Econ unit 1 review questions

Suppose that the price of cornflakes is $3.0 per box and the price of oatmeal is $1.5 per box. Both boxes contain the same number of ounces of cereal. The relative price of cornflakes in terms of oatmeal is

$2.00

Refer to the above table. There is an excess quantity supplied of 2,000 units at a price of

$600

Distinguish between a change in demand and a change in quantity demanded.

-A change in a good's own price leads to a change in quantity demanded. This is a movement along the same demand curve. -When there is a change in ceteris paribus there is a change in demand. This will shift the demand curve to the left or right.

Which of the following is a positive economic statement?

-If minimum wage rates rise, then unemployment will rise.

For a country that produces two goods: Environmental clean-up goods and space program goods. What economic information is contained in its production possibility curve?

-It would represent all of the possible combinations of maximum outputs that could be produced from each. -It could also show trade-offs, scarcity, and opportunity costs. -Any point that is on or below the PPC is achievable. However, anything outside of the curve is not.

Rent controls primarily benefit

-people who already occupy rental units.

Other things being equal, an increase in the price of a good leads to an increase in the amount produced. This is known as

-the law of supply.

In which decade did the U.S. federal government first establish a system of agricultural price supports?

1930's

Justin and Maria work at a restaurant. Justin can make either 10 pancakes or 4 waffles; Maria can make either 8 pancakes or 2 waffles. According to this scenario, the opportunity cost of making one pancake for Jose is

2/5 waffle

In what type of economy does the government decide how economic resources will be allocated?

A centrally planned economy

How does a change in quantity supplied differ from a change in supply?

A change in the price affects quantity supplied, not supply.

The economic system in which a government establishes ownership of resources and issues rules for how to manage the production of products is best described as

A command and control system

When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of?

A market

"No individual should have less than $20,000 income in the United States in 2017" is an example of

A normative statement.

A change in which of the following will result in a shift of the supply​ curve?

A. technology and productivity B. taxes and subsidies C. cost of inputs used to produce the product D. All of the above!!!!

The author of the book An Inquiry into the Nature and Causes of the Wealth of Nations is

Adam Smith.

In economic terms, a(n) is the total amount of some good or service.

Aggregate

Ms. Boulware is the best lawyer and the best secretary in town. She has

An absolute advantage in both jobs.

Using real world data to test a hypothesis is known as:

An empirical test

Which of the following is consistent with the law of supply?

An increase in the market price of MP3 players causes an increase in the production of MP3 players.

Which of the following is a true statement about​ self-interest as used in the study of​ economics?

Any action can be based on​ self-interest if the person has some reason for the action.

Why do most people specialize in their work?

Because they can see what they are the best at and become more efficient at that job; they see their comparative advantage and can produce more.

The hypothesis that people cannot always make completely rational decisions by examining every possible choice but instead use of rules of thumb to guide them is known as;

Bounded rationality

The law of increasing additional cost is represented by a​ ________ production possibilities curve.

Bowed-out

Scarcity...

Cannot be avoided in the real world

The factors of production include land, labor and:

Capital

The primary purpose of economics is to understand how people make

Choices.

A centrally planned economy is also referred to as a;

Command and control economy.

The global trend towards large multinational firms is partially driven by __________.

Comparative advantage

Countries gain from specializing in producing goods in which they have a(n) __________ advantage and trading for goods in which other countries have a(n) __________ advantage.

Comparative, comparative

Microeconomics examines the...

Decision making undertaken by individual households.

If consumers expect that the price of pretzels will decrease next week, what would happen today?

Demand today for pretzels would decrease.

Which of the following is true of incentives?

Different people are motivated by different incentives.

According to the rationality assumption, people:

Do not intentionally make decisions that would leave them worse off.

Which of the following statements is FALSE?

Economic goods are available in desired quantities at a zero price.

Which of the following statements is NOT true?

Economics does not use theories.

Comparative advantage is the ability to produce a good or service at a higher opportunity cost compared to other producers.

False

Economic models relate to the way people think rather than to the way people act.

False

For a nation that only produces two​ goods, the maximum amounts of each of those goods that can be produced are represented by points on a production possibilities curve that are​ half-way between the vertical and horizontal axes.

False

It is relatively easy for an author to keep all normative statements out of a textbook.

False

On a graph that shows the​ trade-off between the production of two​ goods, the​ trade-offs occur outside the production possibilities curve.

False

Scarcity is the same thing as shortage

False

The concept of self interest assumes that individuals can only further their goals at the expense of other individuals.

False

Whenever we use productive resources to make capital​ goods, we are automatically increasing current consumption.

False

Landon increases his consumption of Good X and Good Y when his income increases. For Landon

Good X and Y are normal goods

If a country has a comparative advantage in the production of a good, then that country:

Has a lower opportunity cost in the production of that good.

