) add the quantities supplied for each individual supply schedule horizontally b) add the quantities supplied for each individual supply schedule vertically c) find the average quantity supplied at each price d) find the difference between the quantity supplied and the quantity demanded at each price

Add the quantities supplied for each individual supply schedule horizontally

When the market mechanism is allowed to operate freely prices will determine a) the mix of output to be produced b) the resources to be used in the production process c) to whom the output will be distributed d) all of the above

All of the above

The market mechanism: a) allows buyers to communicate with producers indirectly b) is directed by the government in order to promote efficiency c) results in the misallocation of resources because producers seek to maximize profits d) allocated goods in an equitable manner

Allows buyers to communicate with producers indirectly

A decrease in available resources would cause a) an economy to move inside its production possibilities frontier b) the production possibilities frontier to shift inward c) opportunity cost increase d) the unemployment of resources

An economy to move inside its production possibilities frontier

Suppose there are a series of forest fires which affect the lumber industry while, at the same time, consumers demand more wooden furniture. The wooden furniture market would experience a a) an increase in price and an intermediate change in quantity b) an increase in price and an increase in quantity c) an increase in quantity and an indeterminate change in price d) a decrease in price and an indeterminate change in quantity

An increase in price and an intermediate change in quantity

If bagels and donuts are substitutes, then a decrease in the price of donuts will result in a) an increase in the demand for donuts b) an increase in the demand for bagels c) a decrease in the demand for donuts d) a decrease in the demand for bagels

An increase in the demand for donuts

In a market, the equilibrium price is determined by: a) what buyers are willing and able to purchase b) what sellers are willing and able to odder for sale c) both demand and supply d) the government

Both demand and supply

Economics is a social science that involves the study of how individuals, firms, and societies: a) maximize happiness b) maximize income c) choose among alternatives to satisfy their unlimited wants d) develop their tastes and preferences

Choose among alternatives to satisfy their unlimited wants

The latin phrase ceteris paribus means: a) the production-possibilities frontier never shifts b) lassiez faire c) other things remain equal d) the invisible hand

Other things remain equal

In the graph above a shift to the right of the demand curve would be caused by anything except a a) decrease in the population b) increase in income given that shoes are a normal good c) decrease in the price of a complement d) increase in the price of a substitute

Decrease in the population

The purpose of an economic model is to: a) be a complex, exact replica of reality b) demonstrate which values and beliefs are best for the economy c) the effect of Wal-Mart's pricing policies on consumers d) the effect of the government policies on the country's unemployment rates

Demonstrate which values and beliefs are best for the economy

Land: a) is not a scarce resource because it is everywhere b) earns rent c) earns interest d) is only used for agriculture

Earns rent

Suppose in the market for iPhones, the following two changes take place: the cost of making iPhones rises, and customers begin to prefer Androids. What happens to the equilibrium price and quantity? a) equilibrium price and equilibrium quantity fall b) equilibrium price falls but equilibrium quantity is indeterminate c) equilibrium price is indeterminate and equilibrium quantity falls d) equilibrium price rises but equilibrium price rises but equilibrium quantity is indeterminate

Equilibrium price is indeterminate and equilibrium quantity falls

Suppose that the price of pork rises. We would expect that the supply of beef will a) fall because pork is a resource used in beef production b) fall because farmers will shift resources from beef production to pork production c) rise because pork is a resource used in beef production d) rise because farmers will shift resources from beef production to pork production

Fall because farmers will shift resources from beef production to pork production

Consumer surplus is defined as the a) gap between the demand curve and the market price b) gap between the supply curve and the market price c) the difference between the price floor and the market price d) the difference between the price ceiling and the market price

Gap between the demand curve and the market price

When an economy is producing efficiently it is: a) producing a combination of goods and serviced from the available resources b) getting the most goods and services from the available resources c) experiencing decreasing opportunity cost d) all of the above

Getting the most goods and services from the available resources

When the government directives do not produce a better economic outcome, which of the following has occurred? a) government failure b) market failure c) macroeconomic failure d) scarcity

Government failure

According to the law of increasing opportunity costs a) greater production leads to greater inefficiency b) greater production means factor prices rise c) greater production of one good requires increasingly larger sacrifices of other goods d) higher opportunity costs induce higher output per unit of input

Greater production of one good requires increasingly larger sacrifices of other goods

To answer the question of how the goods and services are to be produced, society must decide: a) what products to export b) what products government wants c) how to combine its scarce resources to produce the desired products d) what products businesses want to produce

How to combine its scarce resources to produce the desired products

Which of the following events would cause the production-possibilities frontier to shift outward? a) a labor strike b) increased efficiency in using resources c) the full employment of resources d) a decrease in available resources