Economic decisions are made at every level in society. When we try to decide which production method to use among several alternatives, which of the following key economic questions are we trying to answer?

How do we produce the product?

Assume the cost of aluminum used by soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft drinks?

I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases. -II & III

With reference to the difference between a change in demand and a change in quantity demanded, which of the following is TRUE?

If a good's price goes down, then quantity demanded will increase.

The U.S. government imposes import quotas on many agricultural products, especially products that receive price supports. Offer an economic explanation for this.

If price supports in the United States are above the price of other countries, then other countries would want to produce more of that product and sell it to the United States. The imports are limited through import quotas to ensure that this does not happen.

Father says, "Earn an A on your next report card and I'll help you buy a car." An economist would say that this parent is providing his child a(n)

Incintive.

Which of the following is NOT a normative economic statement?

Increases in the minimum wage cause increases in unemployment.

Which of the following is a true statement about the economic assumption of rationality?

Individuals generally act as though they are rational.

Normative economics:

Involves value-judgements

Why do most people choose to specialize in a narrow set of skills for their work, rather than to learn a little bit about several varied fields of endeavor?

It allows them to earn more income by being more productive.

Consider the figure and assume that it is the market for health-care services. When the "baby boomer" generation retires, the number of people who require health care increases by 30%, and, as a result, the number of health-care providers also increases, but by only 25%. What is the effect on the price of health-care services over time?

It increases because demand increased by more than supply.

One problem with constructing a perfectly complete economic model is that...

It would be far too complicated to analyze.

A characteristic of a good model is:

Its predictions can be tested using real-world data.

Which of these covers the study of topics such as inflation and unemployment?

Macroeconomics

Macroeconomics is best defined by which of the following statements?

Macroeconomics is the study of the behavior of the economy as a whole.

In some developing countries and in some former Communist countries, people exchange their domestic currencies for foreign currencies such as the dollar in black markets. Why would this practice go on?

Maybe because they know that that one currency is worth more in another country?

__________ is the study of how households and businesses make choices, how they interact in markets, and how government influences their choices.

Microeconomics

The study of an individual's choice about what type of computer to buy is a subject of

Microeconomics.

The resources provided by nature and used to produce goods and services are also known as:

Natural resources

Whenever statements embodying values are made, we enter the realm of

Normative economics.

Which of the following are not essential components of an economic model?

Normative statements

Which of the following countries has an economy where most of the resource allocation is determined by a central planning authority?

North Korea

Which of the following statements is a positive economic statement?

One in every five children in the United States is living in poverty.

In determining how to allocate your​ time,

Only comparative advantage, but not absolute​ advantage, matters.

What is the name given to the highest-valued alternative that must be given up to engage in any activity?

Opportunity cost

Which of the following statements is FALSE about opportunity​ cost?

Opportunity cost exists only for goods with monetary values.

Which of the following is a TRUE statement?

Opportunity cost is always a foregone opportunity.

When nations specialize in their comparative advantage and engage in trade:

Overall standard of living increases.

The factor of production that consists of factories and equipment used in​ production, as well as improvements to natural​ resources, is called

Physical capital

The stock of computers, factory buildings and machine tools used to produce goods is known as:The stock of computers, factory buildings and machine tools used to produce goods is known as:

Physical capital

Macroeconomics is concerned with all of the following except:

Political party affiliation

The above figure is referred to as a

Production possibilities curve (PPC)

In economics...

Resources are things used to produce items that satisfy​ people's wants.

Economics is the study of choice under conditions of:

Scarcity

The principle of opportunity cost evolves from the concept of:

Scarcity

Distinguish between scarcity and shortages.

Scarcity- the inability of society to satisfy all human wants because of limited resources.; we never have enough of everything. It can relate to the poor and the rich. Shortages- Occurs when there isn't enough of something (like people having to wait in line). Scarcity and shortages are not the same.

The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the _ the payoff to devoting additional resources to that activity.

Smaller

Refer to the above figure. Suppose that the supply curve shifts from SA to SB while the demand curve remains at DA. Which of the following is TRUE?

Supply has increased.

Refer to the above figure. Suppose the demand curve shifts from DA to DB, while the supply curve remains at SA. Which of the following statements is FALSE?

Supply has increased.

The role of the entrepreneur always involves:

Taking risks

The price of tea increases. Which of the following is NOT part of the likely chain of events that follows from this price change?

Tea leaf producers lay off some more workers.

All of the following are assumptions underlying the production possibilities curve except:

Technology is assumed to be continuously improving.

Which of the following statements is a positive economic statement?

The President's budget included an increase in unemployment insurance payments.

Which of the following is not a possible opportunity cost of attending college?

The cost of housing.

In his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations," Adam Smith notes that specialization increases productivity. Which of the following was the cause of this phenomenon?

The divison of labor

The greater the amount of productive resources we use to produce capital goods​ today,

The more growth we will experience in the future.

Tiger Woods, a professional golfer, pays a garage mechanic to change the motor oil of his car even though he can do the work himself. Which of the following best explains why Tiger Woods does NOT change the oil himself?

The opportunity cost of changing oil is higher for Tiger Woods than for the garage mechanic.

Which of the following would be a topic of study in macroeconomics​?

The output of the united states

In 1950, a phone call at a pay phone cost 5 cents and a first-class stamp cost 3 cents. Today, those prices are 50 cents and 49 cents respectively. What has happened to the price of each good relative to the other? What has happened to the price of each good relative to all other goods?

The price for the pay phone has increased by 45 cents. The price for the first-class stamps has increased by 46 cents. Compared to other goods, the price is much cheaper, so it has decreased.

The market for corn is initially in equilibrium. Suppose that the production of biofuels, which use corn as an input, increase, and at the same time, increases in the price of oil cause farm production costs to rise. Which of the following explains the effect on equilibrium price and quantity in the corn market?

The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information.

Explain what will happen to the production possibilities curve over time if society gives up some consumption goods in favor of more capital goods.

The production possibilities curve (PPC) will shift outward over time. This is because the capital goods can be used to produce more goods in the future.

Washington state had a bumper apple crop this year, significantly increasing the supply of apples in the U.S. Given this information, choose the statement that correctly describes the effect on the U.S. apple market.

The quantity of apples demanded will increase as the price of apples falls.

Which of these is a macroeconomic study?

The study of how fast prices in general are rising.

If one day a terrible disease were to wipe out over one-half of the orange trees in the United States, which of the following would likely result?

The supply curve of orange juice would shift upward and to the left.

The graph above shows the market for laptop computers. Suppose the price of memory chips used in laptop computers decreases. How will this event impact on the equilibrium quantity and the market price?

The supply increases, causing the equilibrium quantity to rise and the market price to fall.

Wants are...

The things people would consume if they had unlimited incomes.

Which of the following statements about a shortage is correct?

There is no shortage of most scarce goods.

A model is considered​ "good" if it yields usable predictions that are supported by​ real-world observations.

True

Absolute advantage refers to the ability to produce more units of a good or service using a given quantity of labor or resource inputs.

True

An economy is productively efficient whenever it is producing the maximum output with given technology and resources.

True

Division of labor refers to the segregation of resources into different specific tasks.

True

Economic goods are goods for which the quantity demanded exceeds the quantity supplied at a zero price.

True

Engaging in any activity using any​ resource, even​ time, involves trading off the use of that resource for one or more alternative uses.

True

Entrepreneurship is the component of human resources that performs the functions of​ organizing, managing, and assembling the other factors of production to create and operate business ventures.

True

Every choice involves giving up an opportunity to produce or consume something else.

True

The bounded rationality hypothesis assumes people are not fully rational and therefore use simple rules of thumb to sort among the alternatives that happen to occur to them.

True

The economic system in which individuals and families own all of the scarce resources used in​ production, decide how and what to​ produce, and how many products to​ produce, is best described as a price system.

True

The law of increasing additional cost shows that the opportunity cost of additional units of a good generally increases as people attempt to produce more units of that good.

True

When nations specialize in an area of comparative advantage and then trade with the rest of the​ world, the average standard of living in the world rises.

True

When people make​ choices, they attempt to maximize benefits net of opportunity cost.

True

With respect to your grades in your accounting and economics​ classes, a​ one-to-one trade-off means that the opportunity cost of receiving one grade higher in accounting​ (for example, improving from a D to a​ C) is one grade lower in economics​ (falling from a B to a​ C).

True

The sugar quota in the United States creates winners and losers. The winners are __________ and the losers are __________.

U.S. sugar producers, U.S. sugar consumers.

If the minimum wage is set above the market-determined clearing wage, the __________.

Unemployment rate will be higher than it would be without a minimum wage

Macroeconomics focuses on which of the following topics?

Unemployment, inflation, growth, and trade

Which of the following represents an inferior good?

When consumer income increases, the demand for bologna decreases.

Which of the following is not one of the three fundamental questions of​ economics?

Where will items be​ produced?

Which of the following is TRUE with respect to specialization?

With a given set of resources, specialization results in higher output. , Individuals and nations specialize in their areas of comparative advantage in order to reap the gains of specialization, & Adam Smith in The Wealth of Nations referred to specialization and division of labor.

A useful economic model...

Yields usable predictions and implications for the real world.

You and your neighbor pick apples and cherries. If you can pick apples at a lower opportunity cost than your neighbor can, which of the following is true?

You have the comparative advantage in picking apples.