Increased efficiency in using resources

According to the law of demand, the quantity of a good demanded in a given time period a) increases as its price rises, ceteris paribus b) decreases as its price falls, ceteris paribus c) increases as its price falls, ceteris paribus d) does not change

Increases as its price falls, ceteris paribus

An item whose demand rises as peoples incomes fall is known as _______ good a) inferior b) complementary c) superior d) substitute

Inferior

Joes fixes cars for a living in his driveway. He works late at night and makes so much noise that Moe, his neighbor across the street, cannot sleep. Joe: a) is imposing an external benefit on Moe b) is imposing an external cost on Moe c) is breaking the law of supply d) would definitely make more money is he rented a garage

Is imposing an external cost

Which of the following illustrates the law of demand? a) lindsay offers to buy more sticks of chewing gum at $2 than at $1 b) lindsay offers to buy more sticks of chewing gum at $1 than at $2 c) Marcus offers to sell more sticks of chewing gum at $2 than at $1 d) marcus offers to sell more sticks of chewing gum at $1 than at $2

Lindsay offers to buy more sticks of chewing gum at $1 than at $2

A corporation is a firm owned by a) a small number of individuals liable for firms debt b) many people who own shares in a firm but are not liable for the firm's debt c) one individual liable for firms debt d) any of the above

Many people who own shares in a firm but are not liable for the firm's debt

An institution that enables buyers and sellers to interact and transact with one another is known as a a) bank b) economy c) stock exchange d) market

Market

Markets differ in a) geographic location b) product offered c) size d) markets differ in all of these

Markets differ in all of these

A theory composed of a number of assumptions and facts boiled down to their basic relevant elements is called a: a) metaphor b) model c) conclusion d) practice

Model

Which of the following definitely means productivity has increased? a) more output from fewer workers b) more output from more workers c) less output from fewer workers d) less output from more workers

More output from fewer workers

If a price ceiling is set above the equilibrium price a) a surplus results in the market b) no impact is felt in the market c) a shortage occurs in the market d) quantity supplied exceeds quantity demanded

No impact is felt in the market

A single proprietorship is a firm owned by: a) a small number of individuals who are liable for the firms debt and obligations b) many people who own shares of the firm, but who are not liable for the firms debt c) one individual who is liable for the firms obligations and debt d) another firm or corporation

One individual who is liable for the firms obligations and debt

A shift in the demand curve is cause by a change in a) the price of an item b) the behavior of suppliers c) costs of production d) one of the determinants of demand

One of the determinants of demand

If you accept a job in Seattle as a financial analyst, you must give up the chance to accept a similar job in Australia. Giving up the job in Australia is your" a) allocative cost b) opportunity cost c) production cost d) cost factor

Opportunity cost

According to economists, investment includes: a) output which is used to produce output b) purchases of stock c) purchases of bonds d) the hiring of labor

Output which is used to produce output

A leftward shift of the market supply curve, ceteris paribus, causes equilibrium: a) price to increase and quantity to decrease b) price to increase and quantity to increase c) price to decrease and quantity to decrease d) price to decrease and quantity to increase

Price to increase and quantity to decrease

______ Occurs when goods are produced at the lowest possible cost, and ______ occurs when individuals who desire a product the most receive those goods and services a) production efficiency; allocative efficiency b) production possibilities; allocative possibilities c) allocative possibilities; production possibilities d) allocative efficiency; production efficiency

Production efficiency; allocative efficiency

In a market economy, which of the following is an incentive for producers to produce efficiently? a) government and regulations b) the production possibilities curve c) profits d) the publics welfare

Profits

A shift in demand is defined as a change in the a) price b) quantity demanded because of a change in price c) quantity demanded at any given price d) equilibrium quantity

Quantity demanded at any given price

When effective price ceilings are set for a market a) quantity demanded will be less than the equilibrium quantity, and price will be less than the equilibrium price b) quantity demanded will be less than the equilibrium quantity, and price will be greater than the equilibrium price c) quantity demanded will be greater than the equilibrium quantity, and price will be less than the equilibrium price d) quantity demanded will be greater than the equilibrium quantity, and price will be greater than the equilibrium price

Quantity demanded will be greater than the equilibrium quantity, and price will be less than the equilibrium price

An effective price ceiling results in black market pressures to a) Reduce prices because of surpluses b) Raise prices because of surpluses c) Raise prices because of shortages d) reduce prices because of shortages

Raise prices because of shortages

A change in the price of a good a) causes a shift in the supply curve b) results in a change in supply c) results in a change in quantity supplied d) is a determinant of supply