Suppose that your grade point average and academic record are the most important thing to you. What is the opportunity cost of spending 2 hours studying for a biology​ exam?

Your time spent studying for other classes.

Which of the following causes a movement along a supply curve?

a change in the price

In which of the following situations will both market clearing price and the equilibrium quantity decrease?

a decrease in demand with no change in supply.

A wildfire destroyed a large amount of orange crops in California, leading to

a decrease in supply of oranges.

In which of the following situations will market clearing price increase and the equilibrium quantity decrease?

a decrease in supply with no change in demand

The law of supply states that there is

a direct relationship between price and quantity supplied, ceteris paribus.

The relationship between quantity supplied and price is usually

a direct relationship.

Some pet owners are using an "invisible fence" to keep their animals from straying. Every time the animal steps over the edge of the property, it gets a mild shock. A social scientist would call the shock

a distinctive.

Which of the following is not true about economic​ models?

a good model must be realistic.

An inverse relationship will be graphed as

a line that is downward sloping.

If the president of Columbia commented that "we should do something to reduce inflation in Columbia," this would be an example of:

a normative statement

If the federal government sets a minimum price for wheat at $5.00 per bushel when the equilibrium price is $4.50, then

a permanent surplus will develop because the government established the minimum price at $5.00.

an increase in the price of gasoline will reduce the amount of gasoline purchased. this is...

a positive economic statement.

Which of the following is NOT a factor of production?

a product

Consider the following statement based on a positive economic analysis that assumes that all other things remain​ constant:

a reduction in income tax rates will result in more people working.

All other factors being constant, a reduction in price tends to cause which of the following?

a reduction in quantity supplied and an increase in quantity demanded

Other things remaining equal, the law of demand says that higher prices will lead to:

a smaller quantity demanded and lower prices to a larger quantity demanded.

A price floor that is set above market equilibrium will cause

a surplus.

The condition that exists when quantity supplied exceeds quantity demanded at the current price is known as __________.

a surplus.

The outward shift of the production possibilities frontier from point A to point B in the above graph would most likely be caused by:

a technological advance that affects both the production of automobiles and aircraft carriers

All of the following will decrease the supply of airline flights except:

a technological change that makes airplanes safer and more fuel-efficient.

An increase in the equilibrium quantity of good B can be caused by

a technological improvement in the process of producing good B.

Which of the following will cause an outward (rightward) shift in supply?

a technological improvement.

Normative economic analysis involves

a value-free approach to inquiry.

Positive analysis can be described as

a value-free approach to inquiry.

As long as a price floor is​ ________ the market clearing​ price, imposing a price floor creates a​ ________.

above; surplus

Economists assume that when there is a change in demand and/or supply, that prices reach a new equilibrium:

after an adjustment period that varies.

According to the theory of comparative advantage, specialization and free trade will benefit:

all trading partners who specialize in goods where they have comparative advantage.

A demand schedule gives a schedule of​ ________ quantities demanded per time dimension at​ ________.

alternative; different possible prices

A supply schedule gives a schedule of​ ________ quantities supplied per time dimension at​ ________.

alternative; different possible prices

If demand decreases while supply increases, then the equilibrium price

always decreases.

If demand increases while supply simultaneously decreases, then the equilibrium quantity

always increases, always decreases, can never change= none of these.

The economic way of thinking is best described as

an analytical framework enabling one to reach informed conclusions.

Which one of the following would cause an increase in the supply of planes?

an improvement in the technology used to produce planes

In which of the following situations will both market clearing price and the equilibrium quantity increase?

an increase in demand with no change in supply

A price floor set below the equilibrium price will cause which of the following?

an increase in demand, a shortage, a surplus= none of these.

When the price of a good rises, there is

an increase in quantity supplied.

The decrease in the price of gasoline to a national average of less than $2.5 during the summer of 2020 was most likely a result of

an increase in supply resulting from higher refinery output.

Assume that soda and bottled water are substitutes. Given a downward-sloping demand curve for bottled water, an increase in the price of bottled water will cause

an increase in the demand for soda.

Which of the following would cause an increase in the market supply of drones?

an increase in the number of firms making drones

Which of the following​ (initially assumed​ constant) could occur and thus offset the stated​ outcome?

an increase in the outsourcing of jobs.

According to this graph the existence of a minimum wage in the market for low-skilled workers results in:

an increase in wages but lower employment.

Economic growth is shown by

an outward shift of the production possibilities curve.

The relative price of any commodity is its price in terms of

another commodity

Positive economic statements​ ________, and normative economic statements​ ________.

are concerned with​ "what is"; are concerned with​ "what ought to​ be"

Price controls

are government-mandated minimum or maximum prices that may be charged for goods.

Normative economic statements...

are statements of "what ought to be."

If all resources were perfectly adaptable for alternative uses, the production possibilities curve would

be a straight line.

For markets to generate the greatest benefit and function in the most efficient manner they must:

be perfectly competitive

Why is it that all of our wants cannot be satisfied?

because limited resources mean all the goods we want cannot be obtained

________________ deals with the fact that individual choices can be affected by psychological limitations.

behavioral economics

If you can earn $30,000 a year teaching, $20,000 a year making phone apps, $35,000 a year driving a cab, and $40,000 a year as an actor or actress. You have a comparative advantage in

being an actor/actress

As long as a price ceiling is​ ________ the market clearing​ price, imposing a price ceiling creates a​ ________.

below; shortage

Refer to the above figure. A price ceiling has been set at P1, and a black market has opened. The equilibrium black market quantity will be

between Q1 and Q3.

Jack and Jill both decide to go to a movie with free tickets. We know that

both bear an opportunity cost since they could have done other things instead of watching a movie.

Anthony and Kelly decide to watch a movie on Netflix using a promotion code so they do not need to pay for that movie. We know that

both bear an opportunity cost that depends on what each person is giving up to watch the movie.

Market price is determined by _________.

both supply and demand.

Your local grocery store reduces transaction costs to the consumer

by reducing the consumer's need to travel from food producer to food producer (or manufacturer to manufacturer) to purchase the food staples that the consumer desires.

Economic models...

can be used to explain or predict economic phenomena.

Artificial intelligence (AI) technologies...

can enable individuals to make more informed decisions.

A person has a comparative advantage in an activity whenever she

can perform the activity at a lower opportunity cost than another person can.

When supply increases and at the same time demand decreases, we

cannot predict equilibrium quantity, but know that equilibrium price will decrease.

A good economic model

captures the essential relationships of the problem under consideration.

Economic models often simplify the real world by holding all things equal and changing one variable to determine the impact of the change. The "all things equal" assumption is also known as:

ceteris paribus

A change in the ceteris paribus conditions for supply will lead to a

change in supply

On the diagram shown above, a movement from A to B represents a:

change in the quantity supplied.

When both supply and demand​ decrease, the equilibrium price​ ________ and the equilibrium quantity​ ________.

change is uncertain; decreases

The slope of a nonlinear curve

changes along the various points of the curve.

Economics is the study of how people make

choices.

There is an increase in the demand for cookies when the price of milk falls. Other things constant, we can conclude that cookies and milk are

complementary goods

Suppose we observe that the demand for eggs increases when people buy more cheese. We can conclude that eggs and cheese are

compliments

Which of the following is a microeconomic concern?

consumer behavior in the smartphone market.

Who is most likely to benefit from rent controls?

consumers who are able to obtain apartments at the controlled rents

Microeconomics examines the

decision making undertaken by individual households.

An​ above-equilibrium minimum wage will result in​ ________ in the quantity of labor demanded and​ ________ in the quantity of labor supplied.

decrease; an increase

Suppose that today, consumers expect the price of bottled water to double in the future. Then today the bottled water's

demand curve will shift to the right.

In a freely operating market system, queuing is most likely to occur when

demand fluctuates unpredictably and quickly.

Whenever there is a change in a ceteris paribus condition there will be a change in​ ________, which is represented by a​ ________.

demand; shift in the entire demand curve

According to the law of​ supply, the quantity supplied of any commodity is​ ________ related to its​ price, other things being equal.

directly

All mutually beneficial trades have taken place. This implies that

economic efficiency prevails in the society

Demand applies to which of the following?

education, fast food, labor market.

Understanding economics can help policymakers devise strategies to do all of the following except:

eliminate climate change

Two factories make wooden chairs. If the workers in factory X make each chair from start to finish and the workers in factory Y divide labor, one would assume

factory Y can take advantage of division of labor and produce more efficiently.

A change in a​ good's own price leads to a change in​ supply, which shifts the supply curve.

false

A rise in demand is represented by a leftward shift in the demand​ curve, and a fall in demand is represented by a rightward shift in the demand curve.

false

If the number of firms in an industry​ decreases, the supply curve will shift to the right.

false

Markets which are temporarily out of equilibrium will always return to equilibrium immediately.

false

Most of the benefits from agricultural price supports have gone to​ small, family-owned farms.

false

Rent control is a type of price floor.

false

Shortages and scarcity are the same thing.

false

The minimum wage is an example of a price ceiling.

false

When both supply and demand curves​ change, the outcome is definite for both equilibrium price and equilibrium quantity.

false

Suppose a student is trying to decide whether or not to take another economics class. Which of the following is not an aspect of the economic way of thinking that would apply in this​ decision-making process?

flipping a coin

On an afternoon that a class meets, you could alternatively study for an exam that will take place in another class the next morning, go to a movie with a friend, or, most desirable to you at present, take a nap. The opportunity cost of attending the afternoon class is

foregoing a nap

Using productive resources to make capital goods requires that we

forgo some level of current consumption.