Results in a change in quantity supplied

Productivity: a) rises when the value of output rises relative to the cost of inputs b) falls when the value of output rises relative to the cost of inputs c) rises when the ratio of output to input increases d) falls when factors of production cost more

Rises when the ratio of output to input increases

Other things remaining the same; an increase in the price of Chevrolets will cause the demand of Ford to a) shift to the right b) shift to the left c) remain unchanged d) move up and down along the same curve

Shift to the right

An increase in technology a) shifts the PPF curve outward b) shifts the PPF curve inward c) creates unemployment d) decreases inflation

Shifts the PPF curve outward

The purpose of invoking ceteris paribus is to a) simplify the analysis being done b) make the economic model more relevant c) allow the model to make more complexity into account d) introduce risk into the model

Simplify the analysis being done

The result of government intervention in the market is that a) society is always better off b) the production possibilities frontier will always shift outward c) society may be worse off d) society will always be worse off

Society may be worse off

A point on a nation's PPF indicates a) an undesirable combination of goods and services b) combinations of production that are unattainable, given current technology and resources c) levels of production that will cause both unemployment and inflation d) that resources are fully employed in producing a particular combination of goods and services

That resources are fully employed in producing a particular combination of goods and services

In economics, what does scarcity mean? a) that when there is a shortage of a particular good, the price will fall b) that a production-possibilities curve cannot accurately represent the tradeoff between goods c) that society's desires exceed the want-satisfying capability of the resources available to satisfy those desires d) that the market mechanism has failed

That society's desires exceed the want-satisfying capability of the resources available to satisfy those desires

WHich of the following is not a factor of production? a) psychiatrist b) the $100,000 used to start a new business c) a bulldozer d) six thousand acres of farmland

The $100,000

When economists talks about "optimal outcomes" in the marketplace, they mean a) the allocation of resources by the market is perfect b) all the consumer desires are satisfied c) the allocation of resources by the market is likely to be the best possible, given scarce resources and income constraints d) everyone who wants a good or service can have it

The allocation of resources by the market is likely to be the best possible, given scarce resources and income constraints

Opportunity cost is a) only measured in dollars and cents b) the dollar cost to society of producing the goods c) the difficulty associated with using one good in place of another d) the alternative that must be given up in order to get something else

The alternative that must be given up in order to get something else

Ceteris paribus, which of the following can change without shifting demand? a) expectations b) income c) the prices of other related goods d) the price of the good itself

The price of the good itself

A market is said to be in equilibrium when: a) demand is fully satisfied at all alternative prices b) the buying intentions of all consumers are realized c) the supply intentions of all sellers are realized d) the quantity demanded equals the quantity supplied

The quantity demanded equals the quantity supplied

Given a downward sloping market demand curve for product X, if the price of X is reduced from $10 to $8, then, ceteris paribus: a) demand for X will increase b) the quantity demanded of x will increase c) demand for x will decrease d) the quantity demanded of x will decrease

The quantity demanded of x will increase

Which of the following is the best example of land? a) the ethanol refined from corn b) a factory that produces new goods and services c) the river water used to float a riverboat casino d) a barber's chair

The river water used to float a riverboat casino

The fundamental problem of economics is a) the law of increasing opportunity costs b) the scarcity of resources relative to human wants c) how to get government to operate efficiently d) how to create employment

The scarcity of resources relative to human wants

The term market mechanism refers to a) the use of market prices and sales to determine resource allocation b) the establishment of a ceiling price c) supply and demand curves d) gov laws and regulations

The use of market prices and sales to determine resource allocation

Economists make a distinction between changes in quantity supplied and changes in supply a) Because the supply curve shifts whenever there is a change in quantity supplied b) to distinguish a movement along a supply curve from a shift in the supply curve c) because the demand curve shifts whenever there is a change in quantity supplied d) to distinguish a supply shift from a demand shift

To distinguish movement along a supply curve from a shift in the supply curve

The goals of market participants include the maximization of a) utility, profits, and the general welfare of society b) rent, wages, profit and interest c) land, labor, capital and entrepreneurship d) resource constraints, budget constraints, and legal constraints

Utility, profits, and the general welfare of society

The term opportunity costs refers to the: a) value of all the options given up when a good or service is produced b) financial costs of all the factors or production used to produce a good or service c) amount of resources used to produce a good or service d) value of the best option given up when a good or service is produced

Value of all the options given up when a good or service is produced

Reasons to study economics include all of the following EXCEPT that you a) will always live in a world of scarcity and choices b) will understand more about how government and businesses interact c) may become a better informed voter d) will learn exactly how to invest your cash short-term for the highest return on investment

Will learn exactly how to invest your cash short term for the highest return on investment