A surplus occurs when quantity supplied is​ ________ than quantity demanded at a price​ ________ the market clearing price.

greater; above

A shortage occurs when quantity demanded is​ ________ than quantity supplied at a price​ ________ the market clearing price.

greater; below

A bowed production possibilities curve is consistent with

highly specialized resources.

Which of the following is a positive ​statement?

historically, women have been paid less than men.

Total market supply can be derived by

horizontally summing individual supply curves at each and every price level.

Macroeconomics can be used to understand all of the topics listed below, except:

how a consumer decides between the purchase of two different cars

The​ knowledge, skills, and education a worker has is known as

human capital

If demand increases while supply remains​ unchanged, the equilibrium price of the product will​ ________ and the equilibrium quantity will​ ________.

increase; increase

Price controls...

interfere with the rationing function of prices.

According to the law of​ demand, the quantity demanded of any commodity is​ ________ related to its​ price, other things being equal.

inversely

Nathan is willing to pay up to $3 for an ice cream, but he actually pays $2 for it. The consumer surplus of the ice cream for Nathan

is $1.

An import quota...

is a supply restriction limiting the quantity of a good that can be imported.

economics...

is concerned with how people respond to incintives.

Self-interest...

is consistent with many goals that people pursue, including betterment of others.

A demand schedule

is only for a given time period.

The opportunity cost of going to college for a student receiving a scholarship

is the income that she would have earned if she did not go to college.

Opportunity cost

is the value of the next best alternative as a result of choosing some given alternative.

The price of a new textbook increased by 35 percent and the price of a used textbook increased by 30 percent. What happened to the relative price of the new textbook?

it increased, but we can't tell by how much without more information.

The ceteris paribus assumption is important in economics because

it would be impossible to relate the changes in one variable to another variable without holding other variables constant.

Which of the following is most likely to benefit from government established price floors in agriculture?

large farm owners and corporate farms

Holding supply constant, a decrease in demand leads to

lower prices and lower quantity supplied.

In economics, physical capital includes

machinery

The economic way of thinking will help you...

make decisions in financing your homes, make better decisions concerning your education, and analyze solutions to economic problems.

Rent controls...

make tenants less mobile

Another term for the equilibrium price is

market clearing price.

After the price of milk increases, Liza buys more eggs and less hotdogs. For Liza...

milk and eggs are substitutes, and milk and hotdogs are complements.

An economic theory is also known as an economic...

model.

If an effective minimum wage is imposed, then:

more workers will be unable to find jobs

A country that must reduce current consumption to increase future consumption possibilities

must be produced along the production possibilities curve.

Analysis that involves value judgments about economic policies is

normative economics.

Statements using words like ought or should are

normative statements

Who benefits primarily from rent controls?

only renters who are able to get units at below-market rates.

One basic underlying principle in economics is that:

people respond to incintives.

Ceteris paribus, as the price of a good or service increases

people will buy less of it.

What is the type of companies that provide services by linking individuals to others with similar interests or to companies that sell certain products?

platform firms

Analysis that is limited to making either purely descriptive statements or scientific predictions is

positive economics.

A legally determined maximum that sellers may charge is known as a:

price ceiling

In response to information regarding the salaries of executives at firms receiving bailout funds in the United States, some people called for a limit on the salaries paid to executives. Such a limit on the compensation executives can receive is an example of a:

price ceiling

Refer to the above figure. A price control has been set which has led to a shortage. This means that a

price ceiling has been set at P2.

A legally determined minimum price that sellers must receive is known as a:

price floor

Some people believe there should be a legally determined minimum price for farm products such as milk. A limit on the price of milk would be an example of:

price floor

In a market system, which of the following provides the information that individuals need to make decisions about resource allocation?

prices

Prices can achieve the rationing function when

prices are flexible.

Prolonged shortages arise if:

prices are not allowed to rise to equilibrium

Absolute advantage is the ability of an individual, firm, or country to:

produce more of a good or service than competitors using the same amount of resources

Of the following groups, which benefits most from a government price support program that establishes a floor price for an agricultural product that is higher than the product's market clearing price and buys up any surplus?

producers, who earn a higher price on the sale of each unit and also sell more units, thereby unambiguously earning higher revenues

The shape of the production possibilities curve in the above figure indicates that

production of both corn and cloth is characterized by increasing costs.

If a price floor is set below the current market clearing price, then

quantity demanded will remain equal to quantity supplied at the current market clearing price.

At the market equilibrium price:

quantity demanded= quantity supplied

Equilibrium in a market occurs when

quantity supplied and quantity demanded are equal at the market clearing price.

A numerical limit on the quantity of a good that can be imported is a:

quota

Price performs a(n) __________ function. Inputs or outputs go to the __________ bidders if people are free to exchange voluntarily in the markets without government intervention or other market friction.

rationing; highest

In economics, the term physical capital

refers to all manufactured resources used for production.

The price of one product in terms of another commodity is called its

relative price.

In a price system:

relative prices change constantly to reflect changes in supply and demand.

The cost of saving jobs through trade barriers like tariffs and quotas is:

relatively high

Agriculture price supports that establish a price floor at which agricultural products may be purchased that exceeds the market clearing price

result in the quantity of these products supplied exceeding the quantity demanded at the floor price.

If goods A and B are substitute goods, then an increase in the price of B, other things being equal,

results in a decrease in the quantity of B consumed, but increases the demand for A.

For​ substitutes, a change in the price of a product will cause a change in demand in the​ ________ direction for the other good. For​ complements, a change in the price of a product will cause a change in demand in the​ ________ direction for the other good.

same; opposite.

Economics is the study of...

scarce resources and unlimited wants.

Opportunity cost exists because of

scarcity

Rationing goods on the basis of price is a direct result of

scarcity

Economists assume people are motivated by

self-interest.

Economists assume that people are motivated by

self-interest.

Suppose that 50,000 tickets were sold at $400 for an NBA game at Madison Square Garden in New York. The game was sold out and some fans could not get tickets. This suggests that

selling price was below equilibrium price.

Prolonged agricultural surpluses can arise if governments:

set the price above equilibrium

In the previous diagram, when supply decreases, a __________ develops at the original price. Equilibrium price will __________ and equilibrium quantity will __________ as a new equilibrium is established.

shortage; rise; fall

An economic model...

should capture only the essential relationships that are sufficient to analyze a particular problem or answer a particular question.

Economics is a...

social science.

In the production of goods and services, trade-offs exist because

society has only a limited amount of productive resources.

For every choice a person makes it can be assumed that

some opportunity cost was involved.

The rationality assumption as used in economics

states that people respond to incentives.

We cannot predict the effect on the market clearing price, but know that the equilibrium quantity will increase when

supply and demand for a product simultaneously increase.

According to this graph the existence of a minimum wage in the market for low-skilled workers results in a:

surplus of workers

Price controls that put a price floor on goods and services create __________.

surplusses

Which of the following is a non-price determinant of supply?

technological advances in production

When a firm can produce more output from the same level of inputs it is due​ to:

technological change.

Increases in the minimum wage will increase __________.

teenage unemployment

"Ceteris paribus" assumption means

that nothing else changes except the variables under consideration.

A student has a job that pays a wage rate of​ $20 per hour. The night before an economics​ exam, the student has set aside four hours to study for the​ exam, estimating that for each hour spent​ studying, her grade will rise by 5 points. That​ night, she gets a call from her employer to come to work for a wage rate of​ $15 per hour for that night. She decides to work for three hours and earn an extra​ $45. The next day she takes the test and gets a grade of 75. The opportunity cost for her work is

the 15 extra points she estimates that she could have earned on the exam if she had studied the extra three hours.

If economic growth occurs in a​ nation, this is represented by

the PPC curve moving outward

A demand schedule provides...

the alternative quantities demanded for a given time period at different possible prices.

A shift in demand occurs when

the amount demanded of a good changes at each existing price.

A shift in demand occurs when...

the amount demanded of a good changes at each existing price.

The division of labor refers to

the assignment of different workers to different tasks.

The market for gasoline in May is in equilibrium, at a market clearing price of $3 per gallon. After Memorial Day, the demand curve for gasoline increases, which causes

the demand curve for gasoline to shift to the right, creating a shortage at $3 per gallon which causes the market clearing price of gasoline to rise.

When income falls,

the demand for an inferior goods rises

Production is efficient when

the economy cannot produce more of one good without giving up the production of another good.

Suppose the current unemployment rate is 3 percent. If it rises to 4 percent,

the economy will operate farther inside the production possibilities curve.

A macroeconomist would study

the economy's total income level.

Microeconomics is concerned with the study of...

the effects of individual producers of higher wages paid to workers.

Given linear demand curves, if demand and supply both increase but demand increases by a greater amount than supply, then:

the equilibrium price and quantity both increase

Given linear demand curves, if demand and supply increase by identical amounts, then:

the equilibrium price stays the same and the equilibrium quantity rises.

Given linear demand curves, if demand increases and supply decreases, then __________.

the equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous

A black market may occur when

the government imposes a price ceiling below the market clearing price.

If demand increases and supply decreases,

the market clearing price definitely will increase, but the change in the equilibrium quantity cannot be determined without more information.

Suppose that the supply curve remains unchanged. If the demand curve shifts to the right,

the market clearing price definitely will increase.

A straight-line production possibilities curve takes this shape because

the opportunity cost of producing a good is constant.

Even though mass transit systems such as buses are available in most cities in the United States, many residents decide to drive to work in their own vehicles because

the opportunity cost of riding a bus is too high for them.

David has just ordered a smartphone only to be told that he will have to wait one month for it to be delivered. Which of the following statements is TRUE?

the phone is an economic good.

All of the following scenarios depict the characteristics of substitutes except:

the price of bacon increases and the demand for eggs decreases.

All of the following scenarios depict the characteristics of complements except:

the price of coffee increases and the demand for cream increases.

The law of demand includes the statement "other things being equal." These other things include all of the following EXCEPT

the price of the good itself.

Efficiency is defined as

the production of output at minimum cost.

If opportunity costs are constant, then

the production possibilities curve is a negatively sloped straight line.

The discovery of new natural resources will cause

the production possibilities curve to shift up and to the right.

A market is in equilibrium when

the quantity demanded equals the quantity supplied at the market clearing price.

Refer to the above figure. If the government imposes a price ceiling of $20

the quantity of goods that will be traded is 100.

Other things being equal, an increase in wages paid to workers in firms making wireless earbuds will cause

the quantity of wireless earbuds demanded to increase.

Scarcity implies that

the satisfaction of one person's want means another person's want cannot be satisfied.

In constructing a production possibilities curve, all of the following are assumed EXCEPT

the state of technology is improving.

At the market clearing price,

the supply and demand curves intersect, there is neither a shortage nor a surplus, quantity supplied equals quantity demanded.

An increase in the price of steel to car manufacturers will cause

the supply curve for cars to shift left.

Suppose the price of tomato sauce falls. In the market for pizza, in which tomato sauce of a popular ingredient, one would expect that

the supply of pizza would increase, and the price would fall.

A direct relationship occurs when

the two variables being compared change in the same direction, or when one goes up the other also goes up.

Which of the following is a positive statement?

the unemployment rate is 5.8 percent.

The value of a model is determined by

the usefulness of its predictions in the real world.

Opportunity cost is

the value of the next best alternative which was given up.

Opportunity cost refers to

the value of the​ next-best alternative.

What happens as the result of a surplus?

there is a downward pressure on the prices.

According to the graph, what is the impact of a quantity restriction (known as a taxi medallion) on the number of taxis allowed to service this market?

there is an excess demand for taxi service and a higher price.

People always face trade-offs because

they always have more than one use for their time and money.

The ultimate purpose of economics is

to study how individuals make choices

A black market is a market in which a​ price-controlled good is sold at an illegally high price.

true

A change in a​ good's own price leads to a change in quantity demanded for any given demand curve.

true

A market demand curve is derived by summing​ (at each​ price) the individual quantites demanded by all buyers in the market.

true

A market supply curve is derived by summing the individual​ producers' supply curves.

true

An import quota is a supply restriction that prohibits the importation of more than a specified quantity of a particular good in a​ one-year period.

true

At​ equilibrium, there is neither excess quantity supplied nor excess quantity demanded.

true

Middlemen specialize in lowering transaction costs.

true

Rationing by the price system leads to the most efficient use of available resources.

true

The price at which quantity demanded equals quantity supplied and at which the demand curve intersects the supply curve is called the market clearing price.

true

Voluntary exchange refers to an act of trading between individuals that makes both parties to the trade subjectively better off.

true

A point outside a society's production possibilities curve is one that is

unattainable given the resources of the society.

Proponents of behavioral economics suggest that traditional economic models assume that people exhibit all of the following​ "unrealistic" characteristics except

unbounded altruism

Which of the following would cause an economy to produce at a point inside its production possibilities curve?

unemployment and an inefficient use of available resources

Evidence indicates that the group which benefits most from rent ceilings is...

upper-income professionals

Which of the following is NOT an attempt to evade rent controls?

using the courts to challenge the sublease of a tenant

The opportunity cost of a decision is the

value of the best alternative not chosen.

An​ economy's production is efficient

whenever it is operating on its production possibilities curve.

If both buyers and sellers expect the price of a commodity to fall in the future, it is likely that the market clearing price ________ and the equilibrium quantity ________.

will rise; cannot be predicted

A graph shows Price per Pound on the vertical axis and Millions of Pounds of Sugar Per Day on the horizontal axis. There is a single Demand curve. The Total Supply curve intersects the Demand curve at a quantity of 360 and a price of $0.12. The Domestic Supply curve begins at a quantity of 0 pounds and a price of $0.26 and slopes upward from there. According to the graph how much domestic sugar will be supplied at the $0.12 price under free trade?

zero pounds

During the time period assumed by a production possibilities​ curve, it is​ ________ to be at a point outside the curve and​ ________ to be at a point beneath the curve.

​impossible; possible